<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1997
REGISTRATION NO. 333-18525
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HVIDE MARINE INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
FLORIDA 4424 65-0524593
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
</TABLE>
------------------------
2200 ELLER DRIVE, P.O. BOX 13038
FORT LAUDERDALE, FLORIDA 33316
(954) 523-2200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
J. ERIK HVIDE, CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER
2200 ELLER DRIVE, P.O. BOX 13038
FORT LAUDERDALE, FLORIDA 33316
(954) 523-2200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<C> <C>
MICHAEL JOSEPH, ESQ. SETH R. MOLAY, P.C.
DYER ELLIS & JOSEPH AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
600 NEW HAMPSHIRE AVENUE, N.W. 1700 PACIFIC AVENUE, SUITE 4100
WASHINGTON, D.C. 20037 DALLAS, TEXAS 75201
(202) 944-3000 (214) 969-2800
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 28, 1997
PROSPECTUS
, 1997
4,000,000 SHARES
HVIDE MARINE LOGO GRAPHIC
HVIDE MARINE INCORPORATED LOGO
CLASS A COMMON STOCK
Of the 4,000,000 shares of Class A Common Stock offered hereby (the
"Offering"), 3,860,584 are being sold by the Company and 139,416 are being sold
by the Selling Stockholders. See "Principal and Selling Stockholders" and
"Underwriting." The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholders.
The Class A Common Stock is traded on the Nasdaq National Market under the
symbol "HMAR." On January 27, 1997, the last reported sale price of the Class A
Common Stock was $25 1/4 per share. See "Price Range of The Class A Common
Stock" and "Dividend Policy."
The Company's issued and outstanding capital stock consists of Class A
Common Stock and Class B Common Stock. Each holder of Class A Common Stock is
entitled to one vote per share and each holder of Class B Common Stock is
entitled to ten votes per share on all matters submitted to a vote of
stockholders. Except as required by law and the Company's Articles of
Incorporation, holders of the Class A Common Stock and the Class B Common Stock
vote together as a single class. Each share of Class A Common Stock and Class B
Common Stock will share ratably in any dividends or other distributions,
including upon the liquidation, dissolution, or winding up of the Company. The
shares of Class B Common Stock are freely convertible on a one-for-one basis
into shares of Class A Common Stock.
Ownership and control of the Class A Common Stock by persons not citizens
of the United States are limited by the terms of the Company's Articles of
Incorporation. See "Description of Capital Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.......................... $ $ $ $
Total(3)........................... $ $ $ $
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deduction of expenses payable by the Company estimated at
$ .
(3) The Underwriters have been granted a 30-day option to purchase up to 600,000
additional shares of Class A Common Stock at the Price to the Public less
Underwriting Discounts and Commissions, solely to cover over-allotments, if
any. To the extent the Underwriters' over-allotment is exercised, the first
25,000 shares will be purchased from the Hvide Family Trust II and the
balance will be purchased from the Company. See "Underwriting." If such
option is exercised in full, the total Price to the Public, Underwriting
Discounts and Commissions, Proceeds to the Company, and Proceeds to the
Selling Stockholders will be $ , $ , $ , and
$ , respectively.
The shares are being offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters and subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of the shares will be made in New York, New York, on or
about , 1997.
<TABLE>
<S> <C>
DONALDSON, LUFKIN & JENRETTE HOWARD, WEIL, LABOUISSE, FRIEDRICHS
SECURITIES CORPORATION INCORPORATED
</TABLE>
<PAGE> 3
[Pie Chart depicting fleet EBITDA by segment for the nine months ended September
30, 1996]
EBITDA (net income from continuing operations before interest expense,
income tax expense, depreciation expense, amortization expense, minority
interest, and other non-operating income) is frequently used by securities
analysts and is presented here to provide additional information about the
Company's operations. Fleet EBITDA is EBITDA before corporate overhead expenses.
EBITDA and fleet EBITDA are not required by generally accepted accounting
principles and should not be considered as alternatives to net income as
indicators of the Company's operating performance, or as alternatives to cash
flows from operations as a measure of liquidity.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS, IF ANY) AND THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE CLASS A COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Except as otherwise indicated, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. The Pro Forma Condensed
Consolidated Financial Statements and other pro forma operating data included in
this Prospectus give effect to the IPO, the repayment of certain indebtedness
with proceeds of the IPO, and the acquisition of the OMI Chemical Carriers, the
Seal Fleet Vessels, and vessels from GBMS (as each such term is defined herein)
and one additional vessel but do not give effect to the Current Acquisitions (as
defined herein) or the Offering. Unless the context otherwise requires, all
references in the Prospectus to the "Company" or "Hvide" include Hvide Marine
Incorporated, its predecessors, and its consolidated subsidiaries. See
"Glossary" for definitions of certain terms used herein.
THE COMPANY
Hvide (pronounced "vee-dah") provides marine support and transportation
services primarily in the U.S. domestic trade and principally to the energy and
chemical industries. The Company is the third largest operator of supply and
crew boats in the U.S. Gulf of Mexico. In addition, the Company is the sole
provider of commercial tug services in Port Everglades and Port Canaveral,
Florida, and a leading provider of such services in Mobile, Alabama. The Company
also transports petroleum products and specialty chemicals in the U.S. domestic
trade, a market insulated from international competition under the Jones Act.
The total capacity of the Company's five chemical carriers represents
approximately 44% of the capacity of the domestic specialty chemical carrier
fleet. In addition, the Company has options to acquire up to a 75% interest in
five double-hull petroleum product carriers currently under construction for
delivery during 1998.
The Company has grown rapidly through a series of acquisitions, increasing
its marine support fleet from 20 vessels in 1993 to 74 vessels currently and its
marine transportation fleet from three vessels in 1993 to 29 vessels currently.
Primarily as a result of these acquisitions, the Company's revenue increased
196% from $41.5 million in 1993 to $123.0 million in 1995, on a pro forma basis.
Over the same period, the Company's EBITDA increased 181% from $11.3 million to
$31.7 million and its income from operations increased 186% from $6.6 million to
$18.9 million, in each case on a pro forma basis. For the nine months ended
September 30, 1996, the Company reported revenue, EBITDA, and operating income
of $101.0 million, $27.1 million, and $16.0 million, respectively, in each case
on a pro forma basis. For other measures of the Company's operating results as
determined under generally accepted accounting principles and its pro forma
operating results, see "Selected Historical and Pro Forma Consolidated Financial
Data" and the Company's consolidated financial statements.
The Company has recently acquired or entered into agreements to acquire an
aggregate of seven supply boats, five crew boats, one offshore anchor handling
tug, and two harbor tugs (the "Current Acquisitions"). The Current Acquisitions,
which upon completion will increase the Company's marine support fleet from 74
to 89 vessels, will be funded in part with proceeds of the Offering. The $51.2
million aggregate cost of the Current Acquisitions includes the estimated cost
of upgrading, refurbishing, and lengthening two of the supply boats to 225-foot,
4,300-hp dynamically positioned vessels for use in deepwater service. See "Use
of Proceeds" and "Business -- Current Acquisitions."
The Company's strategy is to realize the benefits presented by the
integration of its recent and pending acquisitions with its existing operations
and to continue to grow through selected acquisitions that further consolidate
the marine support and transportation services markets in which the Company
operates. The Company believes it has numerous opportunities to make further
accretive acquisitions in its core businesses. Critical elements of the
Company's strategy include continuing to (i) utilize its demonstrated expertise
in acquiring vessels, thereby further consolidating its niche markets, (ii)
emphasize U.S. domestic operations, (iii) develop and apply marine technology to
meet its customers' needs in an innovative and cost-effective manner, (iv)
maintain and pursue long-term customer relationships that limit the risk
associated with the investments required for new vessels and mitigate the
effects of industry cyclicality, and (v) enhance its record of quality service
and safety.
MARINE SUPPORT SERVICES
Offshore Energy Support. The Company's fleet of 75 offshore energy support
vessels, giving effect to the Current Acquisitions, consists of 31 supply boats,
42 crew boats, and two utility boats that transport supplies and personnel and
provide towing and other support services to offshore oil and natural gas
exploration and production operations, primarily in the U.S. Gulf of Mexico. The
offshore energy support industry in the U.S.
3
<PAGE> 5
Gulf of Mexico has experienced substantial consolidation and vessel attrition
during the past decade. The Company believes that industry fundamentals have
improved, and expects continued strong demand and further consolidation to
result in increasing day rates and utilization. The Current Acquisitions
strengthen the Company's position as the third largest operator of supply and
crew boats in the U.S. Gulf of Mexico. This strengthened position will, at the
same time, make the Company's operations more susceptible to fluctuations in oil
and gas prices, which affect the level of offshore exploration and development
activity and thus the demand for the services provided by the Company's offshore
energy support vessels. In the past, the Company has sought to mitigate the
adverse effect of reduced demand through cost reduction and relocation of
support vessels to other markets. See "Risk Factors -- Cyclical Industry
Conditions" and "Business -- The Industry -- Marine Support Services."
Offshore and Harbor Towing. The Company's 14 tugs, giving effect to the
Current Acquisitions, provide offshore towing services and harbor assistance to
tankers, barges, containerships, other cargo vessels, and cruise ships calling
at Port Everglades and Port Canaveral, Florida, and Mobile, Alabama. In Port
Everglades and Port Canaveral, the Company is the sole franchisee providing
commercial tug services. The Company directed the design and construction of its
technologically advanced 5,100-hp tractor tug, the Broward, which is capable of
providing escort services to tankers and other large vessels and specialized
deepwater services to the offshore energy industry. In addition to these 14
tugs, the Company recently entered into one-year charters of two newly built
4,000-hp tugs with omni-directional propulsion systems, which are currently
being used by the Company to provide harbor services. The Company intends to
remove from service one tug currently engaged in harbor services in the second
quarter of 1997.
MARINE TRANSPORTATION SERVICES
Chemical Transportation. The total capacity of the Company's five chemical
carriers represents approximately 44% of the capacity of the domestic specialty
chemical carrier fleet, and four of the vessels are among the last independently
owned chemical carriers scheduled to be retired under the Oil Pollution Act of
1990 ("OPA 90"). Two of the carriers currently transport industrial chemicals in
bulk parcel lots, and the other three carriers currently transport petroleum
products and petrochemicals, primarily for major oil and chemical companies. The
Company believes that domestic energy and chemical transportation freight rates
will increase within the next three to five years and continue thereafter, as
the supply of vessels eligible to carry petroleum products diminishes as a
result of mandatory retirement imposed by OPA 90.
Petroleum Product Transportation. The Company's petroleum product
transportation fleet is currently comprised of the Seabulk Challenger, a 39,300
dwt product carrier, and a fleet of ten towboats and 13 fuel barges. The Seabulk
Challenger has since 1975 operated under successive charters to Shell Oil
Company ("Shell") (extending to January 2000) carrying refined petroleum
products from Shell's refineries in Texas and Louisiana to various U.S. Gulf of
Mexico and Atlantic coast ports. The towboat and barge fleet is engaged in the
transportation of residual and diesel fuels along the Atlantic intracoastal
waterway and in the St. Johns River in Florida, primarily for a major Florida
utility.
The Company also owns a minority interest in five 45,300 dwt double-hull
petroleum product carriers currently under construction for delivery during
1998. The product carriers are intended to serve the domestic market currently
served by single-hull tankers whose retirement is mandated by OPA 90. The
Company, whose ownership is currently 2.4%, has options to purchase up to an
additional 72.6% ownership interest in the vessels for a total estimated cost of
up to $32.0 million (assuming exercise of the options before January 1, 1998).
The Company is supervising the construction of the vessels and will provide
operational management following delivery.
OPA 90. OPA 90 requires, among other things, that existing single-hull
vessels be retired from domestic transportation of petroleum products between
1995 and 2015, depending upon vessel size and age, unless retrofitted with
double hulls. The Company's chemical carriers and its petroleum product carrier
will be required to cease transporting petroleum products at various dates from
2000 to 2015, and its fuel barges will cease transporting fuel in 2015. See
"Risk Factors -- Mandated Removal of Vessels from Jones Act Trade." The Company
currently has no specific plans concerning the retrofitting or replacement of
such vessels.
4
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock Offered:
By the Company....................... 3,860,584 shares
By the Selling Stockholders.......... 139,416 shares
------------------
Total........................ 4,000,000 shares
------------------
------------------
Common Stock to be Outstanding After
the Offering:
Class A Common Stock.............. 11,508,375 shares(1)
Class B Common Stock.............. 3,419,577 shares
------------------
Total........................ 14,927,952 shares
------------------
------------------
</TABLE>
Voting Rights................ The Company's outstanding capital stock consists
of Class A Common Stock and Class B Common Stock
(together, the "Common Stock"). Each holder of
Class A Common Stock is entitled to one vote per
share and each holder of Class B Common Stock is
entitled to ten votes per share on all matters
submitted to a vote of stockholders. Except as
required by law and the Company's Articles of
Incorporation, holders of the Class A Common
Stock and the Class B Common Stock vote together
as a single class. See "Description of Capital
Stock." After the Offering, the holders of the
Class A Common Stock and the Class B Common Stock
will have 25.2% and 74.8% of the voting power of
the Common Stock, respectively (26.3% and 73.7%,
respectively, if the Underwriters' over-allotment
option is exercised in full).
Upon completion of the Offering, J. Erik Hvide,
the Company's Chairman, together with certain
trusts of which he is the trustee (the "Hvide
Trusts"), and a group of investors (the "Investor
Group") that in September 1994 purchased shares
of Common Stock, Common Stock Contingent Share
Issuances, and the Company's Junior Notes and
Senior Notes (each as defined herein), will own
shares that will represent 11.9% and 12.5%,
respectively, of the outstanding shares of Common
Stock (11.3% and 12.0%, respectively, if the
Underwriter's over-allotment option is exercised
in full) and 38.7% and 36.6%, respectively, of
the voting power of all Common Stock (37.9% and
36.3%, respectively, if the Underwriters'
over-allotment option is exercised in full). In
addition, the Hvide Family (as defined herein)
and the Investor Group have entered into an
agreement giving them the right to nominate eight
and three persons, respectively, to the Company's
11-member Board of Directors. The Company's
Articles of Incorporation require that certain
significant transactions be approved by 95% of
the holders of the Class B Common Stock, which is
held entirely by members of the Hvide Family and
the Investor Group. See "Description of Capital
Stock -- Certain Provisions of Articles of
Incorporation and By-Laws" and "-- Shareholders
Agreement" and "Risk Factors -- Control by
Current Stockholders."
Use of Proceeds to the
Company...................... To fund the balance of the cost of the Current
Acquisitions, to repay a portion of the Company's
indebtedness, and for general corporate purposes.
Nasdaq National Market
Symbol....................... HMAR
- ------------------------------------
(1) Excludes 806,000 shares of Class A Common Stock reserved for issuance upon
exercise of currently outstanding options and 500,000 shares reserved for
issuance under the Company's Employee Stock Purchase Plan. See
"Management -- Equity Ownership Plans."
5
<PAGE> 7
SUMMARY CONSOLIDATED HISTORICAL AND
PRO FORMA FINANCIAL AND OPERATING DATA
The summary consolidated financial data presented below should be read in
conjunction with the consolidated financial statements and notes thereto of the
Company, the financial statements and notes thereto of the OMI Chemical
Carriers, the Seal Fleet Vessels, and GBMS, "Selected Historical and Pro Forma
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Pro Forma Condensed Consolidated
Financial Statements" included elsewhere in this Prospectus. The summary
unaudited pro forma statement of operations data for the year ended December 31,
1995 and the nine months ended September 30, 1996 give effect to the
acquisitions of the three OMI Chemical Carriers and the eight Seal Fleet Vessels
in August 1996, the acquisition of eight crew boats from GBMS in January 1996,
the acquisition of one vessel in February 1996, the August 1996 initial public
offering of the Company's Class A Common Stock (the "IPO"), and the repayment of
certain indebtedness, as if all such transactions had occurred on January 1,
1995 and January 1, 1996, respectively. Such pro forma data are presented for
illustrative purposes only and do not purport to represent what the Company's
results actually would have been if such events had occurred at the dates
indicated, nor do such data purport to project the results of operations for any
future period or as of any future date. The summary unaudited pro forma
statements of operations data for the year ended December 31, 1995 and the nine
months ended September 30, 1996 do not give effect to the Current Acquisitions
or the Offering. The summary balance sheet data at September 30, 1996 have been
adjusted to give effect to the Offering and the application of the estimated net
proceeds therefrom. The results for the nine months ended September 30, 1996 are
not necessarily indicative of the results to be expected for the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- -----------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1995 1995 1996 1996
(IN THOUSANDS, EXCEPT PER SHARE, VESSEL, AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................................... $41,527 $ 49,792 $70,562 $122,985 $51,194 $72,130 $101,046
Income from operations........................... 6,584 5,838 11,072 18,925 7,854 12,877 16,010
Interest expense, net............................ 3,412 5,302 11,460 12,312 8,491 8,751 9,034
Income (loss) before provision for (benefit from)
income taxes, extraordinary item and cumulative
effect of a change in accounting principle..... 3,691 547 (362) 6,803 (581) 4,325 7,175
Income (loss) before extraordinary item and
cumulative effect of a change in accounting
principle...................................... 1,818 358 (360) 4,354 (581) 2,709 4,520
Loss on extinguishment of debt, net(1)........... -- -- -- -- -- 8,016 --
Cumulative effect of a change in accounting
principle...................................... 1,491 -- -- -- -- -- --
------- -------- ------- -------- ------- ------- --------
Net income (loss)................................ 3,309 358 (360) 4,354 (581) (5,307) 4,520
======= ======== ======= ======== ======= ======= ========
EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary item and
cumulative effect of a change in accounting
principle(2)................................... $ 0.26 $ 0.03 $ (0.14) $ 0.40 $ (0.23) $ 0.68 $ 0.41
Net income (loss)(2)............................. 0.50 0.03 (0.14) 0.40 (0.23) (1.32) 0.41
======= ======== ======= ======== ======= ======= ========
Weighted average number of common shares and
common share equivalents outstanding(3)........ 6,268 5,302 2,535 10,905 2,535 4,018 11,064
======= ======== ======= ======== ======= ======= ========
EARNINGS (LOSS) PER COMMON SHARE ASSUMING FULL
DILUTION:
Income before extraordinary item and cumulative
effect of a change in accounting
principle(2)................................... $ 0.26 $ 0.06 $ 0.12 $ 0.00 $ 0.64
Net income (loss)(2)............................. 0.50 0.06 0.12 0.00 (0.95)
======= ======== ======= ======= =======
Weighted average number of common shares and
common share equivalents outstanding(3)........ 6,268 5,616 3,779 3,779 5,049
======= ======== ======= ======= =======
OTHER FINANCIAL DATA:
EBITDA(4)........................................ $11,319 $ 10,338 $17,380 $ 31,655 $12,545 $18,992 $ 27,135
======= ======== ======= ======== ======= ======= ========
NET CASH PROVIDED BY (USED IN):
Operating activities............................. $ 6,956 $ 2,858 $ 3,948 $ 71 $ 6,126
Investing activities............................. (2,247) (39,815) (8,066) (5,312) (61,738)
Financing activities............................. (6,158) 41,249 805 1,715 58,160
</TABLE>
6
<PAGE> 8
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
VESSEL DATA (AT END OF PERIOD):
Marine Support Services
Supply boats............................................ 10 14 14 14 24
Crew boats(5)........................................... -- 21 28 28 39
Tugs.................................................... 10 10 11 11 11
Marine Transportation Services
Chemical carriers....................................... 2 2 2 2 5
Product carriers........................................ 1 1 1 1 1
Towboats and barges..................................... -- 18 23 23 23
------- ------- ------- ------- -------
Total............................................... 23 66 79 79 103
======= ======= ======= ======= =======
OPERATING DATA:
Supply boats:
Average vessel day rates(6)............................... $ 2,696 $ 3,195 $ 3,023 $ 2,947 $ 4,276
Average vessel utilization(7)............................. 98% 84% 81% 77% 95%
Crew boats:
Average vessel day rates(6)............................... -- $ 1,421 $ 1,434 $ 1,426 $ 1,490
Average vessel utilization(7)............................. -- 88% 85% 84% 93%
Tugs:
Total offshore and ship docking tug revenue (in
thousands).............................................. $10,585 $11,140 $12,582 $ 9,204 $10,234
Total ship docking tug jobs............................... 8,178 8,740 9,233 6,847 7,150
Chemical and product carriers:
Time charter equivalents(8)............................... $24,765 $24,898 $26,034 $25,389 $26,227
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
----------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................... $ (105) $ 23,122
Total assets................................................ 254,616 321,261
Total debt.................................................. 134,317 113,006
Stockholders' and minority partners' equity................. 98,927 188,174
</TABLE>
- ------------------------------------
(1) Reflects the loss on the extinguishment of debt from a portion of the
proceeds of the IPO net of applicable income taxes of $1,405,000.
(2) For the purpose of calculating earnings per share for the years 1993 and
1994, historical income available to common stockholders has been reduced
for dividends on Class A Preferred Stock of $203,000 and $222,000,
respectively. The Class A Preferred Stock was redeemed on September 30,
1994. See "Certain Transactions."
(3) For the years 1993 and 1994, the weighted average number of common shares
and common share equivalents assumes the conversion of the Class B Preferred
Stock into shares of Common Stock. The Class B Preferred Stock was redeemed
on September 30, 1994. For the years ended 1994 and 1995 and the nine months
ended September 30, 1995 and 1996, shares outstanding assuming full dilution
reflects the assumed conversion of a portion of the Junior Notes (as defined
herein) into shares of Common Stock. The Junior Notes were issued in
September 1994 and converted into shares of Common Stock in September 1996.
Pro forma shares reflect the weighted average number of common shares giving
effect to the issuance of 7,159,000 shares of Class A Common Stock in the
IPO, 100,358 shares of Class A Common Stock in payment of services, 25,667
shares of Class A Common Stock in exchange for certain outstanding
indebtedness, and 1,244,002 shares of Class A and Class B Common Stock in
exchange for the principal amount of the Junior Notes remaining after the
application of the proceeds of the IPO, and exclude 806,000 shares of Class
A Common Stock reserved for issuance upon exercise of currently outstanding
options and 500,000 shares reserved for issuance under the Company's
Employee Stock Purchase Plan. See "Management -- Equity Ownership Plans."
(4) EBITDA (net income from continuing operations before interest expense,
income tax expense, depreciation expense, amortization expense, minority
interests, and other non-operating income) is frequently used by securities
analysts and is presented here to provide additional information about the
Company's operations. EBITDA is not required by generally accepted
accounting principles and should not be considered as an alternative to net
income as an indicator of the Company's operating performance or as an
alternative to cash flows from operations as a measure of liquidity.
(5) For the years 1994 and 1995 and the nine months ended September 30, 1995 and
1996, the crew boat vessel data include two utility boats. However, the crew
boat operating data exclude the results of the two utility boats.
(6) Average day rates are calculated based on vessels operating domestically by
dividing total vessel revenue by the total number of days of vessel
utilization.
(7) Utilization is based on vessels operating domestically and determined on the
basis of a 365-day year. Vessels are considered utilized when they are
generating charter revenue.
(8) Time charter equivalents are calculated by deducting total voyage expenses
from total voyage revenue and dividing the result by the total days per
voyage.
7
<PAGE> 9
RISK FACTORS
In addition to other information contained in this Prospectus, prospective
purchasers of the Class A Common Stock should carefully consider the following
factors in evaluating an investment in the Company.
POTENTIAL LOSS OF JONES ACT PROTECTION
Most of the Company's operations are conducted in the U.S. domestic trade,
which, by virtue of the U.S. coastwise laws (often referred to as the "Jones
Act"), is restricted to vessels built in the United States, owned and crewed by
U.S. citizens, and registered under U.S. law. There have been repeated attempts
to repeal the coastwise laws, and efforts to effect such repeal are expected to
continue in the future. The Company is already subject to vigorous competition
and potential additional competition in all aspects of its operations, including
competition by companies with financial resources greater than those of the
Company which could be committed to the construction of new vessels in excess of
market requirements. Repeal of the coastwise laws would result in additional
competition from vessels built in lower-cost foreign shipyards and manned by
foreign nationals accepting lower wages than U.S. citizens and could have a
material adverse effect on the Company.
HAZARDOUS ACTIVITIES
The operation of ocean-going vessels carries an inherent risk of
catastrophic marine disasters and property losses caused by adverse weather
conditions, mechanical failures, human error, and other circumstances or events.
In addition, the transportation of petroleum and toxic chemicals is subject to
the risk of spills and environmental damage. Any such event could have a
material adverse effect on the Company. While the Company carries insurance to
protect against most of the accident-related risks involved in the conduct of
its business, including environmental damage and pollution insurance coverage,
there can be no assurance 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.
CYCLICAL INDUSTRY CONDITIONS
Historically, the marine support and transportation services industry has
been cyclical, with corresponding volatility in profitability and vessel values.
This industry cyclicality has been due to changes in the level of general
economic growth as well as changes in the supply of and demand for vessel
capacity, which impact charter rates and vessel values. The supply of vessels is
influenced by the numbers of vessels constructed and retired and by government
and industry regulation of maritime transportation practices. The Company's
offshore energy support services and offshore and harbor towing services are
dependent upon the levels of activity in offshore oil and natural gas
exploration, development, and production. Such activity levels are affected by
both short- and long-term trends in world oil and natural gas prices.
Utilization of the Company's towboat and fuel barge fleet is also partly
dependent on such prices as well as energy utilization, which is partly a
function of the weather. In recent years, oil and natural gas prices, and
therefore the level of offshore drilling and exploration activity, have been
extremely volatile. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Any future prolonged decline in natural
gas or oil prices will, in all likelihood, depress the level of offshore
exploration and development activity and result in a corresponding decline in
the demand for the services provided by the Company's offshore energy support
vessels, and any sustained reduction in such activity could have a material
adverse effect on the Company. See "Business -- The Industry -- Marine Support
Services -- Offshore Energy Support." In addition, marine support and
transportation services are dependent on general economic conditions. Any
general economic slowdown could have an adverse effect on the level of the
provision of those services and therefore upon the Company.
8
<PAGE> 10
ENVIRONMENTAL RISK AND REGULATIONS
Current laws and regulations could impose substantial liability on the
Company for damages, remediation costs, and penalties associated with oil or
hazardous-substance spills or other discharge into the environment involving the
Company's vessel operations. Shoreside industrial operations, including a small
marine maintenance and drydocking facility owned and operated by the Company,
are also subject to federal, state, and local environmental laws and
regulations. Amendment of these laws and regulations to impose more stringent
requirements would likely result in increased maintenance and operating
expenses. In addition, OPA 90 requires tanker owners and operators to establish
and maintain with the U.S. Coast Guard evidence of financial responsibility, as
demonstrated by a certificate of financial responsibility ("COFR"), with respect
to potential oil spill liability, which the Company and most of its competitors
currently satisfy by virtue of self-insurance or third-party insurance.
Additional laws and regulations may be adopted that could limit the ability of
the Company to do business or increase the cost of its doing business and could
have a material adverse effect on its operations. See "Business -- Environmental
and Other Regulation."
HIGH LEVERAGE AND DEBT SERVICE; CERTAIN RESTRICTIONS ON CAPITAL EXPENDITURES
The Company will continue to have substantial indebtedness upon completion
of the Offering. After giving effect to the application of proceeds from the
Offering to repay certain indebtedness, the Company's total outstanding
indebtedness would have been $113.0 million as of September 30, 1996. In
addition, the Company has a minority interest, and options to acquire a majority
interest, in five vessels currently under construction that are being financed,
in substantial part, with non-recourse indebtedness. See "Business -- Company
Operations -- Marine Transportation Services -- Petroleum Product
Transportation." The Company's leverage poses certain risks for the Company,
including the risks that the Company may not generate sufficient cash flow to
service its indebtedness; that the Company will be unable to renegotiate the
terms of its indebtedness; that it may be unable to obtain additional financing
in the future; that, to the extent it is significantly more leveraged than its
competitors, it may be placed at a competitive disadvantage; and that the
Company's capacity to respond to market conditions and other factors may be
adversely affected. The Company's ability to service its debt will depend on its
future performance, which will be subject to prevailing economic and competitive
conditions and other specific factors discussed herein, as well as developments
in capital markets generally. The terms of the Company's Credit Facility (as
defined herein) (i) require the Company to maintain minimum levels of liquidity
and net worth and to meet specified financial ratios, (ii) limit the issuance of
debt by the Company and of debt or preferred stock by the Company's
subsidiaries, (iii) restrict the ability of its subsidiaries to pay dividends or
make distributions to the Company, (iv) restrict the Company's ability to pay
dividends, redeem capital stock or subordinated debt, make certain investments
or issue capital stock, place additional liens on its or its subsidiaries'
property, incur additional long-term indebtedness, make capital expenditures in
excess of specified limitations, and enter into mergers or similar transactions,
and (v) limit certain corporate acts and transactions by the Company. Such
provisions could adversely affect the Company's ability to pursue its strategy
of growth through acquisitions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Financial
Resources" and "Description of Certain Indebtedness -- Credit Facility."
MANDATED REMOVAL OF VESSELS FROM JONES ACT TRADE
OPA 90 establishes a phase-out schedule, depending upon vessel size and
age, for single-hull vessels carrying crude oil and petroleum products which, in
the case of the Company's petroleum products carrier (Seabulk Challenger) and
five chemical carriers (HMI Astrachem, Seabulk Magnachem, HMI Dynachem, HMI
Petrochem and Seabulk America), are the years 2003, 2000, 2007, 2011, 2011, and
2015, respectively; and in the case of its fuel barges is the year 2015. As a
result of this requirement, these vessels will be prohibited from transporting
petroleum products in U.S. waters after their respective phase-out dates. There
can be no assurance that future tanker market rates will be sufficient to
support construction of replacement vessels. Although the Company's remaining
vessels are not subject to mandatory retirement, and the Company employs what it
believes to be a rigorous maintenance program for all its vessels, there can be
no assurance that the Company will be able to maintain its fleet by extending
the economic lives of existing
9
<PAGE> 11
vessels or acquiring new or used vessels. See "Business -- Company
Operations -- Marine Transportation Services" and "-- Environmental and Other
Regulation."
RELIANCE ON SIGNIFICANT CUSTOMERS
Shell, Amoco Corporation ("Amoco"), Phillips Petroleum Company
("Phillips"), and Chevron Corporation ("Chevron") each accounted for between 5%
and 10% of the Company's revenue for the nine months ended September 30, 1996 on
a pro forma basis, and Shell and Phillips each accounted for between 5% and 10%
of the Company's revenue for the year ended December 31, 1995 on a pro forma
basis. The loss of any of these customers could have a material adverse effect
on the Company. See "Business -- Company Operations -- Customers and Charter
Terms."
RISK OF LOSS AND INSURANCE
The business of the Company is affected by a number of risks, including the
mechanical failure of its vessels, collisions, vessel loss or damage, cargo loss
or damage, hostilities, and labor strikes. In addition, the operation of any
vessel is subject to the inherent possibility of a catastrophic marine disaster,
including oil, fuel, or chemical spills and other environmental mishaps, as well
as other liabilities arising from owning and operating vessels. Any such event
may result in loss of revenues and increased costs and other liabilities.
Although the Company's losses from such hazards have not historically exceeded
its insurance coverage, there can be no assurance that this will continue to be
the case.
OPA 90, by imposing virtually unlimited liability upon vessel owners,
operators, and certain charterers for certain oil pollution accidents in the
United States, has made liability insurance more expensive and has also prompted
insurers to consider reducing available liability coverage. See
"Business -- Environmental and Other Regulation." While the Company maintains
insurance, there can be no assurance that all risks are adequately insured
against particularly in light of the virtually unlimited liability imposed by
OPA 90, 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. Because it maintains mutual insurance, the Company is subject to funding
requirements and coverage shortfalls in the event claims exceed available funds
and reinsurance and to premium increases based on prior loss experience. Any
such shortfalls could have a material adverse impact on the Company.
RESTRICTION ON FOREIGN OWNERSHIP
In order to maintain the eligibility of the Company to operate vessels in
the U.S. domestic trade, 75% of the outstanding capital stock and voting power
of the Company is required to be held by U.S. citizens. See
"Business -- Environmental and Other Regulation." Although the Company's
Articles of Incorporation contain provisions limiting non-citizen ownership of
its capital stock (see "Description of Capital Stock -- Foreign Ownership
Restrictions"), the Company could lose its ability to conduct operations in the
U.S. domestic trade if such provisions prove unsuccessful in maintaining the
required level of citizen ownership. Such loss would have a material adverse
effect on the Company.
ACQUISITION STRATEGY
One element of the Company's strategy is to continue to grow through
selected acquisitions that further consolidate the marine support and
transportation markets in which the Company operates. There can be no assurance
that each of the Current Acquisitions, certain of which are subject to
conditions precedent, will be completed or that the Current Acquisitions or any
additional acquisitions will be successful in enhancing the operations or
profitability of the Company; that the Company will be able to identify suitable
additional acquisition candidates; that it will have the financial ability to
consummate additional acquisitions; or that it will be able to consummate such
additional acquisitions on terms favorable to the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Financial Resources" and "Description of Certain
Indebtedness -- Credit Facility."
10
<PAGE> 12
LEGAL PROCEEDINGS
The Company's chemical carrier Seabulk America is the subject of two
pending legal proceedings, one involving the eligibility of the vessel to
operate in the U.S. domestic trade and the other involving the cost of its
completion, either of which, if determined adversely to the Company, could have
a material adverse effect on the Company. See "Business -- Legal Proceedings."
INTERNATIONAL MARINE OPERATIONS
The Company operates three offshore supply boats in Southeast Asia, and one
each in Egypt and Cameroon. Such operations are subject to risks inherent in
conducting business in foreign countries, including political changes, possible
vessel seizure and asset nationalization, or other government actions, all of
which are beyond the control of the Company and the occurrence of any of which
could have a material adverse effect on the Company.
KEY PERSONNEL
The Company is materially dependent upon the continued services of key
members of its management, including its Chairman, President, and Chief
Executive Officer, J. Erik Hvide. The loss of one or more key members of
management could have a material adverse effect on the Company. See
"Management."
POSSIBLE VOLATILITY OF STOCK PRICE
There may be significant volatility in the market price for the Company's
Class A Common Stock. Quarterly operating results of the Company, changes in
general conditions in the economy, the financial markets, or the marine support
and transportation services industry, or other developments affecting the
Company or its competitors, could cause the market price of the Company's Class
A Common Stock to fluctuate substantially. In addition, in recent years, the
stock market and, in particular, the marine support and transportation services
industry segment, has experienced significant price and volume fluctuations.
This volatility has affected the market prices of securities issued by many
companies for reasons unrelated to their operating performance. In addition, the
Company's operating results in future periods may be below the expectations of
securities analysts and investors. In such event, the price of the Class A
Common Stock would likely decline, perhaps substantially.
CONTROL BY CURRENT STOCKHOLDERS; SHAREHOLDERS AGREEMENT; RESTRICTIONS ON
CORPORATE ACTIONS; ANTI-TAKEOVER EFFECT OF DUAL CLASSES OF STOCK AND CERTAIN
OTHER PROVISIONS
The Company's Common Stock is divided into Class A Common Stock, of which
each share is entitled to one vote with respect to all matters submitted to
stockholder vote, and Class B Common Stock, of which each share is entitled to
ten votes with respect to such matters. Upon completion of the Offering, J. Erik
Hvide and the Hvide Trusts will beneficially own 4,000 shares of Class A Common
Stock and 1,769,107 shares of Class B Common Stock, and the Investor Group will
beneficially own 219,850 shares of Class A Common Stock and 1,650,470 shares of
Class B Common Stock. Upon completion of the Offering, Mr. Hvide (together with
the Hvide Trusts) and the Investor Group will therefore own shares that will
represent 11.9% and 12.5%, respectively, of the outstanding shares of Common
Stock (11.3% and 12.0%, respectively, if the Underwriters' over-allotment option
is exercised in full) and 38.7% and 36.6%, respectively, of the voting power of
all Common Stock (37.9% and 36.3%, respectively, if the Underwriters'
over-allotment option is exercised in full). Accordingly, Mr. Hvide and the
Investor Group will be able to elect a majority of the Company's directors and
to determine the disposition of all matters submitted to a vote of the Company's
stockholders. In addition, the Hvide Family and the Investor Group have entered
into an agreement giving them the right to nominate eight and three persons,
respectively, to the Company's 11-member Board of Directors. Each share of Class
B Common Stock is convertible by its holder into one share of Class A Common
Stock at any time, and automatically converts into Class A Common Stock if held
by persons other than the Hvide Family and members of the Investor Group. See
"Management" and "Description of Capital Stock -- Certain Provisions of Articles
of Incorporation and Bylaws." Pursuant to certain agreements, Mr. Hvide and the
Hvide Trusts
11
<PAGE> 13
will be required to transfer shares of Common Stock to the Company upon its
issuance of shares of Common Stock to the Investor Group on June 10, 1997. See
"Description of Capital Stock -- Contingent Share Issuance Agreement." In
addition, so long as the Investor Group owns specified percentages of the
outstanding Class B Common Stock, certain significant transactions will require
the approval of 95%, and the appointment of a new chief executive officer will
require approval of 75%, of the holders of the Class B Common Stock. See
"Description of Capital Stock -- Certain Provisions of Articles of Incorporation
and Bylaws."
Such control by Mr. Hvide and the Investor Group may also have the effect
of discouraging certain types of transactions involving an actual or potential
change of control of the Company, including transactions in which the holders of
Class A Common Stock might otherwise receive a premium for their shares over
then-current market prices. In addition, pursuant to the Company's Articles of
Incorporation, the Board of Directors is divided into three classes of directors
serving staggered three-year terms and, consequently, it would likely require
two annual meetings rather than one for the stockholders to replace a majority
of the Board of Directors.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Class A Common Stock in the public market,
or the perception that such sales may occur, could have an adverse effect on the
market price of the stock. Subject to an agreement that restricts their sale for
90 days following the date of this Prospectus, all 1,531,466 of the shares of
Class B Common Stock owned by Mr. Hvide and the Hvide Trusts will be eligible
for public sale (Class B Common Stock is freely convertible, share for share,
into Class A Common Stock), subject to volume and other limitations of Rule 144
under the Securities Act of 1933, as amended (the "Securities Act"). Subject to
an agreement that restricts their sale prior to August 7, 1997 without the prior
approval of the Representatives of the Underwriters, 1,870,320 shares of Common
Stock owned by the Investor Group will be eligible for public sale under Rule
144 or through the exercise of demand registration rights. Pursuant to the
Shareholders Agreement and CSI Agreement (each as defined herein) Mr. Hvide and
the Hvide Trusts will be required to transfer shares of Common Stock to the
Company upon its issuance of shares of Common Stock to the Investor Group on
June 10, 1997. Such shares may become eligible for public sale under Rule 144.
The Company has granted the Investor Group certain registration rights under the
Securities Act with respect to the Common Stock owned by them. See "Description
of Capital Stock -- Shareholders Agreement" and " -- Contingent Share Issuance
Agreement." Certain directors, officers, and employees of the Company hold
options to purchase 806,000 shares of Class A Common Stock at an exercise price
of $12 per share. See "Shares Eligible for Future Sale." Moreover, the Company
may issue shares of Common Stock in connection with future acquisitions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Strategy."
FORWARD-LOOKING INFORMATION
Certain statements and information in this Prospectus constitute forward
looking statements within the meaning of the Federal Private Securities
Litigation Reform Act of 1995. Such forward looking statements are typically
punctuated by words or phrases such as "anticipate," "estimate," "projects,"
"management believes," "the Company believes," and words or phrases of similar
import. Such statements are subject to certain risks, uncertainties, or
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, or projected. Among the key
factors that may have a direct bearing on the Company's results and financial
condition are: (i) competitive practices in the marine support and
transportation industry in which the Company competes, (ii) fluctuations in oil
and gas prices, (iii) environmental liabilities to which the Company may become
subject in the future which are not covered by an indemnity or insurance, (iv)
the impact of current and future laws and governmental regulations (particularly
coastwise and environmental laws and regulations) affecting the marine support
and transportation industry in general and the Company's operations in
particular, (v) risks relating to the Company's high leverage position and
potential inability to service its debt, (vi) risks related to the mandated
removal of the Company's vessels from the Jones Act trade, (vii) risks related
to the Company's reliance on significant customers, and (viii) risks related to
the outcome of pending legal proceedings.
12
<PAGE> 14
THE COMPANY
Hvide Marine Incorporated was incorporated in Florida in 1994 as Hvide
Corp., the holding company for its principal operating subsidiary. Immediately
prior to the August 1996 closing of the IPO, the principal operating subsidiary
was merged with and into Hvide Corp., which was renamed Hvide Marine
Incorporated. The Company began operations in 1958 as a harbor tug operator and
in 1975 acquired its first petroleum product carrier. It began transporting
specialty chemicals in 1977 and expanded into the operation of offshore energy
support vessels with the acquisition of eight supply boats in 1989.
In 1994, the Company substantially expanded its fleet, adding 20 crew
boats, six supply boats, and two utility boats to its offshore energy support
fleet and an 18-vessel tug and barge fleet to its petroleum product
transportation operations. This expansion also included the acquisition of the
minority interests in certain vessels that were majority owned by the Company.
These acquisitions were financed primarily through borrowings under a Credit
Agreement, dated as of September 28, 1994, by and among the Company, Citibank,
N.A., as Administrative Agent and Co-Agent, The First National Bank of Boston,
as Letter of Credit Agent and Co-Agent, and the lending banks parties thereto
(as amended, the "Credit Facility") and the issuance of debt and equity
securities of the Company to the Investor Group for aggregate proceeds of $50.0
million. The Selling Stockholders are members of the Investor Group. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Certain Transactions,"
"Principal and Selling Stockholders," and "Description of Capital
Stock -- Contingent Share Issuance Agreement."
Further substantial fleet expansions occurred in 1996. In January 1996, the
Company acquired eight crew boats from GBMS, and in August 1996, in transactions
with five different sellers (the "August 1996 Acquisitions"), it acquired three
chemical carriers, ten offshore supply boats, and one crew boat. The aggregate
purchase price of the August 1996 Acquisitions was $97.5 million, consisting of
$35.5 million in cash, funded primarily with proceeds of the IPO, and the
assumption or incurrence of $62.0 million of debt obligations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
The Company has recently acquired or entered into agreements to acquire an
aggregate of seven supply boats, five crew boats, one offshore anchor handing
tug, and two harbor tugs which constitute the Current Acquisitions. The Current
Acquisitions, which will increase the Company's marine support fleet from 74 to
89 vessels, will be funded, in part, with proceeds of the Offering. The $51.2
million aggregate cost of the Current Acquisitions includes the estimated $6.9
million cost of upgrading, refurbishing, and lengthening two of the supply boats
to 225-foot, 4,300-hp dynamically positioned vessels for use in deepwater
service. See "Use of Proceeds" and "Business -- Current Acquisitions."
The Company's principal office is located at 2200 Eller Drive, Fort
Lauderdale, Florida 33316, and its telephone number is (954) 523-2200.
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<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Class A Common Stock
offered hereby, assuming a public offering price of $25 1/4 per share (the last
reported sale price of the Class A Common Stock on the Nasdaq National Market on
January 27, 1997) and after deducting underwriting discounts and commissions and
estimated offering expenses, are estimated to be approximately $91.4 million
($105.7 million if the Underwriters' over-allotment option is exercised in
full). Of such net proceeds, (i) approximately $35.6 million will be used to
fund the balance of the aggregate $51.2 million purchase price for the Current
Acquisitions, which includes $6.9 million that will be used to upgrade,
refurbish, and lengthen two of the vessels included in the Current Acquisitions,
(ii) approximately $36.3 million will be used to repay certain outstanding
indebtedness as described below, and (iii) the balance of approximately $19.5
million will be used for general corporate purposes. For information concerning
the acquisitions to be funded with a portion of the proceeds of the Offering,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Current Acquisitions."
Of the $36.3 million to be used to repay outstanding indebtedness, (i)
$10.2 million will be used to repay $0.4 million of accrued interest on and $9.8
million of principal of the Senior Notes (as defined herein), which mature in
two equal installments in September 2003 and 2004 and bear interest at the rate
of 12% per annum, (ii) $10.0 million will be used to repay the amount
outstanding under the revolving line of credit under the Credit Facility, which
line is due in January 2001 and bears interest at a fluctuating rate (7.9% at
September 30, 1996), (iii) $13.5 million will be used to repay the amount
outstanding under the vessel acquisition credit line under the Credit Facility,
(iv) $2.0 million will be used to repay accrued interest on and the outstanding
principal of the Founder's Note (as defined herein), which is due in 2000 and
bears interest at the greater of 12% per annum or prime plus 3% (12% at
September 30, 1996), and (v) $0.6 million will be used to repay interest on and
the outstanding principal of the HOS Notes and the HCL Notes (each as defined
herein) which are due in 2004 and bear interest at 12% per annum. For additional
information concerning the indebtedness that is being repaid with a portion of
the proceeds from the Offering, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources," "Certain Transactions," and "Description of Certain
Indebtedness -- Credit Facility."
To the extent that the Underwriters' over-allotment option is exercised for
more than 25,000 shares of Class A Common Stock, the net proceeds therefrom will
be used for general corporate purposes, which may include the repayment of
indebtedness, vessel acquisitions, and vessel improvements. Pending the use of
proceeds as described above, the Company intends to place such net proceeds in
interest-bearing accounts or invest such proceeds in short-term,
interest-bearing, investment-grade securities.
The Company will not receive any proceeds from the sale of Class A Common
Stock by the Selling Stockholders or the Hvide Family Trust II.
PRICE RANGE OF THE CLASS A COMMON STOCK
Since August 9, 1996, the Class A Common Stock has been traded on the
Nasdaq National Market under the symbol "HMAR." The following table sets forth
the high and low sale prices per share of the Class A Common Stock as reported
by the Nasdaq National Market for each calendar quarter since the commencement
of trading.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1996
Third Quarter (commencing August 9)................. $13 7/8 $ 11
Fourth Quarter...................................... 24 1/4 12 7/8
1997
First Quarter (through January 27).................. 28 5/8 21 1/8
</TABLE>
The last reported sale price of the Class A Common Stock, as reported by
the Nasdaq National Market on January 27, 1997, was $25 1/4 per share. As of
January 3, 1997, there were 55 holders of record of Class A Common Stock.
14
<PAGE> 16
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock since its
formation. It presently intends to retain its earnings for use in its business
and therefore does not anticipate paying any cash dividends in the foreseeable
future. The payment of any future dividends will be determined by the Board of
Directors in light of conditions then existing, including the Company's
earnings, financial condition and requirements, restrictions in financing
agreements, business conditions, and other factors. The Company's ability to pay
dividends also is dependent upon the earnings of its subsidiaries and the
distribution of those earnings to the Company and loans or advances by the
subsidiaries to the Company. The ability of the subsidiaries to pay dividends or
to make distributions is restricted by the terms of the Credit Facility. So long
as such restrictions remain in effect, the Company is not expected to have
access to the cash flow generated by its subsidiaries. In addition, the
Company's ability to pay dividends or make distributions to its stockholders is
also restricted by the terms of the Credit Facility. See "Description of Certain
Indebtedness -- Credit Facility."
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of
the Company as of September 30, 1996 and as adjusted to give effect to the
Offering and the application of the estimated net proceeds therefrom. The
information presented below should be read in conjunction with the Company's
consolidated financial statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt........................... $ 20,173 $ 14,673
=============== ===============
Long-term debt (excluding current portion)(1)............... $ 114,144 $ 98,333
Minority partners' equity in subsidiaries................... 1,003 1,003
--------------- ---------------
Stockholders' equity:
Class A Common Stock, par value $0.001; 100,000,000 shares
authorized; 7,644,291 shares issued and outstanding;
11,504,875 shares to be issued and outstanding(2)...... 8 12
Class B Common Stock, par value $0.001; 5,000,000 shares
authorized; 3,419,577 shares issued and
outstanding(2)......................................... 3 3
Additional paid-in capital................................ 97,218 188,567
Retained earnings (accumulated deficit)(3)................ 695 (1,411)
--------------- ---------------
Total stockholders' equity............................. 97,924 187,171
--------------- ---------------
Total minority partners' equity in subsidiaries and
stockholders' equity.................................. 98,927 188,174
--------------- ---------------
Total capitalization.............................. $ 213,071 $ 286,507
=============== ===============
</TABLE>
- ------------------------------------
(1) See "Description of Certain Indebtedness" and Note 3 to the Company's
consolidated financial statements for a description of long-term debt.
(2) See "Description of Capital Stock" for a description of the relative rights
of the Class A Common Stock and Class B Common Stock. Shares to be issued
and outstanding exclude 806,000 shares of Class A Common Stock reserved for
issuance upon exercise of currently outstanding options, 500,000 shares of
Class A Common Stock reserved for issuance under the Company's Employee
Stock Purchase Plan, and 3,500 shares of Class A Common Stock issued in
October 1996. See "Management -- Equity Ownership Plans."
(3) The as adjusted amount reflects an extraordinary loss on the extinguishment
of the Senior Notes and the write-off of deferred costs related to the
amended Credit Facility.
16
<PAGE> 18
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below should be read in
conjunction with the consolidated financial statements and notes thereto of the
Company, the financial statements and notes thereto of the OMI Chemical Carrier
Group (the "OMI Chemical Carriers"), eight supply boats acquired from Seal Fleet
Inc. and certain of its affiliates, (the "Seal Fleet Vessels"), and Gulf Boat
Marine Services, Inc. and E&D Boat Rentals, Inc. (together "GBMS"), "Pro Forma
Condensed Consolidated Financial Statements," "Summary Consolidated Historical
and Pro Forma Financial and Operating Data," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus. The selected unaudited pro forma statement of operations data
for the year ended December 31, 1995 and the nine months ended September 30,
1996 give effect to the acquisitions of the three OMI Chemical Carriers and the
eight Seal Fleet Vessels in August 1996, the acquisition of eight crew boats
from GBMS in January 1996, the acquisition of one vessel in February 1996, the
IPO, and the repayment of certain indebtedness, as if all such transactions had
occurred on January 1, 1995. Such pro forma data are presented for illustrative
purposes only and do not purport to represent what the Company's results
actually would have been if such events had occurred at the dates indicated, nor
do such data purport to project results of operations for any future period or
as of any future date. The selected unaudited pro forma statements of operations
for the year ended December 31, 1995 and the nine months ended September 30,
1996 do not give effect to the Current Acquisitions or the Offering. The
selected balance sheet data at September 30, 1996 have been adjusted to give
effect to the Offering and the application of the estimated net proceeds
therefrom. The results for the nine months ended September 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------- -----------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995 1995 1996 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenue......................... $45,120 $39,639 $41,527 $ 49,792 $ 70,562 $122,985 $51,194 $72,130 $101,046
------- ------- ------- -------- -------- -------- ------- ------- --------
Operating expenses.............. 28,165 24,602 24,032 29,873 40,664 76,311 29,482 42,089 61,689
Overhead expenses............... 7,150 6,778 6,176 9,581 12,518 15,019 9,167 11,049 12,222
Depreciation and amortization... 3,829 4,106 4,735 4,500 6,308 12,730 4,691 6,115 11,125
------- ------- ------- -------- -------- -------- ------- ------- --------
Income from operations.......... 5,976 4,153 6,584 5,838 11,072 18,925 7,854 12,877 16,010
Interest expense, net........... 5,024 3,993 3,412 5,302 11,460 12,312 8,491 8,751 9,034
Other income.................... 601 8 519 11 26 190 56 199 199
------- ------- ------- -------- -------- -------- ------- ------- --------
Income (loss) before provision
for (benefit from) income
taxes, extraordinary item and
cumulative effect of a change
in accounting principle....... 1,553 168 3,691 547 (362) 6,803 (581) 4,325 7,175
Provision for (benefit from)
income taxes.................. 601 158 1,873 189 (2) 2,449 -- 1,616 2,655
------- ------- ------- -------- -------- -------- ------- ------- --------
Income (loss) before
extraordinary item and
cumulative effect of a change
in accounting principle....... 952 10 1,818 358 (360) 4,354 (581) 2,709 4,520
Loss on extinguishment of debt,
net(1)........................ -- -- -- -- -- -- -- 8,016 --
Cumulative effect of a change in
accounting principle.......... -- -- 1,491 -- -- -- -- -- --
------- ------- ------- -------- -------- -------- ------- ------- --------
Net income (loss)............... $ 952 $ 10 $ 3,309 $ 358 $ (360) $ 4,354 $ (581) $(5,307) $ 4,520
======= ======= ======= ======== ======== ======== ======= ======= ========
EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) before
extraordinary item and
cumulative effect of a
change in accounting
principle(2)................ $ 0.14 $ (0.01) $ 0.26 $ 0.03 $ (0.14) $ 0.40 $ (0.23) $ 0.68 $ 0.41
Net income (loss)(2).......... 0.14 (0.01) 0.50 0.03 (0.14) 0.40 (0.23) (1.32) 0.41
Weighted average number of
common shares and common
share equivalents
outstanding(3).............. 6,268 6,268 6,268 5,302 2,535 10,905 2,535 4,018 11,064
EARNINGS (LOSS) PER COMMON SHARE
ASSUMING FULL DILUTION:
Income (loss) before
extraordinary item and
cumulative effect of a
change in accounting
principle(2)................ $ 0.14 $ (0.01) $ 0.26 $ 0.06 $ 0.12 $ 0.00 $ 0.64
Net income (loss)(2).......... 0.14 (0.01) 0.50 0.06 0.12 0.00 (0.95)
======= ======= ======= ======== ======== ======= =======
Weighted average number of
shares and common share
equivalents outstanding(3).. 6,268 6,268 6,268 5,616 3,779 3,779 5,049
======= ======= ======= ======== ======== ======= =======
OTHER FINANCIAL DATA:
EBITDA(4)..................... $ 9,805 $ 8,259 $11,319 $ 10,338 $ 17,380 $ 31,655 $12,545 $18,992 $ 27,135
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN):
Operating activities............................. $ 8,584 $ (930) $ 6,956 $ 2,858 $ 3,948 $ 71 $ 6,126
Investing activities............................. (3,633) (1,592) (2,247) (39,815) (8,066) (5,312) (61,738)
Financing activities............................. 440 (2,473) (6,158) 41,249 805 1,715 58,160
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30, 1996
------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)........................ $ 3,330 $ 847 $ 2,640 $ 7,793 $ 4,315 $ (105) $ 23,122
Total assets..................................... 90,916 83,718 82,373 135,471 143,683 254,616 321,261
Total debt....................................... 59,394 57,011 51,273 104,281 109,051 134,317 113,006
Stockholders' and minority partners' equity...... 15,755 15,858 19,926 14,903 13,999 98,927 188,174
</TABLE>
- ------------------------------------
(1) Reflects the loss on the extinguishment of debt from a portion of the
proceeds of the IPO net of applicable income taxes of $1,405,000.
(2) For the purposes of calculating earnings per share for the years 1991, 1992,
1993, and 1994, historical income available to common stockholders has been
reduced for dividends on Class A Preferred Stock of $69,000, $50,000,
$203,000, and $222,000, respectively. The Class A Preferred Stock was
redeemed on September 30, 1994. See "Certain Transactions."
(3) For the years 1991, 1992, 1993, and 1994, the weighted average number of
common shares and common share equivalents assumes the conversion of the
Class B Preferred Stock into shares of Common Stock. The Class B Preferred
Stock was redeemed on September 30, 1994. For the years ended 1994 and 1995
and the nine months ended September 30, 1995 and 1996, shares outstanding
assuming full dilution reflects the assumed conversion of a portion of the
Junior Notes into shares of Common Stock. The Junior Notes were issued in
September 1994 and converted into shares of Common Stock in September 1996.
Pro forma shares reflect the weighted average number of common shares giving
effect to the issuance of 7,159,000 shares of Class A Common Stock in the
IPO, 100,358 shares of Class A Common Stock in payment of services, 25,667
shares of Class A Common Stock in exchange for certain outstanding
indebtedness, and 1,244,002 shares of Class A and Class B Common Stock in
exchange for the principal amount of the Junior Notes remaining after the
application of the proceeds of the IPO and exclude 806,000 shares of Class A
Common Stock reserved for issuance upon exercise of currently outstanding
options and 500,000 shares reserved for issuance under the Company's
Employee Stock Purchase Plan. See "Management -- Equity Ownership Plans."
(4) EBITDA (net income from continuing operations before interest expense,
income tax expense, depreciation expense, amortization expense, minority
interests, and other non-operating income) is frequently used by securities
analysts and is presented here to provide additional information about the
Company's operations. EBITDA is not required by generally accepted
accounting principles and should not be considered as an alternative to net
income as an indicator of the Company's operating performance or as an
alternative to cash flows from operations as a measure of liquidity.
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of the Company's financial condition and
historical results of operations should be read in conjunction with the
Company's consolidated historical financial statements, the Company's unaudited
pro forma condensed consolidated financial statements, and the financial
statements of the OMI Chemical Carriers, the Seal Fleet Vessels, and GBMS and
the related notes thereto included elsewhere in this Prospectus.
HISTORICAL GROWTH
Since September 1994, the Company's operations have expanded through a
series of consolidating acquisitions which, excluding the Current Acquisitions,
aggregate 84 vessels. The following table sets forth certain information with
respect to these acquisitions.
<TABLE>
<CAPTION>
NUMBER OF VESSELS AGGREGATE
PERIOD TRANSACTIONS ACQUIRED INVESTMENT
<S> <C> <C> <C> <C>
Offshore Energy Support................... 1994 5 6 supply boats $19.6 million
20 crew boats
2 utility boats
1995 1 7 crew boats 5.9 million
1996 6 10 supply boats 40.6 million
11 crew boats
Offshore and Harbor Towing................ 1994 1 1 tug 1.8 million
1995 1 1 tractor tug 6.4 million(1)
Chemical Transportation................... 1996 1 3 chemical carriers 64.7 million
Petroleum Product Transportation.......... 1994 1 10 tugs 13.9 million
8 barges
1995 1 5 barges 0.1 million
</TABLE>
- ------------------------------------
(1) The Company operates the tractor tug pursuant to a long-term operating
lease.
CURRENT ACQUISITIONS
Completion of the Current Acquisitions will add 15 marine support vessels
to the Company's fleet. The following table sets forth certain information with
respect to these acquisitions.
<TABLE>
<CAPTION>
AREA OF
EXPECTED INTENDED AGGREGATE
VESSELS DELIVERY DEPLOYMENT INVESTMENT
<S> <C> <C> <C>
Offshore Energy Support
2 supply boats(1)............................ 4th Qtr. 1996 U.S. Gulf $11.5 million
4 crew boats................................. 1st Qtr. 1997 U.S. Gulf 7.4 million
2 supply boats............................... 2nd Qtr. 1997 U.S. Gulf 11.4 million
3 supply boats............................... 2nd Qtr. 1997 U.S. Gulf 15.1 million
1 crew boat.................................. 2nd Qtr. 1997 U.S. Gulf 1.8 million
Offshore and Harbor Towing
1 offshore anchor handling tug............... 4th Qtr. 1996 U.S. Gulf 3.4 million
2 harbor tugs................................ 1st Qtr. 1997 Mobile and Port 0.6 million
Canaveral(2)
</TABLE>
- ------------------------------------
(1) These vessels are currently being upgraded, lengthened, and refurbished and
are expected to enter service during the second quarter of 1997. Aggregate
investment includes the estimated cost of such upgrading, lengthening, and
refurbishment.
(2) The deployment of one harbor tug at Mobile will allow one of the Company's
existing tugs to be redeployed in offshore towing operations in the U.S.
Gulf.
19
<PAGE> 21
AREA OF OPERATIONS OVERVIEW
The financial information presented below represents historical results by
major areas of operations. The historical financial data presented below should
be read in conjunction with the Company's consolidated financial statements and
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1993 1994 1995 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue:
Marine support services:
Offshore energy support................................ $ 4,518 $11,317 $23,217 $16,426 $28,226
Offshore and harbor towing............................. 10,585 11,140 12,582 9,205 10,234
------- ------- ------- ------- -------
15,103 22,457 35,799 25,631 38,460
Marine transportation services:
Chemical transportation................................ 17,337 16,886 18,632 13,728 19,230
Petroleum product transportation....................... 9,087 10,449 16,131 11,835 14,440
------- ------- ------- ------- -------
26,424 27,335 34,763 25,563 33,670
------- ------- ------- ------- -------
Total revenue..................................... 41,527 49,792 70,562 51,194 72,130
------- ------- ------- ------- -------
Operating expenses:
Marine support services:
Offshore energy support................................ 1,719 7,017 13,335 9,413 15,371
Offshore and harbor towing............................. 5,748 5,568 6,001 4,269 5,417
------- ------- ------- ------- -------
7,467 12,585 19,336 13,682 20,788
Marine transportation services:
Chemical transportation................................ 10,678 10,698 11,105 8,453 11,693
Petroleum product transportation....................... 5,887 6,590 10,223 7,347 9,608
------- ------- ------- ------- -------
16,565 17,288 21,328 15,800 21,301
------- ------- ------- ------- -------
Total operating expenses.......................... 24,032 29,873 40,664 29,482 42,089
Direct overhead expenses:
Marine support services:
Offshore energy support................................ 506 1,090 2,182 1,483 1,859
Offshore and harbor towing............................. 969 958 1,111 733 992
------- ------- ------- ------- -------
1,475 2,048 3,293 2,216 2,851
Marine transportation services:
Chemical transportation................................ 554 881 1,433 1,066 1,887
Petroleum product transportation....................... 150 264 738 524 684
------- ------- ------- ------- -------
704 1,145 2,171 1,590 2,571
------- ------- ------- ------- -------
Total direct overhead............................. 2,179 3,193 5,464 3,806 5,422
------- ------- ------- ------- -------
Fleet EBITDA(1):
Marine support services:
Offshore energy support................................ 2,293 3,210 7,700 5,530 10,996
Offshore and harbor towing............................. 3,868 4,614 5,470 4,203 3,825
------- ------- ------- ------- -------
6,161 7,824 13,170 9,733 14,821
Marine transportation services:
Chemical transportation................................ 6,105 5,307 6,094 4,209 5,650
Petroleum product transportation....................... 3,050 3,595 5,170 3,964 4,148
------- ------- ------- ------- -------
9,155 8,902 11,264 8,173 9,798
------- ------- ------- ------- -------
Total fleet EBITDA(1)............................. 15,316 16,726 24,434 17,906 24,619
Corporate overhead expenses................................ 3,997 6,388 7,054 5,361 5,627
------- ------- ------- ------- -------
EBITDA(1).................................................. 11,319 10,338 17,380 12,545 18,992
Depreciation and amortization expenses..................... 4,735 4,500 6,308 4,691 6,115
------- ------- ------- ------- -------
Income from operations..................................... $ 6,584 $ 5,838 $11,072 $ 7,854 $12,877
======= ======= ======= ======= =======
</TABLE>
- ------------------------------------
(1) EBITDA (net income from continuing operations before interest expense,
income tax expense, depreciation expense, amortization expense, minority
interest and other non-operating income) is frequently used by securities
analysts and is presented here to provide additional information about the
Company's operations. Fleet EBITDA is EBITDA before corporate overhead
expenses. EBITDA and fleet EBITDA are not required by generally accepted
accounting principles and should not be considered as alternatives to net
income as indicators of the Company's operating performance, or as
alternatives to cash flows from operations as a measure of liquidity.
20
<PAGE> 22
REVENUE OVERVIEW
MARINE SUPPORT SERVICES
Revenue derived from vessels providing marine support services is
attributable to the Company's offshore energy support fleet and its offshore and
harbor towing operations.
Offshore Energy Support. Revenue derived from the Company's offshore energy
support services is primarily a function of the size of the Company's fleet,
vessel day rates or charter rates, and fleet utilization. Rates and utilization
are primarily a function of offshore drilling, production, and construction
activities. Levels of offshore drilling, production, and construction have
increased over the past several years as a result of fundamental changes in the
U.S. Gulf of Mexico energy industry, including: (i) improvements in exploration
technologies, such as computer-aided exploration and 3-D seismic, that have
increased drilling success rates in the region; (ii) improvements in subsea
completion and production technologies that have led to increased deepwater
drilling and development; and (iii) expansion of the region's production
infrastructure that has improved the economics of developing smaller oil and gas
fields. In addition, the short reserve life characteristics of U.S. Gulf of
Mexico gas production require continuous drilling to replace reserves and
maintain production. These higher overall activity levels have led to increased
demand for the Company's offshore energy support services and higher overall
vessel day rates and utilization in the U.S. Gulf of Mexico. Contracts for the
utilization of offshore service vessels commonly include termination provisions
with three- to five-day notice requirements and no termination penalty. As a
result, the operations of companies engaged in the offshore energy service
market are particularly sensitive to changes in market demand. See "Business --
The Industry -- Marine Support Services -- Offshore Energy Support."
The following table sets forth average day rates achieved by the offshore
supply boats and crew boats owned or operated by the Company in the U.S. Gulf of
Mexico and their average utilization for the periods indicated.
<TABLE>
<CAPTION>
1993 1994
-------------------------------------------- --------------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of supply boats at
end of period............. 3 3 3 3 5 7 7 8
Average supply boat day
rates(1).................. $2,325 $2,400 $2,852 $3,209 $3,433 $3,035 $3,200 $3,060
Average supply boat
utilization(2)............ 100% 100% 100% 94% 94% 73% 80% 90%
Number of crew boats at end
of period(3)(4)........... -- -- -- -- -- -- 20 19
Average crew boat day
rates(1)(3)............... -- -- -- -- -- -- $1,405 $1,435
Average crew boat
utilization(2)(3)......... -- -- -- -- -- -- 87% 88%
</TABLE>
<TABLE>
<CAPTION>
1995 1996
-------------------------------------------- --------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of supply boats at
end of period............. 10 10 10 10 10 11 16
Average supply boat day rate
rates(1).................. $2,886 $2,843 $3,113 $3,244 $3,468 $4,095 $5,034
Average supply boat
utilization(2)............ 71% 76% 84% 93% 92% 100% 97%
Number of crew boats at end
of period(3)(4)........... 26 26 26 26 35 35 36
Average crew boat day
rates(1)(3)............... $1,444 $1,412 $1,422 $1,458 $1,460 $1,466 $1,528
Average crew boat
utilization(2)(3)......... 79% 81% 90% 91% 89% 93% 96%
</TABLE>
- ------------------------------------
(1) Average day rates are calculated based on vessels operating domestically by
dividing total vessel revenue by the total number of days of vessel
utilization.
(2) Utilization is based on vessels operating domestically and determined on the
basis of a 365-day year. Vessels are considered utilized when they are
generating charter revenue.
(3) Excludes utility boats.
(4) The Company first began operating crew boats in July 1994.
21
<PAGE> 23
During the past five years, day rates and utilization in the U.S. Gulf of
Mexico were at their lowest during the summer of 1992 when the Company estimates
average offshore supply boat day rates were $1,300 to $1,400. As a result, in
the summer of 1992, a number of operators relocated supply boats from the U.S.
Gulf of Mexico to West Africa, the Arabian Gulf, and Southeast Asia. The Company
relocated five supply boats to the Arabian Gulf (all of which have been returned
to the U.S. Gulf of Mexico) and two to Southeast Asia in September 1992. Day
rates and utilization in the U.S. Gulf of Mexico increased through the end of
1993 primarily as a result of (i) Hurricane Andrew in the fall of 1992, which
caused substantial damage to pipeline and production facilities and greater
demand for supply boats, (ii) higher natural gas prices and increased drilling
activity for natural gas, and (iii) the reduced supply of immediately available
vessels. Management believes that relocation of vessels to the U.S. Gulf of
Mexico in early 1994 helped to depress day rates and utilization until the end
of the second quarter of 1994 and that industry day rates and utilization were
lower in the first half of 1995 because of weak natural gas prices, primarily
due to the warm winter in North America and Europe.
Management believes that the increased activity in the U.S. Gulf of Mexico
since the second quarter of 1995 has been primarily attributable to improved
technology in the seismic industry and an approximate balance in the supply of
and demand for offshore service vessels. Deepwater activity is also currently a
positive factor in the market, and management believes further deepwater
exploration and production will likely increase demand for available vessels,
resulting in higher day rates and utilization.
Offshore and Harbor Towing. Revenue derived from the Company's tug
operations is primarily a function of the number of tugs available to provide
services, the rates charged for their services, and the volume of vessel traffic
requiring docking and other ship-assist services. Vessel traffic, in turn, is
largely a function of the general trade activity in the region served by the
port. The Company generally has maintained four to five tugs in Port Everglades,
and three each in Port Canaveral and Mobile, although it has shifted tugs among
ports depending upon demand. Since the August 1995 delivery of the tractor tug
Broward, the Company has operated up to five tugs in Port Everglades with one of
the tugs available to provide offshore towing services.
The following table summarizes certain operating information for the
Company's tugs.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- -----------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Number of tugs at end of period(1).............. 10 10 11 11 11
Total ship docking tug jobs(2).................. 8,178 8,740 9,233 6,847 7,150
Total offshore and harbor towing revenue
(in thousands)................................ $10,585 $11,140 $12,582 $9,205 $10,234
</TABLE>
- ------------------------------------
(1) The Company's eleventh tug was delivered in August 1995.
(2) Excludes offshore towing operations.
MARINE TRANSPORTATION SERVICES
Chemical Transportation. Generally, demand for industrial chemical
transportation services coincides with overall economic activity. Since 1989,
revenue derived from chemical transportation operations has been entirely
attributable to the operations of Ocean Specialty Tankers Corporation ("OSTC"),
a company owned equally by OMI Corp. ("OMI") and the Company until August 1996,
when the Company acquired OMI's interest in OSTC along with the three OMI
Chemical Carriers. Prior to the acquisition, the Company's chemical
transportation revenue consisted of distributions from OSTC attributable to the
Company's two chemical carriers marketed by OSTC based upon a formula that took
into account individual vessel performance characteristics applied to OSTC's
revenue (net of fuel costs, port charges, and overhead). Since the acquisition,
the Company continues to have OSTC market the five chemical carriers and
receives the revenue attributable to all five of the vessels. See
"Business -- Company Operations -- Marine Transportation Services -- Chemical
Transportation -- OSTC."
Petroleum Product Transportation. Since entering service in 1975, the
product carrier Seabulk Challenger has derived all of its revenue from
successive voyage and time charters to Shell. Under the current
22
<PAGE> 24
charter, fuel and port costs are for the account of the charterer, charter hire
escalates based upon changes in the consumer price index, and charter hire is
suspended while the vessel is unavailable to transport cargo, as when it is
undergoing repairs or regularly scheduled maintenance. The charter extends to
January 2000, with the charterer retaining the right to early termination upon
the payment to the Company of a significant penalty. In the fourth quarter of
1996, the charter rate was renegotiated and reduced by approximately 6% to
reflect the lower current market rate. Revenue from the Company's towboats and
fuel barges has been derived primarily from contracts of affreightment with
Florida Power & Light Company ("FPL") and Steuart Petroleum Co. that require the
Company to transport fuel as needed by those two customers, with the FPL
contract having a guaranteed minimum utilization.
The following table sets forth the average time charter equivalents for the
Company's chemical and product carriers, including the OMI Chemical Carriers as
if such vessels were owned by the Company during the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------ -------------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Number of vessels.......................................... 6 6 6 6 6
Time charter equivalents(1)................................ $24,566 $24,751 $25,629 $25,334 $25,551
</TABLE>
- ------------------------------------
(1) Time charter equivalents are calculated by deducting total voyage expenses
from total voyage revenue and dividing the result by the total days per
voyage.
OVERVIEW OF OPERATING EXPENSES AND CAPITAL EXPENDITURES
The Company's operating expenses are primarily a function of fleet size and
utilization. The most significant expense categories are crew payroll and
benefits, depreciation and amortization, charter hire, maintenance and repairs,
fuel, and insurance.
The crews of Company-manned chemical and product carriers are paid on a
time-for-time basis by which they receive paid leave in proportion to time
served aboard a vessel. The crews of offshore energy support vessels and certain
tugs and towboats are paid only for days worked.
Charter hire consists primarily of payments made with respect to the
bareboat charters of the Seabulk Challenger and Seabulk Magnachem, which were
acquired pursuant to leveraged lease transactions (see "Description of Certain
Indebtedness -- Long-Term Charter Obligations -- Title XI Bonds") and operating
lease payments on the tractor tug Broward. In addition, the Company recently
entered into one-year charters of two newly built tugs. The Company also pays
charter hire when it charters harbor tugs to meet requirements in excess of its
own tugs' availability.
The Company capitalizes expenditures exceeding $5,000 for product and
chemical tankers and $3,000 for all other vessels, where the item acquired has a
useful life of three years or greater. Vessel improvements and vessel
maintenance and repair are capitalized only if they also extend the useful life
of the vessel or increase its value. The Company overhauls main engines and key
auxiliary equipment in accordance with a continuous planned maintenance program.
Under applicable regulations, the Company's chemical and product carriers,
offshore service vessels, and its four largest tugs are required to be drydocked
twice in a five-year period for inspection and routine maintenance and repairs.
These vessels are also required to undergo special surveys every five years
involving comprehensive inspection and corrective measures to insure their
structural integrity and proper functioning of their cargo and ballast piping
systems, critical machinery and equipment, and coatings. The Company's fuel
barges, because they are operated in fresh water, are required to be drydocked
only twice in each ten-year period. The Company's harbor tugs and towboats
generally are not required to be drydocked on a specific schedule. During the
years ended December 31, 1993, 1994, and 1995 and the nine months ended
September 30, 1996, the Company drydocked five, 13, 42, and 17 vessels,
respectively, at an aggregate cost (exclusive of lost revenue) of $0.9 million,
$1.6 million, $2.0 million, and $0.6 million respectively. See "-- Liquidity and
Capital Resources" for information regarding anticipated maintenance and
improvement expense, including drydocking expense. Effective January 1, 1993,
the Company changed its method of accounting for drydocking costs from the
accrual method to the deferral method. Under the deferral method, capitalized
drydocking costs are expensed over the period preceding the next scheduled
drydocking. The Company believes the deferral method better matches costs with
revenue and minimizes any
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significant changes in estimates associated with the accrual method. See Note 1
of the Company's consolidated financial statements. In addition to variable
expenses associated with vessel operations, the Company incurs fixed charges to
depreciate its marine assets. The Company calculates depreciation based on a
useful life ranging from 25 years for its steel-hull offshore energy support
vessels to 30 years for aluminum-hull vessels, the lesser of any applicable
lease term life or the OPA 90 life for its product and chemical carriers, ten
years for its fuel barges, and 40 years for its towboats and tugs.
Insurance costs consist primarily of premiums paid for (i) protection and
indemnity insurance for the Company's marine liability risks, which are insured
by a mutual insurance association of which the Company is a member and through
the commercial insurance markets; (ii) hull and machinery insurance and other
maritime-related insurance, which are provided through the commercial marine
insurance markets; and (iii) general liability and other traditional insurance,
which is provided through the commercial insurance markets. Insurance costs,
particularly costs of marine insurance, are directly related to overall
insurance market conditions and industry and individual loss records, which vary
from year to year.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
Revenue. Revenue increased 41% to $72.1 million for the nine months ended
September 30, 1996 from $51.2 million for the nine months ended September 30,
1995 primarily due to increased revenue in the Company's offshore energy
support, petroleum product transportation, and chemical transportation
operations.
Revenue from offshore energy operations increased 72% to $28.2 million for
the nine months ended September 30, 1996 from $16.4 million for the nine months
ended September 30, 1995 primarily due to acquisitions and greater utilization
of supply and crew boats and higher day rates resulting from increased offshore
exploration and production activity. During the 1996 period, day rates for
supply boats owned, operated, or managed by the Company increased 42% from the
1995 period, and day rates for crew boats owned, operated, or managed by the
Company increased 4% from the 1995 period. Utilization of supply boats increased
to 96% for the 1996 period from 77% for the 1995 period, and utilization of crew
boats increased to 93% for the 1996 period from 83% for the 1995 period.
Petroleum product transportation revenue increased 22% to $14.4 million for
the nine months ended September 30, 1996 from $11.8 million for the nine months
ended September 30, 1995 primarily due to increased movements of product by the
Company's towboat and barge fleet as a result of the cold winter and higher
natural gas prices.
Chemical transportation revenue increased 40% to $19.2 million for the nine
months ended September 30, 1996 from $13.7 million for the nine months ended
September 30, 1995 primarily due to the August 1996 acquisition of the OMI
Chemical Carriers and the remaining 50% interest in OSTC.
Revenue from offshore and harbor tug operations increased 11% to $10.2
million for the nine months ended September 30, 1996 from $9.2 million for the
nine months ended September 30, 1995 primarily as a result of increased tanker
and freighter traffic in Port Everglades. Revenue also increased in the port of
Mobile due to a tariff increase and an increase in port traffic.
Operating Expenses. Operating expenses increased 43% to $42.1 million for
the nine months ended September 30, 1996 from $29.5 million for the nine months
ended September 30, 1995 primarily due to increases in crew payroll and
benefits, maintenance and repair, and supplies and consumables resulting from
acquisitions and increased business activity. As a percentage of revenue,
operating expenses remained stable at 58% for both the nine months ended
September 30, 1996 and for the nine months ended September 30, 1995.
Overhead Expenses. Overhead expenses increased 21% to $11.0 million for the
nine months ended September 30, 1996 from $9.2 million for the nine months ended
September 30, 1995 primarily due to an increase in professional fees relating to
pending litigation. Additionally, salaries and benefits increased as a result of
an increase in staffing requirements due to acquisitions. As a percentage of
revenue, overhead
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expenses decreased to 15% for the nine months ended September 30, 1996 from 18%
for the nine months ended September 30, 1995.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased 30% to $6.1 million for the nine months ended September 30,
1996 compared with $4.7 million for the nine months ended September 30, 1995 as
a result of an increase in fleet size due to acquisitions.
Income from Operations. Income from operations increased 64% to $12.9
million, or 18% of revenue, for the nine months ended September 30, 1996 from
$7.9 million, or 15% of revenue, for the nine months ended September 30, 1995 as
a result of the factors noted above.
Net Interest Expense. Net interest expense increased 3% to $8.8 million for
the nine months ended September 30, 1996 from $8.5 million for the nine months
ended September 30, 1995 primarily as a result of debt incurred in connection
with acquisitions. As a percentage of revenue, net interest expense decreased to
12% for the nine months ended September 30, 1996 from 17% for the nine months
ended September 30, 1995.
Net Income (Loss). The Company had a net loss of $5.3 million for the nine
months ended September 30, 1996 after incurring a net loss of $0.6 million for
the nine months ended September 30, 1995 primarily as a result of non-recurring
charges of $8.0 million, net of a $1.4 million income tax benefit, related to an
early extinguishment of debt in connection with the IPO.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Revenue. Revenue increased 42% to $70.6 million in 1995 compared with $49.8
million in 1994 primarily due to the Company's purchase of new businesses and
additional vessels.
Offshore energy operations showed a 105% increase in revenue in 1995
primarily due to the acquisition of additional supply and crew boats. Although
revenue increased, the utilization of supply boats decreased to 81% in 1995 from
84% in 1994 and the utilization of crew boats decreased to 85% in 1995 from 88%
in 1994 due primarily to the relatively warm winter in early 1995, which caused
a decline in oil and gas prices thereby reducing exploration and production
activities. There was a 5% decrease in average day rates for the Company's
supply boats in 1995 from 1994, while average day rates for the Company's crew
boats remained relatively stable.
Chemical transportation revenue increased 10% in 1995 primarily due to
fewer off-hire (out-of-service) days incurred by the Seabulk Magnachem in 1995
following its regularly scheduled drydocking in 1994.
Revenue from petroleum product transportation increased 54% in 1995
primarily due to a full year of operating results for the Sun State tug and
barge fleet, which was acquired in September 1994.
Revenue from offshore and harbor tug operations increased 13% to $12.6
million in 1995 from $11.1 million in 1994 primarily due to an increase in
overall traffic in the ports served by the Company.
Operating Expenses. Operating expenses increased 36% to $40.7 million in
1995 from $29.9 million in 1994 primarily due to increased operating expenses
associated with acquisitions, although operating expenses decreased as a
percentage of revenues to 58% in 1995 from 60% in 1994.
Overhead Expenses. Overhead expenses increased 31% to $12.5 million in 1995
compared with $9.6 million in 1994 primarily due to increases in staffing,
certain benefits, and insurance expenses directly related to new business
acquisitions. Also, in addition to paying discretionary performance bonuses in
April 1995 which were, in part, related to prior periods, an accrual of $400,000
was made at year end for 1995 performance bonuses. As a percentage of revenues,
overhead expenses decreased to 18% in 1995 from 19% in 1994.
Depreciation and Amortization. Depreciation and amortization expense
increased 40% to $6.3 million in 1995 compared with $4.5 million in 1994
primarily due to an increase in fleet size as a result of acquisitions.
Income from Operations. Income from operations increased 90% to $11.1
million, or 16% of revenue, in 1995 compared with $5.8 million, or 12% of
revenue, in 1994. This increase was a result of a substantial
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increase in income from operations from the Company's offshore energy segment
and an increase in the Company's fuel energy segment that were mainly the result
of acquisitions. Harbor towing achieved an increase in income from operations of
25% over 1994 as a result of an overall increase in traffic in Mobile, Port
Canaveral, and Port Everglades.
Net Interest Expense. Net interest expense increased 116% to $11.5 million,
or 16% of revenue, in 1995 compared with $5.3 million, or 11% of revenue, in
1994 primarily due to interest on debt incurred in the last quarter of 1994 to
finance acquisitions.
Net Income (Loss). The Company had a net loss of $0.4 million in 1995
compared with net income of $0.4 million in 1994, primarily due to an increase
in financing costs incurred in connection with acquisitions completed in 1994
and the other factors noted above.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
Revenue. Revenue increased 20% to $49.8 million for the year ended December
31, 1994 compared with $41.5 million for the year ended December 31, 1993
primarily due to the addition of revenue from acquisitions completed in 1994.
Revenue from offshore energy support services increased 150% primarily due to
revenue from such acquisitions. In addition, the Company's average Gulf of
Mexico supply boat day rates increased 19% in 1994 from an average of $2,696 per
day in 1993 to $3,195 per day in 1994, although supply boat fleet utilization
decreased from 98% to 84% due to the drydocking of two boats and the addition of
two boats with relatively low utilization rates in 1994. Revenue from chemical
transportation decreased 3% due to the Seabulk Magnachem having greater off-hire
time due to a regularly scheduled drydocking in April 1994. Revenue from
petroleum product transportation increased 15% primarily due to the Sun State
acquisition in September 1994. Offshore and harbor tug towing revenues increased
5% due to a general increase in vessel traffic in the ports served by the
Company.
Operating Expenses. Operating expenses increased 24% to $29.9 million, or
60% of revenue, for the year ended December 31, 1994 compared with $24.0
million, or 58% of revenue, for the year ended December 31, 1993 primarily due
to the increased operating expenses associated with the acquisitions completed
in 1994. Charter hire expense increased due to the Company's chartering in May
and June of 1994 of certain supply and crew boats that were acquired in
September 1994, partly offset by a decrease in charter hire expense due to the
acquisition in September 1994 of the interests in the limited partnership that
owned the tug Hollywood (formerly the Cape Canaveral), which was previously
chartered to the Company.
Overhead Expenses. Overhead expenses increased 55% to $9.6 million, or 19%
of revenue, for the year ended December 31, 1994 compared with $6.2 million, or
15% of revenue, for the year ended December 31, 1993 primarily due to increased
corporate staffing and other greater infrastructure costs associated with the
acquisitions completed in 1994, greater litigation expenses relating to the
Seabulk America (see "Business -- Legal Proceedings"), and expenses incurred to
prepare an initial public offering which was postponed due to market conditions.
Bonuses of approximately $280,000 were paid to Company management personnel in
October 1994 (no bonuses to management personnel were paid in 1993).
Depreciation and Amortization. Depreciation and amortization expense
decreased 5% to $4.5 million for the year ended December 31, 1994 compared with
$4.7 million for the year ended December 31, 1993 primarily due to the
amortization of expenses incurred in 1993 to transport four offshore supply
boats from the Gulf of Mexico to the Arabian Gulf.
Income from Operations. Income from operations decreased 11% to $5.8
million, or 12% of revenue, for the year ended December 31, 1994 compared with
$6.6 million, or 16% of revenue, for the year ended December 31, 1993 primarily
as a result of the factors described above.
Net Interest Expense. Net interest expense increased 55% to $5.3 million,
or 11% of revenue, for the year ended December 31, 1994 compared with $3.4
million, or 8% of revenue, for the year ended December 31, 1993 primarily due to
interest due on the debt incurred to finance the acquisitions completed in 1994.
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Net Income. Net income decreased to $0.4 million for the year ended
December 31, 1994 compared with $3.3 million for the year ended December 31,
1993 primarily due to the factors described above and an approximate $1.5
million gain in 1993 resulting from a change in the Company's method of
accounting for drydocking.
SEASONALITY
The Company has experienced some slight seasonality in its overall
operations. The first half of the year is generally not as strong as the second
half due to lower activity in offshore energy support activity and petroleum
product transportation during the months of February, March, and April.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements historically have arisen primarily from
its working capital needs, acquisition of marine vessels, improvements to
vessels, and debt service requirements. The Company's principal sources of cash
have been borrowings, cash provided by operating activities, and proceeds from
the IPO in August 1996.
In September 1994, the Company entered into the Credit Facility which, as
amended, currently provides for a $60.5 million term loan, a $10.0 million
revolving line of credit, a $19.9 million vessel acquisition credit line which
decreases to $11.5 million over a four-year period, and a $5.6 million letter of
credit. Borrowings under the Credit Facility bear interest at prime or LIBOR, at
the Company's option, plus a margin based on the Company's compliance with
certain financial ratios. At September 30, 1996, borrowings outstanding under
the Credit Facility aggregated $70.2 million, consisting of $60.5 million under
the term loan, $5.5 million under the revolving line of credit, and $4.2 million
under the vessel acquisition credit line. The Company has entered into a
commitment letter with its banks providing for an amendment to the Credit
Facility that would increase the amounts available under the revolving line of
credit and the acquisition credit line and make other modifications to the
Credit Facility. Upon entering into this amended Credit Facility, the Company
will write off approximately $1.2 million of deferred financing costs net of
applicable income taxes. See "Description of Certain Indebtedness -- Credit
Facility." The Company intends to repay all outstanding borrowings under the
revolving line of credit with proceeds of the Offering.
Also in September 1994, the Company received $50.0 million in proceeds from
the issuance of the Senior Notes, the Junior Notes, and certain equity
securities. These proceeds, together with borrowings under the Credit Facility,
were utilized primarily to repay other indebtedness and to fund vessel
acquisitions.
In August 1996, the Company completed the IPO, which resulted in net
proceeds to the Company of approximately $76.7 million. Of such net proceeds,
approximately $34.7 million was used to fund the $35.5 million cash portion of
the $97.5 million aggregate purchase price of the August 1996 Acquisitions and
approximately $42.0 million was used to repay certain indebtedness. The balance
of the purchase price of the August 1996 Acquisitions was paid by the assumption
or incurrence of $62.0 million of debt obligations. In addition, the Company
agreed to indemnify certain affiliates of one of the sellers for certain
liabilities up to a maximum of $7.0 million. Indebtedness repaid with proceeds
from the IPO included $7.0 million under the Credit Facility, $15.8 million of
accrued interest and principal under the Senior Notes, $15.1 million of accrued
interest and principal under the Junior Notes, and $4.1 million under certain
notes payable to affiliates of the Company. The $13.9 million balance of the
outstanding principal under the Junior Notes was converted into Class A Common
Stock and Class B Common Stock in September 1996. As of September 30, 1996,
$10.2 million of accrued interest and principal under the Senior Notes was
outstanding. All outstanding borrowings under the Senior Notes will be repaid
using a portion of the proceeds of the Offering.
The Company's future capital needs are expected to relate primarily to debt
service obligations, maintenance and improvement of its fleet, and acquisitions.
The Company's outstanding indebtedness at September 30, 1996 was approximately
$134.3 million. Debt service requirements for the fourth quarter of 1996 were
approximately $4.0 million for principal and $2.7 million for interest, and
operating lease payments for the fourth quarter of 1996 were approximately $0.2
million. After giving effect to repayments under the revolving line of credit
under the Credit Facility, the Senior Notes, the Founder's Note and the HCL
Notes and HOS Notes with a portion of the proceeds of the Offering, the
Company's principal and interest payment
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obligations for 1997 are estimated to be approximately $15.1 and $8.6 million,
respectively, and operating lease obligations for 1997 are estimated to be
approximately $3.9 million.
Capital requirements for maintenance and improvement (excluding
improvements of $6.9 million associated with the Current Acquisitions) were
approximately $12.0 million for 1996, of which $9.1 million had been recorded as
either capital expenditures or construction in progress as of September 30,
1996, and are estimated to be approximately $15.0 million for 1997.
The Company is considering contracting for the construction of two
ship-docking modules ("SDMs") at an estimated aggregate cost of approximately
$9.5 million with delivery expected in late 1997 or early 1998. The Company is
also considering the construction of five double-hull barges at an estimated
aggregate cost of approximately $9.0 million. The decision to proceed with the
construction of these barges will be based upon successful completion of
negotiations of long-term contracts with a customer concerning use of these
vessels. These negotiations are in a preliminary stage and there can be no
assurance that the construction of these barges will be undertaken. The Company
has also agreed to purchase for an estimated aggregate cost of $7.4 million
three newly constructed 152-foot crew boats scheduled for delivery in January,
May, and September 1998. Prior to delivery of the first of these crew boats in
January 1998, the Company's aggregate expenditures in connection with such
acquisitions are expected to be $190,000. The Company currently intends to fund
the aggregate cost of these SDMs, these crew boats, and, if built, these barges
from available working capital, borrowings under the Credit Facility, lease
financing, or a combination of such sources.
An integral part of the Company's strategy is to acquire additional
vessels, thereby further consolidating its niche markets. The Company regularly
engages in discussions regarding potential acquisitions. However, other than the
Current Acquisitions, and as described in the immediately preceding paragraph,
no acquisitions have been agreed upon or are the subject of a letter of intent.
The Company has a 2.4% equity interest in five 45,300 dwt double-hull
petroleum product carriers currently under construction. The aggregate cost of
the five carriers is estimated to be $255.0 million, of which approximately
$40.0 million will constitute equity investment and $215.0 million will be
financed with the proceeds of government-guaranteed Title XI ship financing
bonds issued in March 1996. Subject to certain conditions, the Company has an
option, exercisable through 2002, to purchase a 49.2% interest at a price equal
to (i) the investor's equity investment plus a stated annual return, or (ii) if
exercised after December 31, 1997, the greater of the fair market value of the
interest or the amount set forth in (i). The Company also has an option,
exercisable on January 15, 1998, to purchase an additional 23.4% interest at a
price equal to the investor's equity investment plus a stated return. Should the
Company fail to exercise the latter option, the investor has the option to
acquire 1.6% of the ownership interest from the Company for nominal
consideration. The total estimated cost of exercising the Company's options is
up to $32.0 million (assuming the options are exercised prior to January 1,
1998). The Company currently has no understandings or agreements with respect to
the financing that it would require if it were to exercise either or both of
these options, and there can be no assurance that such financing will be
available. See "Business -- Marine Transportation Services -- Petroleum Product
Transportation -- New Product Carriers."
The Credit Facility currently restricts the Company's subsidiaries from
paying dividends or making other distributions to the Company. The Company does
not believe that this restriction has had or will have a material effect upon
its ability to meet its cash obligations because a substantial portion of those
obligations is payable by its subsidiaries. See "Description of Certain
Indebtedness -- Credit Facility."
The Company is the defendant in litigation in which one of the shipyards
that completed the Seabulk America is seeking additional payments aggregating
$8.5 million for its work and $10.0 million of punitive damages, plus legal fees
and expenses. Although the Company believes the shipyard's claims are without
merit and has asserted counterclaims aggregating $5.6 million, the Company has
obtained a bank letter of credit to finance up to $5.6 million of any additional
payment that it might ultimately be required to make pursuant to this
litigation.
Of the estimated $91.4 million net proceeds from the Offering, $35.6
million will be used in connection with the Current Acquisitions, $36.3 million
will be used to repay indebtedness, and the balance of
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<PAGE> 30
approximately $19.5 million will be available for general corporate purposes.
See "Use of Proceeds" and "Business -- Current Acquisitions."
At September 30, 1996, the Company had a working capital deficit of $0.1
million. The Company believes that proceeds of the Offering, cash generated from
operations, and amounts available under the Credit Facility will be sufficient
to fund debt service requirements, planned capital expenditures, and working
capital requirements for the foreseeable future. The Company also believes that
such resources, together with the potential future use of debt or equity
financing, will allow the Company to pursue its strategy of growth through
acquisitions. However, since future cash flows are subject to a number of
uncertainties, including the condition of the markets served by the Company,
there can be no assurance that these resources will continue to be sufficient to
fund the Company's cash requirements.
EFFECT OF INFLATION
The Company does not consider inflation a significant business risk in the
current and foreseeable future although the Company has experienced some cost
increases. In some cases, these increases have been offset by charter hire
escalation clauses.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted SFAS No. 121 in
the first quarter of 1996 and the effect of adoption was not material.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation," for fiscal years beginning after December 15, 1995.
This statement establishes a fair-value based method of accounting for stock
compensation plans with employees and others. The Company continues to account
for its stock-based compensation plans under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," as permitted by SFAS No. 123
and will present the pro forma disclosures required under SFAS No. 123 in fiscal
year 1997 with no impact to the Company's results of operations.
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BUSINESS
GENERAL
The Company provides marine support and transportation services primarily
in the U.S. domestic trade and principally to the energy and chemical
industries. The Company is the third largest operator of supply and crew boats
in the U.S. Gulf of Mexico. In addition, the Company is the sole provider of
commercial tug services in Port Everglades and Port Canaveral, Florida, and a
leading provider of such services in Mobile, Alabama. The Company also
transports petroleum products and specialty chemicals in the U.S. domestic
trade, a market insulated from international competition under the Jones Act.
The total capacity of the Company's five chemical carriers represents
approximately 44% of the capacity of the independent domestic specialty chemical
carrier fleet, and four of the vessels are among the last independently owned
chemical carriers scheduled to be retired under OPA 90.
The Company has grown rapidly through a series of acquisitions, increasing
its marine support fleet from 20 vessels in 1993 to 74 vessels currently and its
marine transportation fleet from three vessels in 1993 to 29 vessels currently.
Primarily as a result of these acquisitions, the Company's revenues increased
196% from $41.5 million in 1993 to $123.0 million in 1995, on a pro forma basis.
Over the same period, the Company's EBITDA increased 181% from $11.3 million to
$31.7 million and its income from operations increased 186% from $6.6 million to
$18.9 million, in each case on a pro forma basis. For the nine months ended
September 30, 1996, the Company reported revenue, EBITDA, and operating income
of $101.0 million, $27.1 million, and $16.0 million, respectively, in each case
on a pro forma basis. For other measures of the Company's operating results as
determined under generally accepted accounting principles and its pro forma
operating results, see "Selected Historical and Pro Forma Consolidated Financial
Data" and the Company's consolidated financial statements.
The Company has been operating in the marine support services industry
since its founding in 1958 and has been engaged in the transportation of
petroleum products and chemicals for 21 and 19 years, respectively. The
Company's executive officers have an average of over 22 years of experience in
the marine transportation industry, including an average of over 14 years with
the Company. As a result, the Company believes that it has had favorable
experience with respect to employee turnover and employee injury claims. The
Company's employees are predominantly non-union. See "-- Employees."
STRATEGY
The Company's strategy is to realize the benefits presented by the
integration of its recent and pending acquisitions with its existing operations
and to continue to grow through selected acquisitions that further consolidate
the marine support and transportation services markets in which the Company
operates. The Company believes it has significant opportunities to make further
accretive acquisitions in its core businesses. Critical elements of the
Company's strategy include continuing to (i) utilize its demonstrated expertise
in acquiring vessels, thereby further consolidating its niche markets, (ii)
emphasize U.S. domestic trade operations, (iii) develop and apply marine
technology to meet its customers' needs in an innovative and cost-effective
manner, (iv) maintain and pursue long-term customer relationships that limit the
risk associated with the investments required for new vessels and mitigate the
effects of industry cyclicality, and (v) enhance its record of quality service
and safety.
Demonstrated Expertise in Acquiring and Consolidating in its Niche
Markets. Many domestic maritime transportation markets, including offshore
energy support and towing, are undergoing consolidation. Small, privately owned
companies face increasing difficulty competing for market share, obtaining
adequate insurance coverage at economically viable rates, and meeting
increasingly more stringent customer and regulatory safety and environmental
requirements. The Company believes it is well positioned to take advantage of
this consolidation trend. The Company's recent acquisitions have substantially
increased the size of its fleet, established it as one of the leading operators
in the U.S. Gulf offshore energy market, and given it a
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reputation as a successful consolidator in its niche markets. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Historical Growth" and "-- Current Acquisitions."
U.S. Domestic Market Emphasis. The Company intends to continue to
concentrate its operations in markets protected by the Jones Act against
competition from foreign-built, foreign-crewed vessels. As a result, most of the
Company's vessels are, and will continue to be, built and maintained to U.S.
standards and registered under the U.S. flag. The Company believes that domestic
energy and chemical transportation freight rates will increase within the next
three to five years and continue to rise thereafter, as the supply of vessels
eligible to carry petroleum and other hazardous substances diminishes as a
result of mandatory retirement imposed by OPA 90.
Technological Leadership and Business Innovation. The Company believes it
has been a leader in developing and applying marine technology to meet its
customers' needs in a cost-effective manner. Principals of the Company designed,
engineered, and developed the CATUG(R) integrated tug/barge ("ITB"), in which a
catamaran-hull tug is married to the stern section of a dedicated barge to
achieve construction cost savings and operating efficiencies, such as lower
manning requirements. The Seabulk Challenger, the Company's petroleum product
carrier, was the first of 12 CATUG(R)s constructed in the world. The Company's
Seabulk America is an innovative combination of the stern portion of a wrecked
oil tanker with the forebody of the chemical barge portion of a former ITB. By
combining this stern and forebody, the Company obtained the most recently
constructed chemical carrier in the U.S. domestic trade at a cost substantially
lower than that of a newly constructed vessel. The Company demonstrated its
business innovation in the formation of what was, prior to completion of the
August 1996 Acquisitions, the only pool of chemical carriers in the U.S.
domestic trade and most recently in the formation of the entities that will own
five new double-hull petroleum product carriers currently under construction.
See "-- Company Operations -- Marine Transportation Services."
Long-term Relationships. The Company currently maintains and continues to
pursue long-term customer relationships. Long-term contracts can both minimize
the risk associated with the substantial investments frequently required for new
vessels and mitigate the effects of any cyclical downturns in the industry. This
element of the strategy began with the Company's long-term charter of its
petroleum product carrier to Shell and continued with the acquisition of the
towboat and fuel barge fleet in September 1994, which has a long-term contract
with FPL.
Quality Service and Safety. Over a span of 38 years, the Company believes
it has built a reputation for providing its customers with the highest quality
service and safety in terms of timeliness, dependability, and technical
expertise. The Company continuously seeks to improve the quality of its service
both by upgrading the capabilities of its vessels and by increasing the skill
levels of its employees. It believes, for example, that its chemical carriers
have experienced a particularly low level of cargo degradation claims relative
to its competitors; that its emphasis on preventive maintenance minimizes vessel
time out of service and repair expenses; and that its reputation provides an
advantage in retaining customer loyalty (particularly in times of excess
capacity) and in entering new markets.
As part of its continuing effort to maintain high standards of quality and
safety, the Company has obtained certification under the voluntary quality
assurance, safety, and environmental standards established under ISO 9002 and a
document of compliance with the International Ship Management Code, which
becomes mandatory in July 1998. The Company's success in establishing high
levels of quality and safety are further reflected by its receipt of Shell's
offshore safety award for the last three years.
CURRENT ACQUISITIONS
The Current Acquisitions involve the acquisition of seven supply boats,
five crew boats, one offshore anchor handling tug, and two harbor tugs. The
aggregate cost of the Current Acquisitions is approximately $51.2 million,
including the cost of upgrading, refurbishing, and lengthening two of the supply
boats. Of such aggregate purchase price, $15.6 million had been paid as of
January 27, 1997 and the balance of $35.6 million
31
<PAGE> 33
will be funded with a portion of the proceeds from the Offering, either by
direct payment to the sellers or through repayment of borrowings made under the
Credit Facility for such purpose. Certain of the Current Acquisitions are
subject to conditions precedent and there can be no assurance that such
acquisitions will be completed.
Supply Boats. In October and November 1996, the Company acquired two
supply boats from one seller for an aggregate purchase price of $4.6 million.
These supply boats are currently being upgraded, refurbished, and lengthened at
an estimated cost of $6.9 million and are expected to be placed in service
during the second quarter of 1997. In January 1997, the Company acquired one
supply boat for $4.7 million. In addition, the Company has entered into
agreements to acquire four additional supply boats in transactions scheduled to
close in April 1997 (two boats) and no later than June 1997 (two boats). The
aggregate purchase price of these four additional supply boats is $21.8 million,
against which the Company has made a $2.2 million deposit. The following table
sets forth certain information with respect to the seven supply boats included
in the Current Acquisitions.
<TABLE>
<CAPTION>
LENGTH YEAR BUILT/ AREA OF
SUPPLY BOAT NAME (FEET) REBUILT HORSEPOWER OPERATION
<S> <C> <C> <C> <C>
Seabulk New York(1)......................... 225 1975/1997 4,300 U.S. Gulf
Seabulk New Jersey(1)....................... 225 1975/1997 4,300 U.S. Gulf
Matagorda Island(2)(3)...................... 191 1980 3,900 U.S. Gulf
Jefferson(2)(3)............................. 185 1981 3,900 U.S. Gulf
Sabine(2)(3)................................ 185 1979 3,900 U.S. Gulf
Bolivar(2).................................. 180 1980 2,700 U.S. Gulf
Aransas(2).................................. 180 1980 1,950 U.S. Gulf
</TABLE>
- ------------------------------------
(1) Information reflects completion of planned upgrading, refurbishing, and
lengthening. These vessels will have dynamic-positioning capability.
Reflects name change that is currently in process.
(2) Vessel to be acquired.
(3) Vessel has anchor handling and towing equipment.
Crew Boats. The Company has entered into a memorandum of agreement to
purchase four crew boats in a transaction scheduled to close in February 1997,
for an aggregate purchase price of $7.4 million. In addition the Company has
entered into an agreement to purchase the crew boat Jopeye in a transaction
scheduled to close in April 1997 for an aggregate purchase price of $1.8
million, against which the Company has made a deposit of $0.1 million. The
following table sets forth certain information with respect to these crew boats.
<TABLE>
<CAPTION>
LENGTH AREA OF
CREW BOAT NAME (FEET) YEAR BUILT HORSEPOWER OPERATION
<S> <C> <C> <C> <C>
Jopeye...................................... 135 1995 3,300 U.S. Gulf
Anna P...................................... 135 1993 3,056 U.S. Gulf
Capt. Evan.................................. 135 1991 3,056 U.S. Gulf
Capt. Rami.................................. 135 1991 3,056 U.S. Gulf
Rig Runner.................................. 135 1991 3,056 U.S. Gulf
</TABLE>
Tugs. In December 1996, the Company acquired an offshore anchor handling
tug for $3.4 million and, in January 1997, two harbor tugs for an aggregate of
$0.6 million. The following table sets forth certain information with respect to
the three tugs.
<TABLE>
<CAPTION>
LENGTH YEAR BUILT/ AREA OF
VESSEL NAME HORSEPOWER (FEET) REBUILT OPERATION
<S> <C> <C> <C> <C>
Vigilant(1)............................ 4,600 120 1981/1994 Offshore
Delaware(2)............................ 4,000 107 1952/1990 Mobile
Mary Dee Sanders....................... 3,600 105 1941/1984 Port Canaveral
</TABLE>
- ------------------------------------
(1) Equipped for offshore towing.
(2) The acquisition of this tug will allow the Mobile Pride, which is currently
being operated in Mobile, to be redeployed in offshore towing activities.
32
<PAGE> 34
THE INDUSTRY
All marine transportation between points in the United States, including
drilling rigs affixed to the U.S. outer continental shelf, is restricted by law
to vessels built and registered in the United States and owned and manned by
U.S. citizens. The U.S. domestic trade includes a number of market segments,
including the servicing of domestic offshore oil and gas drilling and production
platforms, the providing of offshore and harbor towing services to the offshore
energy industry, tankers and other vessels, and the transportation of fuels,
petroleum products, and chemicals along and between U.S. coasts. All of the
Company's vessels are eligible to participate in the U.S. domestic trade except
for two Panamanian-flag offshore supply boats operating in Southeast Asia
pursuant to contracts expiring in 1998.
MARINE SUPPORT SERVICES
Offshore Energy Support. Marine support vessels serving offshore energy
exploration and production operations are used primarily to transport materials,
supplies, equipment, and personnel to drilling rigs and to support the
construction, positioning, and ongoing operation of oil and gas production
platforms. Offshore energy support vessels are hired by oil companies and others
engaged in offshore exploration activities, generally on a short-term (less than
six months) basis at varying day rates. See "-- Customers and Charter Terms."
The types of vessels primarily utilized in these activities are supply boats,
crew boats, and anchor handling vessels.
Supply boats (also called workboats) are generally at least 150 feet in
length and serve exploration and production facilities and support offshore
construction and maintenance activities. Supply boats are differentiated from
other vessel types by cargo flexibility and capacity. In addition to
transporting deck cargo, such as drill pipe and heavy equipment, supply boats
transport liquid mud, potable and drilling water, diesel fuel, dry bulk cement,
and dry bulk mud. With their relatively large liquid mud and dry bulk cement
capacity and large areas of open deck space, they are generally in greater
demand than other types of support vessels for exploration and workover drilling
activities.
Crew boats (also called crew/supply boats) are faster and smaller than
supply boats and are utilized primarily to transport light cargo, including food
and supplies, and personnel to and among production platforms, rigs, and other
offshore installations. They can be chartered together with supply boats to
support drilling or construction operations or separately to serve the various
requirements of offshore production platforms. Crew boats are typically
constructed of aluminum and generally have longer useful lives than steel-hull
supply boats. Crew boats also provide a cost-effective alternative to helicopter
transportation services and can operate reliably in all but the most severe
weather conditions.
Anchor handling vessels, which include anchor handling tug/supply vessels
and some tugs, are more powerful than supply boats and are capable of towing and
positioning drilling rigs, production facilities, and construction barges. Some
are specially equipped to assist tankers while they are loading from
single-point buoy mooring systems.
There has been substantial worldwide vessel attrition over the past ten
years as many vessels have reached the end of their useful lives. The number of
offshore supply boats of at least 150 feet in length available for service in
the U.S. Gulf of Mexico decreased from a peak of approximately 700 in 1985 to
approximately 260 in August 1996. Management estimates that during the same
period, the number of companies operating supply boats of at least 150 feet in
length decreased from approximately 40 to 16. Day rates declined in the
mid-1980s and have since improved from an average of $1,730 in August 1987 to an
average of $5,683 in the third quarter of 1996. Although some supply boats were
redeployed from the U.S. Gulf of Mexico to overseas locations, management
believes that existing regulations, mobilization costs, and overseas
opportunities will limit the number of such vessels returning to the U.S. Gulf
of Mexico in the foreseeable future. Management believes that new construction
of offshore supply vessels likely will consist of larger, more capable vessels
of approximately 220 feet in length.
33
<PAGE> 35
The Company estimates that there are currently approximately 13 crew boat
operators in the U.S. Gulf of Mexico operating a total of 200 vessels of at
least 120 feet in length. There are approximately 42 crew boats greater than 120
feet in length currently under construction (not all of which are expected to be
utilized in the U.S. Gulf of Mexico), and the Company believes that current
demand created by exploration for oil in the deeper waters of the U.S. Gulf of
Mexico may support construction of a limited number of additional crew boats.
The following table sets forth as of November 26, 1996, the Company's
estimate of the number of supply boats and crew boats operating in the U.S. Gulf
of Mexico giving effect, in the case of the Company, to the Current
Acquisitions.
<TABLE>
<CAPTION>
OPERATOR SUPPLY BOATS CREW BOATS TOTAL
<S> <C> <C> <C>
Tidewater, Inc. ........................ 113 26 139
Seacor Holdings, Inc. .................. 32(1) 70 102(1)
HVIDE MARINE INCORPORATED............... 26 42 68
Trico Marine Services, Inc. ............ 34 15 49
Ensco International Incorporated........ 29 0 29
Others.................................. 58 46 104
</TABLE>
- ---------------
(1) Gives effect to the pending sale to the Company of five supply boats in the
Current Acquisitions.
While existing exploration and production activities create an ongoing
demand for offshore energy support vessels, incremental vessel demand depends
primarily upon the level of drilling activity, which in turn depends on oil and
gas prices. As a result, drilling rig day rates and utilization are influenced
by oil and gas prices, which are highly cyclical. The relationship since 1993
between natural gas prices and drilling rig utilization in the U.S. Gulf of
Mexico and, similarly, average vessel utilization, is displayed in the following
table.
<TABLE>
<CAPTION>
1993 1994
-------------------------------------------------------- --------------------------
Q1 Q2 Q3 Q4 Q1 Q2
<S> <C> <C> <C> <C> <C> <C>
Natural gas prices(1)........ $ 1.92 $ 2.16 $ 2.20 $ 2.21 $ 2.42 $ 1.95
Competitive mobile rig
utilization(2)............. 71.6% 75.9% 78.5% 81.0% 75.5% 76.6%
Offshore service vessels(3)
Utilization.............. 83.9% 88.6% 89.0% 91.2% 88.6% 83.9%
Day rates................ $ 3,050 $ 3,233 $ 3,700 $ 4,050 $ 3,717 $ 3,200
Anchor handling tug/supply
vessels utilization(4)..... 71.0% 82.6% 82.6% 88.6% 85.0% 74.7%
<CAPTION>
1994
--------------------------
Q3 Q4
<S> <C> <C>
Natural gas prices(1)........ $ 1.70 $ 1.60
Competitive mobile rig
utilization(2)............. 76.7% 80.6%
Offshore service vessels(3)
Utilization.............. 91.6% 94.6%
Day rates................ $ 3,033 $ 3,258
Anchor handling tug/supply
vessels utilization(4)..... 76.3% 92.3%
</TABLE>
34
<PAGE> 36
<TABLE>
<CAPTION>
1995 1996
-------------------------------------------------------- --------------------------
Q1 Q2 Q3 Q4 Q1 Q2
<S> <C> <C> <C> <C> <C> <C>
Natural gas prices(1)........ $ 1.51 $ 1.63 $ 1.54 $ 2.06 $ 3.44 $ 2.45
Competitive mobile rig
utilization(2)............. 70.3% 73.6% 81.8% 85.2% 83.3% 87.5%
Offshore service vessels(3)
Utilization.............. 84.2% 89.7% 91.7% 94.8% 95.3% 92.9%
Day rates................ $ 2,917 $ 2,975 $ 3,307 $ 3,543 $ 3,793 $ 4,933
Anchor handling tug/supply
vessels utilization(4)..... 86.0% 81.5% 92.6% 92.5% 94.9% 90.1%
<CAPTION>
1996
-----------
Q3
<S> <C> <C>
Natural gas prices(1)........ $ 2.18
Competitive mobile rig
utilization(2)............. 89.4%
Offshore service vessels(3)
Utilization.............. 94.5%
Day rates................ $ 5,683
Anchor handling tug/supply
vessels utilization(4)..... 94.4%
</TABLE>
- ---------------
(1) Average monthly natural gas cash price delivered at Henry Hub in $/MMBtu, as
reported in Natural Gas Week.
(2) Includes all jack-up rigs, semi-submersible rigs, submersible rigs,
drillships, and other mobile rig units operating in the U.S. Gulf of Mexico,
as compiled by Offshore Data Services.
(3) Includes all supply boats, crew boats, and other offshore service vessels
greater than or equal to 150 feet in length operating in the U.S. Gulf of
Mexico, as compiled by Offshore Data Services.
(4) Includes all anchor handling tug/supply vessels operating in the U.S. Gulf
of Mexico, as compiled by Offshore Data Services. Day rates are not included
as they are not considered meaningful (i.e., tugs work on a per-job basis,
not a daily basis).
Offshore and Harbor Towing. Offshore and harbor towing services are
provided by tugs to vessels utilizing the ports in which the tugs operate and to
vessels at sea to the extent required by environmental regulations, casualty, or
other emergency. The Company's anchor handling tug/supply boats and offshore
towing-equipped tugs have been engaged in towing a wide variety of barges
carrying heavy equipment, refinery modules, and petroleum products for the
energy industry in the U.S. Gulf of Mexico, the Atlantic Ocean, and the
Mediterranean Sea. In the case of docking services, charges are based on a fixed
rate per job, and in the case of towing services, on hourly or daily rates. In
most ports, competition is unregulated, although a few port
authorities -- including Port Canaveral and Port Everglades, Florida where a
majority of the Company's tugs operate -- grant non-exclusive franchises to
harbor tug operators. Rates are unregulated in franchised ports served by the
Company. See "-- Customers and Charter Terms." Each port is generally a distinct
market for harbor tugs, even though harbor tugs can be moved from port to port.
Demand for towing services depends on vessel traffic, which is in turn generally
dependent on local and national economic conditions. OPA 90 and current state
legislation require oil tankers to be escorted in and around certain ports
located in Alaska and the U.S. Pacific coast. The Company anticipates that such
regulatory requirements will be expanded, increasing the demand for specially
designed tractor tugs, such as the Broward, to perform escort services.
MARINE TRANSPORTATION SERVICES
Chemical Transportation. In the domestic chemical transportation trade,
vessels carry chemicals primarily from chemical manufacturing plants and storage
tank facilities along the U.S. Gulf of Mexico coast to industrial users in and
around the Atlantic and Pacific coast ports and along inland rivers and
waterways. The chemicals primarily transported are caustic soda, alcohols,
chlorinated solvents, paraxyzlene, alkylates, toluene, methyl tertiary butyl
ether (MTBE), phosphoric acid, and lubricating oils. Since 1989, coastwise
chemical tonnage demand has increased as a result of the general expansion of
the U.S. economy and as gasoline additives have begun to move coastwise. Certain
of the chemicals transported must be carried in vessels with specially coated or
stainless steel cargo tanks. Many are very sensitive to contamination and
require special cargo-handling equipment.
The Company estimates that approximately 11% (in terms of tonnage) of bulk
domestic chemical transportation is waterborne, with the remainder transported
by rail. The Company also estimates that approximately 60% of that waterborne
trade is in specialty chemicals, such as caustic soda, which can be transported
only by specially designed vessels. Although chemical carriers and petroleum
product carriers are similar in design, vessels engaged in the transportation of
petroleum products generally lack the large number of small tanks, special tank
coatings, and sophisticated cargo-handling capability necessary to operate in
the parcel or specialty chemical trade. Parcel shipments are usually carried
pursuant to contracts of affreightment
35
<PAGE> 37
by which a shipper contracts for the use of a portion of a vessel's cargo
capacity. See "-- Customers and Charter Terms."
Vessels engaged in domestic chemical transportation that are owned by major
chemical or other companies that use the vessels to transport cargoes for their
own accounts are referred to as "captive" or proprietary vessels. Management
believes that there are 13 specialty chemical carriers active in the domestic
trade, of which nine are non-proprietary, or independently operated, and four
are proprietary. Some of these vessels also transport petroleum products, and
all but one of them will be ineligible to do so after the year 2015 in
accordance with OPA 90 double-hull requirements. See "-- Environmental and Other
Regulation -- Clean Water Regulations." The Seabulk America is the only chemical
carrier to enter service in the domestic trade since 1984, and no new specialty
chemical carriers are currently under construction. In addition to the specialty
chemical tankers, there are 44 tankers and 90 barges in the U.S.-flag domestic
fleet over 10,000 gross tons that are capable of carrying some so-called "easy
chemicals," such as gasoline additives (e.g. MTBE), and that compete with
specialty chemical carriers for the transportation of those chemicals.
The following table sets forth certain information concerning mandatory OPA
90 retirement dates (from transportation of petroleum products) for the 13
active specialty chemical carriers eligible to participate in the U.S. domestic
trade. The Company believes that certain of these vessels will be retired once
they are no longer able to augment their cargoes with petroleum products and
that some may be retired in advance of their OPA 90 retirement dates as required
capital investments may not be economically justifiable over the remaining lives
of the vessels. The retirement dates of others may be extended by reducing their
gross registered tonnage and cargo capacity.
<TABLE>
<CAPTION>
OPA 90
YEAR BUILT/ RETIREMENT DEADWEIGHT
VESSEL NAME OWNER/OPERATOR REBUILT DATE TONS (000'S)
<S> <C> <C> <C> <C>
Keystone Georgia(1)........ Keystone Shipping Co. 1964 2000(2) 25.9(2)
HMI ASTRACHEM.............. HVIDE MARINE INCORPORATED 1970 2000 37.5
Marine Chemist............. Marine Transport Lines 1970 2000 35.9
Guadalupe.................. Sabine/Kirby Corp. 1945/1978 2003 30.4
Chilbar.................... Keystone Shipping Co. 1959/1981 2006 39.4
SEABULK MAGNACHEM.......... HVIDE MARINE INCORPORATED 1977 2007 39.3
HMI DYNACHEM............... HVIDE MARINE INCORPORATED 1981 2011 50.9
HMI PETROCHEM.............. HVIDE MARINE INCORPORATED 1981 2011 50.9
SeaRiver Charleston(1)..... SeaRiver Maritime 1983 2011 48.1
SeaRiver Wilmington(1)..... SeaRiver Maritime 1984 2012 48.0
Sea Venture................ Atlantic Tankships 1972/1983 2013 18.7
SEABULK AMERICA............ HVIDE MARINE INCORPORATED 1975/1990 2015 46.3
Chemical Pioneer(1)........ Marine Transport Lines 1968/1983 n/a(3) 34.9
-----
Total capacity........... 506.2
=====
</TABLE>
- ------------------------------------
Source: Lloyd's Maritime Directory 1994 (for owner/operators, year
built/rebuilt, and deadweight tons); U.S. Maritime Administration (for
OPA 90 retirement dates)
(1) Proprietary.
(2) Retirement date extended from 1998 as the result of a reported reduction of
vessel's gross registered tonnage and cargo capacity from 26,300 dwt.
(3) Double-hull vessel.
Although single-hull chemical carriers may be permitted to continue to
carry chemicals in the U.S. domestic and foreign trade after their OPA 90
retirement dates, the Company believes that the inability of single-hull
carriers to augment chemical cargoes with petroleum products (such as
lubricating oils) after such dates will, in light of the current near balance
between supply and demand and assuming increasing chemical shipment volume as a
result of improvements in the economy, result in increased charter rates for the
Company's chemical carriers.
36
<PAGE> 38
Petroleum Product Transportation. In the domestic energy transportation
trade, oceangoing and inland-waterway vessels transport fuel and other petroleum
products, primarily from the U.S. Gulf of Mexico coast refineries and storage
facilities, to utilities, waterfront industrial facilities, and distribution
facilities along the U.S. Gulf of Mexico, the Atlantic and Pacific coasts, and
inland rivers. The inventory of U.S.-flag oceangoing vessels eligible to
participate in the U.S. domestic trade and capable of transporting fuel or
petroleum products has steadily decreased since 1980 as vessels have reached the
end of their useful lives and the cost of constructing a vessel in the United
States (a requirement for U.S. domestic trade participation) has exceeded the
level at which it was economically feasible to order a new vessel.
The following graph sets forth the projected number of U.S.-flag chemical
and product tankers from 20,000 dwt to 55,000 dwt remaining eligible to
transport crude oil and petroleum products in the U.S. domestic trade as of the
dates indicated:
OPA 90 RETIREMENT OF JONES ACT TANKERS
RETIREMENT OF JONES ACT TANKERS - GRAPH
NUMBER
OF
YEAR VESSELS
---- -------
1996 71.00
1997 67.00
1998 71.00
1999 65.00
2000 62.00
2001 62.00
2002 56.00
2003 52.00
2004 49.00
2005 45.00
2006 45.00
2007 44.00
2008 42.00
2009 41.00
2010 35.00
2011 30.00
2012 22.00
2013 21.00
2014 20.00
2015 20.00
- ------------------------------------
Source: Keith Chartering
(1) Assumes delivery of twelve vessels from 1997 through 2004, including
delivery in 1998 of the five petroleum product carriers in which the Company
has an interest, and scrap dates one year in advance of OPA 90 mandated
retirement dates.
As a result of the retirement dates for single-hull tankers mandated by OPA
90, the Company believes that, of the 71 U.S.-flag product and chemical carriers
and product and chemical barges from 20,000 dwt to 55,000 dwt currently
operating, 19 will have to be retired by the end of year 2000. See
"-- Environmental and Other Regulation -- Clean Water Regulations." Replacement
vessels currently under construction consist of three late 1950s-built
steam-powered single-hull product carriers being converted to double-hull
vessels for delivery in 1997 and the five new diesel-powered double-hull product
carriers in which the Company has an interest. See "-- Company
Operations -- Marine Transportation Services -- Petroleum Product
Transportation -- New Product Carriers." The Company believes that the mandatory
replacement of single-hull carriers by environmentally safer double-hull vessels
will result in a gradual increase in charter rates for product carriers over the
next few years.
37
<PAGE> 39
COMPANY OPERATIONS
MARINE SUPPORT SERVICES
Offshore Energy Support. The Company has provided services to the oil and
gas drilling industry since 1989, when it acquired its first eight offshore
supply boats. In September 1994, March 1995, and January and February 1996, the
Company expanded its offshore energy support service fleet by acquiring an
aggregate of six supply boats and two utility boats (seven of which it was
previously operating or managing) and 36 crew boats. In August 1996, the Company
acquired ten supply boats and one crew boat.
Supply Boats. The following table sets forth certain information concerning
the 24 supply boats currently owned and operated by the Company and the seven
supply boats included in the Current Acquisitions.
<TABLE>
<CAPTION>
LENGTH YEAR BUILT/ AREA OF
SUPPLY BOAT NAME(1) (FEET) REBUILT HORSEPOWER OPERATION
<S> <C> <C> <C> <C>
Seabulk New York(2)(3).............................. 225 1975/1997 4,300 U.S. Gulf
Seabulk New Jersey(2)(3)............................ 225 1975/1997 4,300 U.S. Gulf
Seabulk Minnesota................................... 205 1976/1994 2,250 U.S. Gulf
Seabulk Montana(4).................................. 205 1974/1994 5,350 U.S. Gulf
Matagorda Island(3)................................. 191 1980 3,900 U.S. Gulf
Seabulk North Carolina(4)(5)........................ 190 1979/1993 4,000 U.S. Gulf
Seabulk Colorado.................................... 185 1982/1994 2,250 U.S. Gulf
Seabulk Missouri.................................... 185 1982 2,250 U.S. Gulf
Seabulk Arkansas.................................... 185 1982 2,250 U.S. Gulf
Jefferson(3)........................................ 185 1981 3,900 U.S. Gulf
Seabulk Wyoming..................................... 185 1979 2,250 Cameroon
Sabine(3)........................................... 185 1979 3,900 U.S. Gulf
Seabulk Hawaii...................................... 180 1979/1995 3,000 U.S. Gulf
Seabulk Georgia..................................... 180 1984 3,000 U.S. Gulf
Seamark South Carolina(4)(6)........................ 180 1983 3,000 SE Asia
Seabulk California.................................. 180 1982 2,250 U.S. Gulf
Seabulk Florida..................................... 180 1982 2,250 U.S. Gulf
Seabulk Alabama..................................... 180 1982 2,250 U.S. Gulf
Seamark Mississippi(6).............................. 180 1982 2,250 SE Asia
Seabulk Texas....................................... 180 1982 2,250 U.S. Gulf
Seabulk Louisiana................................... 180 1982 2,250 U.S. Gulf
Bolivar(3).......................................... 180 1980 2,700 U.S. Gulf
Aransas(3).......................................... 180 1980 1,950 U.S. Gulf
Ross Seal........................................... 176 1977/1987 1,700 SE Asia
Seabulk Vermont..................................... 176 1977 1,700 Egypt
Seabulk Kentucky.................................... 175 1983 2,400 U.S. Gulf
Seabulk Tennessee................................... 175 1983 2,400 U.S. Gulf
Seabulk Oregon...................................... 175 1979 2,250 U.S. Gulf
Seabulk Washington.................................. 175 1978 2,250 U.S. Gulf
Seabulk Maryland(5)................................. 165 1980 1,860 U.S. Gulf
Seabulk Virginia(5)................................. 165 1979 1,860 U.S. Gulf
</TABLE>
- ------------------------------------
(1) Certain names reflect name changes currently in process.
(2) Vessel expected to be put into service during second quarter of 1997. Vessel
data reflect upgrading, refurbishment, and lengthening. See "-- Current
Acquisitions."
(3) Vessel included in Current Acquisitions. See "-- Current Acquisitions."
(4) Anchor handling tug/supply vessel.
(5) The Company is bareboat charterer and operator with an option to purchase
the vessel at the end of the bareboat charter for a nominal amount.
38
<PAGE> 40
(6) These offshore supply boats are currently chartered to a joint venture in
which the Company has a 49% interest and are operated by the joint venture
in Southeast Asia. The Company receives bareboat charter hire, which is at a
rate that is approximately equivalent to the capital costs of the vessels,
and has the right to receive a 49% share of net income from the venture. The
joint venture has the right to purchase each vessel for $300,000 upon
expiration of the charters in August 1998.
Crew Boats. The following table sets forth certain information concerning
the 37 crew and two utility boats currently owned or operated by the Company and
the five crew boats included in the Current Acquisitions.
<TABLE>
<CAPTION>
LENGTH YEAR BUILT/
CREW BOAT NAME (FEET) REBUILT HORSEPOWER
<S> <C> <C> <C>
Seabulk St. Frances(1)...................................... 152 1996 4,400
Seabulk St. Charles(1)(2)................................... 152 1993 3,820
Seabulk Winn................................................ 135 1991 3,056
Seabulk Galveston........................................... 135 1990 3,056
Seabulk Bossier............................................. 135 1990 3,056
Sea Robin III............................................... 135 1978 2,250
Jopeye(3)................................................... 135 1995 3,300
Anna P(3)................................................... 135 1993 3,056
Capt. Evan(3)............................................... 135 1991 3,056
Capt. Rami(3)............................................... 135 1991 3,056
Rig Runner(3)............................................... 135 1991 3,056
Seabulk LaFourche........................................... 130 1991 2,040
Seabulk Houston............................................. 125 1985 2,600
Seabulk Lafayette........................................... 125 1985 2,040
Seabulk Starr............................................... 120 1984 2,040
ThunderU.S.A................................................ 120 1984 2,040
Seabulk Lamar............................................... 120 1980 2,040
Seabulk Liberty............................................. 110 1985 2,040
Thunderplanet............................................... 110 1982 2,040
Seabulk Mobile.............................................. 110 1982 2,040
Seabulk Evangeline.......................................... 110 1981 2,040
Thunderwar.................................................. 110 1981 2,040
Seabulk Madison(1).......................................... 110 1980 2,040
Seabulk Bay(1).............................................. 110 1980 2,040
Seabulk Beauregard.......................................... 110 1980 2,040
Seabulk Jackson(1).......................................... 110 1980 2,100
David Jr.(4)................................................ 110 1980 2,820
Seabulk Jasper(4)........................................... 110 1980 2,820
Seabulk Nassau.............................................. 110 1979 2,040
Seabulk Aransas............................................. 110 1978 2,100
Ralph Thompson(4)........................................... 110 1978 2,820
Seabulk Albany(4)........................................... 110 1978 2,820
Seabulk Austin(5)........................................... 110 1978 1,080
Seabulk Baldwin(4).......................................... 110 1976 2,400
Seabulk Claiborne(4)........................................ 110 1975 2,400
Seabulk Baton Rouge(4)(5)................................... 100 1981 910
Thundereagle................................................ 100 1977/1995 1,530
Seabulk Cameron............................................. 100 1976/1995 1,530
Thundercat.................................................. 100 1976/1995 1,530
Seabulk Sabine.............................................. 100 1976/1995 1,530
Seabulk Orleans............................................. 100 1981 1,530
Seabulk Iberia.............................................. 100 1981 1,530
Rig Runner(4)............................................... 90 1974 1,650
Seabulk Maverick............................................ 85 1976 1,200
</TABLE>
- ------------------------------------
(1) Reflects name change currently in process.
(2) The Company is bareboat charterer and operator with an option to purchase
the Seabulk St. Charles, formerly the Royal Runner, at the end of the
bareboat charter in 2002 for $400,000.
(3) Vessel included in Current Acquisitions. See "-- Current Acquisitions."
(4) The Company is bareboat charterer and operator with an option to purchase
the vessel at the end of the bareboat charter for a nominal amount.
(5) Utility vessel.
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<PAGE> 41
Offshore and Harbor Towing. The tugs currently owned or operated by the
Company serve Port Everglades and Port Canaveral, Florida and Mobile, Alabama,
where they primarily assist product carriers, barges, other cargo vessels, and
cruise ships in docking and undocking and in proceeding in confined waters. The
Company recently entered into one-year bareboat charters of two newly
constructed 4,000-hp tugs equipped with omni-directional propulsion units and
having some of the capabilities of tractor tugs. These tugs are serving as
harbor tugs in Mobile, enabling two of the Company's harbor tugs to be utilized
in offshore towing activities. As a result, the Company now operates three tugs
with offshore towing capabilities that conduct a variety of offshore towing
services in the U.S. Gulf and the Atlantic Ocean.
Port Everglades. Port Everglades has the second largest petroleum
non-refining storage and distribution center in the United States, providing
substantially all of the petroleum products for South Florida. Since 1958, when
the Company's tug operations were established, the Company has enjoyed a
franchise as the sole provider of docking services in the port. That franchise
specifies, among other things, that three tugs serving the port be less than 90
feet in length, because of the narrowness of slips in the port, and that tugs
have firefighting capability. The franchise is not exclusive and another
operator could be granted an additional franchise. Although a significantly
larger potential competitor sought a franchise in 1992, the Company won
unanimous endorsement from the Port Authority to continue its sole-franchise
relationship with the port when that competitor failed to make the requisite
showing of public need and necessity. The current franchise expires in 2001, and
there can be no assurance that it will be renewed.
In 1995, the Company took delivery of a new 5,100-hp tractor tug, the
Broward, which has been operating in Port Everglades. The Company operates the
Broward, built at a cost of $6.4 million by a third-party shipyard, pursuant to
a long-term operating lease. Company personnel, working in conjunction with
consulting marine engineers and architects, prepared the conceptual design,
including the tug's distinctive hull form, prepared detailed specifications, and
supervised the construction of the tug.
Tractor tugs have forward-mounted, omni-directional propulsion units,
giving them a high degree of maneuverability and control over the operation of
an escorted oil tanker or other vessel, and are generally considered superior
for tanker escort service. The Broward has twin 2,550-hp diesel engines and twin
propeller nozzles capable of turning 360 degrees. Although all of the Company's
harbor tugs are equipped for firefighting and their crews trained to respond to
fires and oil-spill emergencies, the Broward has significantly enhanced
firefighting capabilities, with two large water cannons capable of producing
6,000 gallons per minute for spraying water or foam. Although a number of
tractor tugs are in operation around the world, there are no others in
commercial service in the southeastern United States. The Broward is also used
to provide tanker escort services and specialized offshore energy support
services.
Port Canaveral. The Company expanded its services in the early 1960s to
Port Canaveral, Florida where, like Port Everglades, it also has the sole
franchise from the port authority to provide harbor docking services. Port
Canaveral is the smallest of the Company's harbor tug operations, providing
docking and undocking services for commercial cargo vessels serving central
Florida and for cruise ships visiting the Disney World/Kennedy Space Center
attractions. The Company's franchise is a month-to-month arrangement and,
although there can be no assurance that the Company will be able to retain its
franchise in Port Canaveral, there has been no challenge to the franchise since
1984.
Mobile. In 1988, the Company purchased a division of a towing company
operating in the port of Mobile, Alabama. The port provides docking and
undocking services primarily for commercial cargo vessels, including vessels
transporting coal and other bulk exports. At the time, that division operated
three harbor tugs in Mobile. The Company added additional equipment and believes
it significantly upgraded the quality and performance of the tug service, thus
enabling the Company to increase its market share to approximately 50% of the
harbor tug business in that port since commencing operations.
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<PAGE> 42
The following table sets forth certain information with respect to the 11
tugs owned or operated by the Company, the two tugs chartered by the Company,
and the three tugs included in the Current Acquisitions.
<TABLE>
<CAPTION>
LENGTH YEAR BUILT/
VESSEL NAME HORSEPOWER (FEET) REBUILT PORT
<S> <C> <C> <C> <C>
Broward(1).......................... 5,100 100 1995 Port Everglades
Vigilant(1)(2)...................... 4,600 120 1981/1994 Offshore
Ft. Lauderdale...................... 4,200 90 1971/1996 Port Everglades
Hollywood........................... 4,200 106 1985 Offshore
Mobile Power........................ 4,100 98 1957/1986 Mobile
Z-One(3)............................ 4,000 94 1996 Mobile
Z-Two(3)............................ 4,000 94 1996 Mobile
Delaware(2)......................... 4,000 107 1952/1990 Mobile
Mary Dee Sanders(2)................. 3,600 105 1941/1984 Port Canaveral
Mobile Pride(1)..................... 3,300 107 1969/1989 Offshore
Paragon(1).......................... 3,300 105 1978/1989/1996 Offshore
Mobile Persistence(4)............... 3,000 98 1940/1975 Port Canaveral
Brevard............................. 2,400 88 1945/1986/1996 Port Canaveral
Captain Brinn....................... 2,145 88 1960/1986 Port Canaveral
Everglades.......................... 2,145 88 1956/1984 Port Everglades
Manatee............................. 2,145 88 1959/1982 Port Everglades
</TABLE>
- ------------------------------------
(1) Equipped for offshore towing.
(2) Vessel included in Current Acquisitions. See "-- Current Acquisitions."
(3) Vessel operated under a one-year bareboat charter.
(4) Expected to be retired in the second quarter of 1997.
Ship-Docking Modules. The Company is considering contracting for the
construction of two SDMs for delivery in late 1997 or early 1998. SDMs are
innovative ship-docking vessels that are designed to be more maneuverable,
efficient, and flexible than harbor tugs. In addition, they are expected to have
lower operating costs than harbor tugs because they require fewer crew members.
Company personnel, working in conjunction with consulting marine engineers and
architects, prepared the conceptual design and detailed specifications for the
SDMs. The Company has filed a patent application on the design. It is currently
anticipated that one SDM will operate in Port Everglades and one in Mobile and
that their deployment will make one or two of the bareboat chartered tugs
available for alternative service or redelivery to their owner.
MARINE TRANSPORTATION SERVICES
Chemical Transportation.
The Company's chemical carriers are the 298,000-barrel, 39,300 dwt Seabulk
Magnachem, the 297,000-barrel, 46,300 dwt Seabulk America, the 360,000-barrel,
50,900 dwt HMI Dynachem, the 360,000-barrel, 50,900 dwt HMI Petrochem, and the
260,000-barrel, 37,100 dwt HMI Astrachem, which are primarily engaged in the
U.S. domestic chemical parcel trade. The Company operates the Seabulk Magnachem
pursuant to a long-term bareboat charter. See "Description of Certain
Indebtedness -- Long-Term Charter Obligations -- Title XI Bonds." The Company
owns a 67% economic interest, and Stolt Tankers (U.S.A.), Inc. owns the
remaining 33% economic interest, in the Seabulk America.
The Seabulk Magnachem, the Seabulk America, the HMI Dynachem, and the HMI
Petrochem have full double bottoms (as distinct from double hulls) and the HMI
Astrachem has a partial double bottom. Double bottoms provide increased
protection over single hull vessels from a spill in the event of a mishap. The
Company's chemical carriers have from 13 to 24 cargo segregations which are
configured, strengthened, and coated to handle various sized parcels of a wide
variety of industrial chemical and petroleum products giving them the ability to
handle a broader range of chemicals than chemical-capable product carriers. Many
of the
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<PAGE> 43
chemicals transported by the Company are hazardous substances. Voyages are
currently generally conducted from the Houston and Corpus Christi, Texas, and
Lake Charles, Louisiana areas to such ports as New York, Philadelphia,
Baltimore, Norfolk, Wilmington, North Carolina, and Charleston, South Carolina.
Delivered in 1977, the Seabulk Magnachem is a CATUG(R) ITB, which requires fewer
personnel to operate than a conventional carrier of equivalent size and has a
higher level of dependability, propulsion efficiency, and performance than an
ordinary tug and barge. Delivered in 1990, the Seabulk America is the only
vessel in the U.S. domestic trade capable of carrying large cargoes of acid, as
a result of its large high-grade alloy stainless steel tanks, and the only such
vessel strengthened to carry relatively heavy cargoes such as phosphoric and
other acids. The Seabulk America's stainless steel tanks were constructed
without internal structure, which greatly reduces cargo residue from
transportation and results in less cargo degradation. Stainless steel tanks,
unlike epoxy-coated tanks, also do not require periodic sandblasting and
recoating. The Seabulk America was one of the first U.S.-flag carriers to be
equipped with state-of-the-art integrated navigation, cargo control monitoring,
and automated engine room equipment.
Pursuant to the requirements of OPA 90, the Seabulk America, the HMI
Dynachem, the HMI Petrochem, and the Seabulk Magnachem, which were built with
full double bottoms but not double sides, cannot be utilized to transport
petroleum and petroleum products in U.S. commerce after 2015, 2011, 2011, and
2007, respectively. The HMI Astrachem, which has a partial double bottom, cannot
be so utilized after 2000. See "-- Environmental and Other Regulation -- Clean
Water Regulations." They may, however, be permitted to continue to carry certain
chemicals in U.S. commerce and may be redocumented in another country and
transport chemicals in non-U.S. trades. Although it has no current plans to do
so, the ITB design of the Seabulk Magnachem would allow the Company to replace
only the cargo-carrying portion of the vessel with a double-hull barge, which
the Company anticipates would be substantially less expensive than constructing
an entirely new double-hull conventional tank vessel.
The Company markets the five chemical carriers through its wholly owned
subsidiary OSTC. The total capacity of the five carriers represents
approximately 44% of the capacity of the domestic specialty chemical carrier
fleet, and four of the chemical carriers are among the last independently owned
carriers scheduled to be retired under OPA 90. See "-- The Industry -- Marine
Transportation Services -- Chemical Transportation."
OSTC books cargoes either on a spot (movement-by-movement) or time basis.
Approximately 75% of contracts for cargo are committed on a 12- to 18-month
basis, with minimum and maximum cargo tonnages specified over the period at
fixed rates per ton. The HMI Dynachem and HMI Astrachem are currently chartered
to major oil companies under charters that expire in August 1997 and November
1997, respectively. Upon the expiration of these charters, the Company intends
to enter into new contracts of affreightment or time charters to market those
vessels. OSTC is often able to generate additional revenues by chartering cargo
space on competitors' vessels and by expanding the carriers' backhaul (return
voyage) opportunities.
Petroleum Product Transportation.
Seabulk Challenger. The 320,000-barrel, 39,300 dwt CATUG(R) ITB Seabulk
Challenger is engaged in the transportation of fuel and other petroleum products
from Shell's refineries in Texas and Louisiana to tank farms and industrial
sites primarily in Port Everglades, Tampa, and Jacksonville, Florida. Delivered
in 1975, the Seabulk Challenger has six cargo segregations and was the first
CATUG(R) ITB constructed in the world. Like the Seabulk Magnachem, it enjoys
certain manning and other advantages over conventional tank vessels. In 1989 and
1991, the vessel had extensive steel renewals and tank recoatings. In addition,
in 1991 the vessel was outfitted with an inert-gas system at the expense of the
charterer.
The Seabulk Challenger has been under continuous contract to Shell since
its delivery in 1975 and to date has performed over 600 voyages for Shell. In
January 1990, Shell renewed the charter for a ten-year period ending in January
2000. Under the charter, the Company is responsible for operating costs such as
crew, maintenance, and insurance, and Shell pays for voyage costs such as fuel
and port charges. The charter hire rate is adjusted annually for inflation. The
charter may be canceled by Shell in January 1998 and January 1999 upon payment
of a percentage of the charter hire due over the remaining term of the charter.
Shell has in the
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<PAGE> 44
past repeatedly renewed its charter of the Seabulk Challenger, and continues to
fully utilize the vessel. Because the termination penalties are substantial, and
Shell has provided significant capital enhancement to the vessel, the Company
believes that Shell will continue to charter the vessel until January 2000,
although there can be no assurance that it will do so. In the fourth quarter of
1996, the charter rate was renegotiated and reduced by approximately 6% to
reflect the lower current market rate.
The Seabulk Challenger, like the Company's chemical carriers and
single-hull barges, cannot be operated in U.S. waters after its January 2003
phase-out date under OPA 90. As with the Seabulk Magnachem, the Company could,
but has no current plans to, replace the barge portion of the Seabulk Challenger
with a double-hull barge, which the Company anticipates would be substantially
less expensive than constructing an entirely new double-hull conventional tank
vessel.
Sun State. In September 1994, the Company acquired the marine assets of Sun
State Marine, Inc. ("Sun State"), which then owned and operated an energy
transportation fleet of ten towboats and eight fuel barges (one small barge was
acquired in April 1995 and four small barges were acquired in December 1995),
all of which are engaged in fuel transportation along the Atlantic intracoastal
waterway and in the St. Johns River in Florida. Sun State has been in operation
for over 50 years, and the Company continues to operate it as a wholly-owned
subsidiary.
A majority of Sun State's revenue for the year ended December 31, 1995 and
the nine months ended September 30, 1996 was derived from a fuel transportation
contract with FPL. The remainder of its revenue was derived from a fuel
transportation contract with another customer and its marine maintenance,
repair, and drydocking facility. See "-- Other Services." Under its contract
with FPL, which has a term extending to September 1998, Sun State has agreed to
transport fuel oil from Port Canaveral and Jacksonville to certain FPL electric
power generating facilities at specified rates (a combination of per diem and
variable rates based upon barrels transported) with an escalation provision. The
FPL contract has a specified guaranteed minimum utilization provision.
The Sun State towboats are as follows:
<TABLE>
<CAPTION>
LENGTH YEAR BUILT/
VESSEL NAME HORSEPOWER (FEET) REBUILT
<S> <C> <C> <C>
Sun River City....................................... 1,000 72 1994
Sun Commander........................................ 1,000 70 1968/1990
Sun Chief............................................ 1,000 72 1971/1990
Sun Merchant......................................... 1,000 65 1966/1994
Sun Trader........................................... 850 56 1972/1980
Sun St. Johns........................................ 850 58 1961/1990
Sun Explorer......................................... 800 57 1980
Sun Gypsy............................................ 800 53 1976/1992
Sun Rebel............................................ 800 60 1957/1991
Sun Venture.......................................... 800 66 1956/1986
</TABLE>
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<PAGE> 45
The Sun State barges are as follows:
<TABLE>
<CAPTION>
BARGE LENGTH YEAR BUILT/
VESSEL NAME CAPACITY (FEET) REBUILT
<S> <C> <C> <C>
Sun State No. 1....................................... 25,684 bbls 290 1952/1994
Sun State No. 2....................................... 25,684 bbls 290 1952/1979
Sun State No. 3....................................... 25,974 bbls 290 1962/1986
Sun State No. 4....................................... 25,974 bbls 290 1962/1984
Sun State No. 6....................................... 21,408 bbls 264 1950/1982
Sun State No. 7....................................... 20,700 bbls 264 1967/1990
Sun State No. 8....................................... 23,000 bbls 272 1970
Sun State No. 9....................................... 23,000 bbls 272 1970
Sun State 501......................................... 4,880 bbls 126 1966
Sun State 701......................................... 7,000 bbls 175 1942
Sun State 901......................................... 9,000 bbls 177 1948
Sun State 902......................................... 9,500 bbls 195 1947
Sun State 1101........................................ 11,000 bbls 200 1963
</TABLE>
OPA 90 requires all single-hull barges, including the Sun State barges, to
discontinue transporting fuel and other petroleum products in 2015.
The Company is considering the construction of five double-hull barges at
an estimated aggregate cost of approximately $9.0 million. The decision to
proceed with the construction of these barges will be based upon successful
completion of negotiations of long-term contracts with a customer concerning use
of these vessels. These negotiations are in a preliminary stage and there can be
no assurance that the construction of these barges will be undertaken.
New Product Carriers. The Company has a 2.4% equity interest in five 45,300
dwt double-hull petroleum product carriers currently under construction by
Newport News Shipbuilding and Drydock Co. for delivery during 1998. The
aggregate cost of the five carriers is estimated to be $255.0 million, of which
approximately $40.0 million will constitute equity investment and $215.0 million
will be financed with the proceeds of government-guaranteed Title XI ship
financing bonds issued in March 1996. In addition to the Company's interest, 25%
of the equity interest in the vessels is held by Van Ommeren International BV
and 49.3% and 23.4%, respectively, by two other investors. Subject to the
condition that the current owner of the 49.3% interest has not previously sold
such interest to a third party, the Company has an option, exercisable through
2002, to purchase the 49.3% interest at a price equal to (i) the investor's
equity investment plus a stated annual return, or (ii) if exercised after
December 31, 1997, the greater of the fair market value of the interest or the
amount set forth in (i). The Company also has an option, exercisable on January
15, 1998, to purchase the additional 23.4% interest at a price equal to the
investor's equity investment plus a stated return. Should the Company fail to
exercise the latter option, the investor has the option to acquire 1.6% of the
ownership interest from the Company for nominal consideration. The total
estimated cost of exercising the Company's options is up to $32.0 million
(assuming the options are exercised prior to January 1, 1998). The Company
currently has no understandings or agreements with respect to the financing that
it would require if it were to exercise either or both of these options, and
there can be no assurance that such financing will be available.
The five double-hull product carriers, the operations of which will be
managed by the Company, are intended to serve the market currently served by
single-hull product carriers whose retirement is mandated by OPA 90. The vessels
will operate in the U.S. domestic trade and may be operated pursuant to long- or
short-term charters, depending upon market conditions during the period prior to
their delivery and thereafter. The Company is serving as the construction
supervisor during the construction period. The construction project is currently
the subject of litigation. See "-- Legal Proceedings."
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<PAGE> 46
OTHER SERVICES
As part of the Sun State acquisition, the Company also acquired a small
marine maintenance, repair, and drydocking facility in Green Cove Springs,
Florida, which is engaged principally in the maintenance of tugs and barges,
offshore support vessels, and other small vessels. The lease for the facility,
including options, expires in 2000. The towboat Sun River City was constructed
in the Green Cove Springs facility, which is capable of drydocking vessels up to
300 feet in length for repair and can make dockside repairs on vessels up to 320
feet in length. Since October 1994, the Green Cove Springs facility has been
utilized to overhaul or rebuild a number of the Company's harbor tugs and
offshore energy support vessels. The facility (originally a U.S. government
naval repair and operations station) has covered steel fabrication facilities,
workshops, and office spaces adjacent to a 1,840-foot finger pier and mooring
basins, where the facility's three floating drydocks are located. The drydocks
are 60, 80, and 108 feet in length, and are capable of lifting 350, 200, and 500
tons, respectively. The 60 and 108 foot drydocks are capable of being joined
together for lifting a vessel or barge with a nominal capacity of 1,175 long
tons.
CUSTOMERS AND CHARTER TERMS
The Company offers its offshore energy support services primarily to oil
companies and large drilling companies. Consistent with industry practice, the
Company's U.S. Gulf of Mexico operations are conducted primarily in the "term"
market pursuant to short-term (less than six months) charters at varying day
rates. Generally, such short-term charters can be terminated by either the
Company or its customer upon notice of five days or less.
The Company offers its offshore and harbor towing services to vessel owners
and operators and their agents. The Company's rates for harbor towing services
are set forth in the Company's published tariffs and are subject to modification
by the Company at any time, limited by competitive factors. The Company also
grants volume discounts to major users of harbor services. Offshore towing
services are priced based upon the service required on an ad hoc basis.
The primary purchasers of chemical transportation services are chemical and
oil companies. The primary purchasers of petroleum product transportation
services are utilities, oil companies, and large industrial consumers of fuel
with waterfront facilities. Both services are generally contracted for on the
basis of short- or long-term time charters, voyage charters, contracts of
affreightment, or other transportation agreements tailored to the shipper's
requirements. Shell is the Company's largest single customer and the long-term
charterer of the Seabulk Challenger. In addition, Chevron is a purchaser of the
Company's offshore energy support services and each of Phillips and Amoco
currently charters one of the Company's chemical carriers. Shell, Amoco,
Phillips and Chevron each accounted for between 5% and 10% of the Company's
revenue for the nine months ended September 30, 1996 on a pro forma basis, and
Shell and Phillips each accounted for between 5% and 10% of the Company's
revenue for the year ended December 31, 1995 on a pro forma basis. The loss of
any of these customers could have a material adverse effect on the Company.
COMPETITION
The Company operates in a highly competitive environment in all its
operations. The principal competitive factors in each of the markets in which
the Company operates are suitability of equipment, personnel, price, service,
and reputation. The Company's vessels that provide chemical and petroleum
products transportation services compete with both other vessel operators and,
in some areas and markets, with alternative modes of transportation, such as
pipelines, rail tank cars, and tank trucks. Moreover, the users of such services
are placing increased emphasis on safety, the environment, and quality, partly
due to heightened liability for the cargo owner in addition to the vessel
owner/operator under OPA 90. See "-- Environmental and Other Regulation -- Clean
Water Regulations." With respect to towing services, the Company's vessels
compete not only with other providers of tug services, but with the providers of
tug services in nearby ports. Many of the companies with which the Company
competes have substantially greater financial and other resources than the
Company. Additional competitors may enter the Company's markets in the future.
Moreover, should U.S. coastwise laws be repealed, foreign-built, foreign-manned,
and foreign-
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<PAGE> 47
owned vessels could be eligible to compete with the Company's vessels. See
"-- Environmental and Other Regulation -- Coastwise Laws."
ENVIRONMENTAL AND OTHER REGULATION
The Company's operations are subject to significant federal, state, and
local regulation, the principal provisions of which are described below.
Clean Water Regulations. OPA 90 established an extensive regulatory and
liability regime for the protection of the environment from oil spills. OPA 90
affects all owners and operators of vessels in United States waters, which
include the United States territorial sea and the 200-mile exclusive economic
zone of the United States. Although it applies in general to all vessels, for
purposes of its liability limits and financial-responsibility and
response-planning requirements, OPA 90 differentiates between tank vessels
(which include the Company's chemical carriers, product carrier, and fuel
barges) and "other vessels" (which include the Company's tugs and offshore
energy service vessels).
Under OPA 90, owners, operators, and certain charterers of vessels are
"responsible parties" and are jointly, severally, and strictly liable for
containment and cleanup costs and other damages arising from oil spills relating
to their vessels, unless the spill results solely from the act or omission of a
third party, an act of God, or an act of war. Such "other damages" are defined
broadly to include (i) natural resources damages and the costs of assessment
thereof; (ii) damages for injury to, or economic losses resulting from the
destruction of, real and personal property; (iii) net loss of taxes, royalties,
rents, fees, and other lost revenues by the U.S. government, a state, or
political subdivision thereof; (iv) lost profits or impairment of earning
capacity due to property or natural resources damage; (v) net cost of public
services necessitated by a spill response, such as protection from fire or other
hazards; and (vi) loss of subsistence use of natural resources.
For tank vessels, the statutory liability of responsible parties is limited
to the greater of $1,200 per gross ton or $10 million ($2 million for a vessel
of 3,000 gross tons or less) per vessel; for "other vessels," such liability is
limited to the greater of $600 per gross ton or $500,000 per vessel. Such
liability limits do not apply, however, to an incident proximately caused by
violation of federal safety, construction, or operating regulations or by the
responsible party's gross negligence or willful misconduct, or if the
responsible party fails to report the incident or to cooperate and assist in
connection with oil removal activities. Although the Company currently maintains
pollution liability insurance with coverage of $700 million per incident for its
tank vessels ($500 million per incident for its fuel barges), a catastrophic
spill could result in liability in excess of available insurance coverage,
resulting in a material adverse effect on the Company.
Under OPA 90, with certain limited exceptions, all newly built or converted
tankers operating in United States waters must be built with double hulls, and
existing single-hull vessels must be phased out at some point, depending upon
their size, age and place of discharge, between 1995 and 2015 unless retrofitted
with double hulls. As a result of this phase-out requirement, as interpreted by
the U.S. Coast Guard, the Company's chemical carriers and its petroleum product
carrier will be required to cease transporting petroleum products over the next
19 years, and its fuel barges will cease transporting fuel in 2015. The
retirement dates of certain tankers may be extended by reducing their gross
registered tonnage and cargo capacity. There can be no assurance that the useful
life of any of the Company's vessels will be so extended.
OPA 90 expanded pre-existing financial responsibility requirements and
requires vessel owners and operators to establish and maintain with the United
States Coast Guard evidence of insurance or qualification as a self-insurer or
other evidence of financial responsibility sufficient to meet their potential
liabilities under OPA 90. U.S. Coast Guard regulations require evidence of
financial responsibility demonstrated by insurance, surety bond, self-insurance,
or guaranty. The regulations also implement the financial responsibility
requirements of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), which imposes liability for discharges of
hazardous substances such as chemicals, by increasing the amount of financial
responsibility from $1,200 to $1,500 per gross ton. The Company has obtained
COFRs pursuant to the Coast Guard regulations for its product carrier and for
its chemical carriers through self-insurance and commercial insurance and as
guarantor for the fuel barges.
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<PAGE> 48
OPA 90 also amended the Federal Water Pollution Control Act to require the
owner or operator of a tank vessel to prepare vessel response plans and to
contract with oil spill response organizations to remove to the maximum extent
practicable a worst-case discharge (loss of all cargo). The Company has complied
with both requirements. As is customary, the Company's oil spill response
contracts are executory in nature and are not activated unless required. Once
activated, the Company's pollution liability insurance covers the cost of spill
removal subject to overall coverage limitations and deductibles.
OPA 90 expressly permits individual states to impose their own liability
regimes with respect to oil pollution incidents occurring within their
boundaries, and many states have enacted legislation providing for unlimited
liability for oil spills. Some states that have enacted such legislation have
not yet issued implementing regulations defining tanker owners' responsibilities
under the legislation. The Company does not anticipate that such legislation or
regulations will have any material impact on its operations.
The Company manages its exposure to losses from potential discharges of
pollutants through the use of well-maintained and well-equipped vessels, safety
and environmental programs, and its insurance program, and believes that it will
be able to accommodate reasonably foreseeable environmental regulatory changes.
There can be no assurance, however, that any new regulations or
requirements or any discharge of pollutants by the Company will not have an
adverse effect on the Company.
Clean Air Regulations. The federal Clean Air Act of 1970, as amended by the
Clean Air Act Amendments of 1990, requires the Environmental Protection Agency
to promulgate standards applicable to the emission of volatile organic compounds
and other air pollutants. These standards are designed to reduce hydrocarbon
emissions released in the atmosphere and are implemented by the states through
State Implementation Plans for areas that are not in compliance with those
standards. The Company's vessels are subject to vapor control and recovery
requirements when loading petroleum cargoes in Louisiana and when loading,
unloading, ballasting, cleaning, and conducting other operations in certain
ports in Texas. The Company's chemical and petroleum product carriers are
equipped with vapor control systems that satisfy the state requirements. The
fuel barges are not equipped with, and are not operated in areas that require,
such systems.
Coastwise Laws. Most of the Company's operations are conducted in the U.S.
domestic trade, which is governed by the coastwise laws of the United States
(principally, the Jones Act). The coastwise laws reserve marine transportation
(including harbor tug services) between points in the United States (including
drilling rigs fixed to the ocean floor in U.S. territorial waters) to vessels
built in and documented under the laws of the United States (U.S. flag) and
owned and manned by U.S. citizens. Generally, a corporation is deemed a citizen
for these purposes so long as (i) it is organized under the laws of the U.S. or
a state thereof, (ii) each of its president or other chief executive officer and
the chairman of its board of directors is a citizen, (iii) no more than a
minority of the number of its directors necessary to constitute a quorum for the
transaction of business are non-citizens, and (iv) 75% of the interest and
voting power in the corporation are held by citizens. Because the Company would
lose its privilege of operating its vessels in the U.S. domestic trade if
non-citizens were to own or control in excess of 25% of the Company's
outstanding capital stock, the Company's Articles of Incorporation contain
restrictions concerning foreign ownership of its stock. See "Description of
Capital Stock -- Foreign Ownership Restrictions." A coalition of shipper
interests opposed to the Jones Act announced in the summer of 1995 its intention
to seek changes to the Jones Act. Although the Company believes that it is
unlikely that the Jones Act will be substantially modified or repealed, there
can be no assurance that Congress will not substantially modify the Jones Act or
repeal it. Such changes could have a material adverse effect on the Company's
operations and financial condition.
Occupational Health Regulations. The Company's vessel operations are
subject to occupational safety and health regulations issued by the Coast Guard.
Such regulations currently require the Company to perform extensive monitoring,
medical testing, and record keeping with respect to seamen engaged in the
handling of the various cargoes transported by the Company's chemical and
petroleum products carriers.
47
<PAGE> 49
Vessel Condition. The Company's chemical and petroleum products carriers,
offshore energy support vessels, seven of its tugs, and the fuel barges are
subject to periodic inspection and survey by, and drydocking and maintenance
requirements of, the Coast Guard and/or the American Bureau of Shipping, a
marine classification society whose periodic certification as to the
construction and maintenance of certain vessels is required in order to maintain
insurance coverage. All of the Company's vessels requiring certification to
maintain insurance coverage are certified.
Oil Tanker Escort Requirements. Implementation of oil tanker escort
requirements of OPA 90 and pending state legislation are expected to introduce
certain performance or engineering standards on tugs to be employed as tanker
escorts. The Company believes its tractor tug will be able to comply with any
existing or currently anticipated requirements for escort tugs. Adoption of such
new standards could require modification or refitting of the tugs currently
operated by the Company to the extent such tugs are employed as tanker escorts.
The Company does not anticipate OPA 90 or state requirements to require
modification of tugs, such as the Company's, involved in harbor tug operations.
The Company believes that it is currently in compliance in all material
respects with the environmental and other laws and regulations, including OSHA
shipyard requirements, to which its operations are subject and is unaware of any
pending or threatened litigation or other judicial, administrative, or arbitral
proceedings against it occasioned by any alleged non-compliance with such laws
or regulations. The risks of substantial costs, liabilities, and penalties are,
however, inherent in marine operations, and there can be no assurance that
significant costs, liabilities, or penalties will not be incurred by or imposed
on the Company in the future.
INSURANCE
The Company's marine transportation services operations are subject to the
normal hazards associated with operating vessels carrying large volumes of cargo
or rendering services in a marine environment. These hazards include the risk of
loss of or damage to the Company's vessels, damage to third parties as a result
of collision, loss, or contamination of cargo, personal injury of employees,
pollution, and other environmental damages. The Company maintains insurance
coverage against these hazards. Risk of loss of or damage to the Company's
vessels is insured through hull insurance policies in amounts that approximate
fair market value. Vessel operating liabilities, such as collision, cargo,
environmental, and personal injury, are insured primarily through the Company's
participation in the Steamship Mutual Underwriting Association (Bermuda
Limited), a mutual insurance association under which the coverage against such
hazards is currently unlimited for each incident except in the case of
pollution, which is limited to $700 million (the maximum amount available) for
each incident involving the Company's chemical and petroleum products carriers
and $500 million with respect to its other vessels. Because it maintains mutual
insurance, the Company is subject to funding requirements and coverage
shortfalls in the event claims exceed available funds and reinsurance and to
premium increases based on prior loss experience.
LEGAL PROCEEDINGS
The Company is party to two legal proceedings involving its chemical
carrier Seabulk America, one involving the Company's continued ability to
operate the vessel in the U.S. domestic trade, the other involving the cost of
completing the vessel.
The Seabulk America was completed in 1990 by combining the stern portion of
the wrecked oil tanker Fuji with the forebody of the chemical barge portion of
the former integrated tug/barge Oxy Producer/Oxy 4102. The Company purchased the
stern portion of the Fuji in 1985 after the tanker had broken apart following an
explosion at sea, and had previously purchased the barge portion of the Oxy
Producer/Oxy 4102 after the tug portion separated from the barge and was lost at
sea. At the time of their respective acquisitions by the Company, neither vessel
was qualified to operate in the U.S. domestic trade. The Fuji was not qualified
because it was built in Japan and the U.S. coastwise laws generally exclude
foreign-built vessels from the U.S. domestic trade. The barge was not qualified
because (i) the Oxy Producer/Oxy 4102, although built in the United States, was
built with the assistance of federal subsidy, (ii) the barge was purchased by
the Company with certain tax-deferred funds, and (iii) the provisions of the
Merchant Marine Act, 1936, as amended,
48
<PAGE> 50
authorizing the subsidy and tax-deferral programs involved exclude vessels that
have been the subject of the programs from operating in the U.S. domestic trade.
An exception to the coastwise laws' exclusion of foreign-built vessels from
the U.S. domestic trade is the Wrecked Vessel Act, which provides that a
foreign-built vessel wrecked on the coast of the United States may become
qualified for the U.S. domestic trade if it is repaired in the United States at
a cost of at least three times its appraised salvaged value. In a series of
rulings between 1985 and 1987, the Coast Guard, which administers the Wrecked
Vessel Act, determined that the Fuji would qualify for domestic operation under
the Act if it were repaired in the United States, by combining it with the barge
portion of the Oxy Producer/Oxy 4102, at a cost of at least $11.5 million. Also
in 1987, the Maritime Administration, which administers the Merchant Marine Act,
determined that once the barge was incorporated into the rebuilt Fuji, the barge
would have lost its character as a vessel and the domestic-trading restrictions
applicable to vessels built with subsidy assistance and purchased with
tax-deferred funds would no longer be operative. In 1990, following the
Company's completion of the repair project, the Coast Guard determined that the
value of the repairs exceeded $20.0 million and that the repaired vessel was the
rebuilt Fuji, renamed Seabulk America, eligible to operate in the U.S. domestic
trade.
In Keystone Shipping Co. v. United States, pending in the U.S. District
Court for the District of Columbia (Civil Action No. 90-2762), the plaintiffs,
competitors of the Company, in 1990 asked the court to invalidate the foregoing
Coast Guard and Maritime Administration determinations that the Seabulk America
is qualified to operate in the U.S. domestic trade. The Company, as the sole
beneficiary of those determinations, has intervened as a defendant in the suit.
In September 1992, the court upheld certain aspects of the Coast Guard
determinations, concluded that the agencies had provided insufficient
explanation to enable the court to determine the validity of the Maritime
Administration determinations and the remaining aspects of the Coast Guard
determinations, and remanded the matter to each agency for further explanation
of its respective determinations. Those explanations were provided by August
1994, and the plaintiffs have to date not renewed their requests for an order
declaring the agency determinations unlawful. Should plaintiffs renew such
requests and obtain such an order, the Seabulk America would be limited to
operations in the foreign trades, where, although it would be less competitive
than in the U.S. domestic trade, it would be eligible to receive
operating-differential subsidy under a currently inactive subsidy contract held
by the Company. The Company believes that plaintiffs' suit was without merit
and, should it be renewed, intends to continue vigorously to support the
government's defense of the agency determinations.
In Norfolk Shipbuilding and Dry Dock Corporation v. Seabulk Transmarine
Partnership, Ltd., pending in the U.S. District Court for the Eastern District
of Louisiana (Civil Action No. 93-1312), one of the shipyards that contracted to
complete the Seabulk America for the Company is seeking to recover from the
Company approximately $6.1 million for alleged additions and changes to the
contract work and costs of alleged delay and disruption, in addition to $2.4
million of the $5.9 million contract price that the Company has withheld. In
addition, the shipyard is seeking legal fees and expenses and $10.0 million of
punitive damages. The Company has asserted counterclaims aggregating $5.6
million for contract deletions, unfinished and defective work, and liquidated
damages for late delivery. In 1993, when this suit was filed, the Company was
required to obtain a $5.6 million letter of credit in order to furnish a bond to
obtain the release of the Seabulk America, which had been arrested pursuant to
customary procedures in litigation involving vessels. The suit, which involves
numerous complex factual issues, is currently in the pre-trial discovery stage.
While the Company believes that the plaintiff's claims are without merit and
that its counterclaims are meritorious, there can be no assurance that the
ultimate resolution of the suit will not require some payment by the Company in
addition to the $3.6 million previously paid.
The Company is also a defendant in a suit relating to certain of its
offshore supply boats pending in the Circuit Court of the 17th Judicial Circuit
of Florida, U.S. Offshore, Inc. v. Seabulk Offshore, Ltd. (No. 93-32963(09)).
The suit involves a claim by a former limited partner in the partnership that
owns eight of the supply boats seeking an unspecified amount of damages for
alleged breach of a contract by which the Company agreed to pay the plaintiff 5%
of the revenues (not to exceed $1.3 million) earned from the operation of the
boats during the 40 months ended March 31, 1994. The Company has paid the
plaintiff
49
<PAGE> 51
approximately $769,000 pursuant to the contract and believes that the claim for
any additional amount is without merit.
Affiliates of the Company have intervened in two parallel legal actions
brought by Kirby Corporation ("Kirby"), an operator of vessels with which the
five new product carriers in which the Company has an interest will compete,
seeking to have the construction project stopped. Kirby's actions allege that
the U.S. Maritime Administration acted unlawfully in guaranteeing, pursuant to
Title XI of the Merchant Marine Act, 1936, as amended ("Title XI"), the $215
million of ship financing bonds issued to finance the project, specifically
asserting that the Maritime Administration erroneously determined that the
project is economically sound and that the entities that will own the vessels
are U.S. citizens qualified to operate the vessels in the coastwise trade. The
Company believes the actions are without merit, has supported the U.S.
Department of Justice in obtaining dismissal of one of the actions, is
continuing to support the Department in defending against Kirby's appeal from
that dismissal and in seeking dismissal of the remaining action. Both actions
are currently pending in the United States Court of Appeals for the Fifth
Circuit, as Kirby Corporation v. United States (No. 96-60154) and Kirby
Corporation v. Pena (No. 96-20582).
From time to time the Company is also party to litigation arising in the
ordinary course of its business, most of which is covered by insurance.
PROPERTIES
The Company's principal offices are located in Fort Lauderdale, Florida,
where the Company leases approximately 36,000 square feet of office and shop
space under a lease that expires in 2009. In addition, the Company leases
facilities in Houston, Texas, Lafayette and Amelia, Louisiana, Mobile, Alabama,
and Port Canaveral and Green Cove Springs, Florida, to support its operations.
EMPLOYEES
As of December 15, 1996, the Company had approximately 953 employees.
Management considers relations with employees to be satisfactory. The Seabulk
America, Seabulk Challenger, and Seabulk Magnachem are manned by approximately
108 officers and crew who are subject to collective bargaining arrangements. In
addition, the HMI Dynachem, HMI Petrochem, and HMI Astrachem are manned by
approximately 90 members of national maritime labor unions pursuant to an
agreement between the Company and a third party employer.
50
<PAGE> 52
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITIONS
<S> <C> <C>
J. Erik Hvide(1)(2)...... 48 Chairman of the Board, President, Chief Executive
Officer, and Director
John H. Blankley(1)(2)... 49 Executive Vice President, Chief Financial Officer, and
Director
Donald L. Caldera........ 61 Executive Vice President -- Development and Director
Eugene F. Sweeney(1)..... 54 Executive Vice President -- Operations and Director
Andrew W. Brauninger..... 50 Vice President -- Offshore Division and
President -- Seabulk Offshore, Ltd.
Leo T. Carey............. 44 Vice President -- Ship Management
Gene Douglas............. 49 Vice President -- Legal & General Counsel and Secretary
William R. Ludt.......... 49 Vice President -- Inland Services Division and
President -- Sun State Marine Services, Inc.
John J. O'Connell, Jr.... 53 Vice President -- Corporate Communications
Robert A. Santos......... 64 Vice President -- Offshore and Harbor Towing Operations
Christopher D. Strong.... 38 Treasurer
Robert B. Calhoun,
Jr.(2)(4).............. 54 Director
Gerald Farmer(3)(4)...... 51 Director
Jean Fitzgerald(1)(3).... 70 Director
John Lee(3).............. 60 Director
Walter C. Mink(4)........ 70 Director
Robert Rice(4)........... 74 Director
Raymond B. Vickers(3).... 47 Director
</TABLE>
- ------------------------------------
(1) Member of the Executive Committee.
(2) Member of the Special Acquisitions Committee.
(3) Member of the Compensation Committee.
(4) Member of the Audit Committee.
MR. HVIDE has been the Company's Chairman since September 1994 and its
President and Chief Executive Officer since January 1991. He has been a director
of the Company since 1973. From 1981 until 1991, Mr. Hvide was President and
Chief Operating Officer of the Company. From January 1991 to September 1994, he
was also Vice Chairman. He has been employed by the Company in various
capacities since 1970 and became Vice President in 1973. He is also a director
of the American Waterways Operators, a participant on the Transportation
Committee of the American Petroleum Institute, a member of the American Bureau
of Shipping, a past Chairman of the Board of the American Institute of Merchant
Shipping and a past appointee to the U.S. Coast Guard's Towing Safety Advisory
Committee. Mr. Hvide is the son of Hans J. Hvide, the founder of the Company.
MR. BLANKLEY has been a director of the Company since September 1991 and
has been Executive Vice President -- Chief Financial Officer since September
1995. He previously served as a director and Chief Financial Officer of Harris
Chemical Group Inc., a chemical manufacturing company, from April 1993 to August
1994. Mr. Blankley is the owner of Seafirst Capital, a ship finance consulting
business he founded in 1994. He served as Executive Vice President -- Finance
and Chief Financial Officer of Stolt-Nielsen, Inc., a publicly traded
international operator of specialty chemical tankers, from 1985 to 1991. From
1983 until 1985, Mr. Blankley was a director, Senior Vice President, and Chief
Financial Officer of BP North America Inc. Mr. Blankley is also a director of MC
Shipping, a publicly traded operator of container feeder vessels.
51
<PAGE> 53
MR. CALDERA has been Executive Vice President -- Development of the Company
since September 1993. Mr. Caldera became a director of the Company in April
1994. From November 1990 to January 1992, he was Chief Executive Officer of
Global Sovcruise Lines, a joint Swiss-Soviet shipping venture. Between 1985 and
June 1990, he was Chairman and Chief Executive of Norex-America, Inc. (formerly
Bermuda Star Lines, Inc.), a publicly traded cruise ship line. Between 1980 and
1985, Mr. Caldera served as Senior Vice President -- Marketing and Sales of
Midland Enterprises, Inc., a diversified inland waterways company. From 1976 to
1980, he was Executive Vice President and Chief Operating Officer of Interocean
Management Corporation, a firm managing foreign-flag and U.S.-flag tankers.
MR. SWEENEY has been Executive Vice President -- Operations of the Company
since September 1994 and a director since 1984. He was Senior Vice
President -- Operations of the Company from 1991 to September 1994. He joined
the Company in 1981 as Vice President -- Ship Management. Prior to joining the
Company, Mr. Sweeney was employed for 17 years by Texaco, Inc., where he served
in sea-going and shore management positions, including operations manager of
Texaco's U.S. tanker fleet. Mr. Sweeney is past President of the Chemical
Carriers Association, a member of the Society of Naval Architects and Marine
Engineers and served as a member of a National Academy of Sciences Committee to
study marine navigation and pilotage.
MR. BRAUNINGER has been Vice President -- Offshore Division since March
1990 and the President of Seabulk Offshore, Ltd., the Company's offshore energy
support services subsidiary, since September 1994. He was Vice President of
Offshore Operations from May 1990 to September 1994 and Vice President --
Development from 1989 to 1990. From 1987 to 1989, Mr. Brauninger was President
of OMI Offshore Services, Inc., an operator of offshore service vessels.
Previously, he was employed by Sabine Towing and Transportation Company, where
he held a variety of posts including Vice President -- Harbor Division.
MR. CAREY has been Vice President -- Ship Management since November 1996.
He previously served as Director of Operations for the Company's fleet of
chemical and petroleum product carriers. He joined the Company in 1981 as
Superintendent Engineer. Prior to that, he served with El Paso Marine Co. as a
deck officer and maintenance manager.
MR. DOUGLAS has been Vice President -- Legal, General Counsel and Secretary
of the Company since 1975. He was an attorney with the Fort Lauderdale, Florida
law firm of Spear and Deuschle, P.A. prior to joining the Company. He has been
admitted to the Florida Bar since 1972 and is admitted to practice before
various federal courts. He is also a member of the American Bar Association, the
Maritime Law Association of the United States, and other professional
organizations.
MR. LUDT has been Vice President -- Inland Services Division since January
1995 and the President of Sun State Marine Services, Inc., the Company's energy
tug and barge subsidiary, since September 1994. He was director -- Fleet
Operations of the Company from 1982 to September 1994. Since joining the Company
in 1979, he has also served as Fleet Manager and Port Engineer. He served as the
President of the Chemical Carriers Association from 1989 to 1990 and as Vice
President of that association from 1990 to 1992. Mr. Ludt has also served on
various working groups within the U.S. Coast Guard's Chemical Transportation
Advisory Committee concerning issues such as vapor control and marine
occupational safety and health. Mr. Ludt holds a dual license as a Third Mate
and Third Assistant Engineer, Steam and Motor Vessels.
MR. O'CONNELL has been Vice President -- Corporate Communications since
August 1996, when he joined the Company. From September 1995 to August 1996 he
was an independent consultant. Previously, he served in a variety of management
positions with W.R. Grace & Co. for 20 years, most recently as Director of
Public Affairs. Mr. O'Connell was a member of the President's Private Sector on
Cost Control in the Federal Government from 1982 to 1984.
MR. SANTOS has been Vice President -- Towing Operations of the Company
since 1983. Mr. Santos joined the Company as its towing operations manager in
1962. He has served as a Commissioner of Florida's Board of Pilot Commissioners,
Chairman of the Escort Vessel Subcommittee of the American Waterways Operators
and as a member of various marine-related trade associations and boards.
52
<PAGE> 54
MR. STRONG has been Treasurer of the Company since November 1996 and
Director of Finance since joining the Company in December 1994. From January
1990 to December 1994, he was Treasurer of the Port Everglades Authority. From
1986 to 1989, he served in several management positions with Kislak Mortgage
Corporation and Kislak National Bank including Vice President -- Finance and
Investment Officer. Mr. Strong previously served as an officer in the U.S. Navy.
MR. CALHOUN has been a director of the Company since September 1994. Mr.
Calhoun has been President of Clipper Asset Management Corporation, the sole
general partner of The Clipper Group, L.P., a private investment firm, since
1991. From 1975 to 1991, Mr. Calhoun was a Managing Director of CS First Boston
Corporation, an investment banking firm. Mr. Calhoun serves as a director of
Avondale Mills, Inc., a textile company, and Interstate Bakeries Corporation, a
national distributor of baked goods, and Sterling Chemicals Holdings, Inc., a
chemical producer. He also serves as a director of several privately held
companies.
MR. FARMER has served as a director of the Company since 1975. He was
Executive Vice President -- Chief Financial Officer and Treasurer of the Company
from September 1994 until September 1, 1995. In May 1995, Mr. Farmer, for
reasons unrelated to the Company or his responsibilities, retired effective as
of September 1, 1995 as Chief Financial Officer and Treasurer. He continued as
an Executive Vice President of the Company through December 15, 1995. He was
Senior Vice President -- Finance and Administration from January 1991 to
September 1994, having joined the Company in 1973 as Vice President -- Finance.
MR. FITZGERALD has been a director of the Company since March 1994. Since
1992, he has served as the Chairman of Florida Alliance, Inc., a consortium of
maritime interests. From 1990 to 1992, he was Executive Vice President of NDE
Testing & Equipment, Inc., a nationwide storage-tank testing company. From 1988
to 1990, he was with Frederic R. Harris, Inc., an international consulting
engineering firm. Mr. Fitzgerald was a co-founder and the President of American
Tank Testing Service, Inc., a firm that was subsequently acquired by NDE
Environmental Corporation, from 1986 to 1987. In 1982 and 1983, he served as the
Company's Vice President for Governmental Affairs. His other business experience
includes service as President of Tracor Marine, Inc. from 1976 to 1979 and
Director of Engineering of Tracor's Systems Technology Division from 1974 to
1976. Mr. Fitzgerald retired from the U.S. Navy in 1974 in the rank of Captain.
During his naval career he commanded major fleet units at sea and served in the
offices of the Chief of Naval Operations and the Secretary of Defense. He is a
past Commissioner and Chairman of the Port Everglades Authority.
MR. LEE has been a director of the Company since September 1994 and is
Chairman and Chief Executive Officer of Hexcel Corporation, an advanced
materials manufacturer. Mr. Lee joined the Board of Hexcel Corporation in May of
1993 as an outside independent director. In August 1993, Mr. Lee was asked to
become the Chairman and Co-Chief Executive Officer of Hexcel Corporation, which
was experiencing financial difficulties, in order to effect a consensual
reorganization. In December 1993, having concluded that a consensual
reorganization could not be accomplished, Hexcel Corporation filed for
protection under Chapter 11 of the Federal Bankruptcy Code and appointed Mr. Lee
sole Chief Executive Officer to effect a Plan of Reorganization. The
reorganization was completed in February 1995 and Hexcel emerged from Chapter
11. Mr. Lee has been a Director of Aviva Petroleum, Inc. since August 1993, and
has been Chairman, President and Chief Executive Officer of Lee Development
Corporation, a corporation providing investment and merchant banking services,
since 1987. He was a director of XTRA Corporation, a Massachusetts-based
transportation and equipment leasing company, from 1990 through January 1996.
Mr. Lee also served as Chairman and Chief Executive Officer of Seminole
Corporation, a fertilizer manufacturer, from July 1989 through April 1993 and
director of Tosco Corporation, a refiner, from April 1988 through April 1993 and
was President and Chief Operating Officer of Tosco Corporation from April 1990
through April 1993. Mr. Lee is an advisor to The Clipper Group, L.P., a private
investment firm, and is a trustee of Yale University.
MR. MINK has been a director of the Company since October 1990. He is
President of Walter C. Mink & Associates, a maritime advisory and consulting
firm in Las Vegas, Nevada. From 1978 to 1986, Mr. Mink was President of Mobil
Shipping and Transportation Company. Previously, he was President of Seabrokers,
Inc., a marine brokerage firm, and was earlier employed by Lago Oil, Esso
Tankers, and Mobil Oil Transport.
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<PAGE> 55
Mr. Mink is a director of First Olsen Tankers, Ltd. He served on the Board of
Managers of the American Bureau of Shipping and is a member of the Society of
Naval Architects and Marine Engineers.
MR. RICE has been a director of the Company since January 1992. A financial
consultant, he was Senior Vice President of Citibank, N.A. from 1954 to his
retirement in 1983. Mr. Rice is a director of ATCO Ltd., First Olsen Tankers
Ltd., and Pride Refining Inc.
DR. VICKERS has been a director of the Company since March 1994. An
attorney in private practice in Florida, he has represented more than a hundred
financial institutions. He is the author of Panic in Paradise: Florida's Banking
Crash of 1926 and an adjunct professor of U.S. economic and business history at
Florida State University. From 1975 to 1979, he served as Assistant Comptroller
of the State of Florida.
The Company's Board of Directors is divided into three classes, one class
of which is elected each year to hold office for a three-year term and until
successors are elected and qualified. The three classes of the Board of
Directors are as follows: Class I, comprised of Messrs. Caldera, Vickers, and
Rice, who serve for a term expiring in 1997; Class II, comprised of Messrs.
Sweeney, Mink, Blankley, and Lee, who serve for a term expiring in 1998; and
Class III, comprised of Messrs. Hvide, Fitzgerald, Farmer, and Calhoun, who
serve for a term expiring in 1999. Under the terms of the Shareholders Agreement
(as defined herein), the Investor Group nominated three persons to the Company's
current 11-member Board of Directors and Mr. Hvide nominated eight persons to
the Board. See "Description of Capital Stock -- Shareholders Agreement" and
"-- Common Stock." Messrs. Calhoun, Lee, and Rice are currently the Investor
Group's nominees.
BOARD COMMITTEES
The Company's Board of Directors has four committees: (i) the Executive
Committee; (ii) the Compensation Committee; (iii) the Audit Committee; and (iv)
the Special Acquisitions Committee.
The Executive Committee exercises the powers of the Board of Directors in
the management of the business and affairs of the Company between Board meetings
to the extent permitted by Florida law and as limited by the Company's bylaws.
Its current members are Messrs. Hvide (Chairman), Blankley, Fitzgerald, and
Sweeney.
The Compensation Committee reviews and recommends to the Board of Directors
the compensation and benefits of all executive officers of the Company and
reviews general policy matters relating to compensation and benefits of
employees of the Company. The Compensation Committee also administers the
Company's bonus and stock option plans. Its current members are Messrs.
Fitzgerald (Chairman), Vickers, Lee, and Farmer.
The Audit Committee is authorized by the Board to review, with the
Company's independent public accountants, the annual financial statements of the
Company prior to publication; to review the work of, and approve audit services
performed by, such independent accountants; to make annual recommendations to
the Board for the appointment of independent public accountants for the ensuing
year; and to review the adequacy and effectiveness of the accounting and
financial controls of the Company. Its current members are Messrs. Farmer
(Chairman), Calhoun, Mink, and Rice.
The Special Acquisitions Committee is authorized by the Board of Directors
to facilitate the acquisition of additional offshore energy support vessels,
subject to an aggregate purchase price limit of $20.0 million for all such
acquisitions. Its current members are Messrs. Hvide (Chairman), Blankley, and
Calhoun.
54
<PAGE> 56
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the Chief Executive
Officer and each of the five most highly compensated executive officers whose
individual remuneration exceeded $100,000 for the years ended December 31, 1996
and 1995 (the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ALL
NAME AND ANNUAL COMPENSATION ANNUAL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION(1) COMPENSATION(2)
<S> <C> <C> <C> <C> <C>
J. Erik Hvide................................. 1996 $469,513 (3) $5,927 $23,799
Chief Executive Officer 1995 462,000 $100,000 4,286 56,238
John H. Blankley(4)...........................
Executive Vice President, Chief Financial 1996 203,788 (3) 1,936 13,101
Officer 1995 73,125 15,000 246 5,310
Eugene F. Sweeney............................. 1996 185,288 (3) 3,163 11,573
Executive Vice President -- Operations 1995 150,000 50,000 2,676 16,470
Donald L. Caldera............................. 1996 184,701 (3) 718 13,942
Executive Vice President -- Development 1995 152,625 35,000 709 15,572
Gene Douglas.................................. 1996 131,270 (3) -- 11,491
Vice President -- Legal and General Counsel 1995 115,000 20,000 -- 9,871
</TABLE>
- ------------------------------------
(1) Reflects personal use of Company automobiles in the amounts indicated.
(2) For 1996, consists of Company 401(k) contributions of $10,500 for each of
Messrs. Hvide, Blankley, Sweeney, Caldera, and Douglas and Company life
insurance premium payments of $1,148, $348, $540, $1,404, and $66 for Messrs
Hvide, Blankley, Sweeney, Caldera, and Douglas, respectively, and club and
professional membership payments of $12,151, $2,253, $533, $2,038, and $915
for Messrs. Hvide, Blankley, Sweeney, Caldera, and Douglas, respectively.
For 1995, consists of Company 401(k) contributions of $10,500 for each of
Messrs. Hvide, Sweeney, and Caldera and $8,890 for Mr. Douglas, and Company
life insurance premium payments of $1,091, $116, $540, $1,404, and $66, for
Messrs. Hvide, Blankley, Sweeney, Caldera, and Douglas, respectively, and
club and professional membership payments of $13,357, $75, $180, $1,568, and
$915 for Messrs. Hvide, Blankley, Sweeney, Caldera, and Douglas,
respectively, and additional benefits of $31,290, $5,119, $5,250, and
$2,100, for Messrs. Hvide, Blankley, Sweeney, and Caldera, respectively.
(3) The amounts of bonuses to be paid for 1996 have not been determined as of
the date of this Prospectus.
(4) Executive Vice President and Chief Financial Officer beginning September 1,
1995.
The following table contains information concerning stock options granted
to each of the Named Executives and Mr. Blankley in 1996 upon consummation of
the IPO. All options were granted pursuant to the Hvide Marine Incorporated
Equity Ownership Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE OF
PERCENT VALUE AT ASSUMED UNEXERCISED
TOTAL SHARES ANNUAL RATES IN-THE-MONEY
SHARES UNDERLYING OF STOCK OPTIONS AT
UNDERLYING OPTIONS PER SHARE APPRECIATION FOR FISCAL YEAR
OPTIONS GRANTED EXERCISE EXPIRATION OPTION TERM(2) END (ALL
NAME GRANTED(1) TO EMPLOYEES PRICE DATE 5% 10% UNEXERCISABLE)(3)
<S> <C> <C> <C> <C> <C> <C> <C>
J. Erik Hvide........ 100,000 13.0 % $12.00 8/8/01 $331,538 $ 732,612 $962,500
John H. Blankley..... 100,000 13.0 12.00 8/8/06 754,624 1,912,491 962,500
Eugene F. Sweeney.... 100,000 13.0 12.00 8/8/06 754,624 1,912,491 962,500
Donald L. Caldera.... 100,000 13.0 12.00 8/8/06 754,624 1,912,491 962,500
Gene Douglas......... 28,000 3.6 12.00 8/8/06 211,309 535,497 269,500
</TABLE>
- ------------------------------------
(1) Options vest 25% per annum over four years.
(2) The dollar amounts are the result of calculations at specified rates of
appreciation and, therefore, are not intended to forecast possible future
appreciation.
(3) Based upon the last reported sale price of the Class A Common Stock of
$21 5/8, as reported by the Nasdaq National Market on December 31, 1996.
55
<PAGE> 57
EQUITY OWNERSHIP PLANS
Long-Term Incentive Plan. The Company has reserved 1,000,000 shares of
Class A Common Stock for issuance under the Hvide Marine Incorporated Equity
Ownership Plan (the "Plan"). The Plan is administered by the Compensation
Committee. Subject to selection by the Compensation Committee, any key employee,
including executive officers, is eligible to participate in the Plan. The
benefits to be granted under the Plan may take the form of (i) incentive or
non-qualified stock options, (ii) stock awards subject to future vesting, (iii)
stock appreciation rights, (iv) phantom shares, or (v) performance unit awards.
Options granted under the Plan may not be exercised until vested and shares of
Common Stock may not be issued pursuant to any stock award until vested. The
Compensation Committee is empowered under the Plan to determine all terms and
provisions under which options, awards, and other rights are granted under the
Plan, including (i) the number of shares subject to each option, award, or
right, (ii) when the option, award, or right becomes exercisable, (iii) the
exercise price, and (iv) the duration of the option, award, or right, which
cannot exceed ten years. Upon consummation of the IPO, options were granted to
63 employees to purchase 771,000 shares of Class A Common Stock at an exercise
price of $12 per share. Such options have ten-year terms, with the exception of
an option to purchase 100,000 shares which has a five-year term, and all such
options will vest 25% each year over four years.
Employee Stock Purchase Plan. The Company has reserved 500,000 shares of
Class A Common Stock for purchase over the next five years under its 1996
Employee Stock Purchase Plan. This plan permits employees to purchase stock at a
discount to market value and be eligible to receive favorable income tax
treatment of the discount under Section 423 of the Internal Revenue Code. Under
this plan, all employees working more than twenty hours weekly are eligible to
purchase reserved shares at a discount equal to 15% of market price. The market
cost of shares purchased by an employee under this plan may not exceed $25,000
per year.
DIRECTOR COMPENSATION AND OPTIONS
Directors not employed by the Company are paid $2,000 per board meeting and
$1,500 per board committee meeting attended and are reimbursed by the Company
for reasonable out-of-pocket expenses incurred for attendance at such meetings
in accordance with Company policy. All committee chairmen not employed by the
Company are also paid an annual retainer of $3,000. In order to promote the
alignment of the directors' and the stockholders' financial interests, it is the
intent of the Board of Directors that each Director should initially acquire at
least 500 shares of Common Stock and should increase this ownership interest by
a minimum of 500 shares annually. Each director's ownership interest can be
achieved by the purchase of Common Stock on the open market, by stock grants, or
by the exercise of stock options. In this regard, the Company granted to each
director who was not an employee 500 shares of Class A Common Stock upon
consummation of the IPO, and intends to grant each such director 500 shares of
Class A Common Stock each year.
Additionally, the Company adopted a stock option plan for directors (the
"Directors Plan") and reserved 70,000 shares of Class A Common Stock for
issuance under that plan. In 1996, options to purchase 35,000 shares of Class A
Common Stock were issued under the Directors Plan. Under the Directors Plan, all
directors not employed by the Company will annually be granted an option to
purchase 1,500 shares of Class A Common Stock with an exercise price equal to
the fair market value of the Class A Common Stock on the date of grant. The date
of grant for these options will be the first business day following the annual
meeting of stockholders. Also, the Company granted to each director not employed
by the Company upon consummation of the IPO and pursuant to the Directors Plan,
an option to purchase 5,000 shares of Class A Common Stock at an exercise price
of $12 per share. Directors elected to the Board in the future will each be
granted an option to purchase 5,000 shares with an exercise price equal to the
fair market value of the Class A Common Stock as of the first business day
following the stockholder meeting at which the director is elected to the Board.
All stock options under the Directors Plan will vest at the earliest of death,
disability, change-in-control, voluntary retirement from the Board at or after
age 62, completion of ten years service on the Board, or one year from the date
of grant. All directors have agreed not to sell any shares of Class A Common
Stock for 90 days after the date of the Prospectus without the written consent
of Donaldson, Lufkin & Jenrette Securities Corporation.
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<PAGE> 58
ANNUAL INCENTIVE PLAN
The Company has established an annual incentive plan under which key
members of management will be awarded cash payments based upon the achievement
of certain performance goals. Each year, the chief executive officer will
recommend to the Compensation Committee a list of participants and performance
goals for each proposed participant. The performance goals will consist of an
objective element, which will be based upon financial objectives relating to the
Company as a whole and/or a component of the Company, and a discretionary
element, which will be established by a participant's supervisor and may be
financial or non-financial in nature. Participants will be awarded cash payments
based upon the extent to which they have met or exceeded their performance
goals.
NON-COMPETE AND BENEFITS AGREEMENTS
The Company is party to a non-compete agreement dated September 28, 1994
with Hans J. Hvide, the founder of the Company and father of its current
Chairman, pursuant to which Mr. Hvide receives a fee of $185,000 per year
(subject to annual adjustments based on the Consumer Price Index) in exchange
for an agreement not to provide any services to any person in competition with
the Company. The non-compete agreement expires upon the earlier of September 30,
2014 or the death of Mr. Hvide. The non-compete agreement can be terminated by
the Company only if Mr. Hvide materially breaches the Agreement, and by Mr.
Hvide only if the Company fails to pay the non-compete fees. The Company is also
party to a post-retirement benefits agreement with Mr. Hvide pursuant to which
he receives the use of an automobile, major medical health insurance for himself
and for his spouse, the use of an office and secretarial assistance, and a
payment of $2,000 per month in lieu of other expenses. The term of the
post-retirement benefits agreement is for the life of Mr. Hvide except for major
medical health insurance for Mr. Hvide's spouse, which is for the life of Mr.
Hvide's spouse. In the event the Company terminates the non-compete agreement,
the post-retirement benefits agreement terminates automatically.
CERTAIN TRANSACTIONS
The Company's Articles of Incorporation require that any material
transaction between the Company and any of its officers, directors, holders of
more than 5% of any class of its capital stock, or other affiliates be on terms
no less favorable than those that could be obtained from unaffiliated persons
and be approved by a majority of the independent and disinterested directors.
The Company believes that the transactions described below are on terms no less
favorable than those that could be obtained from unaffiliated persons. Furnished
below is information regarding certain transactions since January 1, 1993 in
which executive officers and directors of the Company have had an interest.
In September 1994, the Company purchased all of the partnership interests
owned by certain directors, officers, and employees of the Company in Hvide
Offshore Services, Ltd. ("HOS") for $607,000 in cash and $1.0 million in
promissory notes (the "HOS Notes") and assumed the bareboat charter rights and
obligations of HOS, which charters were acquired by HOS at no cost. HOS was the
bareboat charterer of four offshore service vessels managed by the Company. See
"Description of Certain Indebtedness -- Long-Term Charter
Obligations -- Bareboat Charters" and "-- Acquisition Notes and Assumed
Indebtedness." The purchase price of these interests was based upon an
independent appraisal of the fair market value of the vessels being acquired.
The appraisal, which was based upon a market analysis, was conducted by Bassoe
Offshore (USA), Inc., a company with substantial experience in the maritime
industry. The general partner of HOS was Maritime Transport Development Corp.
("Maritime Transport"), a company wholly owned by Hans J. Hvide and for which J.
Erik Hvide serves as an officer and a director. The limited partners of HOS were
Messrs. Hans J. Hvide (32%), J. Erik Hvide (32%), Farmer (10%), Sweeney (7.5%),
Brauninger (10%), John Krumenacker (the Company's Controller) (5%), and Douglas
(2.5%). HOS has since been dissolved and the Company has assumed all of its
obligations. As a result of the cancellation of $0.1 million in principal amount
of the HOS Notes held by Messrs. J. Erik and Hans J. Hvide as described below,
immediately prior to the IPO there remained outstanding $0.9 million principal
amount of HOS Notes, of which $0.3 million was repaid in cash with a portion of
the proceeds of the IPO and $0.2 million was exchanged for shares of Class A
57
<PAGE> 59
Common Stock valued at the IPO price. Accordingly, there remains outstanding a
$0.4 million balance on the HOS Notes which the Company intends to repay with a
portion of the proceeds of the Offering.
Also in September 1994, the Company purchased for $781,000 in cash and an
aggregate of $1,089,000 in promissory notes (the "HCL Notes") partnership
interests owned by certain directors, officers, and employees of the Company in
(i) Hvide Chartering, Ltd. ("HCL"), which owns the tug Hollywood (formerly the
Cape Canaveral) and chartered it to the Company; (ii) Hvide Leasing Partnership,
Ltd. ("HLP"), which owned office and computer equipment leased to the Company
(acquired by HLP in 1988 for $87,000); and (iii) HLP II, Ltd. ("HLP II"), which
owned office furniture and equipment leased to the Company (acquired by HLP II
in 1990 for $372,000). HLP and HLP II have since been dissolved. The purchase
price of the HCL interests was based upon an independent appraisal of the fair
market value of the Hollywood. The HCL appraisal, which was based upon a market
analysis, was conducted by Charles S. Smith, a marine consultant with
substantial experience in the maritime industry. The HLP and HLP II partnership
interests were purchased at book value, which the Company believes approximated
fair market value, for $20,000 and $93,000, respectively, in cash. The Company
believes that the book value approximated fair market value because the
interests were not liquid and had declining values which the Company believes
correspond with their depreciated book value. Messrs. Hans J. Hvide (33.33%), J.
Erik Hvide (20.0%), Farmer (2.67%), Sweeney (2.67%), Santos (2.67%), and Douglas
(2.67%) were limited partners of HCL. The Company was the sole general partner
of HCL and the owner of a 33.33% interest in that partnership. Messrs. J. Erik
Hvide (30%), Farmer (10%), Sweeney (5%), Santos (10%), and Douglas (5%) were the
limited partners of HLP. The Company was the sole general partner of HLP and the
owner of a 40.0% interest in that partnership. The Company, Mr. J. Erik Hvide
(14.29%), and Mr. Farmer (14.29%) were the limited partners of HLP II. As a
result of the cancellation of $0.8 million in principal amount of the HCL Notes
held by Messrs. J. Erik and Hans J. Hvide as described below, immediately prior
to the IPO there remained outstanding $0.3 million principal amount of HCL
Notes, of which $0.1 million was exchanged for shares of Class A Common Stock
valued at the IPO price. Accordingly, there remains outstanding a $0.2 million
balance on the HCL Notes which the Company intends to repay with a portion of
the proceeds of the Offering.
In September 1994, the Company redeemed its outstanding preferred stock,
all of which was owned by Hans J. Hvide, at its par value in exchange for $2.4
million in cash and a $3.6 million promissory note (the "Founder's Note"). The
Company repaid $1.6 million of outstanding principal and accrued interest on the
Founder's Note with a portion of the proceeds from the IPO. Accordingly, there
remains a $2.0 million balance on the Founder's Note which the Company intends
to repay with a portion of the proceeds of the Offering.
As of December 31, 1995, J. Erik Hvide was indebted to Maritime Transport
in the amount of $675,000 as a result of miscellaneous personal advances made to
him over a number of years. In 1996, Mr. Hvide guaranteed repayment of a like
portion of approximately $0.9 million owed to the Company by Maritime Transport.
All amounts owed to the Company by Maritime Transport, including the amount
guaranteed by Mr. Hvide, were repaid upon the consummation of the IPO by the
cancellation of $0.8 million of the HCL Notes and $0.1 million of the HOS Notes
held by Mr. Hvide and Hans J. Hvide.
In September 1994, the Company issued to the Investor Group $25.0 million
aggregate principal amount of 12% Senior Notes due 2004 (the "Senior Notes") and
$25.0 million aggregate principal amount of 8% Junior Notes due 2014 (the
"Junior Notes") at discounts resulting in proceeds to the Company of
approximately $23.1 million and $17.5 million, respectively. In connection with
the issuance of the Senior Notes and the Junior Notes, the Company issued to
members of the Investor Group an aggregate of 452,518 shares of Class B Common
Stock and 313,215 shares of Class C Common Stock, and in connection with the
issuance of the Junior Notes agreed to issue to them up to 554,495 additional
shares of Common Stock (to be contributed by J. Erik Hvide and the Hvide Trusts)
to the extent necessary to earn a specified return on their investment. The
issuance of the Senior Notes and Common Stock issued in connection with the
Senior Notes resulted in total proceeds to the Company of $25.0 million, and the
issuance of Junior Notes and the Common Stock and CSIs (as defined herein)
issued in connection with the Junior Notes resulted in total proceeds to the
Company of $25.0 million. In addition, J. Erik Hvide and the Investor Group are
parties to an agreement granting them certain voting and approval rights,
including the right to nominate eight and three persons,
58
<PAGE> 60
respectively, to the Company's 11-member Board of Directors. The Company repaid
$15.8 million on the Senior Notes and $15.1 million on the Junior Notes with a
portion of the proceeds of the IPO. The outstanding principal amount of the
Junior Notes not repaid with the proceeds of the IPO was exchanged for shares of
Class A Common Stock and Class B Common Stock and certain shares of Class B
Common Stock and all shares of Class C Common Stock held by the Investor Group
were converted into shares of Class A Common Stock or Class B Common Stock. The
Company made aggregate cash payments on the Senior Notes during 1995 in the
approximate amount of $3.0 million. The remaining $10.2 million of accrued
interest on and principal of the Senior Notes, all of which are held by the
Investor Group, will be repaid with part of the proceeds of the Offering. In
addition, the Company agreed to pay an annual advisory fee of $100,000 to the
Investor Group. Such fee was paid in full in 1995 and in a pro rata amount of
$25,000 for 1994. Following the IPO, the amount of the fee was reduced by the
compensation received by Messrs. Calhoun and Lee in their capacities as
directors of the Company. For additional information concerning relationships
and transactions between the Company and the Investor Group, see "Use of
Proceeds," "Management -- Director Compensation and Options," "Description of
Capital Stock -- Shareholders Agreement," "-- Contingent Share Issuance
Agreement," and "-- Recapitalization Agreement."
Certain members of the Investor Group are selling an aggregate of 139,416
shares of Common Stock in the Offering. See "Principal and Selling
Stockholders."
Maritime Transport is the successor in interest to the entity which
developed and engineered and provides marketing services for the CATUG(R) vessel
design. Maritime Transport receives a commission equal to 1.25% of charter hire
received by the Company for the Seabulk Challenger and the Seabulk Magnachem as
payment for those development and engineering services. For each of the years
ended December 31, 1993, 1994, and 1995, the Company made payments to Maritime
Transport of $0.2 million.
In November 1996, the Company took delivery of a 152-foot crew/supply boat,
named Seabulk St. Frances, which it purchased from J. Erik Hvide and the
Investor Group for a purchase price of approximately $2.2 million, which was
equal to their cost of the vessel.
The Company has verbal arrangements with Jean Fitzgerald and Gerald Farmer
to provide technical and financial consulting services, respectively, to the
Company. Mr. Fitzgerald, whose arrangement commenced in February 1994, is
currently compensated for such services at the rate of $6,500 per month, and
received total compensation of $66,000 during 1995. Mr. Farmer, whose
arrangement commenced in December 1995, is compensated at an hourly rate. Both
arrangements may be terminated by either party without prior notice.
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<PAGE> 61
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock (i) immediately prior to the Offering and (ii) as
adjusted to give effect to the sale of 139,416 shares of Class A Common Stock by
the Selling Stockholders and the sale of 3,860,584 shares of Class A Common
Stock by the Company in the Offering, by (a) each Named Executive, (b) each
director of the Company, (c) each of the Company's stockholders who is known by
the Company to beneficially own at least five percent of any class of Common
Stock of the Company or at least five percent of the voting power of the
Company's Common Stock, (d) each Selling Stockholder, and (e) all executive
officers and directors of the Company as a group. Management believes that the
beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole voting and investment power with respect to
such shares, subject to community property laws where applicable, the provisions
of the Shareholders Agreement, and the information contained in the footnotes to
the table below.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
---------------------------------------------- --------- -----------------------
BEFORE OFFERING BEING AFTER OFFERING SHARES VOTING POWER
# % OFFERED # % OWNED BEFORE AFTER
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Erik Hvide(2)...................... 4,000 * -- 4,000 * 1,769,107 42.3% 38.7%
Hvide Family Trust I(3)............... -- * -- -- * 1,454,383 34.8% 31.8%
Hvide Family Trust II(3).............. -- * -- -- * 110,215 2.6% 2.4%
Clipper/Park HMI, L.P.(4)............. -- * -- -- * 750,297 17.9% 16.4%
Clipper/Hercules, L.P.(4)............. -- * -- -- * 414,871 9.9% 9.1%
Clipper/Merban, L.P.(4)............... 219,850 2.9% -- 219,850 1.9% 152,089 4.2% 3.8%
Clipper/Merchant HMI, L.P.(4)......... -- * -- -- * 300,119 7.2% 6.6%
Clipper Capital Associates, L.P.(4)... 219,850 2.9% -- 219,850 1.9% 1,650,470 40.0% 36.6%
Metropolitan Life Insurance
Company(4).......................... 71,820 * 71,820 -- * -- * *
Olympus Growth Fund II, L.P.(4)....... 67,596 * 67,596 -- * -- * *
John H. Blankley...................... 1,000 * -- 1,000 * -- * *
Eugene F. Sweeney..................... 8,098 * -- 8,098 * -- * *
Gene Douglas.......................... 4,580 * -- 4,580 * -- * *
Donald L. Caldera..................... -- * -- -- * -- * *
Andrew W. Brauninger.................. 7,895 * -- 7,895 * -- * *
Robert B. Calhoun, Jr................. 219,850(6) 2.9% -- 219,850(6) 1.9% 1,650,470(6) 40.0% 36.6%
Gerald Farmer......................... 5,060 * -- 5,060 * -- * *
Jean Fitzgerald....................... 1,500 * -- 1,500 * -- * *
John Lee.............................. 500(7) * -- 500 * -- * *
Walter C. Mink........................ 500 * -- 500 * -- * *
Robert Rice........................... 2,500 * -- 2,500 * -- * *
Raymond B. Vickers.................... 10,500 * -- 10,500 * -- * *
All executive officers and directors
as a group (18 persons)............. 266,728 3.5% -- 266,728 2.3% 3,419,577 82.4% 75.4%
</TABLE>
- ------------------------------------
* Less than one percent
(footnotes on following page)
60
<PAGE> 62
(1) Unless otherwise indicated, the address of each of the persons whose name
appears in the table above is: c/o Hvide Marine Incorporated, 2200 Eller
Drive, P.O. Box 13038, Fort Lauderdale, Florida 33316.
(2) Includes the shares held by Hvide Family Trust I and Hvide Family Trust II,
of which Mr. Hvide is the sole trustee.
(3) J. Erik Hvide is the sole trustee for both trusts. Hvide Family Trust I is a
trust for the benefit of Mr. Hvide, his sister, Elsa Hvide Sowrey (now known
as Elsa Hvide Mumma), and their children and in which Mr. Hvide has an
economic interest in 65% of the income of the trust. Hvide Family Trust II
is a trust for the benefit of Elsa Hvide Sowrey and her children, and in
which Mr. Hvide has no economic interest. To the extent the Underwriters'
over-allotment option is exercised, the first 25,000 shares will be
purchased from the Hvide Family Trust II and the balance will be purchased
from the Company.
(4) Member of the Investor Group, defined as the "Investor Shareholders" in the
Company's Articles of Incorporation. The Investor Group owns an aggregate of
359,266 shares of Class A Common Stock and 1,650,470 shares of Class B
Common Stock. The address for Clipper Capital Associates, L.P. ("Clipper
Capital"), Clipper/Hercules HMI, L.P., Clipper/Merban, L.P.,
Clipper/Merchant HMI, L.P., Clipper/Park HMI, L.P. is: c/o Clipper Capital
Associates, L.P., Eleven Madison Avenue, 26th Floor, New York, New York
10010. The address for Metropolitan Life Insurance Company is: 334 Madison
Avenue, P.O. Box 633, Convent Station, New Jersey 07961-0633. The address
for Olympus Growth Fund II, L.P. is: c/o Olympus Partners, Metro Center, One
Station Place, Stamford, Connecticut 06902.
(5) Consists of 26,172 shares owned by Clipper Capital and an aggregate of
2,014,901 shares held by Clipper/Hercules, L.P., Clipper/Merban, L.P.,
Clipper/Merchant, L.P., and Clipper/Park, L.P. (collectively, the "Clipper
Limited Partnerships"). Clipper Capital is the general partner of the
Clipper Limited Partnerships and may be deemed to be the beneficial owner of
the shares held by the Clipper Limited Partnerships.
(6) Consists of shares held by the Clipper Limited Partnerships and Clipper
Capital. Mr. Calhoun is an officer, director, and stockholder of the
corporate general partner of Clipper Capital and may be deemed to be the
beneficial owner of the shares held by Clipper Capital and the Clipper
Limited Partnerships.
(7) Excludes 17,985 shares in which Mr. Lee has a pecuniary interest as an
investor in the Clipper Limited Partnerships.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a description of the principal terms of certain of the
Company's indebtedness, including indebtedness to be repaid with a portion of
the proceeds of the Offering. Copies of the definitive agreements setting forth
the terms of this indebtedness have been filed as exhibits to the Registration
Statement relating to the IPO. The following summaries of certain provisions of
the agreements do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
agreements.
CREDIT FACILITY
The Company's outstanding indebtedness under the Credit Facility was $70.2
million at September 30, 1996. The Credit Facility provides for a $60.5 million
term loan, a $10.0 million revolving line of credit, a $19.9 million vessel
acquisition credit line, and a $5.6 million letter of credit, all maturing
January 15, 2001, with the exception of the letter of credit, which matures on
January 15, 2000. Advances under the vessel acquisition credit line are not
permitted to exceed either (i) 70% of the lesser of the purchase price or
appraised value of the vessel being acquired, or (ii) a multiple of six times
EBITDA of the acquisition, and the amount of available credit will decrease to
$11.5 million over a four-year period, during which time the Company will be
required to make quarterly installment payments equal to the reduction in the
available commitment.
Borrowings under the Credit Facility bear interest at prime or LIBOR, at
the Company's option, plus a margin based upon certain financial ratios. Such
borrowings were accruing interest at approximately 8.2% at September 30, 1996.
Based on the outstanding borrowings at September 30, 1996 and the current
amortization schedule, annual principal payments under the term loan will be
$7.0 million in 1997, $9.0 million in 1998, $11.0 million in 1999, $13.0 million
in 2000, with the remaining $18.5 million due January 15, 2001. All borrowings
are secured by preferred ship mortgages on all vessels owned by the Company,
assignments of all of the Company's receivables and earnings, and collateral
mortgages of spare parts, supplies, and fuel.
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<PAGE> 63
The letter of credit serves as collateral for a surety bond to ensure
payment of any final judgment in the pending litigation relating to the
reconstruction of the Seabulk America. See "Business -- Legal Proceedings" and
Note 5 to the Company's consolidated financial statements.
Covenants under the Credit Facility, among other things, (i) require the
Company to meet certain financial tests, including tests requiring the
maintenance of minimum interest coverage ratios, leverage ratios, levels of
liquidity, and cash flow ratios; (ii) require the Company to maintain certain
levels of collateral securing amounts outstanding under the Credit Facility;
(iii) limit the incurrence of additional indebtedness; (iv) limit purchases of
capital equipment and other capital expenditures; (v) restrict payments,
including dividends, with respect to shares of any class of capital stock; and
(vi) limit certain corporate acts of the Company, such as incurring debt,
creating liens, and entering into certain types of business transactions,
including mergers and joint ventures. The limitation on mergers generally
prohibits mergers other than acquisitions funded by the Credit Facility or
otherwise meeting certain requirements for such acquisitions, including the
requirements described above.
Events of default under the Credit Facility include, among other things,
(i) any failure to pay principal thereunder when due, or to pay interest or fees
within three business days after the date due; (ii) the breach of certain
covenants or the inaccuracy of certain representations or warranties made under
the Credit Facility; (iii) any failure to pay amounts due on certain
indebtedness, or defaults that result in or permit the acceleration of such
indebtedness; (iv) certain events of bankruptcy, insolvency, or dissolution; (v)
certain judgments or orders; (vi) certain seizures, condemnations, or similar
actions pertaining to the Company's assets or business; (vii) the invalidity of
the security interests granted under the Credit Facility; and (viii) a Change in
Control (as defined herein).
The Credit Facility limits the Company's annual capital expenditures,
including capital expenditures respecting maintenance and improvements of
existing vessels, to $13.0 million without the consent of the lending banks.
This limitation excludes (i) acquisitions made with the $19.9 million vessel
acquisition credit line, (ii) additional indebtedness of $10.0 million that the
Company is permitted to incur outside the Credit Facility, (iii) acquisitions
financed with proceeds of the Offering, and (iv) the payment of amounts
necessary to retire the Senior Notes, the Junior Notes, and certain related
party notes.
The Company has entered into a commitment letter with its banks providing
for an amendment to the Credit Facility that would, upon consummation of the
Offering, (i) increase the amount available under the revolving line of credit
to $20.0 million, (ii) increase the amount available under the vessel
acquisition credit line to $50.0 million, (iii) permit financing of 100% of the
purchase price of a vessel with borrowings under the vessel acquisition credit
line, (iv) eliminate the limit on capital expenditures, (v) increase the limit
on additional indebtedness to $30.0 million, and (vi) reduce the interest rate
to LIBOR plus 1.25% per annum or prime plus 0.25% per annum, at the Company's
election. The effectiveness of this amendment is subject to the consummation of
the Offering.
LONG-TERM CHARTER OBLIGATIONS
Title XI Bonds. Two of the Company's subsidiaries are parties to long-term,
"hell or high water" charters of the Seabulk Challenger and the Seabulk
Magnachem, the performance of which is guaranteed by the Company. Both vessels
were financed by the issuance of U.S. Government Guaranteed Ship Financing Bonds
issued pursuant to Title XI in leveraged lease transactions. As of December 31,
1996, the total remaining outstanding obligations of the Company under the
charters for the Seabulk Challenger and Seabulk Magnachem are $4.3 million and
$10.6 million, respectively. The Company's aggregate payments due under such
charters for 1997 and 1998 are $3.2 million and $3.3 million, respectively. The
long-term charter for the Seabulk Challenger is coterminous with the maturity
date of the respective obligation, and the charter for the Seabulk Magnachem
terminates in 2002. The Company has the option to purchase the vessels or renew
the charters at fair market value and, with respect to the Seabulk Magnachem,
has the right to share in the residual value proceeds of any sale to a third
party.
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In connection with the acquisition of the OMI Chemical Carriers, the
Company assumed approximately $34.7 million of U.S. Government Guaranteed Ship
Financing Bonds issued pursuant to Title XI in five distinct series bearing
interest at an average rate of 7.65%.
Repayment of the Company's Title XI bonds is guaranteed by the full faith
and credit of the United States, acting through the Maritime Administration. As
security for such guarantee, the vessels are mortgaged to the United States, and
the subsidiaries that own or charter the vessels are each party to a security
agreement and a financial agreement with the United States containing various
operating covenants and financial conditions that, among other things, restrict
the ability of each to (i) incur additional indebtedness, (ii) make certain
loans, advances, or investments, (iii) create certain liens, (iv) pay stock
dividends, (v) sell, transfer, or dispose of assets, (vi) change the nature of
its business, (vii) make capital expenditures, (viii) effect certain mergers,
consolidations, or similar business combinations, or (ix) enter into certain
vessel charter arrangements. The agreements specify various events of default,
including failure to pay charter hire, pay certain guarantee fees, satisfy
certain covenants, maintain required insurance, and maintain U.S. citizenship
(within the meaning of Section 2 of the Shipping Act, 1916) and certain events
of insolvency or bankruptcy.
Bareboat Charters. The Company is party to bareboat charters relating to
four offshore service vessels, two of which expire in June 2001 and two of which
expire in January 2002. See "Certain Transactions" and Note 4 to the Company's
consolidated financial statements. The Company has an option to purchase each of
these vessels for a nominal amount upon the expiration of the charters. The
Company is also party to two bareboat charters relating to a total of nine crew
boats. The charter on one crew boat expires in 2002 with an option to purchase
the vessel for $0.4 million. The charter on the remaining eight crew boats
expires in 2004 with an option to purchase the vessels for a nominal amount. In
addition, the Company is party to a bareboat charter on a tractor tug which
expires in 2010 with an option to purchase the vessel for $1.6 million.
DESCRIPTION OF CAPITAL STOCK
The following summary description of the Company's capital stock is
qualified in its entirety by reference to the Articles of Incorporation and its
Amended and Restated Bylaws (the "Bylaws"), copies of which have been included
as exhibits to the Registration Statement relating to the IPO, and reference to
Florida law. All capitalized terms used and not defined below have the
respective meanings assigned to them in the Articles of Incorporation.
The authorized capital stock of the Company consists of 100,000,000 shares
of Class A Common Stock, par value $.001 per share, of which 7,647,791 shares
are issued and outstanding, 5,000,000 shares of Class B Common Stock, par value
$.001 per share, of which 3,419,577 shares are issued and outstanding, and
10,000,000 shares of Preferred Stock, par value $1.00 per share, none of which
are issued and outstanding. Upon consummation of the Offering, there will be
issued and outstanding 11,508,375 shares of Class A Common Stock, 3,419,577
shares of Class B Common Stock, and no shares of Preferred Stock.
COMMON STOCK
The holders of Common Stock are entitled to receive such dividends, in
cash, property or securities, as may be declared from time to time by the Board
of Directors out of funds legally available therefor. The holders of Common
Stock are entitled to participate in dividends ratably on a per share basis. If
dividends consist of Common Stock or other voting securities of the Company, the
voting rights of each such security shall correspond to the voting rights of the
security held. Any dividend declared for one class of Common Stock must be
declared for the other classes of Common Stock. The holders of Common Stock have
no preemptive or redemption rights and are not subject to future calls or
assessments by the Company. Subject to the prior rights of holders, if any, of
any outstanding class or series of capital stock having a preference in relation
to the Common Stock as to distributions upon dissolution, liquidation, and
winding-up of the Company, holders of Common Stock are entitled to share ratably
in any assets of the Company that remain after payment in full of all debts and
liabilities of the Company.
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The holders of Class A Common Stock and Class B Common Stock vote together
as a single class on all matters submitted to a vote of the stockholders,
including the election of directors, except as described below under "-- Foreign
Ownership Restrictions" and as provided under Florida law. In all matters
submitted to a vote of the stockholders, including the election of directors,
and except as described below under "-- Foreign Ownership Restrictions" and
under "-- Certain Provisions of Articles of Incorporation and Bylaws," each
share of Class A Common Stock is entitled to one vote and each share of Class B
Common Stock is entitled to ten votes. The stockholders do not have cumulative
voting rights.
The Class B Common Stock can be owned only by (i) J. Erik Hvide and,
subject to certain limitations set forth in the Articles of Incorporation, any
person related to him by kinship or marriage, trusts or similar arrangements
established solely on the behalf of one or more of them, and partnerships and
other entities that are wholly owned by them (collectively, the "Hvide Family");
or (ii) the Investor Group and its affiliates. If the ownership or beneficial
interest in any share of Class B Common Stock ceases to be vested in any of
these persons, then such share will automatically and immediately convert into a
share of Class A Common Stock, although such a conversion will not occur where
Class B Common Stock is transferred from one Hvide Family member, upon death, to
another Hvide Family member.
Except as described below under "-- Foreign Ownership Restrictions," each
holder of Class B Common Stock may elect at any time to convert any of his
shares, share for share, into Class A Common Stock.
Immediately after completion of the Offering, the Hvide Family and the
Investor Group will hold 51.7% and 48.3%, respectively, of the outstanding Class
B Common Stock. The Hvide Family and the Investor Group will thus own 11.9% and
12.5%, respectively, of the combined classes of Common Stock (11.3% and 12.0%,
respectively, if the Underwriters' over-allotment option is exercised in full)
and control 38.7% and 36.6%, respectively, of the voting power of such stock
upon completion of the Offering (37.9% and 36.3%, respectively, if the
Underwriters' over-allotment option is exercised in full) and will control the
management and affairs of the Company and any corporate actions requiring
stockholder approval.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue from time to time shares of Preferred Stock in one or
more series and to fix, with respect to each series, the number of shares,
voting powers, designations, relative rights, preferences (including seniority
upon liquidation), privileges, and restrictions thereof. The rights,
preferences, privileges, and restrictions of different series of Preferred Stock
may differ with respect to dividend rates, amounts payable on liquidation,
voting rights, conversion rights, redemption provisions, sinking fund
provisions, and other matters. The Preferred Stock is subject to the dual stock
certificate system described below under "-- Foreign Ownership Restrictions."
The issuance of Preferred Stock could decrease the amount of earnings and
assets available for distribution to holders of Common Stock, could adversely
affect the rights and powers, including voting and distribution rights, of
holders of Common Stock and could have the effect of delaying, deferring, or
preventing a change in control of the Company. Except as otherwise provided by
law, the holders of any series of Preferred Stock may be given the right, voting
separately as a class, to elect one or more directors of the Company. The term
of any such director would expire at the next succeeding annual meeting of
shareholders.
The Company has no present intention to issue any shares of Preferred
Stock.
FOREIGN OWNERSHIP RESTRICTIONS
The Articles of Incorporation (i) contain provisions limiting the aggregate
percentage ownership by Non-Citizens of each class of the Company's capital
stock (including the Class A Common Stock and the Class B Common Stock) to
24.99% of the outstanding shares of each such class (the "Permitted Percentage")
to ensure that such foreign ownership will not exceed the maximum percentage
permitted by applicable federal law (presently 25.0%), (ii) require institution
of a dual stock certificate system to help determine such ownership, and (iii)
permit the Board of Directors to make such determinations as may reasonably be
necessary to ascertain such ownership and implement such limitations. These
provisions are intended to
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protect the Company's ability to operate its vessels in the U.S. domestic trade
governed by the Jones Act. The ability of the Company to so operate is necessary
to avoid default under certain of the Company's financings, may enhance the
Company's ability to incur additional debt, and may have other effects upon the
Company. See "Risk Factors -- Restriction on Foreign Ownership" and
"Business -- Environmental and Other Regulation -- Coastwise Laws."
To provide a method to enable the Company reasonably to determine stock
ownership by Non-Citizens, the Articles of Incorporation require the Company to
institute (and to implement through the transfer agent for the Common Stock) a
dual stock certificate system, pursuant to which certificates representing
shares of Common Stock will bear legends that designate such certificates as
either "citizen" or "non-citizen," depending on the citizenship of the owner.
Accordingly, stock certificates are denominated as "citizen" (blue) in respect
of Class A Common Stock owned by Citizens and as "non-citizen" (red) in respect
of Class A Common Stock owned by Non-Citizens. The Company may also issue
non-certificated shares through depositories if the Company determines such
depositories have established procedures that allow the Company to monitor the
ownership of Common Stock by Non-Citizens.
For purposes of the dual stock certificate system, a "Non-Citizen" is
defined as any person other than a Citizen, and a "Citizen" is defined as: (i)
any individual who is a citizen of the U.S. by birth, naturalization, or as
otherwise authorized by law; (ii) any corporation (a) organized under the laws
of the U.S., or a state, territory, district, or possession thereof, (b) of
which title to not less than 75% of its stock is beneficially owned by and
vested in Citizens, free from any trust or fiduciary obligation in favor of
Non-Citizens, (c) of which not less than 75% of the voting power is vested in
Citizens, free from any contract or understanding through which it is arranged
that such voting power may be exercised directly or indirectly in behalf of
Non-Citizens, (d) of which there are no other means by which control is
conferred upon or permitted to be exercised by Non-Citizens, (e) whose president
or chief executive officer, chairman of the board of directors and all officers
authorized to act in their absence or disability are Citizens, and (f) of which
more than 50% of that number of its directors necessary to constitute a quorum
are Citizens; (iii) any partnership (a) organized under the laws of the U.S., or
a state, territory, district, or possession thereof, (b) all general partners of
which are Citizens, and (c) of which not less than a 75% interest is
beneficially owned and controlled by, and vested in, Citizens, free and clear of
any trust or fiduciary obligation in favor of Non-Citizens; (iv) any association
(a) organized under the laws of the U.S., or a state, territory, district, or
possession thereof, (b) of which 100% of the members are Citizens, (c) whose
president, chief executive officer, or equivalent position, chairman of the
board of directors, or equivalent committee or body, and all persons authorized
to act in their absence or disability are Citizens, (d) of which not less than
75% of the voting power is beneficially owned by Citizens, free and clear of any
trust or fiduciary obligation in favor of Non-Citizens, and (e) of which more
than 50% of that number of its directors or equivalent persons necessary to
constitute a quorum are Citizens; (v) any limited liability company (a)
organized under the laws of the U.S., or a state, territory, district or
possession thereof, (b) of which not less than 75% of the membership interests
are beneficially owned by and vested in Citizens, free from any trust or
fiduciary obligation in favor of Non-Citizens, and the remaining membership
interests are beneficially owned by and vested in persons meeting the
requirements of 46 U.S.C. Sec. 12102(a), (c) of which not less than 75% of the
voting power is vested in Citizens, free from any contract or understanding
through which it is arranged that such voting power may be exercised directly or
indirectly in behalf of Non-Citizens, (d) of which there are no other means by
which control is conferred upon or permitted to be exercised by Non-Citizens,
(e) whose president or other chief executive officer or equivalent position,
chairman of the board of directors or equivalent committee or body, managing
members (or equivalent), if any, and all persons authorized to act in their
absence or disability are citizens, free and clear of any trust or fiduciary
obligation in favor of any Non-Citizens, and (f) of which more than 50% of that
number of its directors or equivalent persons necessary to constitute a quorum
are Citizens; (vi) any joint venture, if not an association, corporation,
partnership, or limited liability company (a) organized under the laws of the
U.S., or a state, territory, district, or possession thereof, and (b) of which
100% of the equity is beneficially owned and vested in Citizens, free and clear
of any trust or fiduciary obligation in favor of any Non-Citizens; and (vii) any
trust (a) domiciled in and existing under the laws of the U.S., or a state,
territory, district, or possession thereof, (b) the trustee of which is a
Citizen, and (c) of which not less than a 75% interest is held for the benefit
of Citizens, free and clear of any trust or fiduciary obligation in favor of any
Non-Citizens. The
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foregoing definition is applicable at all tiers of ownership and in both form
and substance at each tier of ownership.
Shares of Common Stock are transferable to Citizens at any time and are
transferable to Non-Citizens if, at the time of such transfer, the transfer
would not increase the aggregate ownership by Non-Citizens of that particular
class of Common Stock above the Permitted Percentage in relation to the total
outstanding shares of that particular class of Common Stock. Non-Citizen
certificates may be converted to Citizen certificates upon a showing,
satisfactory to the Company, that the holder is a Citizen. Any purported
transfer to Non-Citizens of shares or of an interest in shares of the Company
represented by a Citizen certificate in excess of the Permitted Percentage will
be ineffective as against the Company for all purposes (including for purposes
of voting, dividends, and any other distribution, upon liquidation or
otherwise). In addition, the shares may not be transferred on the books of the
Company, and the Company, whether or not such stock certificate is validly
issued, may refuse to recognize the holder thereof as a stockholder of the
Company except to the extent necessary to effect any remedy available to the
Company. Subject to the foregoing limitations, upon surrender of any stock
certificate for transfer, the transferee will receive citizen (blue)
certificates or non-citizen (red) certificates, as applicable.
The Articles of Incorporation establish procedures with respect to the
transfer of shares to enforce the limitations referred to above and authorize
the Board of Directors to implement such procedures. The Board of Directors may
take other ministerial actions or make interpretations of the Company's foreign
ownership policy as it deems necessary in order to implement the policy.
Pursuant to the procedures established in the Articles of Incorporation, as a
condition precedent to each issuance and/or transfer of stock certificates
representing shares of Common Stock (including the shares of Class A Common
Stock being sold in the Offering), a citizenship certificate will be required
from all transferees (and from any recipient upon original issuance) of Common
Stock and, with respect to the beneficial owner of the Common Stock being
transferred, if the transferee (or the original recipient) is acting as a
fiduciary or nominee for such beneficial owner. The registration of the transfer
(or original issuance) will be denied upon refusal to furnish such citizenship
certificate, which must provide information about the purported transferee's or
beneficial owner's citizenship. Furthermore, as part of the dual stock
certificate system, depositories holding shares of the Company's Common Stock
will be required to maintain separate accounts for "Citizen" and "Non-Citizen"
shares. When the beneficial ownership of such shares is transferred, the
depositories' participants will be required to advise such depositories as to
which account the transferred shares should be held. In addition, to the extent
necessary to enable the Company to determine the number of shares owned by
Non-Citizens, the Company may from time to time require record holders and
beneficial owners of shares of Common Stock to confirm their citizenship status
and may, in the discretion of the Board of Directors, temporarily withhold
dividends payable to, and deny voting rights to, any such record holder or
beneficial owner until confirmation of citizenship is received.
Should the Company (or its transfer agent for the Common Stock) become
aware that the ownership by Non-Citizens of Common Stock at any time exceeds the
Permitted Percentage (the "Excess Shares"), the Board of Directors is authorized
to withhold dividends and other distributions temporarily on the Excess Shares,
pending the transfer of such shares to a Citizen or the reduction in the
percentage of shares owned by Non-Citizens to or below the Permitted Percentage,
and to deny voting rights with respect to the Excess Shares. If dividends and
distributions are to be withheld, they will be set aside for the account of the
Excess Shares. At such time as such shares are transferred to a Citizen or the
ownership of such shares by Non-Citizens will not result in aggregate ownership
by Non-Citizens in excess of the Permitted Percentage, the dividends withheld
shall be paid to the then record holders of the related shares. Excess Shares
shall, so long as the excess exists, not be deemed to be outstanding for
purposes of determining the vote required on any matter brought before the
stockholders for a vote. The Articles of Incorporation provide that the Board of
Directors has the power, in its reasonable discretion and based upon the records
maintained by the Company's transfer agent, to determine those shares of Common
Stock that constitute the Excess Shares. Such determination will be made by
reference to the date or dates on which such shares were purchased by Non-
Citizens, starting with the most recent acquisition of shares by a Non-Citizen
and including, in reverse chronological order, all other acquisitions of shares
by Non-Citizens from and after the acquisition that first
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caused the Permitted Percentage to be exceeded; provided that Excess Shares
resulting from a determination that a record holder or beneficial owner is no
longer a Citizen will be deemed to have been acquired as of the date of such
determination. To satisfy the Permitted Percentage described above, the Articles
of Incorporation authorize the Board of Directors, in its discretion, to redeem
(upon written notice) Excess Shares in order to reduce the aggregate ownership
by Non-Citizens to the Permitted Percentage. As long as the shares of Class A
Common Stock offered hereby continue to be authorized for quotation on the
Nasdaq National Market, the redemption price will be the average of the closing
sale price of the shares (as reported by the Nasdaq National Market) during the
30 trading days next preceding the date of the notice of redemption. The
redemption price for Excess Shares will be payable in cash. In the event the
Company is not permitted by applicable law to make such redemption or the Board
of Directors, in its discretion, elects not to make such redemption, the Company
will give notice to the holders of Class B Common Stock and those of whom are
Citizens may elect to purchase their pro rata portion of the Excess Shares by
delivering written notice of such election within 30 days of receipt of the
Company's notice.
POSSIBLE ANTI-TAKEOVER PROVISIONS
Florida Business Corporation Act. The Company is subject to Sections
607.0901 and 607.0902 of the Florida Business Corporation Act ("FBCA"), which
regulate the acquisition and exercise of corporate control.
Under Section 607.0902 of the FBCA, "control shares" of certain
corporations acquired in a "control share acquisition," with certain exceptions,
have no voting rights unless such rights are granted pursuant to a vote of the
holders of a majority of the corporation's voting stock (excluding all
"interested shares"). "Control shares" are shares that, when added to all other
shares which a person owns or has the power to vote, would give that person any
of the following ranges of voting power: (i) one-fifth or more but less than
one-third of the voting power; (ii) one-third or more but less than a majority
of the voting power; and (iii) more than a majority of the voting power. A
"control share acquisition" is the acquisition of ownership of, or the power to
vote, outstanding control shares. Shares acquired within 90 days, or as part of
a plan to effectuate a control share acquisition, are deemed to have been
acquired in the same transaction. "Interested shares" include shares held by the
person attempting to effectuate the control share acquisition or any officer or
employee-director of the corporation. A corporation may elect to not be governed
by Section 607.0902 of the FBCA in its articles of incorporation or bylaws.
Section 607.0901 of the FBCA requires that certain transactions between an
interested stockholder (in general, a stockholder that beneficially owns more
than 10% of a corporation's outstanding voting stock) and a corporation be
approved by the affirmative vote of the holders of two-thirds of the
corporation's voting shares (excluding those shares beneficially owned by the
interested stockholder). In general, such approval will not be required if the
transaction is approved by a majority of disinterested directors, the interested
stockholder has been the beneficial owner of at least 80% of the corporation's
outstanding voting stock for at least the preceding five years, the interested
stockholder is the beneficial owner of at least 90% of the outstanding voting
stock of the corporation (excluding stock acquired directly from the corporation
in a transaction not approved by a majority of the disinterested directors), or
the consideration paid in the affiliated transaction satisfies the statutory
"fair price" formula and certain other conditions are met. Transactions covered
by Section 607.0901 include mergers, consolidations, sales of assets having an
aggregate fair market value of 5% or more of the aggregate fair market value of
all the corporation's assets on a consolidated basis or of all the corporation's
outstanding stock or representing 5% or more of the corporation's earning power
or net income on a consolidated basis, transfers of shares having an aggregate
fair market value of 5% or more of the aggregate fair market value of all
outstanding shares of the corporation, liquidations, dissolutions,
reclassifications, recapitalizations, and loans. A corporation may elect, by the
vote of a majority of the outstanding voting stock (not including shares held by
an interested stockholder), by amending such corporation's articles of
incorporation or bylaws, to not be subject to the provisions of Section 607.0901
of the FBCA. Any such election, however, will not be effective until 18 months
after it is made, and will not apply to any affiliated transaction between such
corporation and someone who was an interested stockholder prior to the effective
date of such amendment.
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Each of the foregoing provisions of the FBCA could have the effect of
delaying or making it more difficult to effect a change of control or management
of the Company, even though such a change may be beneficial to the Company and
its stockholders.
Dual Classes of Common Stock. The Class A Common Stock entitles its holders
to one vote per share, and the Class B Common Stock entitles its holders to ten
votes per share. Accordingly, upon consummation of the Offering, the Hvide
Family, as the holder of all the outstanding Class B Common Stock, will be able
to control the vote on all matters submitted to a vote of the holders of the
Common Stock, and such control may have the effect of discouraging certain types
of transactions involving an actual or potential change of control of the
Company, including transactions in which the holders of Class A Common Stock
might otherwise receive a premium for their shares over then-current market
prices.
Board of Directors. In all elections of directors, except elections, if
any, for directors for Preferred Stock, as described in "-- Preferred Stock,"
the holders of the Class A Common Stock and Class B Common Stock vote together
as a class, with each share of Class A Common Stock entitled to one vote and
each share of Class B Common Stock entitled to ten votes. Neither class has
cumulative voting rights. As a result of their ownership of Class B Common
Stock, the Hvide Family and the Investor Group will, upon consummation of the
Offering, have the ability to elect all of the members of the Company's Board of
Directors. Under the terms of the Shareholders Agreement, the Hvide Family and
the Investor Group have the ability to nominate eight and three persons,
respectively, to the Company's 11-member Board of Directors. In addition,
pursuant to the Articles of Incorporation, the Board of Directors is divided
into three classes of directors serving staggered three-year terms as well as
directors, if any, for Preferred Stock who serve one-year terms. As a result,
approximately one third of the Board of Directors is elected each year. Each of
these provisions could have the effect of delaying or making it more difficult
to effect a change in control or management of the Company, even though such a
change may be beneficial to the Company and its stockholders.
Restrictions on Taking Stockholder Action. The Company's Bylaws provide
that a stockholder must notify the Company in advance of such holder's intent to
bring up items of business or nominate directors at any annual meeting of
stockholders. With respect to other items of business, the Bylaws provide that a
stockholder's notice must be given in accordance with the procedures set forth
in Rule 14a-8 of Regulation 14A under the Securities Exchange Act of 1934, as
amended, which generally requires that such proposals be received by the Company
not less than 120 days prior to the anniversary date that proxy solicitation
materials were sent out for the immediately preceding annual meeting of
stockholders of the Company. As permitted by the FBCA, pursuant to the Company's
Articles of Incorporation, stockholders may only call a special meeting of
stockholders when the holders of not less than 50% of the shares entitled to
vote make written demand on the Company for such a meeting.
Authorized but Unissued Capital Stock. One of the effects of the existence
of authorized but unissued Common Stock and undesignated Preferred Stock may be
to enable the Board of Directors to make more difficult or to discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest, or otherwise, and thereby to protect the continuity of the
Company's management. If, in the exercise of its fiduciary obligations, the
Board of Directors were to determine that a takeover proposal was not in the
Company's best interest, such shares could be issued by the Board of Directors
without stockholder approval in one or more transactions that might prevent or
make more difficult or costly the completion of the takeover transaction by
diluting the voting or other rights of the proposed acquiror or insurgent
stockholder group, by creating a substantial voting block in institutional or
other hands that might undertake to support the position of the incumbent Board
of Directors, by effecting an acquisition that might complicate or preclude the
takeover, or otherwise. In this regard, the Articles of Incorporation grant the
Board of Directors broad power to establish the rights and preferences of the
authorized and unissued Preferred Stock, one or more series of which could be
issued entitling holders (i) to vote separately as a class on any proposed
merger or consolidation, (ii) to cast a proportionately larger vote together
with the Common Stock on any such transaction or for all purposes, (iii) to
elect directors having terms of office or voting rights greater than those of
other directors, (iv) to convert Preferred Stock into a greater number of shares
of Common Stock or other securities, (v) to demand redemption at a specified
price under prescribed circumstances related to a change of control, or (vi) to
exercise other rights designated to impede a takeover. The issuance of shares of
Preferred
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Stock pursuant to the Board of Directors' authority described above may
adversely effect the rights of holders of the Common Stock.
CERTAIN PROVISIONS OF ARTICLES OF INCORPORATION AND BYLAWS
Rights of Approval. So long as the Investor Group owns at least 5% of the
Company's outstanding Class B Common Stock, subject to the following exception,
the following actions must be approved by holders of at least 95% of the Class B
Common Stock: (i) engagement of the Company or its subsidiaries in any material
new business; (ii) a merger involving the Company or a sale of all or
substantially all of the Company's assets; (iii) a recapitalization or voluntary
bankruptcy filing; (iv) a capital investment, acquisition, or asset sale in
excess of $5.0 million; (v) borrowings or issuances of securities in excess of
$5.0 million; or (vi) amendment to the Articles of Incorporation reducing or
delegating the authority of the Board of Directors or affecting the rights of
holders of shares of Class B Common Stock. After September 30, 1999, however, a
merger or sale of substantially all of the Company's assets no longer will
require the approval of holders of 95% of the Class B Common Stock. In addition,
so long as the Investor Group owns at least 25% of the Company's outstanding
Class B Common Stock, the appointment of a new chief executive officer must be
approved by the holders of at least 75% of the Class B Common Stock.
Liability of Directors and Officers. The FBCA permits corporations to (i)
include provisions in their articles of incorporation that limit the personal
liability of directors for monetary damages resulting from breaches of the duty
of care, subject to certain exceptions, and (ii) indemnify directors and
officers, among others, in certain circumstances for their expenses and
liabilities incurred in connection with defending pending or threatened suits.
The Articles of Incorporation include a provision that eliminates the
personal liability of a director to the Company and its stockholders for
monetary damages resulting from breaches of the duty of care to the fullest
extent permitted by the FBCA and further provide that any amendment or repeal of
that provision will not adversely affect any right or protection of a director
of the Company existing at the time of such amendment, modification, or repeal
to any director for acts or omissions occurring prior to such amendment.
Pursuant to the Articles of Incorporation, the Board of Directors has
indemnified the Company's current and former directors, officers, employees, and
agents to the fullest extent permitted, from time to time, under the FBCA as
presently or hereafter in effect. The Company also may enter into agreements
providing for greater or different indemnification of any of these persons. The
Company maintains an insurance policy covering the liability of its directors
and officers for actions taken in their official capacity.
Citizenship of Directors and Officers. The Company's Bylaws provide that
the Chairman of the Board of Directors, Chief Executive Officer, President, and
all Vice Presidents must be Citizens, and restrict any officer who is not a
Citizen from acting in such capacities in the absence or disability of such
persons. The Bylaws further provide that the number of Non-Citizen directors
shall not exceed a minority of the number necessary to constitute a quorum for
the transaction of business. See "Business -- Environmental and Other
Regulation -- Coastwise Laws."
RECAPITALIZATION AGREEMENT
The Company, the Investor Group, J. Erik Hvide, and the Hvide Trusts
entered into a recapitalization agreement (the "Recapitalization Agreement") in
connection with the IPO. Under the Recapitalization Agreement, immediately prior
to the IPO, 74,704 shares of the 452,518 Class B Common Stock owned by the
Investor Group were converted into 74,704 shares of Class A Common Stock, the
313,215 shares of Class C Common Stock of the Company owned by the Investor
Group were converted into 229,062 shares of Class A Common Stock and 84,153
shares of Class B Common Stock and the 663,415 shares of Class C Common Stock
owned by J. Erik Hvide and the Hvide Trusts were converted into 663,415 shares
of Class B Common Stock. Contemporaneous with the IPO, the Board authorized the
retirement of the Class C Common Stock. In addition, under the Recapitalization
Agreement, $31.0 million of the proceeds of the IPO was used to repay $15.9
million of principal and accrued but unpaid interest on the Senior Notes and
$15.1 million of the principal and accrued but unpaid interest on the Junior
Notes. Under the Recapitalization Agreement, the
69
<PAGE> 71
$13.9 million of remaining outstanding principal amount of the Junior Notes
following application of the proceeds of the IPO was converted into an aggregate
of 55,500 shares of Class A Common Stock and 1,188,502 shares of Class B Common
Stock. The parties are also parties to the Shareholders Agreement and the CSI
Agreement, each as described below.
SHAREHOLDERS AGREEMENT
In connection with the September 30, 1994 issuance of the Senior Notes and
the Junior Notes, the Company, J. Erik Hvide, the Hvide Trusts, and the Investor
Group entered into an agreement granting certain voting and approval rights to
the Investor Group and the Hvide Family. Immediately prior to the IPO, that
agreement was terminated and Mr. Hvide, the Hvide Trusts, and the Investor Group
entered into a new agreement (the "Shareholders Agreement") that provides as
follows:
Designations to the Board of Directors. The Investor Group may initially
nominate three persons to the Board of Directors and must vote all its shares so
as to elect eight other persons nominated to the Board of Directors by Mr. J.
Erik Hvide. Of these eight nominees, one will be Mr. Hvide, no more than three
others may be employees of the Company, its subsidiaries or members of the Hvide
Family, and the remainder must be independent of Mr. Hvide, the Company, and its
subsidiaries. In addition, J. Erik Hvide and the Hvide Trusts must vote their
shares to elect the three Investor Group nominees. The number of nominees that
the Investor Group is entitled to designate will be reduced by one at such times
as the Investor Group's Primary Economic Interest (as defined in the
Shareholders Agreement) drop below 20%, 10%, and 5%, respectively, of the
Company's outstanding Common Stock. The Investor Group may remove their
nominees, with or without cause, and may nominate successors to their nominees.
All director nominees must be U.S. citizens.
Right of First Refusal. Mr. Hvide (together with the Hvide Trusts) and the
Investor Group, respectively, have granted a right of first refusal for each to
purchase the other's stock in certain circumstances.
Share Adjustment. The Investor Group has agreed that, if following the
issuance of the CSIs (as defined below), the aggregate votes held by the
Investor Group by virtue of its ownership of Class A and Class B Common Stock
would exceed the votes held by the Hvide Family by virtue of its ownership of
Class A and Class B Common Stock, the Investor Group will convert sufficient
Class B Common Stock to Class A Common Stock to allow the Hvide Family to
maintain a one vote majority over the Investor Group.
CONTINGENT SHARE ISSUANCE AGREEMENT
Also in connection with the issuance of the Junior Notes, the Company and
the Investor Group entered into a Contingent Share Issuance Agreement (the "CSI
Agreement"). The agreement, as amended and restated pursuant to the
Recapitalization Agreement, provides for the issuance of additional shares of
Class A Common Stock to the purchasers of the Junior Notes to the extent
necessary for such purchasers to earn a specified All-in Return (as defined
below) on their investment. Mr. Hvide and the Hvide Trusts agreed in the
Shareholders Agreement to contribute to the Company a number of shares of Class
B Common Stock equal to the number of shares of Common Stock issued by the
Company pursuant to the CSI Agreement.
Pursuant to the CSI Agreement, the Company issued to the purchasers of the
Junior Notes two series of Common Stock Contingent Share Issuances ("CSIs") that
are convertible into shares of Class A Common Stock on June 10, 1997 (300 days
following completion of the IPO). The number of shares of such stock issuable
with respect to the first series of CSIs is the lesser of (i) that number
necessary to cause the All-in Return to equal 60% and (ii) a number of shares
equal to 9.375% of the outstanding shares of the Company's Common Stock on a
fully-diluted basis, without giving effect to the IPO, the Offering, or the CSI
issuance. The number of shares issuable with respect to the second series of
CSIs is equal to the lesser of (i) that number necessary to cause the All-in
Return to equal 35% and (ii) a number of shares equal to 12.5% of the
outstanding shares of the Company's Common Stock on a fully-diluted basis,
without giving effect to the Offering or the CSI issuance. The value of the
shares of Class A Common Stock issuable upon conversion of the CSIs is based
upon the average market price of the Class A Common Stock during the 30 trading
days preceding June 10, 1997 (the "Valuation Period"). "All-in Return" is
defined as the annual rate of return
70
<PAGE> 72
earned by the purchasers of the Junior Notes with respect to their aggregate
investment in the Junior Notes, the shares of Common Stock issued to them in
connection with their purchase of the Junior Notes, and the shares of Common
Stock issued to them upon conversion of the CSIs. Accordingly, as calculated
pursuant to such formulas, the maximum number of shares of Class A Common Stock
issuable with respect to the first and second series of CSIs is 237,641 and
316,855 shares, respectively.
While it is not possible to predict the future market value of the
Company's Common Stock, barring a dramatic increase in the average market price
of the Class A Common Stock during the Valuation Period, the Company will issue
to the Investor Group following the Valuation Period all 237,641 shares of Class
A Common Stock issuable under the first series of CSIs. With respect to the
shares issuable under the second series of CSIs, if the average market price of
the Class A Common Stock during the Valuation Period is less than $16.63 per
share, the Company will issue to the Investor Group following the Valuation
Period all 316,855 shares of Class A Common Stock issuable under the second
series of CSIs. However, to the extent the average market price of the Class A
Common Stock is greater than $16.63, the number of shares of Class A Common
Stock will be reduced, and no second series CSI shares will be issuable in the
event the average market price of the Class A Common Stock during the Valuation
Period exceeds $19.25 per share. If all 554,496 shares of Class A Common Stock
issuable under the CSIs are issued, the Investor Group's ownership would
increase from 12.5% to 16.2% of the outstanding shares of Common Stock and Mr.
Hvide's ownership would be reduced from 11.9% to 8.2% of the outstanding shares.
The Investor Group has agreed, however, that if following the issuance of the
CSIs, the aggregate votes held by the Investor Group would exceed the votes held
by the Hvide Family, the Investor Group will convert sufficient Class B Common
Stock to Class A Common Stock to allow the Hvide Family to maintain a one-vote
majority over the Investor Group. See " -- Shareholders Agreement -- Share
Adjustment."
REGISTRATION RIGHTS AGREEMENT
In connection with the Recapitalization Agreement the Company and the
Investor Group entered into a registration rights agreement (the "Registration
Rights Agreement"). Under the Registration Rights Agreement, the Investor Group
has the right to demand that its shares of Common Stock be registered for sale
pursuant to the requirements of the Securities Act, up to three times, subject
to certain deferral rights of the Company. Each of the members of the Investor
Group has the right to request that its shares be included in any registered
underwritten public offering of the Company's Common Stock, subject to certain
cutbacks.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, LLC, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, 11,508,375 shares of Class A Common Stock
and 3,419,577 shares of Class B Common Stock will be outstanding, of which the
4,000,000 shares of Class A Common Stock offered hereby (assuming the
Underwriters' over-allotment option is not exercised) and the 7,159,000 shares
sold in the IPO will be transferable without restriction under the Securities
Act, except for shares acquired by "affiliates" of the Company (as defined in
Rule 144 under the Securities Act ("Rule 144")). Of the 1,815,985 shares of
Common Stock to be beneficially owned by the Company's executive officers and
directors following the completion of the Offering, 1,786,818 are currently
eligible for resale under Rule 144, subject to volume and other restrictions
under Rule 144. All of the 1,870,320 shares of Common Stock beneficially owned
by members of the Investor Group are currently eligible for resale under Rule
144, subject to volume and other restrictions under Rule 144.
In general, under Rule 144, a person (or persons whose shares are
aggregated) (i) who is not an "affiliate," as that term is defined below, and
whose shares have been outstanding and not owned by an "affiliate" for at least
two years, or (ii) who is an "affiliate" and has beneficially owned his or its
shares for a period of at least two years, is entitled to sell, within any
90-day period, such number of shares that does not
71
<PAGE> 73
exceed the greater of (i) one percent (1%) of the then-outstanding shares or
(ii) the average weekly trading volume of the then outstanding shares during the
four calendar weeks next preceding each such sale. Resales under Rule 144 are
also subject to certain notice and manner of sale requirements, and the
availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not deemed an "affiliate" of the
Company at any time during the three months next preceding a sale by such person
(or persons) and who has beneficially owned shares of Common Stock that were not
acquired from the Company or an "affiliate" of the Company within the previous
three years, would be entitled to sell such shares under Rule 144(k) without
regard to volume limitations, manner of sale provisions, notification
requirements, or the availability of current public information concerning the
Company. Affiliates continue to be subject to the restrictions and requirements
of Rule 144. As defined in Rule 144, an "affiliate" of an issuer is a person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such issuer.
The Company's executive officers and directors, who collectively are the
beneficial owners of an aggregate of 266,728 shares of Class A Common Stock and
3,419,577 shares of Class B Common Stock in the aggregate (less than 3% of the
Class A Common Stock and 100.0% of the Class B Common Stock upon completion of
the Offering, or 75.4% of the voting power of the Common Stock, assuming the
Underwriters' over-allotment option is not exercised), have executed lock-up
agreements pursuant to which they have agreed not to sell, or otherwise dispose
of, any of their shares of Common Stock for a period of 90 days after the date
of this Prospectus, without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. The members of the Investor Group, who will
beneficially own 219,850 shares of Class A Common Stock and 1,650,470 shares of
Class B Common Stock in the aggregate upon completion of the Offering (1.9% of
the Class A Common Stock and 48.3% of the Class B Common Stock upon completion
of the Offering, or 36.6% of the voting power of the Common Stock, assuming the
Underwriters' over-allotment option is not exercised) executed lock-up
agreements in connection with the IPO pursuant to which they agreed not to
demand the registration of, offer, sell, contract to sell, or otherwise dispose
of, except to other members of the Investor Group or affiliates thereof, any of
their shares prior to August 7, 1997, without the prior written consent of
Donaldson Lufkin & Jenrette Securities Corporation.
The Company has granted registration rights to certain stockholders. See
"Description of Capital Stock -- Registration Rights Agreement."
The Company has filed a Registration Statement on Form S-8 covering an
aggregate of 1,570,000 shares of Class A Common Stock reserved for issuance
under the Company's Equity Ownership Plan, Employee Stock Purchase Plan, and
Directors Plan. Shares issued under such plans, or issued upon exercise of
options granted under such plans, will be eligible for sale by non-affiliates in
the public market without limitation and by affiliates subject to the provisions
of Rule 144, except for the holding period limitation of Rule 144, subject to
the terms of the lock-up agreements described above.
Sales of substantial amounts of such shares in the public market could
adversely affect the prevailing market price of the Common Stock and could
impair the Company's future ability to raise capital through an offering of its
equity securities.
As part of its business plan, the Company may, from time to time, issue
shares of Common Stock or Preferred Stock to finance future vessel improvements,
acquisitions, and other transactions. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Strategy."
72
<PAGE> 74
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company, the Selling Stockholders, the
Hvide Family Trust II, and each of the underwriters named below (the
"Underwriters"), the Company and the Selling Stockholders have agreed to sell to
each of the Underwriters, and each of the Underwriters, for whom Donaldson,
Lufkin & Jenrette Securities Corporation and Howard, Weil, Labouisse, Friedrichs
Incorporated are acting as representatives (the "Representatives"), have
severally agreed to purchase from the Company and the Selling Stockholders an
aggregate of 4,000,000 shares of Class A Common Stock. The number of shares of
Class A Common Stock that each Underwriter has agreed to purchase is set forth
opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.......
Howard, Weil, Labouisse, Friedrichs Incorporated..........
---------
Total........................................... 4,000,000
=========
</TABLE>
The Underwriters are obligated to purchase all of such shares if any are
purchased. Under certain circumstances, the commitments of non-defaulting
Underwriters may be increased as set forth in the Underwriting Agreement.
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares of Class A Common
Stock are subject to certain conditions precedent.
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose to offer the shares of Class A Common Stock to the
public initially at the public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
re-allow, a discount not in excess of $0.10 per share on sale to certain other
dealers. After the initial offering of the Class A Common Stock, the public
offering price, concession, and discount may be changed.
The Company and the Hvide Family Trust II have granted the Underwriters an
option, exercisable by the Representatives, to purchase up to 600,000 additional
shares of Class A Common Stock, at the public offering price, less the
underwriting discount. The first 25,000 shares to be purchased pursuant to the
over-allotment option will be purchased from the Hvide Family Trust II and the
balance will be purchased from the Company. Such option, which expires 30 days
after the date of this Prospectus, may be exercised solely to cover
over-allotments. To the extent the Representatives exercise such option, each of
the Underwriters will be obligated, subject to certain conditions, to purchase
approximately the same percentage of the option shares as the number of shares
of Class A Common Stock to be purchased initially by that Underwriter bears to
the total number of shares to be purchased initially by the Underwriters.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
In accordance with applicable rules of the National Association of
Securities Dealers, Inc. ("NASD"), no NASD member participating in the
distribution is permitted to confirm sales to accounts over which it
73
<PAGE> 75
exercises discretionary authority without prior written consent, and,
accordingly, each Underwriter intends to abide by such rules.
In connection with the Offering, the Company's officers and directors and
certain of its stockholders, have agreed that, during a period of 90 days from
the date of this Prospectus, such holders will not, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation, directly or
indirectly, offer, sell, grant any option with respect to, pledge, hypothecate,
or otherwise dispose of, any shares of Common Stock. In addition, the Company
has agreed that, during a period of 90 days from the date of this Prospectus,
the Company will not, without the prior written consent of the Representatives,
directly or indirectly, offer, sell, grant any option with respect to, pledge,
hypothecate, or otherwise dispose of any shares of Class A Common Stock or Class
B Common Stock except for (i) shares of Class A Common Stock to be issued in the
Offering, and (ii) shares issued upon the exercise of options to be granted
under the various employee and director benefit plans, as described under
"Management." See "Shares Eligible for Future Sale."
In connection with the Offering, certain Underwriters and selling group
members may engage in passive market making transactions in the Class A Common
Stock on the Nasdaq National Market immediately prior to the commencement of
sales, in accordance with Rule 10b-6A under the Exchange Act. Passive market
making consists of, among other things, displaying bids on the Nasdaq National
Market limited by the bid prices of independent market makers and purchases
limited by such prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the Class A Common Stock
during a specified prior period, and all passive market making activity must be
discontinued when such limit is reached. Passive market may stabilize the market
price of the Class A Common Stock at a level above that which might otherwise
prevail and, if commenced, may be discontinued at any time.
LEGAL MATTERS
Certain legal matters in connection with the validity of the issuance of
the Common Stock offered hereby are being passed upon for the Company by Dyer
Ellis & Joseph PC, Washington, D.C. Certain legal matters in connection with the
Offering will be passed upon for the Underwriters by Akin, Gump, Strauss, Hauer
& Feld, L.L.P.
EXPERTS
The consolidated financial statements of Hvide Marine Incorporated and
subsidiaries at December 31, 1995 and 1994 and for each of the three years in
the period ended December 31, 1995, and the statements of assets to be sold of
Gulf Boat Marine Services, Inc. and E&D Boat Rentals, Inc. as of September 30,
1994 and 1995, and the related statements of vessel operations for the years
then ended, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent certified public accountants, as set
forth in their reports thereon, appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
The combined financial statements of OMI Chemical Carrier Group at December
31, 1995 and 1994 and for each of the three years in the period ended December
31, 1995 appearing in this Prospectus and Registration Statement have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The financial statements of the Seal Fleet Vessels at December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
Pannell Kerr Forster of Texas, P.C., independent certified public accountants,
as set forth in their reports thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
74
<PAGE> 76
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") pursuant to the Securities Act, with respect to the Class A Common
Stock offered hereby. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any contract, agreement, or other document
are summaries of the material terms of such contract, agreement, or document.
With respect to each such contract, agreement, or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files periodic
reports, proxy statements, and other information with the Commission relating to
its business, financial statements, and other matters. The Registration
Statement (including the exhibits and schedules thereto) as well as such
reports, proxy statements, and other information, may be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: New York Regional Office, Seven World Trade Center, 13th Floor,
New York, New York 10048; and Chicago Regional Office, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material may be obtained
at prescribed rates from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549. Such documents may also be obtained
through the website maintained by the Commission at http://www.sec.gov. In
addition, reports and other information concerning the Company are available for
inspection and copying at the offices of the Nasdaq Stock Market at 1735 K
Street, N.W., Washington, D.C., 20006-1506.
75
<PAGE> 77
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED):
Pro Forma Condensed Consolidated Statement of Operations for
the Nine Months Ended September 30, 1996 (unaudited)...... F-2
Pro Forma Condensed Consolidated Statement of Operations for
the Year Ended December 31, 1995 (unaudited).............. F-5
HVIDE MARINE INCORPORATED AND SUBSIDIARIES:
Report of Independent Certified Public Accountants.......... F-8
Consolidated Balance Sheets as of December 31, 1994 and 1995
and September 30, 1996 (unaudited)........................ F-9
Consolidated Statements of Operations for the Three Years
Ended December 31, 1995 and for the Nine Months Ended
September 30, 1995 and 1996 (unaudited)................... F-10
Consolidated Statements of Stockholders' Equity for the
Three Years Ended December 31, 1995 and for the Nine
Months Ended September 30, 1996 (unaudited)............... F-11
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1995 and for the Nine Months Ended
September 30, 1995 and 1996 (unaudited)................... F-12
Notes to Consolidated Financial Statements.................. F-13
OMI CHEMICAL CARRIER GROUP:
Independent Auditors' Report................................ F-26
Combined Balance Sheets as of December 31, 1994 and 1995 and
June 30, 1996 (unaudited)................................. F-27
Combined Statements of Operations and Deficit for the Three
Years Ended December 31, 1995 and for the Six Months Ended
June 30, 1995 and June 30, 1996 (unaudited)............... F-28
Combined Statements of Cash Flows for the Three Years Ended
December 31, 1995 and for the Six Months Ended June 30,
1995 and June 30, 1996 (unaudited)........................ F-29
Notes to Combined Financial Statements...................... F-30
SEAL FLEET VESSELS:
Independent Auditors' Report................................ F-35
Combined Statements of Vessel Operations for the Three Years
Ended December 31, 1995 and for the Six Months Ended June
30, 1995 and 1996 (unaudited)............................. F-36
Notes to Combined Financial Statements...................... F-37
Independent Auditors' Report................................ F-39
Statements of Assets to be Sold as of December 31, 1993,
1994, and 1995 and June 30, 1995 and 1996 (unaudited)..... F-40
Statements of Vessel Operations for the Three Years Ended
December 31, 1995 and for the Six Months Ended June 30,
1995 and 1996 (unaudited)................................. F-41
Notes to Financial Statements............................... F-42
GULF BOAT MARINE SERVICES, INC. AND E&D BOAT RENTALS, INC.:
Report of Independent Certified Public Accountants.......... F-44
Statement of Assets to be Sold as of September 30, 1994 and
1995 and December 31, 1995 (unaudited).................... F-45
Statements of Vessel Operations for the Two Years Ended
September 30, 1995 and for the Three Months Ended December
31, 1994 and 1995 (unaudited)............................. F-46
Notes to Financial Statements............................... F-47
</TABLE>
F-1
<PAGE> 78
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The pro forma condensed consolidated statements of operations for the year
ended December 31, 1995 and the nine months ended September 30, 1996 give effect
to the acquisitions of the three OMI Chemical Carriers and the eight Seal Fleet
Vessels in August 1996, the eight GBMS vessels in January 1996 and one vessel in
February 1996, and the IPO as if all such transactions had occurred on January
1, 1995 and 1996, respectively. The pro forma financial information is presented
for illustrative purposes only and does not purport to represent what the
Company's results actually would have been if such events had occurred at the
dates indicated, nor does such information purport to project the results of
operations for any future period or as of any future date. The pro forma
condensed consolidated financial information should be read in conjunction with
the notes thereto and with the financial statements and the notes thereto of the
Company, the OMI Chemical Carriers, the Seal Fleet Vessels, and the GBMS vessels
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," all appearing elsewhere in this Prospectus. See "Business -- The
Current Acquisitions."
F-2
<PAGE> 79
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO
COMPANY OMI FORMA
AS CHEMICAL SEAL ROYAL ADJUST-
REPORTED CARRIERS(A) FLEET(A)(B) GBMS(C) RUNNER(C) OSTC(C) ELIMINATIONS MENTS
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............... $ 72,130 $12,262 $5,021 $296 $57 $34,066 $(27,548)(1) $4,762(2)
Operating expenses..... 42,089 8,227 2,253 174 29 33,034 (27,548)(1) 3,431(2)
Overhead expenses...... 11,049 414 44 674 41(2)
Depreciation and
amortization......... 6,115 2,560 196 14 110 2,130(3)
--------- ------- ------ ---- --- ------- -------- ------
Income (loss) from
operations........... 12,877 1,061 2,572 64 28 248 (840)
Net interest........... 8,751 1,995 27 (1,739)(4)
Other income (expense):
Minority interest
and equity in
subsidiaries..... 721
Other.............. (522)
--------- ------- ------ ---- --- ------- -------- ------
Total other
income
(expense).... 199
--------- ------- ------ ---- --- ------- -------- ------
Income before income
taxes................ 4,325 (934) 2,572 64 28 221 899
Provision (benefit) for
income taxes......... 1,616 (326) 54 1,311(5)
--------- ------- ------ ---- --- ------- -------- ------
Net income (loss)
before non-recurring
items directly
attributable to the
transaction.......... $ 2,709 $ (608) $2,572 $ 64 $28 $ 167 $ $ (412)
========= ======= ====== ==== === ======= ======== ======
Earnings per common
share and common
share equivalents.... $ 0.68
=========
Weighted average number
of common shares and
common share
equivalents
outstanding.......... 4,017,796
=========
<CAPTION>
COMPANY
PRO FORMA
CONDENSED
CONSOLIDATED
<S> <C>
Revenues............... $ 101,046
Operating expenses..... 61,689
Overhead expenses...... 12,222
Depreciation and
amortization......... 11,125
-----------
Income (loss) from
operations........... 16,010
Net interest........... 9,034
Other income (expense):
Minority interest
and equity in
subsidiaries..... 721
Other.............. (522)
-----------
Total other
income
(expense).... 199
-----------
Income before income
taxes................ 7,175
Provision (benefit) for
income taxes......... 2,655
-----------
Net income (loss)
before non-recurring
items directly
attributable to the
transaction.......... $ 4,520
===========
Earnings per common
share and common
share equivalents.... $ 0.41
===========
Weighted average number
of common shares and
common share
equivalents
outstanding.......... 11,063,867
===========
</TABLE>
- ---------------
(a)Amounts represent the results of operations for the period January 1, 1996 to
June 30, 1996.
(b)Represents the combined statements of vessel operations of assets to be sold
for Seal Fleet, Inc. and the Seal Partners, (Indian Seal Partners, Ltd.,
Baffin Seal Partners, Ltd., Baltic Seal Partners, Ltd., Bengal Seal Partners,
Ltd., and Ross Seal Partners, Ltd.)
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------
SEAL SEAL SEAL
FLEET, INC. PARTNERS FLEET
<S> <C> <C> <C>
Revenues.................................................... $1,806 $3,215 $5,021
Operating expenses.......................................... 909 1,344 2,253
Depreciation and amortization............................... 196 196
------ ------ ------
Income from operations...................................... $ 701 $1,871 $2,572
====== ====== ======
</TABLE>
(c)Amounts represent the results of operations for the period January 1, 1996
through the date of acquisition of January 31, 1996 for GBMS, February 9,
1996 for Royal Runner, and August 14, 1996 for OSTC.
F-3
<PAGE> 80
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<S> <C> <C>
(1) Elimination of historical revenue and expense associated
with OSTC charter hire of vessels from Hvide and OMI........ $27,548
=======
(2) Reflects the adjustments for the historical results of
operations for the period from July 1, 1996 to August 14,
1996 for the OMI Chemical Carriers and the Seal Fleet
Vessels. Historical operating and overhead expenses, for the
period January 1, 1996 through the acquisition dates, are
adjusted for insurance expense based upon quotations
received from the Company's insurance underwriters;
adjustments to drydocking expense to reflect the Company's
deferral method; elimination of operating lease expense on
acquired OMI vessels financed by Hvide; and adjustments to
reflect incremental corporate overhead and employee salaries
and benefits in accordance with management's plans with
respect to the Seal Fleet Vessels and reduction of
historical overhead expenses related to the integration of
the OMI Chemical Carriers, and the GBMS vessels into the
Company's operations.
</TABLE>
<TABLE>
<CAPTION>
OMI
CHEMICAL SEAL
CARRIERS FLEET GBMS TOTAL
<S> <C> <C> <C> <C>
Revenues:
Historical revenues....................................... $3,321 $1,441 $ $4,762
Operating Expenses:
Historical operating expenses............................. $1,058 $1,306 $2,364
Insurance................................................. (406) 24 30 (352)
Maintenance & Repair...................................... 410 410
Drydocking................................................ 1,764 1,764
Operating lease expense................................... (755) (755)
------ ------ ---- ------
$2,071 $1,330 $ 30 $3,431
====== ====== ==== ======
Overhead Expenses:
Historical overhead expenses.............................. $ 145 $ $ $ 145
Salaries and benefits..................................... 93 112 (19) 186
Other..................................................... (304) 31 (17) (290)
------ ------ ---- ------
$ (66) $ 143 $(36) $ 41
====== ====== ==== ======
(3) The adjustment to depreciation and amortization is comprised
of:
Depreciation adjustment to reflect the historical
depreciation for the period from July 1, 1996 to August 14,
1996(a)..................................................... $ 754
Depreciation adjustment to reflect the Company's policies
applied to the acquired cost of the vessels of:
OMI......................................................... 417
Seal Fleet.................................................. 971
GBMS (acquired January 31, 1996)............................ 4
Royal Runner (acquired February 9, 1996).................... 6
------
1,398
Amortization Adjustments related to the IPO:
Deferred loan costs amortization-Junior Notes............... (24)
Deferred loan costs amortization-Senior Notes............... (33)
New money fee for the Seal Fleet acquisition................ 9
Commitment fee.............................................. 10
Revolver fee................................................ 16
------
(22)
------
$2,130
======
</TABLE>
- ---------------
(a) Includes historical depreciation for OMI Chemical Carriers of $707,000
and Seal Fleet of $47,000.
<TABLE>
<S> <C> <C>
(4) The adjustment of net interest expense is comprised of:
Historical interest for the period from July 1, 1996 to
August 14, 1996 for OMI..................................... $ 2,146
Interest expense on additional borrowings pursuant to the
OMI acquisition............................................. 350
Interest expense on assumed Title XI debt from OMI.......... (2,352)
Interest expense on OMI Star debt........................... 339
Interest expense on additional borrowings pursuant to the
Seal Fleet acquisition...................................... 393
Interest expense on additional borrowings pursuant to the
GBMS acquisition............................................ 23
Interest expense on Royal Runner debt....................... 11
Reduction of interest expense due to the repayment of Junior
Notes....................................................... (1,460)
Reduction of interest expense due to the repayment of Senior
Notes....................................................... (1,167)
Reduction of interest expense due to the repayment of other
subordinated notes.......................................... (85)
Commitment fee on acquisition line of credit................ 63
-------
$(1,739)
=======
(5) Adjustment for historical income taxes for the period from
July 1, 1996 to August 14, 1996............................. $ (258)
To adjust pro forma income taxes to combined federal and
state statutory rates....................................... 1,569
-------
$ 1,311
=======
</TABLE>
F-4
<PAGE> 81
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------------------------------
COMPANY OMI PRO FORMA
AS CHEMICAL SEAL ROYAL ELIMINA- ADJUST-
REPORTED CARRIERS FLEET(A) GBMS RUNNER OSTC TIONS MENTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Revenues........................... $ 70,562 $26,099 $8,650 $3,287 $651 $57,577 $(43,841)(1) $
Operating expenses................. 40,664 29,141 4,500 2,209 243 56,064 (43,841)(1) (12,669)(2)
Overhead expenses.................. 12,518 848 469 74 1,205 (95)(2)
Depreciation and amortization...... 6,308 3,355 498 195 145 166 2,063(3)
--------- ------- ------ ------ ---- ------- -------- --------
Income (loss) from operations...... 11,072 (7,245) 3,652 414 189 142 10,701
Net interest....................... 11,460 2,160 95 68 (1,471)(4)
Other income (expense):
Minority interest and equity in
subsidiaries................. 137
Other.......................... (111) 167 (3)
--------- ------- ------ ------ ---- ------- -------- --------
Total other income
(expense)................ 26 167 (3)
--------- ------- ------ ------ ---- ------- -------- --------
Income before income taxes......... (362) (9,238) 3,652 414 94 71 12,172
Provision (benefit) for income
taxes............................ (2) (3,234) 21 5,664(5)
--------- ------- ------ ------ ---- ------- -------- --------
Net income (loss) from continuing
operations before non-recurring
items directly attributable to
the transaction.................. $ (360) $(6,004) $3,652 $ 414 $ 94 $ 50 $ $ 6,508
========= ======= ====== ====== ==== ======= ======== ========
Earnings (loss) per common share... $ (0.14)
=========
Weighted average number of common
shares and common share
equivalents outstanding.......... 2,534,840
=========
<CAPTION>
COMPANY
PRO FORMA
CONDENSED
CONSOLIDATED
<S> <C>
Revenues........................... $ 122,985
Operating expenses................. 76,311
Overhead expenses.................. 15,019
Depreciation and amortization...... 12,730
----------
Income (loss) from operations...... 18,925
Net interest....................... 12,312
Other income (expense):
Minority interest and equity in
subsidiaries................. 137
Other.......................... 53
----------
Total other income
(expense)................ 190
----------
Income before income taxes......... 6,803
Provision (benefit) for income
taxes............................ 2,449
----------
Net income (loss) from continuing
operations before non-recurring
items directly attributable to
the transaction.................. $ 4,354
==========
Earnings (loss) per common share... $ 0.40
==========
Weighted average number of common
shares and common share
equivalents outstanding.......... 10,904,868
==========
</TABLE>
- ---------------
(a)Represents the combined statements of vessel operations of assets to be sold
for Seal Fleet, Inc. and the Seal Partners, (Indian Seal Partners, Ltd.,
Baffin Seal Partners, Ltd., Baltic Seal Partners, Ltd., Bengal Seal Partners,
Ltd., and Ross Seal Partners, Ltd.).
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------
SEAL SEAL SEAL
FLEET, INC. PARTNERS FLEET
<S> <C> <C> <C>
Revenues......................................................................... $ 3,267 $5,383 $8,650
Operating expenses............................................................... 1,723 2,777 4,500
Depreciation and amortization.................................................... 498 498
------ ------ ------
Income from operations........................................................... $ 1,046 $2,606 $3,652
====== ====== ======
</TABLE>
See notes to the pro forma condensed consolidated financial statements
F-5
<PAGE> 82
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<S> <C> <C>
(1) Elimination of historical revenue and expense associated
with OSTC charter hire of vessels from Hvide and OMI........ $43,841
=======
</TABLE>
(2) Reflects the reduction in insurance expense based upon quotations received
from the Company's insurance underwriters; adjustment to drydocking expense
to reflect the Company's deferral method; elimination of operating lease
expense on acquired OMI vessels owned or capital leased by Hvide;
elimination of a provision for lease penalties on an OMI vessel that will
not be incurred due to the purchase of the vessel; and adjustments to
reflect incremental corporate overhead and employee salaries and benefits
in accordance with management's plans with respect to the OMI Chemical
Carriers and Seal Fleet Vessels and reduction of historical overhead
expenses related to the integration of the GBMS vessels into the Company's
operations.
<TABLE>
<CAPTION>
OMI
CHEMICAL SEAL
CARRIERS FLEET GMBS TOTAL
<S> <C> <C> <C> <C>
Operating Expenses:
Insurance...................................... $ (598) $ 8 $ (80) $ (670)
Drydocking..................................... (1,145) (1,145)
Operating lease expense........................ (7,557) (7,557)
Provision for lease penalties.................. (3,297) (3,297)
-------- ---- ----- --------
$(12,597) $ 8 $ (80) $(12,669)
======== ==== ===== ========
Overhead Expenses:
Salaries and benefits.......................... $ 247 $447 $(245) $ 449
Other.......................................... (544) 124 (124) (544)
-------- ---- ----- --------
$ (297) $571 $(369) $ (95)
======== ==== ===== ========
</TABLE>
(3) The adjustment to depreciation and amortization is comprised of:
<TABLE>
<S> <C>
Depreciation adjustment to reflect the Company's policies applied to
the acquired cost of the vessels of:
OMI(a).................................................... $1,094
Seal Fleet................................................ 1,009
GBMS...................................................... 23
Royal Runner.............................................. (70)
------
2,056
Amortization Adjustment:
Deferred loan costs amortization -- Junior Notes....... (32)
Deferred loan costs amortization -- Senior Notes....... (52)
New money fee for the Seal Fleet acquisition........... 17
Commitment fee......................................... 48
Revolver fee........................................... 26
------
7
------
$2,063
======
</TABLE>
- ---------------
(a) Includes depreciation on an OMI vessel historically under an operating
lease.
F-6
<PAGE> 83
(4) The adjustment of net interest expense is comprised of:
<TABLE>
<S> <C>
Interest expense on additional borrowings pursuant to the
OMI acquisition........................................... $ 634
Removal of historical interest income of OMI................ 1
Interest expense on assumed Title XI debt from OMI(a)....... 1,003
Interest expense on OMI Star capital lease.................. 520
Interest expense on debt issued pursuant to the Seal Fleet
acquisition............................................... 638
Interest expense on debt issued pursuant to the GBMS
acquisition............................................... 269
Removal of historical interest expense of Royal Runner...... (95)
Interest expense on Royal Runner debt....................... 131
Reduction of interest expense due to the repayment of Junior
Notes..................................................... (2,199)
Reduction of interest expense due to the repayment of Senior
Notes..................................................... (1,775)
Reduction of interest expense due to the repayment of Credit
Facility.................................................. (63)
Reduction of interest expense due to the repayment of other
subordinated notes........................................ (665)
Commitment fee on acquisition line of credit................ 130
-------
$(1,471)
=======
</TABLE>
-----------------------
(a) Reflects a full year of interest expense on Title XI debt that was
outstanding for a partial year for OMI.
<TABLE>
<S> <C> <C>
(5) To adjust pro forma income taxes to combined federal and $5,664
state statutory rates.......................................
======
</TABLE>
F-7
<PAGE> 84
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
HVIDE MARINE INCORPORATED
We have audited the accompanying consolidated balance sheets of Hvide
Marine Incorporated (f/k/a Hvide Corp.) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hvide Marine
Incorporated and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for drydocking
costs from the accrual method to the deferral method.
ERNST & YOUNG LLP
Miami, Florida
March 28, 1996, except the second
paragraph of Note 10, as to which
the date is May 10, 1996.
F-8
<PAGE> 85
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 6,363 $ 3,050 $ 5,598
Escrow deposit.......................................... 500 -- --
Accounts receivable:
Trade, net.......................................... 7,862 9,602 15,469
Insurance claims and other.......................... 1,292 4,399 2,046
Due from affiliate...................................... 547 101 --
Spare parts and supplies................................ 3,375 3,417 5,137
Prepaid expenses........................................ 784 960 944
Deferred costs (net).................................... 1,523 2,550 4,440
-------- -------- --------
Total current assets................................ 22,246 24,079 33,634
Property:
Construction in progress................................ 1,646 1,387 4,250
Vessels and improvements................................ 110,542 122,198 222,719
Less accumulated depreciation....................... (16,040) (20,585) (24,641)
Furniture and equipment................................. 2,054 2,601 3,494
Less accumulated depreciation....................... (827) (998) (1,294)
-------- -------- --------
Net property........................................ 97,375 104,603 204,528
Other assets:
Deferred costs (net).................................... 4,422 4,112 5,841
Due from affiliates..................................... 109 131 255
Investment in affiliates................................ 574 423 1,112
Goodwill (net).......................................... 9,586 9,117 8,738
Long-term receivable (net).............................. 785 831 45
Other................................................... 374 387 463
-------- -------- --------
Total other assets.................................. 15,850 15,001 16,454
-------- -------- --------
Total............................................... $135,471 $143,683 $254,616
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.................... $ 4,779 $ 7,708 $ 17,108
Current obligations under capital leases................ 521 577 3,065
Accounts payable........................................ 4,681 4,905 3,197
Charter hire and other liabilities...................... 4,472 6,574 10,369
-------- -------- --------
Total current liabilities........................... 14,453 19,764 33,739
Long-term liabilities:
Long-term debt.......................................... 93,700 96,014 100,533
Notes payable to related parties........................ 1,302 1,302 177
Obligations under capital leases........................ 3,979 3,450 13,434
Due to charterer........................................ 547 547 891
Deferred income taxes................................... 4,319 4,317 3,477
Other................................................... 2,268 4,290 3,438
-------- -------- --------
Total long-term liabilities......................... 106,115 109,920 121,950
-------- -------- --------
Total liabilities................................... 120,568 129,684 155,689
Minority partners' equity in subsidiaries................... 2,198 1,654 1,003
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $1.00 par value -- authorized
10,000,000 shares, issued and outstanding, none....... -- -- --
Class A Common Stock -- $.001 par value, authorized
100,000,000 shares, issued and outstanding, 0, 0, and
7,644,291............................................. -- -- 8
Class B Common Stock -- $.001 par value, authorized
5,000,000 shares, issued and outstanding, 1,558,210,
1,558,210 and 3,419,577............................... 1 1 3
Class C Common Stock -- $.001 par value, authorized
2,500,000 shares, issued and outstanding, 976,630,
976,630, and 0........................................ 1 1 --
Additional paid-in capital.............................. 6,341 6,341 97,218
Retained earnings....................................... 6,362 6,002 695
-------- -------- --------
Total stockholders' equity.......................... 12,705 12,345 97,924
-------- -------- --------
Total minority partners' equity in subsidiaries and
stockholders' equity.............................. 14,903 13,999 98,927
-------- -------- --------
Total............................................... $135,471 $143,683 $254,616
======== ======== ========
</TABLE>
See notes to consolidated financial statements
F-9
<PAGE> 86
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------- -----------------
1993 1994 1995 1995 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues.................................................... $41,527 $49,792 $70,562 $51,194 $72,130
Operating expenses:
Crew payroll and benefits............................... 11,238 13,510 20,132 14,794 19,968
Charter hire and bond guarantee fee..................... 4,037 5,013 4,063 2,967 3,386
Repairs and maintenance................................. 3,024 3,847 5,347 3,984 5,848
Insurance............................................... 2,365 2,991 4,547 3,157 4,957
Consumables............................................. 1,770 2,237 3,395 2,476 4,196
Other................................................... 1,598 2,275 3,180 2,104 3,734
------- ------- ------- ------- -------
Total operating expenses............................ 24,032 29,873 40,664 29,482 42,089
Selling, general and administrative expenses:
Salaries and benefits................................... 3,202 4,649 6,856 5,130 5,903
Office expenses......................................... 633 819 1,068 784 989
Professional fees....................................... 1,268 2,645 2,137 1,748 2,137
Other................................................... 1,073 1,468 2,457 1,505 2,020
------- ------- ------- ------- -------
Total overhead expenses............................. 6,176 9,581 12,518 9,167 11,049
Depreciation and amortization............................... 4,735 4,500 6,308 4,691 6,115
------- ------- ------- ------- -------
Income from operations...................................... 6,584 5,838 11,072 7,854 12,877
Interest:
Interest expense........................................ 3,606 5,614 11,748 8,718 8,949
Interest income......................................... (194) (312) (288) (227) (198)
------- ------- ------- ------- -------
Net interest........................................ 3,412 5,302 11,460 8,491 8,751
Other income (expense):
Minority interest and equity in earnings of
subsidiaries.......................................... (960) (115) 137 153 721
Other................................................... 1,479 126 (111) (97) (522)
------- ------- ------- ------- -------
Total other income (expense)........................ 519 11 26 56 199
------- ------- ------- ------- -------
Income (loss) before provision for (benefit from) income
taxes, extraordinary item and cumulative effect of a
change in accounting principle............................ 3,691 547 (362) (581) 4,325
Provision for (benefit from) income taxes................... 1,873 189 (2) -- 1,616
------- ------- ------- ------- -------
Income (loss) before extraordinary item and cumulative
effect of a change in accounting principle................ 1,818 358 (360) (581) 2,709
------- ------- ------- ------- -------
Loss on early extinguishment of debt, net of applicable
income taxes of $1,405.................................... -- -- -- -- 8,016
Cumulative effect (to January 1, 1993) of change in
drydocking method......................................... 1,491 -- -- -- --
------- ------- ------- ------- -------
Net income (loss)................................... $ 3,309 $ 358 $ (360) $ (581) $(5,307)
======= ======= ======= ======= =======
Earnings (loss) per common and common equivalent share:
Income (loss) applicable to common shares before
extraordinary item and cumulative effect of a change in
accounting principle...................................... $ 0.26 $ 0.03 $ (0.14) $ (0.23) $ 0.68
Loss on early extinguishment of debt........................ -- -- -- -- (2.00)
Cumulative effect (to January 1, 1993) of change in
drydocking method......................................... 0.24 -- -- -- --
------- ------- ------- ------- -------
Net income (loss) applicable to common shares....... $ 0.50 $ 0.03 $ (0.14) $ (0.23) $ (1.32)
======= ======= ======= ======= =======
Earnings per common share -- assuming full dilution:
Income (loss) applicable to common shares before
extraordinary item and cumulative effect of a change in
accounting principle...................................... $ 0.26 $ 0.06 $ 0.12 $ -- $ 0.64
Loss on early extinguishment of debt........................ -- -- -- -- (1.59)
Cumulative effect (to January 1, 1993) of change in
drydocking method......................................... 0.24 -- -- -- --
------- ------- ------- ------- -------
Net income (loss) applicable to common shares....... $ 0.50 $ 0.06 $ 0.12 $ -- $ (0.95)
======= ======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements
F-10
<PAGE> 87
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
11% 5% CLASS A CLASS B CLASS C
CLASS A CLASS B COMMON STOCK COMMON STOCK COMMON STOCK
PREFERRED PREFERRED -------------------- ------------------ -----------------
STOCK STOCK SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 as
previously reported............ $2,669 $3,266 16,302,946 $ 19 -- $-- -- $ --
Effect of recapitalization (see
Note 1)........................ -- -- (16,302,946) (19) 1,105,692 1 633,415 1
------ ------ ----------- ---- --------- -- -------- ----
Balance at January 1, 1993, as
restated....................... 2,669 3,266 -- -- 1,105,692 1 633,415 1
Net income....................... -- -- -- -- -- -- --
Preferred stock cash dividends... -- -- -- -- -- -- --
------ ------ ----------- ---- --------- -- -------- ----
Balance at December 31, 1993..... 2,669 3,266 -- -- 1,105,692 1 633,415 1
Net income....................... -- -- -- -- -- -- -- --
Common stock issued, net of
issuance costs................. -- -- -- -- 452,518 -- 313,215 --
Redemption of preferred stock.... (2,669) (3,266) -- -- -- -- -- --
Acquisition of limited
partnership interests.......... -- -- -- -- -- -- -- --
Preferred stock cash dividends... -- -- -- -- -- -- --
------ ------ ----------- ---- --------- -- -------- ----
Balance at December 31, 1994..... -- -- -- -- 1,558,210 1 976,630 1
Net loss......................... -- -- -- -- -- -- -- --
------ ------ ----------- ---- --------- -- -------- ----
Balance at December 31, 1995..... -- -- -- -- 1,558,210 1 976,630 1
Net loss......................... -- -- -- -- -- -- -- --
Common Stock issued, net of
issuance costs................. -- -- 7,644,291 8 1,861,367 2 (976,630) (1)
------ ------ ----------- ---- --------- -- -------- ----
Balance at September 30, 1996
(unaudited).................... $ -- $ -- 7,644,291 $ 8 3,419,577 $3 -- $ --
====== ====== =========== ==== ========= == ======== ====
<CAPTION>
ADDITIONAL
PAID-IN RETAINED TREASURY
CAPITAL EARNINGS STOCK TOTAL
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Balance at January 1, 1993 as
previously reported............ $ 1,008 $ 9,381 $(5,935) $10,408
Effect of recapitalization (see
Note 1)........................ 17 (5,935) 5,935 --
------- ------- ------- -------
Balance at January 1, 1993, as
restated....................... 1,025 3,446 -- 10,408
Net income....................... 3,309 -- 3,309
Preferred stock cash dividends... (366) -- (366)
------- ------- ------- -------
Balance at December 31, 1993..... 1,025 6,389 -- 13,351
Net income....................... -- 358 -- 358
Common stock issued, net of
issuance costs................. 8,640 -- -- 8,640
Redemption of preferred stock.... (1,350) -- -- (7,285)
Acquisition of limited
partnership interests.......... (1,974) -- -- (1,974)
Preferred stock cash dividends... (385) -- (385)
------- ------- ------- -------
Balance at December 31, 1994..... 6,341 6,362 -- 12,705
Net loss......................... -- (360) -- (360)
------- ------- ------- -------
Balance at December 31, 1995..... 6,341 6,002 -- 12,345
Net loss......................... -- (5,307) -- (5,307)
Common Stock issued, net of
issuance costs................. 90,877 -- -- 90,886
------- ------- ------- -------
Balance at September 30, 1996
(unaudited).................... $97,218 $ 695 $ -- $97,924
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE> 88
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................ $ 3,309 $ 358 $ (360) $ (581) $(5,307)
Adjustments to reconcile income (loss) to net cash
provided by operating activities:
Loss on early extinguishment of debt, net............ -- -- -- -- 8,016
Cumulative effect of change in drydocking method..... (1,491) -- -- -- --
Depreciation and amortization........................ 4,735 4,500 6,308 4,691 6,115
Provision for bad debts.............................. -- -- 114 -- 144
(Gain) loss on disposals of property................. -- -- (73) (73) 12
Amortization of discount on long-term debt........... -- 52 201 147 148
Provision for (benefit from) deferred taxes.......... 1,402 189 (2) -- 564
Minority partners' equity in earnings (losses) of
subsidiaries, net.................................. 1,179 184 (625) (588) (651)
Undistributed (earnings) losses of affiliates, net... (219) (69) 488 449 (87)
Changes in operating assets and liabilities, net of
effect of acquisitions:
Accounts receivable.............................. (790) (4,574) (5,056) (3,087) (1,696)
Due from affiliates.............................. (630) (235) (394) (282) (23)
Other assets..................................... (819) (1,622) (1,317) (3,140) 718
Accounts payable and other liabilities........... 280 4,075 4,664 2,535 (1,827)
------- ------- ------- ------- -------
Net cash provided by operating activities................... 6,956 2,858 3,948 71 6,126
INVESTING ACTIVITIES:
Purchase of property..................................... (1,917) (5,672) (6,312) (3,672) (5,941)
Proceeds from disposals of property...................... -- -- 690 690 8
Capital contribution to affiliates....................... (330) -- -- -- (602)
Deposit of funds in escrow........................... -- (500) -- -- --
Acquisitions, net of cash acquired of $106 in 1994, net
of $500 escrow deposit utilized in 1995 and net of cash
acquired of $1,722 in 1996............................. -- (33,643) (2,444) (2,330) (55,203)
------- ------- ------- ------- -------
Net cash used in investing activities....................... (2,247) (39,815) (8,066) (5,312) (61,738)
FINANCING ACTIVITIES:
Proceeds (repayment) of lines of credit, net............. -- -- 7,500 6,000 (1,220)
Proceeds from long-term debt............................. -- 90,580 -- -- 21,700
Proceeds from issuance of common stock, net.............. -- 8,640 -- -- 76,695
Principal payments of long-term debt..................... (5,738) (51,700) (5,458) (3,700) (37,099)
Payment of debt and other financing costs................ -- (3,478) (727) (211) (575)
Payment of obligations under capital leases.............. -- (34) (510) (374) (971)
Payment of notes payable to related parties.............. -- -- -- -- (370)
Payment of dividends..................................... (366) (385) -- -- --
Distribution of minority partners' equity................ (54) -- -- -- --
Redemption of preferred stock............................ -- (2,374) -- -- --
------- ------- ------- ------- -------
Net cash (used in) provided by financing activities......... (6,158) 41,249 805 1,715 58,160
------- ------- ------- ------- -------
(Decrease) increase in cash and cash equivalents............ (1,449) 4,292 (3,313) (3,526) 2,548
Cash and cash equivalents at beginning of period............ 3,520 2,071 6,363 6,363 3,050
------- ------- ------- ------- -------
Cash and cash equivalents at end of period.................. $ 2,071 $ 6,363 $ 3,050 $ 2,837 $ 5,598
======= ======= ======= ======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Net assets recorded in connection with dissolution of
affiliate.................................................. $ -- $ -- $ 341 $ -- $ --
======= ======= ======= ======= =======
Notes payable and notes payable to related parties issued
for the acquisition of vessels (see Note 3)................ $ -- $ 2,149 $ 3,000 $ -- $ --
======= ======= ======= ======= =======
Capital leases assumed for the acquisition of vessels and
equipment (see Note 4)..................................... $ -- $ 4,534 $ -- $ -- $13,443
======= ======= ======= ======= =======
Note payable issued for the acquisition of minority interest
(see Note 3)............................................... $ -- $ 3,039 $ -- $ -- $ --
======= ======= ======= ======= =======
Note payable issued and other liabilities incurred in
conjunction with the redemption of preferred stock (see
Note 9).................................................... $ -- $ 4,911 $ -- $ -- $ --
======= ======= ======= ======= =======
Liabilities assumed for the acquisition of vessels (see Note
3)......................................................... $ -- $ 279 $ -- $ -- $34,650
======= ======= ======= ======= =======
Capital stock issued for the redemption of notes payable to
related parties............................................ $ -- $ -- $ -- $ -- $ 308
======= ======= ======= ======= =======
Capital stock issued for the repayment of debt.............. $ -- $ -- $ -- $ -- $13,883
======= ======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements
F-12
<PAGE> 89
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(INFORMATION PERTAINING TO SEPTEMBER 30, 1996 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Organization and Basis of Consolidation. Hvide Marine Incorporated ("HMI,"
the "Company," and the "Successor") (f/k/a Hvide Corp.) was incorporated in the
state of Florida on September 28, 1994 as the holding company for the former
Hvide Marine Incorporated (f/k/a Hvide Shipping, Incorporated) and its
majority-owned subsidiaries (the "Predecessor Company"). On September 30, 1994,
100% of the Common Stock of the Predecessor Company was exchanged for common
stock of HMI and accounted for in a manner similar to a pooling of interests.
Accordingly, the accompanying consolidated financial statements include the
combined successor/predecessor companies for all periods subsequent to September
30, 1994 and the Predecessor Company for all periods prior to September 30,
1994. All share and per share amounts have been adjusted to give retroactive
effect to the capital structure of HMI. All material intercompany transactions
and balances have been eliminated in the consolidated financial statements.
Investments in limited partnerships and less-than-majority-owned subsidiaries
are accounted for on the equity method.
On August 14, 1996, the Company completed the initial public offering (the
"IPO") of 7,000,000 shares of its Class A Common Stock at $12.00 per share. The
net proceeds to the Company were approximately $74,900,000, after deducting
underwriting commissions and other offering expenses. The net proceeds were used
primarily to repay certain indebtedness that was outstanding prior to the IPO
and for the cash portion of the purchase price of certain acquisitions
consummated simultaneously with and subsequent to the IPO. On September 12,
1996, the underwriters' over-allotment option was exercised in part pursuant to
which an additional 159,000 shares were issued. The net proceeds of
approximately $1,774,000 were used by the Company to repay certain outstanding
indebtedness. In addition, on August 14, 1996, the Company issued 182,000 and
1,188,000 shares of Class A and Class B Common Stock, respectively, in payment
of certain outstanding indebtedness.
Operations. The principal operations of the Company consist of vessel time
charters, vessel operating agreements and harbor towing. Through its vessel time
charters and operating agreements, the Company serves the energy and chemical
industries in the U.S. domestic trade. The Company's harbor towing operations
principally serve the passenger cruise ship, energy, and chemical industries and
are concentrated in ports located in the southeastern United States.
Revenues. Revenues from time charters are earned and recognized on a daily
basis. Time charter revenues are adjusted periodically based on changes in
specified price indices and market conditions.
Cash and Cash Equivalents. The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
Insurance Claims Receivable. Insurance claims receivable represent costs
incurred in connection with insurable incidents for which the Company expects to
be reimbursed by the insurance carrier(s), subject to applicable deductibles.
Deductible amounts related to covered incidents are expensed in the period of
occurrence of the incident.
Spare Parts and Supplies. Inventories of spare parts and supplies are
stated at the lower of cost, determined on a basis that approximates the
last-in, first-out method, or market.
Prepaid Expenses. Prepaid expenses primarily include prepaid vessel
insurance.
Property. Vessels, improvements and equipment are stated at cost less
accumulated depreciation. Major renewals and improvements are capitalized and
replacements, maintenance and repairs which do not improve or extend the lives
of the assets are expensed. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets. The estimated useful lives of
vessels and improvements other than tankers are 15 to 40 years and the estimated
useful lives of furniture and equipment are 3 to 10 years. Tankers and
F-13
<PAGE> 90
related improvements are depreciated over estimated useful lives, as determined
by the Oil Pollution Act of 1990 and other factors, ranging from 4 to 24 years.
Vessels under capital leases are amortized over the estimated useful lives
of the vessels. Included in vessels and improvements at December 31, 1994 and
1995 and at September 30, 1996 are vessels under capital leases of approximately
$5,003,000, $5,229,000, and $18,147,000, net of accumulated amortization of
approximately $37,000, $149,000, and $556,000, respectively.
For the years ended December 31, 1993, 1994 and 1995, and the nine months
ended September 30, 1995 and 1996, depreciation and amortization of vessels,
improvements and equipment was approximately $3,020,000, $3,397,000, and
$4,770,000, and $3,590,000, and $4,963,000, respectively.
Accounting for Drydocking Expenses. Approximately every 30 months, certain
Company vessels are drydocked for major repairs and maintenance which cannot be
performed while the vessels are operating.
Through fiscal 1992, the Company provided currently for the estimated
future costs of drydockings. Effective January 1, 1993, the Company changed its
method of accounting for drydocking costs from the accrual method to the
deferral method. Under the deferral method, the Company capitalizes its
drydocking costs and amortizes them over the period through the next drydocking.
Management believes the deferral method better matches costs with revenues.
Also, the deferral method minimizes any significant changes in estimates
associated with the accrual method. The cumulative effect of this accounting
change for years prior to 1993, which is shown separately in the consolidated
statement of operations for 1993, resulted in a benefit of $1,491,000, or $0.24
per common share.
The following summary reflects net income and net income per common share
for the year ended December 31, 1993 on an historical basis and as if the change
in accounting principle had been retroactively applied:
<TABLE>
<CAPTION>
NET INCOME
PER COMMON
SHARE (PRIMARY
NET INCOME AND FULLY DILUTED)
<S> <C> <C>
As reported................................................ $3,309,000 $0.50
Pro Forma.................................................. 1,818,000 0.26
</TABLE>
At December 31, 1994 and 1995 and at September 30, 1996, deferred costs
include unamortized drydocking of approximately $1,938,000, $2,534,000, and
$7,572,000, respectively.
Deferred Costs. Deferred costs primarily represent drydocking and
financing costs. Deferred financing costs are amortized over the term of the
related borrowings.
Goodwill. Goodwill represents the excess of the purchase price over the
fair value of certain assets acquired and is amortized on the straight-line
basis over 20 to 40 years. The carrying value of goodwill is reviewed if facts
and circumstances suggest that it may be impaired. If this review indicates that
goodwill will not be recoverable, as determined based on the estimated
undiscounted cash flows of the assets acquired over the remaining amortization
period, the carrying value will be adjusted accordingly. At December 31, 1994
and 1995 and at September 30, 1996, accumulated amortization of goodwill was
approximately $1,184,000, $1,689,000, and $2,067,000, respectively.
Income Taxes. HMI files a consolidated tax return with all corporate
subsidiaries other than Seabulk Ocean Systems Holdings, Inc. and Seabulk Ocean
Systems Corporation, which file a separate consolidated income tax return. Each
partnership subsidiary files a separate partnership tax return.
The Financial Accounting Standards Board ("FASB") issued Statement No. 109,
"Accounting for Income Taxes," which requires the liability method of accounting
for income taxes. Under the liability method, deferred income tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities, and are measured using the enacted tax
rates and laws in effect when the differences are expected to reverse. Under
FASB Statement No. 109, the effect on deferred tax
F-14
<PAGE> 91
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. The Company adopted FASB Statement No.
109 in 1993 and applied its provisions retroactively.
Recent Accounting Change. In March 1995, the FASB issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement No. 121 in the first quarter of 1996 and the effect of
adoption was not material.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation," for fiscal years beginning after December 15, 1995.
This Statement establishes a fair-value based method of accounting for stock
compensation plans with employees and others. The Company continues to account
for its stock-based compensation plans under Accounting Principles Board Opinion
No. 25 "Accounting for Stock Issued to Employees", as permitted by Statement No.
123 and will present the pro forma disclosures required under Statement No. 123
in fiscal year 1997 with no impact to the Company's results of operations.
Earnings (Loss) per Common Share. Earnings (loss) per common share is
calculated based on the weighted average number of common shares and dilutive
common stock equivalents outstanding during the period. Common stock equivalents
result from convertible preferred stock outstanding in 1993 and 1994 and
outstanding stock options at September 30, 1996. Earnings (loss) per common
share-assuming full dilution includes the if-converted dilutive effect of a
portion of the convertible Junior Note through conversion in August 1996 (see
Note 3) and the incremental dilutive effect of outstanding common stock options
at September 30, 1996.
Concentrations of Credit Risk. Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of cash
and cash equivalents in banks, trade accounts receivable and insurance claims
receivable. The credit risk associated with cash and cash equivalents in banks
is considered low due to the credit quality of the financial institutions. The
Company performs ongoing credit evaluations of its trade customers and generally
does not require collateral. The credit risk associated with insurance claims
receivable is considered low due to the credit quality and funded status of the
insurance pools that the Company participates in.
Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassifications. Certain amounts from prior periods' consolidated
financial statements have been reclassified to conform with the current period's
presentation.
Interim Financial Information (Unaudited). The unaudited consolidated
interim financial statements for the nine-month periods ended September 30, 1995
and 1996 and as of September 30, 1996 have been prepared on a basis consistent
with that of the Company's audited consolidated financial statements as of and
for the three-year period ended December 31, 1995. In the opinion of management,
all adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the unaudited information shown have been included. The results
of operations for such interim periods are not necessarily indicative of the
results expected for the full year ending December 31, 1996.
2. CAPITAL CONSTRUCTION FUNDS
Pursuant to a Dual Use Agreement between Seabulk Tankers, Ltd. ("STL") and
the United States of America ("U.S."), the Capital Construction Funds maintained
by STL is collateral to the U.S., which amounts were $33,000 and $36,000 at
December 31, 1994 and 1995, respectively.
F-15
<PAGE> 92
3. DEBT
Long-term debt consisted of the following (in thousands)
<TABLE>
<CAPTION>
DECEMBER 31
----------------- SEPTEMBER 30,
1994 1995 1996
(UNAUDITED)
<S> <C> <C> <C>
Lines of Credit........................................ $ -- $ 7,500 $ 7,433
Term Loan.............................................. 50,000 46,000 60,500
Acquisition Line....................................... -- -- 4,200
Senior Note............................................ 23,096 23,200 9,021
Junior Note............................................ 17,536 17,633 --
Title XI Debt.......................................... -- -- 33,388
Notes Payable.......................................... 7,447 9,389 3,099
Other.................................................. 400 -- --
------- ------- --------
98,479 103,722 117,641
Less: Current maturities............................... (4,779) (7,708) (17,108)
------- ------- --------
$93,700 $96,014 $100,533
======= ======= ========
</TABLE>
On September 28, 1994, the Company entered into an agreement, as amended on
May 15, 1995, March 26, 1996 and June 21, 1996, for a credit facility (the
"Credit Facility") with its principal banks.
The Credit Facility provides for a working capital credit line of
$7,500,000 through January 15, 2001 (the "Line") and a stand-by letter of credit
(the "Letter of Credit") of $5,600,000. Borrowings under the Line bear interest
at the prime rate or LIBOR, at the option of the Company, plus an applicable
margin based upon the Company's compliance with certain financial covenants
(approximately 8.9% and 7.9% at December 31, 1995 and September 30, 1996,
respectively), and are subject to an annual commitment fee of 0.50% of the
unused portion of the Line. Borrowings outstanding under the Line totaled
$7,500,000 and $5,500,000 at December 31, 1995 and September 30, 1996, of which
$5,500,000 is currently due. The Letter of Credit is collateral for a surety
bond to fund any final award relating to the shipyard's claims discussed in Note
5. Additionally, the Credit Facility provides for a letter of credit in an
amount equal to the greater of amounts available to be drawn under the Line or
$4,000,000. Amounts drawn under either letter of credit are due on demand or the
ultimate maturity date of January 15, 2001. There were no amounts outstanding
under the letters of credit at December 31, 1995 or September 30, 1996.
The Credit Facility provided for a term loan (the "Term Loan") in the
original principal amount of $50,000,000. The Term Loan is payable in quarterly
principal and interest payments beginning January 15, 1995. Borrowings under the
Term Loan bear interest at the prime rate or LIBOR, at the option of the
Company, plus an applicable margin based upon the Company's compliance with
certain financial covenants. At December 31, 1995 and September 30, 1996, the
Term Loan was accruing interest at LIBOR +3.0% and LIBOR +2.5%, respectively
(approximately 8.9% and 8.2%, respectively).
The Credit Facility provided for automatic increases under the Line and
Term Loan and certain additional borrowings upon the successful completion of a
public offering. Accordingly, upon consummation of the IPO on August 14, 1996,
the Line increased to $10,000,000, the Term Loan increased to $60,500,000 and an
acquisition line of credit (the "Acquisition Line") of $19,900,000 became
available. On August 14, 1996, $4,200,000 was drawn under the Acquisition Line
which bears interest at LIBOR +2.5% (8.0% at September 30, 1996) and is due in
January, 2001.
The collateral for the Company's indebtedness under the Credit Facility
includes all Company-owned vessels, its partnership interests in STL and Seabulk
Transmarine Partnership, Ltd., spare parts, fuel and supplies, and eligible
accounts receivable.
On September 30, 1994, and as amended on May 24, 1995, the Company issued a
$25,000,000 senior subordinated note (the "Senior Note"). The Senior Note bears
interest at 12%, payable semi-annually on March 31 and September 30. The
principal portion of the Senior Note is payable in equal annual installments
F-16
<PAGE> 93
on September 30, 2003 and 2004. The Company received proceeds of approximately
$23,072,000, net of a discount of $1,928,000 ($1,904,000, $1,800,000 and
$789,000 at December 31, 1994 and 1995 and September 30, 1996, respectively)
which is being amortized as interest expense over the term of the Senior Note.
On August 14, 1996 and September 12, 1996, the Company repaid $13,490,000, and
$1,700,000, respectively, of the principal balance of the Senior Note with a
portion of the proceeds from the IPO and the exercise of the underwriters'
related over-allotment option. Repayment of the Senior Note is subordinated to
the claims of the Company's principal banks for amounts outstanding under the
Credit Facility.
The terms of the Credit Facility and Senior Note prohibit the Company or
any of its wholly owned subsidiaries from paying dividends on any class of
common stock and restrict, among other things, the Company's ability to enter
into new commitments or borrowings over specified amounts and dispose of assets
outside the ordinary course of business. In addition, the Company is required to
maintain a minimum level of tangible net worth, as defined, and to prepay
amounts outstanding under the Credit Facility to the extent of 50% of excess
cash flow, as defined.
On September 30, 1994, HMI issued a $25,000,000 junior subordinated note
(the "Junior Note"). The Junior Note bears interest at 8%, compounded quarterly.
The principal sum and all accrued and unpaid interest ($2,607,000 at December
31, 1995) was payable on the earlier of the IPO or September 30, 2014. The
Company received proceeds of approximately $17,508,000, net of a discount of
$7,492,000 ($7,464,000 and $7,367,000 at December 31, 1994 and 1995,
respectively) which was being amortized as interest expense over the term of the
Junior Note. Repayment of the Junior Note was subordinated to the claims of the
Company's principal banks for amounts outstanding under the Credit Facility and
to the claims of the note holders for amounts outstanding under the Senior Note.
In August 1996, the principal sum and all accrued and unpaid interest was repaid
with $15,115,000 of the proceeds from the IPO and the issuance of 1,244,002
shares of Common Stock.
In connection with the acquisition of the minority interest in STL in 1994
(see Note 6), the Company issued a note payable of approximately $3,039,000.
Interest on the note is payable quarterly at Prime +2%, limited to 10% (10% at
December 31, 1995), and the principal portion of the note is due in equal annual
installments through 1999 ($2,431,000 outstanding at December 31, 1995). On
August 14, 1996, the note was repaid with a portion of the proceeds from the
IPO.
In connection with the acquisition of the outstanding limited partnership
interests in Hvide Chartering, Ltd. ("HCL") and Hvide Offshore Services, Ltd.
("HOS") in 1994 (see Note 6), the Company issued notes payable of approximately
$2,149,000. Approximately $1,302,000 of these notes were issued to certain
officers and employees of the Company and are recorded as notes payable to
related parties in the accompanying consolidated balance sheets. Interest on the
notes is payable quarterly at 12% and the notes are due in 2004. On August 14,
1996, approximately $678,000 of the notes payable to related parties, was repaid
with $370,000 of the proceeds from the IPO and the issuance of 25,667 shares of
Common Stock.
In connection with redemption of the outstanding preferred stock of the
Predecessor Company in 1994 (see Note 9), the Company issued notes payable
totaling approximately $3,561,000 to the former stockholder. Interest on the
notes is payable quarterly at the greater of 12% or Prime +3% (12% at December
31, 1995 and September 30, 1996). The principal portion of the notes is due in
the year 2000. Repayment of these notes is subordinated to the claims of the
Company's principal banks for amounts outstanding under the Credit Facility. On
August 14, 1996, approximately $1,548,000 was repaid with a portion of the
proceeds from the IPO.
In connection with the acquisition of seven crew vessels in 1995 (see Note
12), the Company issued a $3,000,000 note payable. The note bears interest at 8%
and provides for quarterly payments of principal and interest through the year
2000 ($2,550,000 outstanding at December 31, 1995). The note is secured by first
preferred mortgages on four of the acquired vessels. The note payable was repaid
in February 1996.
In connection with the acquisition of the outstanding common stock of its
previously unconsolidated 50%-owned affiliate Ocean Specialty Tankers
Corporation ("OSTC"), on August 14, 1996, the Company assumed OSTC's obligations
under a $2,000,000 revolving line of credit secured by the outstanding accounts
F-17
<PAGE> 94
receivables generated by three chemical carriers. The revolving line of credit
bears interest monthly at 7.0% of the outstanding amount. At September 30, 1996,
$1,933,000 was outstanding under the line of credit which is due currently.
On August 14, 1996, the Company assumed approximately $34,650,000 of Title
XI Debt in connection with the acquisitions of certain vessels (see note 12).
The Title XI Debt is collateralized by first preferred mortgages on certain
vessels and bears interest at rates ranging from 5.4% to 10.1%. The debt is due
in semiannual principal and interest payments through December 1, 2006.
The aggregate annual future payments due on debt and notes payable are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
(UNAUDITED)
<S> <C> <C>
1996....................................................... $ 7,708 $ 17,108
1997....................................................... 7,208 15,876
1998....................................................... 9,208 16,208
1999....................................................... 9,208 20,898
2000....................................................... 11,710 27,836
Thereafter................................................. 58,680 19,892
------------ -------------
$ 103,722 $ 117,818
============ =============
</TABLE>
In addition to the Letter of Credit available pursuant to the Credit
Facility, the Company has an available letter of credit of $7,000,000 for future
charter hire payments relating to the Seabulk Magnachem lease financing.
The Company made interest payments of approximately $3,593,000, $3,062,000
and $8,952,000 in 1993, 1994 and 1995, respectively and approximately $8,206,295
and $12,953,011 for the nine months ended September 30, 1995 and 1996,
respectively.
4. CAPITAL LEASES
The Company owns certain vessels under leases that are classified as
capital leases. The following is a schedule of future minimum lease payments
under capital leases together with the present value of the net minimum lease
payments (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
(UNAUDITED)
<S> <C> <C>
1996.................................................. $ 875 $ 4,304
1997.................................................. 875 4,273
1998.................................................. 875 6,047
1999.................................................. 863 1,860
2000.................................................. 863 1,773
Thereafter............................................ 683 1,678
------- -------
Total minimum lease payments.......................... 5,034 19,935
Less amount representing interest..................... (1,007) (3,436)
------- -------
Present value of minimum lease payments (including
current portion of $577 and $3,065, respectively)... $ 4,027 $16,499
======= =======
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
A significant portion of the Company's operations consists of charters of
ocean-going vessels. The Seabulk Challenger and Seabulk Magnachem are bareboat
chartered for periods extending through the years 1999 and 2002, respectively.
Charter hire expense on these vessels was approximately $3,400,000, $3,100,000
and $3,153,000, and $2,355,000 and $2,388,000, for the years ended December 31,
1993, 1994 and 1995, and the nine months ended September 30, 1995 and 1996,
respectively. The Company's tractor tug Broward is
F-18
<PAGE> 95
bareboat chartered, through the year 2010. Charter hire expense on this vessel
was approximately $217,000 and $488,000 for the year ended December 31, 1995 and
the nine months ended September 30, 1996, respectively. The aggregate annual
future payments due under these charter agreements at December 31, 1995 for the
next five years are as follows (in thousands):
<TABLE>
<S> <C>
1996........................................................ $ 3,795
1997........................................................ 3,842
1998........................................................ 3,893
1999........................................................ 3,949
2000........................................................ 2,592
-------
$18,071
=======
</TABLE>
The Company is party to a lease agreement, as amended, of its office
facilities with a remaining period of 14 years. The estimated remaining
commitment under this lease at December 31, 1995 was $7,450,000 with
approximately $532,000 payable in each of the next five years.
Rent expense for the years ended December 31, 1993, 1994 and 1995, and for
the nine months ended September 30, 1995 and 1996, was approximately $341,000,
$467,000 and $666,000 and $545,000 and $524,000, respectively.
In 1990, the Company withheld approximately $2,400,000 from a shipyard
relating to delays and other problems encountered in the construction of a
vessel. In 1993, the shipyard filed a claim to recover approximately $8,500,000
for costs allegedly due the shipyard, and the Company asserted a counterclaim
for approximately $5,600,000 against the shipyard. In addition, the shipyard is
seeking $10,000,000 of punitive damages. Management believes the shipyard's
claim amounts are unsubstantiated and that recoveries upon the Company's
counterclaim, together with insurance coverage, will exceed amounts, if any,
which may be awarded to the shipyard. Management believes that the additional
costs incurred to complete the construction of the vessel exceeded the amounts
withheld (settlement of construction costs, if any, would generally be
capitalized and depreciated over future periods); however, the Company is unable
to predict the final outcome of this matter.
In November 1989, STL formed an 88%-owned subsidiary, Seabulk Offshore,
Ltd. ("SOL"), which acquired eight offshore supply vessels for approximately
$13,510,000. In December 1990, STL and Hvide Marine Transport, Incorporated (a
wholly-owned subsidiary of HMI) purchased the remaining 12% interest in SOL from
the limited partner ("U.S. Offshore") for $825,000. Additionally, SOL agreed to
pay U.S. Offshore an amount equal to 5% of gross revenues from the operation of
the vessels for a period not to exceed a maximum of 40 months (December 1, 1990
through March 31, 1994) and in a total amount not to exceed $1,300,000,
whichever occurred first. Approximately $769,000 has been paid to U.S. Offshore
under this agreement. U.S. Offshore has filed a claim against SOL related to the
amount due under the agreement. SOL is vigorously defending this claim and
believes that it will ultimately prevail; however, the Company is unable to
predict the final outcome of this matter.
On August 6, 1992, a wholly-owned subsidiary, Seabulk Transmarine II, Inc.
acquired a 49% interest in a joint venture which charters two offshore supply
vessels from SOL for a period of six years. At the end of the charter period,
the joint venture shall have the option to purchase each of the vessels at an
agreed-upon purchase price of $300,000.
On September 30, 1994, the Company acquired Sun State Marine Services, Inc.
("SSMS"). The acquisition agreement provides the sellers contingent payments for
a period of five years from the date of the agreement. The contingent amount
payable each year is 30% of the amount by which net income pertaining to the
acquired operations for that year, as defined, exceeds $1,800,000. The aggregate
total of the additional consideration is limited to $3,000,000 over the term of
the agreement. Such contingent payments, when incurred, will be recorded as
additional cost of the acquisition. During the year ended December 31, 1995,
contingent payments made related to 1994 amounted to approximately $36,000.
There were no contingent amounts due related to the acquired operations for the
year ended December 31, 1995.
F-19
<PAGE> 96
The Company has guaranteed 50% of the outstanding line of credit borrowings
of OSTC, up to a maximum of $2,000,000. Total borrowings outstanding under the
line of credit subject to the guarantee were approximately $1,600,000 at
December 31, 1995.
At December 31, 1995, the Company was party to an agreement, as amended on
January 31, 1996 and March 28, 1996, for the purchase of the remaining 50% of
the outstanding common stock of OSTC, pursuant to which the Company is to
acquire three chemical tankers. On August 14, 1996, the Company consummated the
agreement (See Note 12).
At December 31, 1995, Hvide Partners, L.P. ("HPLP"), an affiliated entity
in which the Company participates as the sole general partner, was party,
through its five 75%-owned limited liability companies Hvide Van Ommeren Tankers
I-V LLC ("HVOT I-V"), to contracts for the construction of five double-hull
petroleum product carriers. Pursuant to its general and indirect limited
partnership interests in HPLP, the Company is required to make capital
contributions to HPLP in 1996 totaling approximately $1,000,000. The Company was
also party to an agreement at December 31, 1995 to provide technical services
and support related to the operations of HVOT I-V. Pursuant to this agreement
and commencing in 1997, the Company is to be paid an annual fee of $295,000,
subject to future escalation equal to increases, if any, in the CPI.
In November and December 1996, the Company entered into agreements to
purchase 12 vessels for an aggregate amount of approximately $36,275,000.
Deposits aggregating $2,739,000 have been paid on these vessels.
In November 1996, the Company entered into an agreement to bareboat charter
two tugs for a one year period.
6. RELATED PARTY TRANSACTIONS
In 1994, the Company acquired outstanding limited partnership interests of
HCL, a limited partnership in which the Company owned a 33 1/3% interest as
general partner, from certain officers and employees of the Company for cash and
notes payable of approximately $668,000 and $1,089,000, respectively.
In 1994, the Company acquired the outstanding limited partnership interests
of HOS from certain officers and employees of the Company for cash and notes
payable of approximately $607,000 and $1,060,000, respectively. Additionally,
the company assumed HOS's outstanding capital lease obligations and certain
other liabilities.
The purchase price of the vessels and other net assets acquired in the
acquisition of the limited partnership interests of HCL and HOS was
approximately $1,974,000 in excess of their historical net book value.
Accordingly, such amounts were deemed special distributions to the related
parties and recorded as a reduction of paid-in capital.
In 1994, the Company acquired the outstanding minority interest in STL for
cash and notes payable of approximately $1,302,000 and $3,039,000, respectively.
Maritime Transport Development Corp., which is owned by the former Chairman
of the Company, receives a commission equal to 1.25% of charter hire
(approximately $210,000, $190,000, and $210,000 for the years ended December 31,
1993, 1994, and 1995, respectively) received by the Company for the Seabulk
Challenger and the Seabulk Magnachem as payment for development and engineering
services and marketing services related to the design of these vessels.
7. EMPLOYEE BENEFIT PLANS
The Company sponsors a Section 401(k) retirement plan covering
substantially all employees. Expense under this plan for the years ended
December 31, 1993, 1994 and 1995, and for the nine months ended September 30,
1995 and 1996, was approximately $724,000, $834,000 and $1,047,000, and $796,000
and $998,000, respectively. Contributions under the plan are determined on the
basis of employee compensation.
F-20
<PAGE> 97
8. STOCK OPTIONS
On August 12, 1996, the Company granted options to purchase 35,000 and
771,000 shares of Class A Common Stock to members of the Company's board of
directors and certain executives, respectively. The exercise price of the
options was equal to the fair market value of the underlying common stock of
that date. The directors' options are 100% vested and all other options vest
ratably over a four-year period. For the period from August 13, 1996 to
September 30, 1996, there were no options granted, exercised or cancelled.
9. INCOME TAXES
The components of the provision for (benefit from) income taxes are as
follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- -------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current........................................... $ 471 $ -- $ -- $-- $1,052
Deferred.......................................... 1,402 189 (2) -- 564
------ ---- ---- --- ------
$1,873 $189 $ (2) $-- $1,616
====== ==== ==== === ======
</TABLE>
Income taxes paid were approximately $18,000, $400,000, and $0 in 1993,
1994, and 1995, respectively.
A reconciliation of the Company's income tax rate to the federal rate of
34% is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Income tax expense (benefit) computed at the statutory
rate...................................................... 34% 34% (34)%
State income taxes.......................................... 3 2 (2)
Capital Construction Funds.................................. 8 16 24
Rate differential........................................... 4 -- --
Other....................................................... 2 (17) 11
-- --- ---
51% 35% (1)%
== === ===
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred income tax assets and liabilities as of December 31, 1994
and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforward........................... $3,779 $ 8,388
Charitable contributions carryforward..................... 22 43
Alternative minimum tax credit carryforward............... 1,226 1,226
Accrued compensation...................................... 142 315
Other..................................................... 12 161
------ -------
Total deferred income tax assets.................. 5,181 10,133
------ -------
Deferred income tax liabilities:
Fixed asset differences................................... 8,850 13,869
Deferred drydocking costs................................. 617 581
Other..................................................... 33 --
------ -------
Total deferred income tax liabilities............. 9,500 14,450
------ -------
Net deferred income tax liability................. $4,319 $ 4,317
====== =======
</TABLE>
At December 31, 1995, the Company had approximately $23,600,000 in net
operating loss carryforwards for federal income tax purposes, expiring in
various amounts from 1998 to 2010. Due to the IPO, the
F-21
<PAGE> 98
utilization of the Company's NOL's are limited, based upon the value of the
Company prior to the IPO, to approximately $3,300,000 per year.
10. CAPITAL STOCK
On August 14, 1996 and September 12, 1996 the Company issued 7,000,000 and
159,000 shares of its Class A Common Stock, respectively, pursuant to the IPO
and related partial exercise of the underwriters' over-allotment option. Shares
of the Company's Class C Common Stock were exchanged for 304,000 and 673,000
shares of the Company's Class A and Class B Common Stock, respectively.
Additionally, 182,000 and 1,188,000 shares of the Company's Class A and Class B
Common Stock were, respectively, issued in repayment of a portion of the Junior
Notes and other certain outstanding indebtedness.
On May 10, 1996, the Company's Board of Directors authorized a 1.5843-for-1
split of its common stock, and an increase of the number of authorized shares of
its Class A, Class B, and Class C Common Stock to 100,000,000, 5,000,000, and
2,500,000, respectively. All share and per share data in the accompanying
financial statements have been restated to reflect the stock split.
Contemporaneous with the IPO, the Company's Board of Directors authorized the
retirement of the Company's Class C Common Stock.
On September 28, 1994, all the stock of the Predecessor Company was
exchanged for shares of the Company's stock (see Note 1). The fair value of the
Predecessor Company's common stock and the Company's common stock were
equivalent.
On September 29, 1994, all of the outstanding shares of Class A and Class B
Preferred Stock of the Predecessor Company were repurchased from the shareholder
for cash of $2,374,000, notes of $3,561,000 and certain agreements providing for
future payments over a specified term. The present value of the agreements
providing for future payments has been recorded in other liabilities in the
accompanying consolidated balance sheets and total approximately $1,350,000 and
$1,282,000 at December 31, 1994 and 1995, respectively.
Each share of the Company's Class A Common Stock is entitled to one vote
per share and each share of Class B Common Stock is entitled to ten votes per
share. Shares of Class C Common Stock are nonvoting. The holders of Class B
Common Stock are entitled to convert, at the holder's election and at any time,
such shares into shares of Class A Common Stock or Class C Common Stock at the
rate of one share of Class B Common Stock for one share of Class A Common Stock
or Class C Common Stock. The holders of Class C Common Stock are entitled to
convert, at the holder's election and subject to certain restrictions, such
shares into shares of Class A Common Stock at the rate of one share of Class C
Common Stock for one share of Class A Common Stock.
In connection with the issuance of the Junior Note, the Company issued to
the note holders 765,733 shares of its Class B and Class C Common Stock and
Common Stock Contingent Share Issuances ("CSIs") to purchase a maximum of
554,495 additional shares of its common stock. The Junior Note, shares of Class
A and Class C Common Stock and the CSIs were recorded based upon their estimated
fair values at the date of issuance. The CSIs are generally exercisable, at a
price equal to the par value of the underlying shares, at the earlier of a
qualified initial public offering of the Company's common stock, or September
30, 1998. The maximum amount of CSIs that may be exercised is based upon the
note holders return on their investment in the Company.
Simultaneously with the issuance of the CSIs, the Company entered into an
agreement with its Chairman and principal stockholder and certain trusts whereby
the principal stockholder and the trusts agreed to contribute pro rata a like
amount of shares of common stock to the Company concurrently with the issuance
of shares pursuant to the CSIs. Accordingly, issuance of shares pursuant to the
CSIs will not effect the Company's financial position or results of operations.
11. SIGNIFICANT CUSTOMER
The Company derived revenues from a long-term contract with one company
representing 13% to 22% of its revenues over the three year period ended
December 31, 1995.
F-22
<PAGE> 99
12. ACQUISITIONS
On September 30, 1994, the Company acquired 24 vessels and associated spare
parts and other equipment. The Company paid an aggregate amount of approximately
$17,886,000, consisting of $17,056,000 in cash and the assumption of $279,000 of
vessel mortgages and $551,000 of bareboat charter obligations.
On September 30, 1994, the Company acquired SSMS in an acquisition
accounted for as a purchase. The aggregate purchase price of $13,900,000 was
approximately $8,615,000 in excess of the net assets acquired, which is being
amortized using the straight-line method over 20 years.
On March 8, 1995, the Company acquired seven crew boats for $5,875,000,
including cash of $2,875,000 and a $3,000,000 promissory note.
In January and February 1996, the Company acquired nine crew boats under
capital lease obligations.
On August 14, 1996, the Company purchased the remaining 50% of the
outstanding common stock of an entity and acquired three chemical tankers. The
aggregate purchase price of approximately $64,650,000 consisted of approximately
$15,500,000 paid in cash with a portion of the proceeds from the IPO and the
assumption of approximately $34,650,000 in mortgage obligations related to two
of the vessels acquired, $7,000,000 under the Term Loan and 7,500,000 under a
capital lease.
On August 14, 1996, the Company purchased eight supply boats. The aggregate
purchase price of $26,075,000 was paid in cash with $18,075,000 of the proceeds
from the IPO and $8,000,000 drawn under the Term Loan. The Company has agreed to
indemnify certain affiliates of the sellers against certain of one seller's
liabilities due to its creditors. The Company's maximum liability pursuant to
the guarantee and indemnification is $7,000,000.
On August 14, 1996, the Company acquired two supply boats and one crew
boat. The aggregate purchase price of $6,825,000 was paid in cash with
$1,950,000 of the proceeds from the IPO, $4,200,000 drawn under the Acquisition
Facility and the issuance of $675,000 of notes payable. The crew boat was
purchased from the Company's Chairman and the Investor Group for a purchase
price of approximately $2,200,000, which was equal to their cost of the vessel.
The operations of acquired vessels and assets are included in the
accompanying condensed consolidated statements of operations for the period
subsequent to their acquisition dates.
In October 1996, the Company purchased two supply boats for cash of
approximately $4,600,000.
In December 1996, the Company purchased a tug for cash of approximately
$3,400,000.
In January 1997, the Company purchased a supply boat for cash of
approximately $4,700,000.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of financial instruments included in the following categories:
Cash and cash equivalents and accounts receivable. The carrying
amounts reported in the balance sheets approximates fair value.
Credit Facility, Mortgage note and Other. Amounts outstanding under
the Company's Credit Facility, as amended, bear interest at variable rates
that periodically adjust to reflect changes in overall market rates and
approximate fair value. Amounts outstanding in 1994 under the mortgage note
and other amounts approximate fair value due to their short-term nature.
Senior and Junior Notes. Amounts outstanding under the Senior and
Junior Notes bear interest at 12% and 8%, respectively. The fair value of
the Senior and Junior Notes at December 31, 1995 was estimated to be $23.5
million and $16.5 million, respectively, using a discounted cash flow
analysis at estimated market rates.
Notes Payable. The carrying amount reported in the balance sheets
approximates fair value using a discounted cash flow analysis at estimated
market rates.
F-23
<PAGE> 100
14. CONDENSED FINANCIAL INFORMATION
The following are parent company-only condensed financial statements, and
notes thereto, of Hvide Marine Incorporated:
PARENT COMPANY -- ONLY CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Deferred costs......................................... $ 78 $ 38
------- -------
Total current assets.............................. 78 38
Other assets:
Deferred costs, net............................... 1,358 1,235
Other (principally investment in wholly-owned
subsidiaries).................................... 29,524 31,614
------- -------
Total other assets........................... 30,882 32,849
------- -------
Total........................................ $30,960 $32,887
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities (principally amounts due to wholly-owned
subsidiaries)............................................. $ 215 $ 302
Long-Term Debt......................................... 17,536 17,633
Other Noncurrent Liabilities (long-term payable)............ 504 2,607
------- -------
Total liabilities............................ 18,255 20,542
Stockholders' Equity:
Common stock...................................... 2 2
Other stockholders' equity........................ 12,703 12,343
------- -------
Total stockholders' equity................... 12,705 12,345
------- -------
Total........................................ $30,960 $32,887
======= =======
</TABLE>
PARENT COMPANY--ONLY CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(SEPTEMBER 28,
1994) THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Cost and expenses:
Professional fees...................................... $1,195 $ 151
Interest expense....................................... 549 2,218
Other.................................................. 331 81
------ ------
Total costs and expenses.......................... 2,075 2,450
Benefit from income taxes................................... 714 871
------ ------
1,361 1,579
Equity in net income of subsidiaries................... 717 1,219
------ ------
Net loss.......................................... $ 644 $ 360
====== ======
</TABLE>
BASIS OF PRESENTATION
In the parent company-only financial statements, the Company's investment
in subsidiaries is stated at cost plus equity in undistributed earnings of its
wholly-owned subsidiaries. The parent company-only financial statements should
be read in conjunction with the Company's consolidated financial statements.
F-24
<PAGE> 101
LONG-TERM DEBT
On September 30, 1994, the Company issued the Junior Note (see Note 3).
The Company serves as co-guarantor of amounts under the Credit Facility and
Senior Note (see Note 3). Repayment of the Junior Note is subordinated to the
claims for amounts outstanding under the Credit Facility and the Senior Note.
DIVIDENDS FROM SUBSIDIARIES
No cash dividends have been paid to the Parent Company since inception as
the Company's Credit Facility prohibits the payment of dividends or other
distributions on any class of capital stock of the Company or its wholly-owned
subsidiaries.
STATEMENT OF CASH FLOWS
The statement of cash flows has been omitted as the Parent Company does not
maintain cash balances.
15. EXTRAORDINARY ITEM
On August 14, 1996, the Company utilized common stock and a portion of the
proceeds from the IPO to repay $25,000,000 and $15,190,000 of the Junior and
Senior Notes, respectively. Accordingly, the Company recorded a loss on
extinguishment of $8,016,000, net of a tax benefit of $1,405,000.
F-25
<PAGE> 102
INDEPENDENT AUDITORS' REPORT
To the Boards of Directors and Stockholder of OMICHEM TRANSPORT, INC.,
OMI CLOVER TRANSPORT, INC., and OMI HUDSON TRANSPORT, INC.:
We have audited the accompanying combined balance sheets of the OMI
Chemical Carrier Group as of December 31, 1994 and 1995 and the related combined
statements of operations and deficit and of cash flows for each of the three
years in the period ended December 31, 1995. The combined financial statements
include the accounts of Omichem Transport, Inc., OMI Clover Transport, Inc., and
OMI Hudson Transport, Inc. which are wholly owned subsidiaries of OMI Corp.
These financial statements are the responsibility of the companies' management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of the OMI Chemical Carrier Group at
December 31, 1994 and 1995 and the combined results of their operations and
their combined cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
January 26, 1996
F-26
<PAGE> 103
OMI CHEMICAL CARRIER GROUP
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER
------------------- JUNE 30,
1994 1995 1996
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Advances to masters..................................... $ 171 $ 102 $ 325
Receivables:
Due from OSTC (Notes 1, 3)......................... 638 544 401
Other.............................................. 40 52 59
Deferred income taxes (Note 4).......................... 731 9,176 249
Prepaid expenses and other current assets............... 987 524 556
-------- -------- --------
Total current assets............................... 2,567 10,398 1,590
-------- -------- --------
Vessels (Notes 1, 3)........................................ 75,225 84,738 114,686
Less accumulated depreciation............................... (43,872) (47,066) (49,625)
-------- -------- --------
Vessels -- net.......................................... 31,353 37,672 65,061
-------- -------- --------
Due from parent (Notes 4, 6)................................ 3,983 6,429
Other assets and deferred charges........................... 1,537 1,094 957
-------- -------- --------
Total.............................................. $ 39,440 $ 49,164 $ 74,037
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................................ $ 1,328 $ 389 $ 667
Accrued liabilities:
Voyage and vessel.................................. 2,524 2,273 3,347
Interest........................................... 498 432 565
Operating lease (Note 3)........................... 738 756
Accrued lease termination costs (Note 5)................ 25,000
Accrued loss on lease obligation (Note 5)............... 1,487
Current portion of long-term debt (Notes 2, 3).......... 2,525 2,525 4,815
-------- -------- --------
Total current liabilities.......................... 9,100 31,375 9,394
-------- -------- --------
Long-term debt (Notes 2, 3)................................. 17,488 14,963 29,835
Accrued loss on lease obligation (Note 5)................... 18,313
Deferred income taxes (Note 4).............................. 1,523 8,797 8,393
Due to parent (Notes 4, 6).................................. 1,535
Advances from parent (Note 3)............................... 9,623 9,623
Accrued lease payable (Note 3).............................. 2,243
Deferred gain on sale/leaseback of vessel (Note 3).......... 1,281
Advance time charter revenues and other liabilities......... 1,447 830 1,059
Commitments and contingencies (Note 7)
Stockholder's equity (deficit):
Common stock............................................
Capital surplus (Note 3)................................ 80,881 80,881 115,181
Deficit (Note 1)........................................ (92,836) (98,840) (99,448)
-------- -------- --------
Total stockholder's equity (deficit)............... (11,955) (17,959) 15,733
-------- -------- --------
Total.............................................. $ 39,440 $ 49,164 $ 74,037
======== ======== ========
</TABLE>
See notes to combined financial statements
F-27
<PAGE> 104
OMI CHEMICAL CARRIER GROUP
COMBINED STATEMENTS OF OPERATIONS AND DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- --------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues...................................... $ 24,434 $ 26,564 $ 26,099 $ 13,245 $ 12,262
-------- -------- -------- -------- --------
Operating Expenses:
Vessel and voyage......................... 17,418 17,711 18,287 11,176 7,473
Depreciation and amortization............. 3,672 3,878 3,355 1,367 2,560
Operating lease (Note 3).................. 10,730 10,805 7,557 2,878 754
Provision for losses (Notes 3, 5):
Impaired value of vessel............. 14,798
Lease obligation..................... 19,800 3,297
General and administrative (Note 6)....... 827 854 848 427 414
-------- -------- -------- -------- --------
Total operating expenses......... 32,647 67,846 33,344 15,848 11,201
-------- -------- -------- -------- --------
Operating (loss) income....................... (8,213) (41,282) (7,245) (2,603) 1,061
-------- -------- -------- -------- --------
Other Income (Expense):
Gain on disposal of assets (Note 3)....... 334 333 167 167 --
Interest expense, net..................... (2,779) (2,148) (2,160) (944) (1,995)
-------- -------- -------- -------- --------
Net other expense................ (2,445) (1,815) (1,993) (777) (1,995)
-------- -------- -------- -------- --------
Loss before income taxes...................... (10,658) (43,097) (9,238) (3,380) (934)
Benefit for income taxes (Note 4)............. 3,293 15,084 3,234 1,183 326
-------- -------- -------- -------- --------
Net loss...................................... (7,365) (28,013) (6,004) (2,197) (608)
Deficit, beginning of period.................. (57,458) (64,823) (92,836) (92,836) (98,840)
-------- -------- -------- -------- --------
Deficit, end of period........................ $(64,823) $(92,836) $(98,840) $(95,033) $(99,448)
======== ======== ======== ======== ========
</TABLE>
See notes to combined financial statements
F-28
<PAGE> 105
OMI CHEMICAL CARRIER GROUP
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------- ---------------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES:
Net loss............................... $(7,365) $(28,013) $ (6,004) $ (2,197) $ (608)
Adjustments to reconcile net loss to
cash provided by operating
activities:
(Decrease) increase in deferred
income taxes.................... (461) (13,629) (1,171) 305 8,523
Depreciation and amortization..... 3,672 3,878 3,355 1,367 2,560
Gain on disposal of assets--net... (334) (333) (167) (167)
Provision for losses on vessel and
lease........................... 34,598 3,297
Changes in Assets and Liabilities:
Decrease (increase) in receivables
and other current assets........ 135 (371) 614 (585) (119)
(Decrease) increase in accounts
payable and accrued expenses.... (1,814) 2,614 (1,975) (522) 1,501
Decrease (increase) in due from
(to) parent..................... 8,346 3,654 5,518 3,319 (7,964)
Decrease (increase) in other
assets and deferred charges..... 260 (200) 443 147 137
Increase (decrease) in advance
time charter revenues and other
liabilities..................... 1,369 78 (617) 113 229
Other assets & liabilities--net... 1,257 133 (85)
------- -------- -------- -------- -------
Net cash provided by operating
activities.................. 5,065 2,276 3,426 1,695 4,259
------- -------- -------- -------- -------
CASH FLOWS (USED) PROVIDED BY INVESTING
ACTIVITIES:
Additions to vessels................... (3,040) (351) (10,524) (10,055) (1,851)
Proceeds received on note receivable... 500 1,500
------- -------- -------- -------- -------
Net cash (used) provided by
investing activities............ (2,540) 1,149 (10,524) (10,055) (1,851)
------- -------- -------- -------- -------
CASH FLOWS (USED) PROVIDED BY FINANCING
ACTIVITIES:
Payments on long-term debt............. (2,525) (3,425) (2,525) (1,263) (2,408)
Advances from parent................... 9,623 9,623
------- -------- -------- -------- -------
Net cash (used) provided by
financing activities............ (2,525) (3,425) 7,098 8,360 (2,408)
------- -------- -------- -------- -------
Net (decrease) increase in cash... $ -- $ -- $ -- $ -- $ --
======= ======== ======== ======== =======
</TABLE>
See notes to combined financial statements
F-29
<PAGE> 106
OMI CHEMICAL CARRIER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
AND (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Combined Statements. The combined financial statements for the
OMI Chemical Carrier Group (the "Group" or "Companies") include the financial
statements of Omichem Transport, Inc., OMI Clover Transport, Inc., and OMI
Hudson Transport, Inc. which are wholly owned subsidiaries of OMI Corp. ("OMI").
The three companies each own a vessel (OMI Star, OMI Hudson and OMI Dynachem,
respectively) which is time chartered to a joint venture, Ocean Specialty
Tankers Corporation ("OSTC"), owned by OMI and Seabulk Ocean Systems Corporation
("SOSC"), a subsidiary of Hvide Marine Incorporated ("Hvide") (see Note 3). OSTC
contracts with customers for ocean shipping of liquid chemicals.
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
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Since inception, the Companies have incurred cumulative losses aggregating
over $99,000,000 at June 30, 1996. The Companies have been able to sustain their
ongoing operations because of OMI's commitment to provide funding for working
capital and other purposes. These financial statements have been prepared on the
assumption that OMI will continue to provide required funding in the future.
In October 1995, OMI entered into an agreement with Hvide for the sale of
the OMI Star, OMI Hudson and OMI Dynachem and its interest in OSTC for
approximately $64,650,000, $30,000,000 in cash and the assumption of all
outstanding indebtedness relating to the vessels ($34,650,000 at June 30, 1996).
The agreement was amended April 30, 1996 to swap the OMI Dynachem for a
replacement vessel to be identified at a later date. Cash of $12,775,000 (of the
$30,000,000) was transferred to an escrow account at delivery until such vessel
is identified and delivered. The sale of these three vessels and the interest in
OSTC is contingent upon Hvide successfully completing its initial public
offering of common stock in 1996, which was accomplished on August 14, 1996.
Unaudited Financial Statements. In the opinion of management, the
unaudited combined financial statements reflect the adjustments (comprising only
normal recurring accruals) necessary for a fair presentation of financial
position at June 30, 1996 and results of operations and cash flows for the six
months ended June 30, 1995 and 1996.
Accounting Estimates. 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 disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Operating Revenues and Expenses. Voyage revenues are earned and recognized
on a daily basis and are subject to adjustments based on the operating results
of OSTC.
Special survey and drydock expenses are accrued and charged to operating
expense over the survey cycle, which generally is a two- to three-year period.
The accruals of such expenses are based on management's best estimates of future
cost and the expected length of the survey cycle. However, the ultimate
liability may be more or less than such estimates.
F-30
<PAGE> 107
Vessels and Improvements. Vessels are recorded at cost. Depreciation for
financial reporting purposes is provided principally on the straight-line method
based on the estimated useful lives of the vessels up to the vessels' estimated
salvage value. The useful lives of the vessels are 25 and 30 years. Salvage
value is based upon a vessel's light weight tonnage multiplied by a scrap rate.
Improvements on leased vessels are amortized on the straight-line method
over the lives of the leases.
In the event that facts and circumstances indicate that the carrying amount
of a vessel may be impaired, an evaluation of recoverability is performed. If an
evaluation is required, the estimated future undiscounted cash flows associated
with the vessel are compared to the vessel's carrying value to determine if a
write-down to fair value or discounted cash flow is required (see Note 5).
The Companies adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" effective January 1, 1995. Adoption of this statement did not
have a material effect on the Companies' combined financial position or results
of operations.
Income Taxes. The Companies are included in a consolidated Federal income
tax return filed by OMI which includes all eligible subsidiary Companies. The
accompanying financial statements include for each subsidiary in the Group a
cost or benefit for Federal income taxes based on the related separate taxable
income of each subsidiary. Deferred income taxes are recorded under the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."
Retirement Plans. The Companies comprising the Group make contributions to
union sponsored multi-employer pension plans covering seagoing personnel.
Contributions to these plans amounted to approximately $218,000, $276,000, and
$262,000 for the years ended December 31, 1993, 1994 and 1995 and $130,000 and
$116,000 for the six months ended June 30, 1995 and 1996, respectively. If these
Companies were to withdraw from the plans or the plans were to terminate, the
Companies would be liable for a portion of any unfunded plan benefits that might
exist. The Group has been advised by the trustees of such plans that it has no
withdrawal liability as of December 31, 1995.
Cash Flows. During the years ended December 31, 1993, 1994 and 1995, the
Group paid interest of $2,504,000, $1,932,000, and $1,475,000, respectively.
During the six months ended June 30, 1995 and 1996 the Group paid interest of
$884,000 and $565,000, respectively.
2. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1994 1995 1996
<S> <C> <C> <C>
Bonds, secured by vessels, at 5.35% and 10.1%
payable in installments to 2006............... $20,013,000 $17,488,000 $34,650,000
Less: current portion of long-term debt......... 2,525,000 2,525,000 4,815,000
----------- ----------- -----------
Long-term debt.................................. $17,488,000 $14,963,000 $29,835,000
=========== =========== ===========
Fair value of long-term debt.................... $19,871,000 $18,926,000 $38,054,000
=========== =========== ===========
</TABLE>
The bonds are collateralized by a mortgage on the OMI Dynachem and OMI
Hudson and are guaranteed as to principal and interest by the U.S. Government
under the Title XI Program. At June 30, 1996, the vessels (net book values
aggregating $56,978,000) and investments of $9,857,000 held by OMI Corp. in its
Capital Construction and other restricted funds have been pledged as collateral
for the long-term debt issues. The security arrangement restricts OMI Hudson
Transport, Inc. and OMI Clover Transport, Inc. ("OMI Clover") from, among other
things, the withdrawal of capital, the payment of common stock dividends and the
extending of loans to affiliated parties.
F-31
<PAGE> 108
Subsequent to December 31, 1995, aggregate annual maturities of the bonds
during each of the next five years 1996 through 2000 were $2,525,000. Subsequent
to June 30, 1996, aggregate maturities for a twelve month period on such bonds
in the next five years through 2001 are $4,815,000.
The fair value of the bonds is estimated based on current rates available
for similar issues.
3. OPERATING LEASES
Total rent expense, which relates to two vessels, amounted to $10,730,000,
$10,805,000 and $7,557,000 for the years ended December 31, 1993, 1994 and 1995,
respectively. Rent expense for the six months ended June 30, 1995 and 1996 was
$4,371,000 and $755,000, respectively.
OMI Clover has operated the vessel OMI Hudson under a long-term operating
lease requiring semi-annual payments through December 2006. In October 1995, OMI
Clover entered into an agreement with the owner/lessor of the OMI Hudson to
terminate the operating lease for $25,000,000 and subsequently purchase the
vessel for $30,000,000. The estimated loss on lease termination of $3,297,000
was reported as a separate item in the 1995 Combined Statement of Operations and
Deficit. In February 1996, OMI Clover terminated the operating lease on the
vessel for $22,000,000 cash and the issuance of a $3,000,000 Convertible Note by
OMI. In March 1996, OMI Clover purchased the vessel for cash of $9,300,000
($10,430,000 less reimbursement of a portion of the lease payment of $1,130,000
in accordance with the agreement) and assumption of debt of $19,570,000 (see
Note 2). The $31,300,000 cash paid by OMI on behalf of OMI Clover and the
$3,000,000 Convertible Note issued by OMI aggregating $34,300,000 to terminate
the lease and purchase the vessel was recorded as a capital contribution to OMI
Clover.
In 1992, Omichem Transport, Inc. ("Omichem") entered into a sale/leaseback
transaction for the OMI Star. Omichem received $11,500,000 in cash, of which
$3,500,000 was used to pay the mortgage on the vessel, a $2,000,000 secured note
receivable paid December 1994 and a six year lease. The gain on the transaction
of approximately $2,001,000 was deferred and amortized over the life of the
lease until June 29, 1995 when Omichem repurchased the OMI Star for $9,623,000.
The funds to purchase the OMI Star were in the form of a long-term advance from
OMI at a variable rate based on the London Interbank Offering Rate.
The three vessels operated by the Group are time chartered to OSTC, a joint
venture between OMI and SOSC. The balances included in the financial statements
due from OSTC represent charter hire receivables.
As of December 31, 1995 the Companies have time charter agreements with
OSTC for initial terms ending May 31, 2000, with extension options after that
date. The vessels are under charter for "base" hire rates dependent upon the
performance of the vessels.
4. INCOME TAXES
A summary of the components of the benefit for income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
----------------------------
1993 1994 1995
<S> <C> <C> <C>
Current benefit.......................................... $(2,542) $ (1,156) $(1,766)
Deferred tax benefit..................................... (461) (13,629) (1,171)
------- -------- -------
Benefit for income taxes as originally reported for
internal purposes...................................... (3,003) (14,785) (2,937)
Current benefit for allocated general and administrative
expenses (see Note 6).................................. (290) (299) (297)
------- -------- -------
Total.......................................... $(3,293) $(15,084) $(3,234)
======= ======== =======
</TABLE>
F-32
<PAGE> 109
Deferred income taxes are payable to OMI. The components of deferred
income taxes relate to tax effects of temporary differences as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
<S> <C> <C>
Deferred tax liabilities:
Differences between book and tax basis of vessels...... $ 9,424 $ 9,108
Other............................................. 54 74
------- -------
Total deferred tax liabilities............... 9,478 9,182
------- -------
Deferred tax assets:
Future lease liability accrual......................... (6,930) (8,750)
Accrual for drydocking................................. (567) (811)
Accrued lease payable.................................. (785)
Deferred gain on sale/leaseback........................ (404)
------- -------
Total deferred tax assets.................... (8,686) (9,561)
------- -------
Deferred income taxes -- net........................... $ 792 $ (379)
======= =======
</TABLE>
On August 2, 1993, Congress passed the Omnibus Budget Reconciliation Act of
1993 (the "Act"). The major component of the Act affecting the Group was the
retroactive increase in the marginal corporate tax rate from 34 percent to 35
percent, increasing the 1993 deferred income taxes of the Group by $438,000 to
comply with the provisions of the Act.
5. IMPAIRMENT AND PROVISION FOR LOSS ON VESSEL LEASE OBLIGATION
As part of the periodic review of the recoverability of the investment in
vessels, in 1994 management determined that the carrying value of the OMI
Dynachem exceeded the undiscounted forecasted future net cash flows from its
operations. This indicated that an impairment loss for this vessel should be
recognized. This loss was measured by the excess of the carrying value of the
vessel over its estimated fair value which was based on values provided by two
shipbrokers. The carrying value was reduced by $14,798,000, which is reported as
a separate item in the 1994 Combined Statement of Operations and Deficit.
As part of this periodic review, it also was determined that a similar loss
should be recognized for the forecasted loss from operations of the OMI Hudson
which is chartered-in on an operating lease through 2006. The amount of the loss
was estimated based on forecasted undiscounted cash flows, excluding from rent
expense an amount representative of the interest component of the lease
agreement, through the lease expiration date. This loss, estimated as
$19,800,000, is also reported as a separate item in the 1994 Combined Statement
of Operations and Deficit.
6. TRANSACTIONS WITH PARENT
Due from (to) Parent represents tax benefits currently due from OMI reduced
by non-interest bearing advances from OMI to fund the Group's operations. OMI
maintains a centralized cash management system whereby it accepts and deposits
all cash receipts on behalf of its subsidiaries and pays all costs, expenses and
other obligations of such subsidiaries. These disbursements primarily represent
vessel and voyage expenses, lease payments, interest expense and required
payments of long-term debt. The average balances due from (to) OMI (based on
individual monthly balances outstanding) are as follows:
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS MONTHS
ENDED DECEMBER 31, ENDED JUNE 30,
- ------------------------- --------------------------
1993 1994 1995 1995 1996
<C> <C> <C> <C> <C>
$11,957 $5,307 $1,535 $3,641 $ 631
</TABLE>
OMI provides all general and administrative services for the Group and has
not followed the practice of allocating general and administrative expenses
incurred by OMI to its various domestic subsidiaries although it does allocate
such costs to its various foreign subsidiaries. For purposes of the accompanying
financial
F-33
<PAGE> 110
statements, provision has been made during each period for the allocation of
general and administrative costs to the Group on a basis similar to that used by
OMI for allocation of such costs to foreign subsidiaries as follows:
<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS SIX MONTHS
ENDED DECEMBER 31, ENDED JUNE 30,
--------------------- ---------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Allocated general and administrative costs....... $ 827 $ 854 $ 848 $ 427 $ 414
Benefit for income taxes (see Note 4)............ (290) (299) (297) (145) (145)
----- ----- ----- ----- -----
$ 537 $ 555 $ 551 $ 282 $ 269
===== ===== ===== ===== =====
</TABLE>
The method used allocates fixed annual amounts of costs on a per vessel
basis for financial accounting and vessel management activities and allocates
costs for general corporate activities based on 1.25 percent of revenues earned
by each vessel. Management of OMI believes that this allocation method is
reasonable.
7. CONTINGENT LIABILITIES
Companies in the Group are defendants in various legal actions from
shipping operations. Such actions are covered by insurance or, in the opinion of
management after review with counsel, are of such a nature that the ultimate
liability, if any, would not have a material adverse effect on the combined
financial statements.
F-34
<PAGE> 111
INDEPENDENT AUDITORS' REPORT
Partners of
INDIAN SEAL PARTNERS, LTD.,
BAFFIN SEAL PARTNERS, LTD.,
BALTIC SEAL PARTNERS, LTD.,
BENGAL SEAL PARTNERS, LTD., AND
ROSS SEAL PARTNERS, LTD.
We have audited the accompanying Combined Statements of Vessel Operations
of Indian Seal Partners, Ltd., Baffin Seal Partners, Ltd., Baltic Seal Partners,
Ltd., Bengal Seal Partners, Ltd., and Ross Seal Partners, Ltd. (collectively
"the Seal Partners") for the years ended December 31, 1995, 1994 and 1993. These
financial statements are the responsibility of the management of the Seal
Partners. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1, the combined financial statements referred to above
have been prepared in accordance with the Asset Purchase Agreement between the
Seal Partners and Hvide Marine Incorporated, dated March 29, 1996, and amended
July 23, 1996, for the sale of certain assets and operations to Hvide Marine
Incorporated (the "Agreement") and are not intended to be complete presentations
of the Seal Partners' revenues and expenses.
In our opinion, the combined statements referred to above present fairly,
in all material respects, the combined vessel operations of the Seal Partners
for the years ended December 31, 1995, 1994, and 1993, pursuant to the Agreement
described in Note 1, in conformity with generally accepted accounting
principles.
PANNELL KERR FORSTER OF TEXAS, P.C.
Houston, Texas
April 12, 1996, except for the fourth paragraph of
Note 1, as to which the date is August 1, 1996
F-35
<PAGE> 112
INDIAN SEAL PARTNERS, LTD.
BAFFIN SEAL PARTNERS, LTD.
BALTIC SEAL PARTNERS, LTD.
BENGAL SEAL PARTNERS, LTD.
ROSS SEAL PARTNERS, LTD.
COMBINED STATEMENTS OF VESSEL OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------ -----------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Combined operating revenues.................... $4,402,220 $4,150,519 $5,383,398 $2,567,219 $3,215,100
Combined operating expenses
Groceries.................................. 16,742 30,490 49,741 24,602 26,441
Insurance claims........................... 115,252 77,907 62,543 19,837 33,620
Insurance premiums......................... 302,295 431,129 428,589 211,647 196,494
Medical.................................... 14,809 37,549 44,242 18,977 21,273
Payroll taxes.............................. 39,618 68,539 101,600 54,924 51,233
Repairs and maintenance.................... 286,373 417,341 422,016 211,661 185,531
Safety training............................ 18,792 30,163 34,919 20,587 17,087
Salaries -- crews.......................... 690,960 995,602 1,297,067 643,461 654,883
Supplies................................... 77,145 268,254 87,672 30,352 70,877
Taxes, licenses and miscellaneous.......... 42,910 168,467 154,769 52,570 44,878
Transportation -- crews.................... 133,148 84,888 93,453 46,685 41,587
---------- ---------- ---------- ---------- ----------
Total combined operating expenses..... 1,738,044 2,610,329 2,776,611 1,335,303 1,343,904
---------- ---------- ---------- ---------- ----------
Excess of combined operating revenues
over expenses....................... $2,664,176 $1,540,190 $2,606,787 $1,231,916 $1,871,196
========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements
F-36
<PAGE> 113
INDIAN SEAL PARTNERS, LTD.
BAFFIN SEAL PARTNERS, LTD.
BALTIC SEAL PARTNERS, LTD.
BENGAL SEAL PARTNERS, LTD.
ROSS SEAL PARTNERS, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS
1 BASIS OF PRESENTATION
The accompanying combined financial statement includes certain accounts of:
<TABLE>
<CAPTION>
NAME OF ENTITY TYPE OF ENTITY NAME OF SHIP
<S> <C> <C>
Indian Seal Partners, Ltd. Limited Partnership Indian Seal -- 204
Feet
Baffin Seal Partners, Ltd. Limited Partnership Baffin Seal -- 185
Feet
Baltic Seal Partners, Ltd. Limited Partnership Baltic Seal -- 205
Feet
Bengal Seal Partners, Ltd. Limited Partnership Bengal Seal -- 185
Feet
Ross Seal Partners, Ltd. Limited Partnership Ross Seal -- 163 Feet
</TABLE>
Each of the five limited partnerships above (collectively "the Seal
Partners") owns an offshore service ship (collectively "the Seal Partners
Ships"). These entities have been combined because they have common partners and
have collectively entered into an Asset Purchase Agreement to sell certain
assets. There have been no significant intercompany transactions or interrelated
activities between these entities.
The Baltic Seal was purchased by Baltic Seal Partners, Ltd. in February
1994 and was placed in service in August 1994 after a period of drydocking.
According to the terms of the Asset Purchase Agreement dated March 29,
1996, and amended July 23, 1996 the Seal Partners have committed to sell certain
assets which include the Seal Partners Ships and related improvements to Hvide
Marine Incorporated ("Hvide"). In accordance with the July 1996 amendment, Hvide
will purchase the assets for the price of $16.0 million.
The accompanying combined statements of vessel operations include only
operating revenues and direct expenses related solely to the assets to be
acquired by Hvide. Other operating results of the Seal Partners are omitted from
the statements as they do not directly relate to the assets being sold to Hvide.
The accompanying combined statements of vessel operations (i) include the
operating revenues and operating expenses directly related to the operations of
the Seal Partners Ships, and (ii) exclude depreciation, general and
administrative overhead allocations, management fees, interest expense and
income taxes.
General and administrative expenses have been excluded since Seal Partners
have operations other than the vessel operations presented herein. Seal Partners
do not allocate general and administrative expenses among specific operations or
vessels.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operating revenues
All operating revenues are earned from time charters and recognized based
on contract day rates.
F-37
<PAGE> 114
3 ASSETS TO BE SOLD BY THE SEAL PARTNERS (UNAUDITED)
The following presents the combined historical costs of acquisition and
accumulated depreciation of the assets to be sold to Hvide which have been
recorded by the Seal Partners (unaudited):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Vessels................. $10,761,504 $11,411,504 $11,411,504 $11,411,504 $11,411,504
Accumulated
depreciation.......... (7,445,096) (7,971,650) (8,514,471) (8,243,060) (8,785,883)
----------- ----------- ----------- ----------- -----------
Net........... $ 3,316,408 $ 3,439,854 $ 2,897,033 $ 3,168,444 $ 2,625,621
=========== =========== =========== =========== ===========
</TABLE>
The costs of major improvements to the vessels which have been made by the
Seal Partners have not been capitalized and depreciated, are excluded from the
above unaudited schedule, and aggregated $481,765, $3,487,435 and $922,475
during the years ended December 31, 1995, 1994, and 1993, respectively and
$407,604 and $351,575 during the six months ended June 30, 1996 and 1995,
respectively. Additional costs of improvements were incurred during periods
prior to 1993.
Depreciation expense, based on useful lives of 7 to 32 years for the
vessels and approximately three years for the related improvements presented
herein, is approximately $2,093,000, $1,415,000 and $608,000 for the years ended
December 31, 1995, 1994 and 1993, respectively, and $1,121,000 and $1,047,000
for the six months ended June 30, 1996 and 1995, respectively.
The assets of the Seal Partners that are not being sold to Hvide have been
excluded from the table above. No liabilities of the Seal Partners are to be
assumed in connection with the Agreement.
4 ALLOCATION OF PURCHASE PRICE (UNAUDITED)
In accordance with the Agreement, as amended, the purchase price of the
assets of $16.0 million will be allocated to the vessels.
Based upon Hvide's policies, the vessels will be depreciated on a straight
line basis over 8 to 26 years.
F-38
<PAGE> 115
INDEPENDENT AUDITORS' REPORT
Board of Directors of
Seal Fleet, Inc.
We have audited the accompanying Statements of Assets to be Sold of Seal
Fleet, Inc. and Subsidiaries as of December 31, 1995, 1994 and 1993 and the
related Statements of Vessel Operations for the years then ended. These
financial statements are the responsibility of the management of Seal Fleet,
Inc. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1, the financial statements referred to above have
been prepared in accordance with the Asset Purchase Agreement between Seal
Fleet, Inc. and Subsidiaries and Hvide Marine Incorporated dated March 29, 1996,
and amended July 23, 1996 for the sale of certain assets and operations to Hvide
Marine Incorporated (the "Agreement") and are not intended to be complete
presentations of Seal Fleet, Inc. and Subsidiaries' assets, liabilities,
revenues and expenses.
In our opinion, the statements referred to above present fairly, in all
material respects, the assets to be sold of Seal Fleet, Inc. and Subsidiaries as
of December 31, 1995, 1994 and 1993 and the related vessel operations for the
years then ended, pursuant to the Agreement described in Note 1, in conformity
with generally accepted accounting principles.
PANNELL KERR FORSTER OF TEXAS, P.C.
Houston, Texas
April 12, 1996, except for the second paragraph of Note 1,
as to which the date is August 1, 1996
F-39
<PAGE> 116
SEAL FLEET, INC. AND SUBSIDIARIES
STATEMENTS OF ASSETS TO BE SOLD
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------ -------------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Vessels............................ $9,922,088 $9,922,088 $9,922,088 $ 9,922,088 $ 9,922,088
Accumulated depreciation........... (6,320,197) (6,819,771) (7,319,309) (7,068,745) (7,515,017)
Deferred drydocking (net).......... 558,412 315,323 643,049 470,719 750,578
Inventory.......................... 125,652 125,652 49,127 49,127 49,127
---------- ---------- ---------- ----------- -----------
Total.................... $4,285,955 $3,543,292 $3,294,955 $ 3,373,189 $ 3,206,776
========== ========== ========== =========== ===========
</TABLE>
See notes to financial statements
F-40
<PAGE> 117
SEAL FLEET, INC. AND SUBSIDIARIES
STATEMENTS OF VESSEL OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------ -----------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating revenues................... $3,155,315 $3,333,704 $3,267,072 $1,583,855 $1,805,496
Operating expenses:
Depreciation.................... 498,140 498,144 498,139 248,974 195,708
Engineering allocation.......... 58,284 19,576 42,530 16,959 20,592
Groceries....................... 24,606 12,395 16,167 9,564 8,875
Insurance claims................ 41,886 43,481 12,589 12,076 25,822
Insurance premiums.............. 243,954 237,558 232,565 119,377 110,252
Medical......................... 20,479 14,259 19,423 8,096 11,158
Payroll taxes................... 48,637 50,326 65,934 35,956 33,683
Repairs and maintenance......... 416,337 412,302 471,493 257,429 264,985
Safety training................. 16,016 15,349 17,736 7,813 11,083
Salaries--crews................. 612,871 675,786 731,030 365,701 365,906
Supplies........................ 49,607 26,737 27,915 17,286 21,859
Taxes, licenses and
miscellaneous................. 81,118 34,964 40,668 21,831 23,527
Transportation--crews........... 17,379 64,731 45,255 25,581 11,518
---------- ---------- ---------- ---------- ----------
Total operating expenses... 2,129,314 2,105,608 2,221,444 1,146,643 1,104,968
---------- ---------- ---------- ---------- ----------
Excess of operating
revenues over expenses... $1,026,001 $1,228,096 $1,045,628 $ 437,212 $ 700,528
========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements
F-41
<PAGE> 118
SEAL FLEET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1 BASIS OF PRESENTATION
Seal Fleet, Inc. and Subsidiaries ("Seal Fleet") own and manage the
following three offshore service ships (the "Seal Fleet Ships").
China Seal--176 Feet
Hawke Seal--185 Feet
Pegasus Seal--185 Feet
In accordance with an Asset Purchase Agreement with Hvide Marine
Incorporated ("Hvide"), dated March 29, 1996, and amended July 23, 1996 Seal
Fleet committed to sell the Seal Fleet Ships, related improvements, and
inventory to Hvide. In accordance with the July 1996 amendment, Hvide will
purchase the assets for the price of $9.6 million and provide the sum of
$475,000 to Seal Fleet for its use in downsizing its operations.
The accompanying statements of assets include only those assets to be sold.
They are presented at their historical cost, less any accumulated depreciation
and amortization.
The assets and liabilities of Seal Fleet which are not being sold to or
assumed by Hvide, are omitted from the accompanying statements of assets, as
such statements are not intended to be complete financial statements of Seal
Fleet.
The accompanying statements of vessel operations include only operating
revenues and direct expenses related solely to the assets to be acquired by
Hvide. Other operating results of Seal Fleet are omitted from the statements as
they do not directly relate to the assets being sold to Hvide.
The accompanying statements of vessel operations (i) include the operating
revenues and operating expenses directly related to the operations of the Seal
Fleet Ships, and (ii) exclude general and administrative overhead allocations,
intercompany commissions allocated among Seal Fleet, Inc. and its Subsidiaries,
interest expense and income taxes.
General and administrative expenses have been excluded since Seal Fleet has
operations other than the vessel operations presented herein. Seal Fleet does
not allocate general and administrative expenses among specific operations or
vessels.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Vessels and Improvements
Vessels and improvements include two seismic ships and one supply service
ship and are stated at cost less accumulated depreciation. Depreciation is
computed on the straight-line method using estimated useful lives of twenty
years. Major improvements are capitalized as deferred drydocking and are
amortized over the estimated period benefitted of eighteen months to four years
while replacements, maintenance and repairs which do not improve or extend the
lives of the assets are expensed as incurred. The costs of annual drydocking and
inspections of the ships are expensed as incurred.
Operating revenues
Operating revenues are earned from time charters and are recognized based
on contract day rates for the Seal Fleet Ships.
F-42
<PAGE> 119
3 DEFERRED DRYDOCKING
The costs of major improvements to the vessels, which have been capitalized
as deferred drydocking, aggregated $659,780, $22,719 and $476,922 during the
years ended December 31, 1995, 1994 and 1993, respectively, and $296,278 and
$354,445 during the six months ended June 30, 1996 and 1995, respectively.
4 ALLOCATION OF PURCHASE PRICE (UNAUDITED)
In accordance with the Agreement, as amended, the following is the expected
allocation of the purchase price of the assets (in thousands):
<TABLE>
<S> <C>
Vessels..................................................... $ 9,190
Deferred drydocking costs................................... 836
Spare parts and supplies.................................... 49
-------
$10,075
=======
</TABLE>
Based upon Hvide's policies, the vessels will be depreciated on a straight
line basis over 6 to 11 years and the drydocking costs will be amortized on a
straight line basis from the date purchased to the next required drydocking for
each vessel.
F-43
<PAGE> 120
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
HVIDE MARINE INCORPORATED
We have audited the accompanying statements of assets to be sold of Gulf
Boat Marine Services, Inc. and E&D Boat Rentals, Inc. (the Companies) as of
September 30, 1994 and 1995, and the related statements of vessel operations for
the years then ended. These statements of assets to be sold and the related
statements of vessel operations are the responsibility of the management of the
Companies. Our responsibility is to express an opinion on the statements of
assets to be sold and the related statements of vessel operations based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of assets to be sold and the
related statements of vessel operations are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statements of assets to be sold and the related statements of
vessel operations. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the statements of assets to be sold and the related
statements of vessel operations. We believe that our audits provide a reasonable
basis for our opinion.
As described in Note 1, the statements of assets to be sold and the related
statements of vessel operations referred to above have been prepared in
accordance with the Asset Purchase Agreement between the Companies and Hvide
Marine Incorporated dated January 15, 1996 for the sale of certain assets to
Hvide Marine Incorporated, and is not intended to be a complete presentation of
the Companies' assets, liabilities, revenue and expenses.
In our opinion, the statements of assets to be sold and the related
statements of vessel operations referred to above present fairly, in all
material respects, the assets to be sold of the Companies at September 30, 1994
and 1995, and its vessel operations for each of the years then ended, pursuant
to the Sale and Purchase Agreement described in Note 1, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New Orleans, Louisiana
February 1, 1996
F-44
<PAGE> 121
GULF BOAT MARINE SERVICES, INC. AND E&D BOAT RENTALS, INC.
STATEMENTS OF ASSETS TO BE SOLD
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------- DECEMBER 31,
1994 1995 1995
(UNAUDITED)
<S> <C> <C> <C>
Vessels and improvements.................................... $8,864 $8,972 $8,999
Less accumulated depreciation............................... 8,030 8,240 8,283
------ ------ ------
$ 834 $ 732 $ 716
====== ====== ======
</TABLE>
See accompanying notes
F-45
<PAGE> 122
GULF BOAT MARINE SERVICES, INC. AND E&D BOAT RENTALS, INC.
STATEMENTS OF VESSEL OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
--------------- -------------
1994 1995 1994 1995
(UNAUDITED)
<S> <C> <C> <C> <C>
Charter hire revenue..................................... $3,095 $3,252 $797 $832
Operating expenses:
Crew payroll and benefits........................... 1,137 1,113 276 276
Repairs, maintenance, fuel and supplies............. 584 565 126 166
Insurance........................................... 384 424 105 86
Depreciation........................................ 222 210 58 43
Other............................................... 37 60 -- 26
------ ------ ---- ----
Total operating expenses....................... 2,364 2,372 565 597
------ ------ ---- ----
Gross profit............................................. 731 880 232 235
Overhead expenses:
Salaries and benefits............................... 308 290 74 91
Office expenses..................................... 46 53 17 21
Professional fees................................... 26 30 3 10
Other............................................... 59 56 30 42
------ ------ ---- ----
Total overhead expenses........................ 439 429 124 164
------ ------ ---- ----
Income from vessel operations.................. $ 292 $ 451 $108 $ 71
====== ====== ==== ====
</TABLE>
See accompanying notes
F-46
<PAGE> 123
GULF BOAT MARINE SERVICES, INC. AND E&D BOAT RENTALS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994 AND 1995
1. BASIS OF PRESENTATION
Under the terms of an Asset Purchase Agreement (the Agreement) dated
January 15, 1996, Gulf Boat Marine Services, Inc. and E&D Boat Rentals, Inc.
(the Companies) have agreed to sell eight crew boats to Hvide Marine
Incorporated (Hvide) for $3,350,000. On January 31, 1996, Hvide assigned its
rights under the terms of the Agreement to Lawrence Bedrosian (d/b/a Steel Style
Marine C.C.F. Fund) and the sale was completed.
The accompanying statements of assets to be sold presents the historical
cost and accumulated depreciation of these eight crew boats which were owned and
operated by the Companies.
The accompanying statements of vessel operations include the revenue,
operating expenses and overhead expenses directly related to the operations of
these eight crew boats. Items excluded are the revenue, operating expenses and
overhead expenses associated with the operations of six other crew boats not
being sold to Hvide, along with the Companies' interest income and expense, and
income taxes. Overhead expenses of the Companies were allocated based upon
revenue by crew boat.
The accompanying statements are not intended to be complete financial
statements of the Companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Unaudited Interim Financial Statements
The unaudited statement of assets to be sold at December 31, 1995 and the
unaudited statements of vessel operations for the three months ended December
31, 1994 and 1995 and the notes thereto have been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair statement have been included. The
results of vessel operations are not necessarily indicative of the results which
can be expected for full years.
Operations
The principal operations of the Companies consist of short-term vessel time
charters of its crew boats. The crew boats are used primarily in the Gulf of
Mexico by operators drilling oil and gas wells. During the years ended September
30, 1994 and 1995, five major customers accounted for 91% and 88%, respectively,
of its charter hire revenue. During the years ending September 30, 1994 and
1995, there were five individual customers representing greater than 10% of
charter hire revenues, as follows:
<TABLE>
<CAPTION>
1994 1995
<S> <C>
34.1% 26.6%
23.5 23.9
14.2 13.9
13.5 13.8
13.9% 12.9%
</TABLE>
Revenue
Revenue from time charters are earned and recognized on a daily basis.
F-47
<PAGE> 124
Vessels and Improvements
Vessels and improvements are stated at cost less accumulated depreciation.
Depreciation is computed on the straight-line method over 5 years for
improvements and 12 to 24 years for vessels, the estimated useful life of the
assets. Major renewals and betterments are capitalized, while replacements,
maintenance, and repairs which do not improve or extend the life of the assets
are expensed.
3. RELATED PARTIES
The Companies are owned by four individuals. Total salaries for these
individuals for the years ended September 30, 1994 and 1995 were $311,000 and
$298,000, respectively. Approximately $178,000 and $170,000, respectively, of
these salaries are included in the accompanying 1994 and 1995 statements of
vessel operations. Total salaries for these individuals for the three months
ended December 31, 1994 and 1995 were $76,000 and $92,000, respectively.
Approximately $43,000 and $52,000, respectively, of these salaries are included
in the accompanying statements of vessel operations for the quarters ended
December 31, 1994 and 1995 (unaudited).
F-48
<PAGE> 125
GLOSSARY
The following is a set of definitions for shipping terms that are used
throughout this Prospectus:
American Bureau of Shipping or "ABS" -- a vessel classification society.
Bareboat Charter -- the rental or lease of an empty ship, without crew,
stores or provisions; the charterer (lessee) has the responsibility of operating
the vessel as though it were his own.
Certificate of Financial Responsibility (Water Pollution) or
"COFR" -- means a certificate issued by the U.S. Coast Guard that evidences a
vessel owner or operator's compliance with the statutory requirement to provide
evidence of the financial ability to meet liability for discharges of oil and
hazardous substances under the federal Water Pollution Control Act, the
Comprehensive Environmental Response, Compensation, and Liability Act, and OPA
90.
Classification Societies -- classification societies hold records of the
class maintenance of each ship registered or classed with them; these records
are deposited for the personal and confidential information and guidance of the
owner of the vessel.
Crew Boat or Vessel -- an offshore supply vessel generally employed to
transport crew and supplies between ports and offshore drilling or production
facilities.
Day Rate -- the price paid under a bareboat charter for one day's
operation.
Double Bottom -- compartments at the bottom of a vessel between the skin of
the vessel and its inner compartments containing cargo tanks and machinery
spaces; double bottom spaces can be used as void spaces or as ballast, water, or
fuel tanks.
Double Hull -- hull construction technique by which a ship has an inner and
outer hull separated by void space, usually several feet in width.
Drydocking -- the process by which a vessel is taken out of the water to
accomplish underwater repairs.
DWT -- deadweight ton; a measurement of the carrying capacity of a vessel,
generally equal to the difference between the amount of water displaced by the
unloaded vessel and that displaced by the fully loaded vessel.
Dynamically Positioned Vessel -- a vessel equipped with specialized
instrumentation and positioning gear enabling it to maintain a constant position
with respect to wellheads and other devices on the ocean floor.
Escort Tug -- a tugboat employed as an escort for a larger vessel usually
in dangerous or constricted waters.
Gross Ton -- enclosed space of a ship measured in cubic feet divided by
100; thus 100 cubic feet of such capacity is equivalent to one gross ton.
Integrated Tug/Barge or "ITB" -- a large barge integrated from the stern
onto the bow of a tug constructed to push the barge.
ISO 9002 -- one of three generic standards for quality management and
quality assurance intended to instill confidence in customers that a business
will provide satisfactory service on a consistent basis.
Jones Act -- the portions of the federal Merchant Marine Act, 1920
restricting U.S. domestic trade to U.S.-owned and constructed U.S.-flag vessels.
OPA 90 -- the federal Oil Pollution Act of 1990.
Supply Boat or Vessel -- an offshore service vessel engaged in providing
supply services to the offshore energy industry.
Time Charter -- the hire of a fully operational ship for a specified period
of time; the shipowner provides the ship with crew, stores and provisions, ready
in all aspects to load cargo and proceed on a voyage as
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<PAGE> 126
instructed by the charterer. The charterer pays for fuel and all voyage-related
expenses including canal tolls and port charges.
Tractor Tug -- a tugboat able to apply force in all directions which can
generally perform certain maneuvers more quickly and efficiently than
conventional tugs.
Utility Boat or Vessel -- an offshore supply vessel generally employed to
transport crew and supplies between ports and offshore drilling or production
facilities.
Voyage Charter -- contract of carriage in which the charterer pays for the
use of a ship's cargo capacity for one, or sometimes more than one, voyage;
under this type of charter, the shipowner pays all the operating costs of the
ship (including fuel, canal and port charges, pilotage, towage and ship's
agency) while payment for port and cargo handling charges are subject to
agreement between the parties; freight is generally paid per unit of cargo, such
as a ton, based on an agreed quantity, or as a lump sum irrespective of the
quantity loaded.
A-2
<PAGE> 127
------------------------------------------------------
------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE UNDERWRITERS, OR ANY OTHER
PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHO IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 8
The Company............................ 13
Use of Proceeds........................ 14
Price Range of Common Stock............ 14
Dividend Policy........................ 15
Capitalization......................... 16
Selected Historical and Pro Forma
Consolidated Financial Data.......... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 19
Business............................... 30
Management............................. 51
Certain Transactions................... 57
Principal and Selling Stockholders..... 60
Description of Certain Indebtedness.... 61
Description of Capital Stock........... 63
Shares Eligible for Future Sale........ 71
Underwriting........................... 73
Legal Matters.......................... 74
Experts................................ 74
Available Information.................. 75
Index to Financial Statements.......... F-1
Glossary............................... A-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
4,000,000 SHARES
HVIDE MARINE GRAPHIC
HVIDE MARINE INCORPORATED LOGO
CLASS A COMMON STOCK
--------------------
PROSPECTUS
--------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
, 1997
------------------------------------------------------
------------------------------------------------------
<PAGE> 128
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable in connection with the
registration of the Common Stock that is the subject of this Registration
Statement, all of which shall be borne by the Company. All the amounts shown are
estimates except for the registration fee, and the NASD listing and filing fees.
<TABLE>
<CAPTION>
TO BE PAID BY
REGISTRANT
<S> <C>
Securities and Exchange Commission registration fee......... $ 40,511.37
NASD filing fee............................................. $ 13,869
Nasdaq National Market listing fees......................... $ 17,500
Printing and engraving expenses............................. 225,000
Legal fees and expenses..................................... 200,000
Accounting fees and expenses................................ 230,000
Blue sky fees and expenses.................................. $ 6,000
Transfer Agent and Registrar fees........................... 1,500
Miscellaneous expenses...................................... 265,619.63
-------------
Total............................................. $ 1,000,000
=============
</TABLE>
- ---------------
(*) To be supplied.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provides that the Company shall
indemnify each director and officer of the Company to the fullest extent
permitted from time to time by the laws of the State of Florida or any other
applicable laws as presently or hereafter in effect. Section 607.0850 of the
Florida Business Corporation Act currently provides as follows:
(1) A corporation shall have power to indemnify any person who was or
is a party to any proceeding (other than an action by, or in the right of,
the corporation), by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise
against liability incurred in connection with such proceeding, including
any appeal thereof, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any
proceeding by judgment, order, settlement, or conviction or upon a plea of
nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in, or not opposed to, the best interests of
the corporation or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(2) A corporation shall have power to indemnify any person, who was or
is a party to any proceeding by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses and amounts paid in settlement not
exceeding, in the judgment of the board of directors, the estimated expense
of litigating the proceeding to conclusion, actually and reasonably
incurred in connection with the defense or settlement of such proceeding,
including any appeal thereof. Such indemnification shall be authorized if
such person acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the corporation, except
that no indemnification shall be made under this subsection in respect of
any claim, issue, or matter as to which
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<PAGE> 129
such person shall have been adjudged to be liable unless, and only to the
extent that, the court in which such proceeding was brought, or any other
court of competent jurisdiction, shall determine upon application that,
despite the adjudication of liability but in view of all circumstances of
the case, such person is fairly and reasonably entitled to indemnity for
such expenses which such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of
any proceeding referred to in subsection (1) or subsection (2), or in
defense of any claim, issue, or matter therein, he shall be indemnified
against expenses actually and reasonably incurred by him in connection
therewith.
(4) Any indemnification under subsection (1) or subsection (2), unless
pursuant to a determination by a court, shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsection (1) or subsection (2). Such determination shall be
made:
(a) By the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by
majority vote of a committee duly designated by the board of directors
(in which directors who are parties may participate) consisting solely
of two or more directors not at the time parties to the proceeding;
(c) By independent legal counsel:
1. Selected by the board of directors prescribed in paragraph
(a) or the committee prescribed in paragraph (b); or
2. If a quorum of the directors cannot be obtained for paragraph
(a) and the committee cannot be designated under paragraph (b),
selected by majority vote of the full board of directors (in which
directors who are parties may participate); or
(d) By the stockholders by a majority vote of a quorum consisting
of stockholders who were not parties to such proceeding or, if no such
quorum is obtainable, by a majority vote of stockholders who were not
parties to such proceeding.
(5) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of
permissibility is made by independent legal counsel, persons specified by
paragraph (4)(c) shall evaluate the reasonableness of expenses and may
authorize indemnification.
(6) Expenses incurred by an officer or director in defending a civil
or criminal proceeding may be paid by the corporation in advance of the
final disposition of such proceeding upon receipt of an undertaking by or
on behalf of such director or officer to repay such amount if he is
ultimately found not to be entitled to indemnification by the corporation
pursuant to this section. Expenses incurred by other employees and agents
may be paid in advance upon such terms or conditions that the board of
directors deems appropriate.
(7) The indemnification and advancement of expenses provided pursuant
to this section are not exclusive, and a corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding
such office. However, indemnification or advancement of expenses shall not
be made to or on behalf of any director, officer, employee, or agent if a
judgment or other final adjudication
II-2
<PAGE> 130
establishes that his actions, or omissions to act, were material to the
cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director, officer,
employee, or agent had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer, employee, or
agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of s. 607.0834 are applicable; or
(d) Willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or
in the right of a stockholder.
(8) Indemnification and advancement of expenses as provided in this
section shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee,
or agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person, unless otherwise provided when authorized
or ratified.
(9) Unless the corporation's articles of incorporation provide
otherwise, notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary determination of the board or of
the stockholders in the specific case, a director, officer, employee, or
agent of the corporation who is or was a party to a proceeding may apply
for indemnification or advancement of expenses, or both, to the court
conducting the proceeding, to the circuit court, or to another court of
competent jurisdiction. On receipt of an application, the court, after
giving any notice that it considers necessary, may order indemnification
and advancement of expenses, including expenses incurred in seeking
court-ordered indemnification or advancement of expenses, if it determines
that:
(a) The director, officer, employee, or agent is entitled to
mandatory indemnification under subsection (3), in which case the court
shall also order the corporation to pay the director reasonable expenses
incurred in obtaining court-ordered indemnification or advancement of
expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the
exercise by the corporation of its power pursuant to subsection (7); or
(c) The director, officer, employee, or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or
both, in view of all the relevant circumstances, regardless of whether
such person met the standard of conduct set forth in subsection (1),
subsection (2), or subsection (7).
(10) For purposes of this section, the term "corporation" includes, in
addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger, so that any person who is or was a director, officer, employee, or
agent of a constituent corporation, or is or was serving at the request of
a constituent corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other
enterprise, is in the same position under this section with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(11) For purposes of this section:
(a) The term "other enterprises" includes employee benefit plans;
(b) The term "expenses" includes counsel fees, including those for
appeal;
II-3
<PAGE> 131
(c) The term "liability" includes obligations to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect
to any employee benefit plan), and expenses actually and reasonably
incurred with respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or
completed action, suit, or other type of proceeding, whether civil,
criminal, administrative, or investigative, and whether formal or
informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation" includes
any service as a director, officer, employee, or agent of the
corporation that imposes duties on such persons, including duties
relating to an employee benefit plan and its participants or
beneficiaries; and
(g) The term "not opposed to the best interest of the corporation"
describes the actions of a person who acts in good faith and in a manner
he reasonably believes to be in the best interests of the participants
and beneficiaries of an employee benefit plan.
(12) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was director, officer, employee, or agent
of the corporation or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against any
liability asserted against him and incurred by him in any such capacity or
arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under the provisions
of this section.
The Underwriting Agreement (Exhibit 1) provides for indemnification by the
Underwriters of the Registrant, its directors and executive officers and by the
Registrant of the Underwriters for certain liabilities, including liabilities
arising under the Securities Act of 1933, as amended (the "Act") and affords
certain rights of contribution with respect thereto.
The Registrant has purchased an insurance policy that provides for
indemnification of the Registrant's executive officers and directors for
liability resulting from their negligence, error, omission or breach of duty
while acting in their capacities as executive officers and directors on any
matter claimed against them by reason of their being executive officers and
directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In September 1994, the Company exchanged 1,105,962 shares of Class B Common
Stock and 663,415 shares of Class C Common Stock for all of the outstanding
common stock of its predecessor. Also in September 1994, in connection with the
issuance of the Senior Notes and the Junior Notes, the Company issued 452,518
shares of Class B Common Stock and 313,215 shares of Class C Common Stock to
members of the Investors Group. The proceeds of the issuances of the Senior
Notes and the Junior Notes were $23.1 million and $17.5 million, respectively,
and the proceeds of the issuances of the Class B Common Stock and the Class C
Common Stock to the Investor Group were $4.1 million and $2.9 million,
respectively.
In August 1996, the Company exchanged 74,704 shares of Class A Common Stock
for 74,704 shares of Class B Common Stock owned by the Investor Group, 229,062
shares of Class A Common Stock and 84,153 shares of Class B Common Stock for
313,215 shares of Class C common Stock owned by the Investor Group, and 663,415
shares of Class B Common Stock for 663,415 shares of Class C Common Stock owned
by the Hvide Family.
In September 1996, the Company exchanged 1,188,502 shares of Class B Common
Stock and 55,500 shares of Class A Common Stock for $13.9 million principal
amount of Junior Notes.
Each such issuance was made in reliance upon section 4(2) of the Act.
II-4
<PAGE> 132
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of exhibits furnished:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
<C> <S>
1 Form of Underwriting Agreement.
2.1 Stock Purchase Agreement dated as of October 12, 1995 by and
between Hvide Marine Incorporated and OMI Corp.(2)
2.1(a) Amendment to Stock Purchase Agreement dated as of January
31, 1996, by and among Hvide Marine Incorporated and OMI
Corp.(2)
2.2 Asset Purchase Agreement dated as of March 29, 1996, by and
among Hvide Marine Incorporated, Seal Fleet, Inc., Sealcraft
Operators, Inc., Seal GP, Inc., South Corporation, and
Thomas M. Ferguson.(2)
2.2(a) Amendment No. 1 dated July 23, 1996, to Asset Purchase
Agreement dated as of March 29, 1996, by and among Hvide
Marine Incorporated, Seal Fleet, Inc., Sealcraft Operators,
Inc., Seal GP, Inc., South Corporation, and Thomas M.
Ferguson.(5)
2.3 Asset Purchase Agreement dated as of March 29, 1996, by and
among Hvide Marine Incorporated, Ross Seal Partners, Ltd.,
Bengal Seal Partners, Ltd., Indian Seal Partners, Ltd.,
Baffin Seal Partners, Ltd., Baltic Seal Partners, Ltd., and
Irwin M. Herz, Jr., as trustee under certain trusts.(2)
2.3(a) Amendment Number 1 dated July 23, 1996, to Asset Purchase
Agreement dated as of March 29, 1996, by and among Hvide
Marine Incorporated, Ross Seal Partners, Ltd., Bengal Seal
Partners, Ltd., Indian Seal Partners, Ltd., Baffin Seal
Partners, Ltd., Baltic Seal Partners, Ltd., and Irwin M.
Herz, Jr., as trustee under certain trusts.(5)
2.4 Articles of Merger of Hvide Marine Incorporated, a Florida
corporation into Hvide Corp., a Florida corporation.(5)
3.1 Amended and Restated Articles of Incorporation.(5)
3.2 Bylaws of the Company, as amended.(5)
4.1 Form of Class A Common Stock Certificate (Domestic).(5)
4.2 Form of Class A Common Stock Certificate (Foreign).(5)
5 Opinion of Counsel as to the legality of the securities
being registered.
10.1 Non-Compete Agreement, between the Company and Hans J.
Hvide, dated September 28, 1994.(2)
10.2 Consulting Agreement between Sun State Marine Services, Inc.
and Frank V. Oliver, Jr., dated September 30, 1994.(2)
10.3 Equity Ownership Plan.(6)
10.4 Stock Option Plan for Directors.(6)
10.4.1 1996 Employee Stock Purchase Plan.(6)
10.4.2 Equity Ownership Plan.(5)
10.5 Security Agreement, dated December 14, 1973, relating to
United States Government Ship Financing Bonds, between The
Provident Bank and The United States of America, with
respect to Seabulk Challenger/S.T.L. 3901.(1)
10.6* Bareboat Charter, dated as of December 14, 1973, by and
between The Provident Bank and Seabulk Tankers, Ltd., with
respect to Seabulk Challenger/S.T.L. 3901.(1)
10.7* Time Charter Party, dated as of December 20, 1989, between
Seabulk Tankers, Ltd., and Shell Oil Company with respect to
Seabulk Challenger/S.T.L. 3901, as amended.(1)
10.8 Security Agreement, dated August 20, 1975, by and among Port
Everglades Towing, Inc., Central National Bank of Cleveland
and The United States of America, with respect to the
Seabulk Magnachem/S.C.C. 3902, as amended.(1)
10.9* Bareboat Charter, dated February 24, 1977, by and between
Central National Bank of Cleveland and Seabulk Chemical
Carriers, Inc., with respect to Seabulk Magnachem/S.C.C.
3902, as amended.(1)
10.10 Sub-Bareboat Charter, dated January 16, 1988, between
Seabulk Chemical Carriers, Inc., and Hvide Shipping,
Incorporated, with respect to Seabulk Magnachem/S.C.C. 3902,
as amended.(1)
</TABLE>
II-5
<PAGE> 133
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
<C> <S>
10.12* Tanker Time Charter Party, dated December 15, 1989, between
Seabulk Ocean Systems Corporation and Ocean Specialty
Tankers Corporation, with respect with to Seabulk
Magnachem/S.C.C. 3902, as amended.(1)
10.13* Tanker Time Charter Party, dated December 15, 1989, between
Seabulk Transmarine Partnership, Ltd., and Ocean Specialty
Tankers Corporation, with respect to Seabulk America.(1)
10.14 Franchise Agreement, dated as of January 8, 1975, by and
between Canaveral Port Authority and Port Everglades Towing,
Inc.(1)
10.15 Non-Exclusive Franchise Agreement, dated as of March 7,
1991, by and between Port Everglades Authority and Hvide
Shipping, Incorporated.(1)
10.16* Contract for Fuel Transportation, dated as of February 18,
1993, by and between Florida Power & Light Company and Sun
State Marine, Incorporated.(1)
10.17 Sale and Purchase Agreement between the Company and certain
officers, directors and employees relating to the purchase
of partnership interests, dated September 30, 1994.(2)
10.18 Post-Retirement Benefits Agreement between the Company and
Hans J. Hvide, dated September 28, 1994.(2)
10.19 Junior Subordinated Note and Common Stock Purchase Agreement
dated September 30, 1994.(2)
10.20 Senior Subordinated Note and Common Stock Purchase Agreement
dated September 30, 1994.(2)
10.21 Letter of Credit Agreement, dated as of September 29, 1994,
between Hvide Shipping, Inc. and Bank of Boston.(2)
10.22 Credit Agreement, dated as of September 28, 1994, among
Hvide Marine Incorporated, Citibank, N.A., The First
National Bank of Boston, and Citibank, N.A.(2)
10.22(a) Amendment No. 1 dated as of May 15, 1995, to the Credit
Agreement dated as of September 28, 1994, by and among Hvide
Marine Incorporated, Citibank, N.A., The First National Bank
of Boston, and others.(2)
10.22(b) Amendment No. 2 dated as of March 26, 1996, to the Credit
Agreement dated as of September 28, 1994, by and among Hvide
Marine Incorporated, Citibank, N.A., The First National Bank
of Boston, and others.(2)
10.22(c) Amended and Restated Credit Agreement dated as of June 21,
1996, by and among Hvide Marine Incorporated, Citibank,
N.A., The First National Bank of Boston, BNY Financial
Corporation, Hibernia National Bank, and Amsouth Bank of
Florida.(5)
10.22(d) Form of Amended and Restated Credit Agreement dated as of
February 3, 1997.
10.26 Amendment No. 2 to Charter of Seabulk Magnachem.(2)
10.27 Form of Recapitalization Agreement among Hvide Corp., Hvide
Marine Incorporated, the Junior Subordinated Noteholders,
the Senior Subordinated Noteholders, J. Erik Hvide, and
certain trusts.(5)
10.28 Form of Registration Rights Agreement by and between Hvide
Marine Incorporated and certain shareholders.(5)
10.29 Form of Agreement Among Shareholders among certain
shareholders.(5)
10.30 Form of Amended and Restated Contingent Share Issuance
Agreement among Hvide Marine Incorporated and certain
purchasers.(5)
11 Computation of Earnings (Loss) per Share
21 List of Subsidiaries.(4)
23.1 Consents of Ernst & Young LLP.
23.2 Consent of Counsel (included as part of Exhibit 5).
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Pannell Kerr Forster of Texas, P.C.
24.1 Power of Attorney.
</TABLE>
II-6
<PAGE> 134
* Confidential treatment requested. The materials omitted from these documents
have been marked with an asterisk (*). The materials omitted have been
separately filed with the Commission pursuant to the confidential treatment
request.
(1) Incorporated herein by reference to Registration Statement on Form S-1
(Registration No. 33-78166) filed with the Commission on April 26, 1994.
(2) Incorporated herein by reference to Amendment No. 1 to Registration
Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
on May 3, 1996.
(3) Incorporated herein by reference to Amendment No. 2 to Registration
Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
on May 13, 1996.
(4) Incorporated herein by reference to Amendment No. 3 to Registration
Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
on July 11, 1996.
(5) Incorporated herein by reference to Amendment No. 4 to Registration
Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
on August 5, 1996.
(6) Incorporated herein by reference to Form S-8 (Registration No. 333-17621)
filed with the Commission on December 11, 1996.
Schedules not listed above have been omitted because they are not
applicable or because required information is included in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(2) The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Fort Lauderdale,
Florida on the 28th day of January, 1997.
HVIDE MARINE INCORPORATED
By: /s/ J. ERIK HVIDE
------------------------------------
J. ERIK HVIDE
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <C> <C>
/s/ J. ERIK HVIDE Chairman of the Board, January 28, 1997
- ------------------------------------------------ President, Chief Executive
(J. ERIK HVIDE) Officer and Director (principal
executive officer)
/s/ JOHN H. BLANKLEY Executive Vice January 28, 1997
- ------------------------------------------------ President -- Chief Financial
(JOHN H. BLANKLEY) Officer and Director (principal
financial officer)
/s/ DONALD L. CALDERA Executive Vice President and January 28, 1997
- ------------------------------------------------ Director
(DONALD L. CALDERA)
/s/ JOHN J. KRUMENACKER Controller (principal accounting January 28, 1997
- ------------------------------------------------ officer)
(JOHN J. KRUMENACKER)
/s/ EUGENE F. SWEENEY Director January 28, 1997
- ------------------------------------------------
(EUGENE F. SWEENEY)
Director January , 1997
- ------------------------------------------------
(ROBERT B. CALHOUN, JR.)
/s/ GERALD FARMER Director January 28, 1997
- ------------------------------------------------
(GERALD FARMER)
/s/ JEAN FITZGERALD Director January 28, 1997
- ------------------------------------------------
(JEAN FITZGERALD)
Director January , 1997
- ------------------------------------------------
(JOHN LEE)
/s/ WALTER C. MINK Director January 28, 1997
- ------------------------------------------------
(WALTER C. MINK)
/s/ ROBERT RICE Director January 28, 1997
- ------------------------------------------------
(ROBERT RICE)
/s/ RAYMOND B. VICKERS Director January 28, 1997
- ------------------------------------------------
(RAYMOND B. VICKERS)
</TABLE>
II-8
<PAGE> 1
EXHIBIT 1
4,000,000 Shares
HVIDE MARINE INCORPORATED
Class A Common Stock
UNDERWRITING AGREEMENT
January , 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
HOWARD, WEIL, LABOUISSE,
FRIEDRICHS INCORPORATED
As representatives of the
several underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Hvide Marine Incorporated, a Florida corporation (the "Company"), proposes
to issue and sell to the several underwriters named in Schedule I hereto (the
"Underwriters") 3,860,584 shares of Class A Common Stock, par value $0.001 per
share, of the Company, and certain stockholders of the Company named in Schedule
II hereto (the "Selling Stockholders") severally propose to sell to the
Underwriters an aggregate of 139,416 shares of Class A Common Stock of the
Company (certain of which may be in the form of shares of Class B Common Stock
of the Company at the time of sale). The 3,860,584 shares to be sold by the
Company are hereinafter referred to as the "Company Shares" and the 139,416
shares to be sold by the Selling Stockholders are hereinafter referred to as the
"Stockholder Shares." The Company Shares and the Stockholder Shares are
hereinafter collectively referred to as the "Firm Shares."
The Company also proposes to issue and sell to the Underwriters not more
than 575,000 shares of Class A Common Stock (the "Company Additional Shares") to
the Underwriters, and the Hvide Family Trust II (the "Hvide Trust") proposes to
sell to the Underwriters not more than 25,000 shares of Class A Common Stock
(which may be in the form of shares of Class B Common Stock at the time of sale)
(the "Trust Additional Shares"
<PAGE> 2
and, together with the Company Additional Shares, the "Additional Shares"), if
requested by the Underwriters as provided in Section 2 hereof. The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"Shares." The Company, the Hvide Trust and the Selling Stockholders are
hereinafter collectively referred to as the "Sellers."
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Securities Act"), a registration statement on Form S-1 (File No. 333-18525)
including a prospectus relating to the Shares, which may be amended. The
registration statement as amended at the time when it becomes effective,
including information (if any) deemed to be part of the registration statement
at the time of effectiveness pursuant to Rule 430A under the Securities Act and
a registration statement (if any) filed pursuant to Rule 462(b) under the
Securities Act increasing the size of the offering registered under the
Securities Act, is hereinafter referred to as the Registration Statement; and
the prospectus in the form first used to confirm sales of Shares is hereinafter
referred as the Prospectus.
2. Agreements to Sell and Purchase. On the basis of the representations and
warranties contained in this Agreement, and subject to its terms and conditions,
the Company hereby agrees to issue and sell the Company Shares to the several
Underwriters and each Selling Stockholder, severally and not jointly, hereby
agrees to sell to the several Underwriters the number of Stockholder Shares set
forth opposite such Selling Stockholder's name in Schedule II hereto, and each
of the Underwriters, severally and not jointly, hereby agrees to purchase from
the Company and each Selling Stockholder at a price per share of $_____ (the
"Purchase Price") the respective number of Company Shares and Stockholder Shares
(subject to adjustments to eliminate fractional shares as the Representatives
may determine) that bears the same proportion to the number of Company Shares
and Stockholder Shares to be sold by the Company or such Selling Stockholder, as
the case may be, as the number of Firm Shares set forth in Schedule I hereto
opposite the name of such Underwriter bears to the total number of Firm Shares
set forth opposite the names of all Underwriters in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company hereby agrees to
issue and sell to the Underwriters the Company Additional Shares, and the Hvide
Trust hereby agrees to sell to the Underwriters the Trust Additional Shares, and
each of the Underwriters shall have the right to purchase, severally and not
jointly, up to 575,000 Company Additional Shares from the Company at the
Purchase Price and up to 25,000 Trust Additional Shares from the Hvide Trust at
the Purchase Price. Additional Shares may be purchased solely for the purpose of
covering over allotments made in connection with the offering of the Firm
Shares. The Underwriters may exercise their right to purchase Additional Shares
in whole or in part from time to time by giving written notice thereof to the
Company and the Hvide Trust within 30 days after the date of this Agreement. The
Representatives shall give any such notice on behalf of the Underwriters and
such notice shall specify the aggregate number of Additional Shares to be
purchased pursuant to such exercise and the date for payment and delivery
thereof. The date
2
<PAGE> 3
specified in any such notice shall be a business day (i) no earlier than the
Closing Date (as hereinafter defined) and (ii) no later than 10 business days
after such notice has been given. If any Additional Shares are to be purchased,
each Underwriter, severally and not jointly, agrees to purchase from the Hvide
Trust the number of Trust Additional Shares (subject to such adjustments to
eliminate fractional shares as the Representatives may determine) which bears
the same proportion to the total number of Trust Additional Shares to be
purchased by the Underwriters from the Hvide Trust as the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I hereto bears to
the total number of Firm Shares. If more than 25,000 Additional Shares are to be
purchased, each Underwriter, severally and not jointly, agrees to purchase from
the Company the number of Company Additional Shares (subject to such adjustments
to eliminate fractional shares as the Representatives may determine) which bears
the same proportion to the total number of Company Additional Shares to be
purchased by the Underwriters from the Company as the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I hereto bears to the
total number of Firm Shares.
The Company shall, concurrently with the execution of this Agreement,
deliver an agreement executed by (i) each of the directors and officers of the
Company and (ii) each stockholder listed on Annex 1 hereto, pursuant to which
each such person agrees, not to offer, sell, contract to sell, grant any option
to purchase, or otherwise dispose of any Class A Common Stock or other common
stock of the Company or any securities convertible into or exercisable or
exchangeable for such Class A Common Stock or other common stock of the Company
(collectively, the "Common Stock") or in any other manner transfer all or a
portion of the economic consequences associated with the ownership of any such
Common Stock, except to the Underwriters pursuant to this Agreement, for a
period of 90 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company may grant options to purchase
shares of Class A Common Stock pursuant to the Company's existing stock option
plans and (ii) the Company may issue shares of its Common Stock pursuant to its
employee stock purchase plan and upon the exercise of an option or warrant or
the conversion of a security outstanding on the date hereof.
3. Terms of Public Offering. The Sellers are advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Shares as soon after the effective date of the Registration Statement as
in your judgment is advisable and (ii) initially to offer the Shares upon the
terms set forth in the Prospectus.
4. Delivery and Payment. Delivery to the Underwriters of and payment for
the Firm Shares shall be made at 10:00 a.m., New York City time, on the third
business day, unless otherwise permitted or required by the Commission pursuant
to Rule 15c6-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), following the date of the offering (the "Closing Date"), at
such place as you shall designate. The Closing Date and the location of delivery
of and the form of payment for the Firm Shares may be varied by agreement
between you and the Company.
3
<PAGE> 4
Delivery to the Underwriters of and payment for any Additional Shares to be
purchased by the Underwriters shall be made at such place as you shall designate
at 10:00 a.m., New York City time, on the date specified in the applicable
exercise notice given by you pursuant to Section 2 (an "Option Closing Date").
Any such Option Closing Date and the location of delivery of and the form of
payment for such Additional Shares may be varied by agreement between you and
the Company.
Certificates for the Shares shall be registered in such names and issued in
such denominations as you shall request in writing not later than two (2) full
business days prior to the Closing Date or an Option Closing Date, as the case
may be. Such certificates shall be made available to you for inspection not
later than 9:30 a.m., New York City time, on the business day next preceding the
Closing Date or an Option Closing Date, as the case may be. Certificates in
definitive form evidencing the Shares shall be delivered to you on the Closing
Date or an Option Closing Date, as the case may be, with any transfer taxes
thereon duly paid by the respective Sellers, for the respective accounts of the
several Underwriters, against payment of the Purchase Price therefor by
certified or official bank checks payable in New York Clearing House funds to
the order of the applicable Sellers.
5. Agreements of the Company. The Company agrees with you:
(a) To use its best efforts to cause the Registration Statement to
become effective at the earliest possible time.
(b) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) when the Registration Statement has become
effective and when any post-effective amendment to it becomes effective,
(ii) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purposes, and
(iv) of the happening of any event during the period referred to in
paragraph (e) below which makes any statement of a material fact made in
the Registration Statement or the Prospectus untrue or which requires the
making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal or lifting of such order at the
earliest possible time.
(c) To furnish to you, without charge, three signed copies of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, as you may reasonably request,
and to furnish to you and each Underwriter designated by you such number
of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
4
<PAGE> 5
(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or
to make any amendment or supplement to the Prospectus of which you shall
not previously have been advised or to which you shall reasonably object;
and to prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause
any such amendment to become promptly effective.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of counsel
for the Underwriters a prospectus is required by law to be delivered in
connection with sales by an Underwriter or a dealer, to furnish to each
Underwriter and dealer as many copies of the Prospectus (and of any
amendment or supplement to the Prospectus) as such Underwriter or dealer
may reasonably request.
(f) If during the period specified in paragraph (e) any event shall
occur as a result of which, in the opinion of counsel for the Underwriters
it becomes necessary to amend or supplement the Prospectus in order to
make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with any law,
forthwith to prepare and file with the Commission an appropriate amendment
or supplement to the Prospectus so that the statements in the Prospectus,
as so amended or supplemented, will not in the light of the circumstances
when it is so delivered, be misleading, or so that the Prospectus will
comply with law, and to furnish to each Underwriter and to such dealers as
you shall specify, such number of copies thereof as such Underwriter or
dealers may reasonably request.
(g) Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters
and by dealers under the state securities or Blue Sky laws of such
jurisdictions as you may request, to continue such qualification in effect
so long as required for distribution of the Shares and to file such
consents to service of process or other documents as may be necessary in
order to effect such registration or qualification.
(h) To mail and make generally available to its stockholders as soon
as reasonably practicable an earnings statement covering a period of at
least twelve months after the effective date of the Registration Statement
(but in no event commencing later than 90 days after such date) which
shall satisfy the provisions of Section 11(a) of the Securities Act, and
to advise you in writing when such statement has been so made available.
(i) During the period of five years after the date of this Agreement,
(i) to mail as soon as reasonably practicable after the end of each fiscal
year to the record
5
<PAGE> 6
holders of its Common Stock an annual report of the Company and the
Subsidiaries meeting the requirements of the Exchange Act, all such annual
reports to include a consolidated balance sheet, a consolidated statement
of operations, a consolidated statement of cash flows and a consolidated
statement of shareholders' equity, certified by independent certified
public accountants, and (ii) to mail and make generally available as soon
as practicable after the end of each quarterly period (except for the last
quarterly period of each fiscal year) to such holders a quarterly report
meeting the requirements of the Exchange Act, all such quarterly reports
to include a consolidated balance sheet, a consolidated statement of
operations and a consolidated statement of cash flows.
(j) During the period referred to in paragraph (i), to furnish to you
as soon as available a copy of each report or other publicly available
information of the Company mailed to the holders of Common Stock or filed
with the Commission and such other publicly available information
concerning the Company and the Subsidiaries as you may reasonably request.
(k) To pay all costs, expenses, fees and taxes incident to (i) the
preparation, printing, filing and distribution under the Securities Act of
the Registration Statement (including financial statements and exhibits),
each preliminary prospectus and all amendments and supplements to any of
them prior to or during the period specified in paragraph (e), (ii) the
printing and delivery of the Prospectus and all amendments or supplements
to it during the period specified in paragraph (e), (iii) the printing and
delivery of this Agreement, the Preliminary and Supplemental Blue Sky
Memoranda and all other agreements, memoranda, correspondence and other
documents printed and delivered in connection with the offering of the
Shares (including in each case any disbursements of counsel for the
Underwriters relating to such printing and delivery), (iv) the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states (including in each case
the fees and disbursements of counsel for the Underwriters relating to
such registration or qualification and memoranda relating thereto), (v)
filings and clearance with the National Association of Securities Dealers,
Inc. in connection with the offering, (vi) the listing of the Shares on
the Nasdaq National Market, (vii) furnishing such copies of the
Registration Statement, the Prospectus and all amendments and supplements
thereto as may be requested for use in connection with the offering or
sale of the Shares by the Underwriters or by dealers to whom Shares may be
sold and (viii) the performance by the Sellers of their other obligations
under this Agreement.
(l) To use its best efforts to maintain the inclusion of the Common
Stock in the Nasdaq National Market (or on a national securities exchange)
for a period of five years after the effective date of the Registration
Statement.
(m) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company
prior to the Closing
6
<PAGE> 7
Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
6. Representations and Warranties of the Company. The Company represents
and warrants to each Underwriter that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by
the Commission.
(b) (i) Each part of the Registration Statement, when such part
became effective, did not contain and each such part, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Securities Act and (iii) the Prospectus does not contain and, as amended
or supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
set forth in this paragraph (b) do not apply to statements or omissions in
the Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Securities Act, and each Registration
Statement (if any) filed pursuant to Rule 462(b) under the Securities Act,
complied when so filed in all material respects with the Securities Act;
and did not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Exhibit 21 to the Registration Statement sets forth a complete
and accurate list of all of the subsidiaries of the Company (the
"Subsidiaries"). Each of the Company and the Subsidiaries has been duly
incorporated or formed, is validly existing as a corporation, limited
liability company or partnership in good standing under the laws of its
jurisdiction of incorporation or formation and has the power and authority
to carry on its business as it is currently being conducted and to own,
lease, charter and operate its properties, including, without limitation,
the Vessels (defined herein) owned, chartered and operated by it, and each
is duly qualified and is in good standing as a foreign corporation,
limited liability company or partnership authorized to do business in each
jurisdiction in which the nature of its business or its ownership,
chartering, leasing or operation of Vessels and other property requires
such qualification, except
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<PAGE> 8
where the failure to be so qualified would not have a material
adverse effect on the Company and the Subsidiaries, taken as a whole.
(e) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned by
the Company, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature.
(f) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights; and the Shares to be
issued and sold by the Company hereunder have been duly authorized and,
when issued and delivered to the Underwriters against payment therefor as
provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.
(g) The authorized capital stock of the Company, including the Common
Stock, conforms as to legal matters to the description thereof contained
in the Prospectus.
(h) Neither the Company nor any of the Subsidiaries is in violation
of its respective charter, bylaws or other organizational or constituent
documents (collectively, "Constituent Documents") or in default in the
performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
other agreement, indenture or instrument material to the conduct of the
business of the Company and the Subsidiaries, taken as a whole, to which
the Company or any of the Subsidiaries is a party or by which it or any of
the Subsidiaries or their respective property is bound.
(i) The execution, delivery and performance of this Agreement,
compliance by the Company with all the provisions hereof and the
consummation of the Current Acquisitions (as defined in the Prospectus)
and the transactions contemplated hereby will not require any consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body (except as such may be
required under the securities or Blue Sky laws of the various states) and
will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the Constituent Documents of the
Company or any of the Subsidiaries or any agreement, indenture or other
instrument to which it or any of the Subsidiaries is a party or by which
it or any of the Subsidiaries or their respective property is bound, or
violate or conflict with any laws, administrative regulations or rulings
or court decrees applicable to the Company, any of the Subsidiaries or
their respective property.
(j) Except as otherwise set forth in the Prospectus, there are no
material legal or governmental proceedings pending to which the Company or
any of the Subsidiaries is a party or of which any of their respective
property is the subject, and, to the best of the Company's knowledge, no
such proceedings are threatened or
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<PAGE> 9
contemplated. No contract or document of a character required to be
described in the Registration Statement or the Prospectus or to be filed
as an exhibit to the Registration Statement is not so described or filed
as required.
(k) Neither the Company nor any of the Subsidiaries has violated or
is in violation of any foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), nor any federal or state law relating to
discrimination in the hiring, promotion or pay of employees nor any
applicable federal or state wages and hours laws, nor any provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or the rules and regulations promulgated thereunder, which in each case
might result in any material adverse change in the business, prospects,
financial condition or results of operation of the Company and the
Subsidiaries, taken as a whole.
(l) Each of the Company and the Subsidiaries has such permits,
certificates, endorsements, licenses, franchises and authorizations of
governmental or regulatory authorities ("Permits"), including, without
limitation, under any applicable Environmental Laws, as are necessary to
own, lease, charter and operate its respective Vessels and other
properties and to conduct its business; each of the Company and the
Subsidiaries has fulfilled and performed all of its material obligations
with respect to such Permits and no event has occurred which allows, or
after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of the
holder of any such permit; and, except as described in the Prospectus,
such Permits contain no restrictions that are materially burdensome to the
Company or any of the Subsidiaries.
(m) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and the Subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up or closure of properties or compliance
with Environmental Laws or any Permits or any related constraints on
operating activities and any potential liabilities to third parties). On
the basis of such review, the Company has reasonably concluded that such
associated costs and liabilities would not, singly or in the aggregate,
have a material adverse effect on the Company and the Subsidiaries, taken
as a whole.
(n) Except as otherwise set forth in the Prospectus or such as are
not material to the business, prospects, financial condition or results of
operation of the Company and the Subsidiaries, taken as a whole, the
Company and each of the Subsidiaries has good and marketable title, free
and clear of all liens, claims, encumbrances and restrictions except liens
for taxes not yet due and payable, to all property and assets described in
the Registration Statement as being owned by it. All leases and charters
to which the Company or any of the Subsidiaries is a party are valid
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<PAGE> 10
and binding and no default has occurred or is continuing thereunder,
which might result in any material adverse change in the business,
prospects, financial condition or results of operation of the Company and
the Subsidiaries taken as a whole, and the Company and the Subsidiaries
enjoy peaceful and undisturbed possession under all such leases and
charters to which any of them is a party as lessee or charterer with such
exceptions as do not materially interfere with the use made by the Company
or such Subsidiary.
(o) Each of the Company and the Subsidiaries maintains adequate
insurance.
(p) Ernst & Young LLP are independent public accountants with respect
to the Company as required by the Securities Act.
(q) The historical financial statements, together with related
schedules and notes, set forth in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and changes in
financial position of the Company and the Subsidiaries on the basis stated
in the Registration Statement at the respective dates or for the
respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; the pro forma financial statements
of the Company, together with the related notes, set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) have been prepared on a basis consistent with the historical
financial statements, except for the pro forma adjustments specified
therein, and have been prepared in good faith on the basis of the
assumptions described in the Registration Statement and such assumptions
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein; and the
other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared
on a basis consistent with such financial statements and the books and
records of the Company.
(r) Each of the Company and the Subsidiaries has such Permits as are
necessary to own, lease, charter and operate its respective Vessels and
other properties and to conduct its business in the manner described in
the Prospectus, subject to such qualifications as may be set forth in the
Prospectus; each of the Company and the Subsidiaries has fulfilled and
performed all of its material obligations with respect to such Permits and
no event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, subject in each
case to such qualification as may be set forth in the Prospectus; and,
except as described in the Prospectus, such Permits contain no
restrictions that are materially burdensome to the Company or any of the
Subsidiaries.
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<PAGE> 11
(s) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(t) Except as disclosed in the Prospectus, no holder of any security
of the Company has any right to require registration of shares of Common
Stock or any other security of the Company.
(u) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
(v) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens
related to or entitling any person to purchase or otherwise to acquire any
shares of the capital stock of, or other ownership interest in, the
Company or any Subsidiary thereof except as otherwise disclosed in the
Registration Statement.
(w) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-K of the Commission.
(x) There is (i) no significant unfair labor practice complaint
pending against the Company or any of the Subsidiaries or, to the best
knowledge of the Company, threatened against any of them, before the
National Labor Relations Board or any other federal, state or local labor
relations board, and no significant grievance or more significant
arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Company or any of the Subsidiaries or,
to the best knowledge of the Company, threatened against any of them, and
(ii) no significant strike, labor dispute, slowdown or stoppage pending
against the Company or any of the Subsidiaries or, to the best knowledge
of the Company, threatened against it or any of the Subsidiaries except
for such actions specified in clause (i) or (ii) above, which, singly or
in the aggregate could not reasonably be expected to have a material
adverse effect on the Company and the Subsidiaries, taken as a whole.
(y) Each of the Company and the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(z) All material tax returns required to be filed by the Company and
each of the Subsidiaries in any jurisdiction have been filed, other than
those filings being
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<PAGE> 12
contested in good faith, and all material taxes, including, without
limitation, withholding taxes, penalties and interest, assessments, fees
and other charges due pursuant to such returns or pursuant to any
assessment received by the Company or any of the Subsidiaries have been
paid, other than those being contested in good faith and for which
adequate reserves have been provided.
(aa) The Company has filed a registration statement pursuant to
Section 12(g) of the Exchange Act to register the Class A Common Stock,
has filed an application to list the Shares on the Nasdaq National Market,
and has received notification that the listing has been approved, subject
to notice of issuance of the Firm Shares.
(bb) Each of the Company and the Subsidiaries that owns any of the
marine vessels described in the Prospectus (the "Vessels") is and at all
times has been a citizen of the United States within the meaning of
Section 2 of the Shipping Act, 1916, as amended, 46 U.S.C.app. 802 (the
"Shipping Act"), and qualified to engage in coastwise trade. During the
period that the Company or any Subsidiary has owned any of the Vessels,
none of the Vessels has been sold, chartered or otherwise transferred to
any person or entity in violation of any applicable laws, rules or
regulations. Each Vessel operated in the U.S. coastwise trade is properly
documented under the laws of the United States with all necessary
endorsements to operate in the U.S. coastwise trade and maintained and
operated in compliance with the requirements of a currently valid
Certificate of Inspection issued by the U.S. Coast Guard and the each of
the Vessels not operated in the U.S. coastwise trade is properly
documented under the laws of Panama. Each Vessel which is classed by the
American Bureau of Shipping is in class and classed in the highest
classification for vessels of the same age and type by the American Bureau
of Shipping, free of any outstanding recommendations affecting class.
7. Representations and Warranties of the Selling Stockholders. Each
Selling Stockholder severally and not jointly represents and warrants to each
Underwriter that:
(a) Such Selling Stockholder is duly formed, validly existing and in
good standing as a limited partnership under the laws of the State of
Delaware and has all necessary partnership power and authority to own,
lease and operate its properties and is duly qualified and is in good
standing as a foreign partnership registered to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on such
Selling Stockholder.
(b) Such Selling Stockholder is the lawful owner of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement and has, and
on the Closing Date will have, good and valid title to such Shares, free
of all restrictions on transfer, liens, encumbrances, security interests
and claims whatsoever other than those imposed by the Securities Act or
Blue Sky Laws or those described in the Prospectus
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<PAGE> 13
pursuant to the Custody Agreement (as defined), the Power of
Attorney (as defined) or lock-up agreement executed by such Selling
Stockholder in connection with the initial public offering of the
Company's Common Stock in August 1996.
(c) Upon delivery of and payment for such Shares pursuant to this
Agreement, good and valid title to such Shares will pass to the
Underwriters, free of all restrictions on transfer, liens, encumbrances,
security interests and claims whatsoever other than those imposed by the
Securities Act or Blue Sky Laws or as described in the Prospectus.
(d) Such Selling Stockholder has, and on the Closing Date will have,
full legal right, power and authority to enter into this Agreement and the
Custody Agreement between such Selling Stockholder and ChaseMellon
Shareholder Services, LLC, as Custodian (such agreement and each similar
agreement may be referred to herein as a "Custody Agreement"), and to
sell, assign, transfer and deliver such Shares in the manner provided
herein and therein, and this Agreement and the Custody Agreement have been
duly authorized, executed and delivered by such Selling Stockholder and
each of this Agreement and the Custody Agreement is a valid and binding
agreement of such Selling Stockholder enforceable in accordance with its
terms, except as rights to indemnity and contribution hereunder may be
limited by applicable law, and subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of
general applicability affecting creditors' rights and to general equity
principles.
(e) The power of attorney (such power of attorney and each similar
power of attorney may be referred to herein as a "Power of Attorney")
signed by such Selling Stockholder appointing Kevin A. Macdonald and
Robert B. Calhoun, or any of them acting singly, as its attorney-in-fact
to the extent set forth therein with regard to the transactions
contemplated hereby and by the Registration Statement and the Custody
Agreement has been duly authorized, executed and delivered by or on behalf
of such Selling Stockholder and is a valid and binding instrument of such
Selling Stockholder enforceable in accordance with its terms, and,
pursuant to such power of attorney, such Selling Stockholder has
authorized Kevin A. Macdonald and Robert B. Calhoun, or any of them acting
singly, to execute and deliver on its behalf this Agreement and any other
document necessary or desirable in connection with transactions
contemplated hereby and to deliver the Shares to be sold by such Selling
Stockholder pursuant to this Agreement.
(f) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to, or which might reasonably
be expected to, cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Shares pursuant to the distribution contemplated by this Agreement,
and other than as permitted by the Securities Act, the Selling Stockholder
has not distributed and will not distribute any prospectus or other
offering material in connection with the offering and sale of the Shares.
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<PAGE> 14
(g) The execution, delivery and performance of this Agreement by
such Selling Stockholder, compliance by such Selling Stockholder with all
the provisions hereof and the consummation of the transactions
contemplated hereby by such Selling Stockholder will not (i) require any
consent, approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body (except as such may
be required under the Securities Act or Blue Sky Laws), (ii) conflict with
or constitute a breach of any of the terms or provisions of, or a default
under, organizational documents of such Selling Stockholder, if not an
individual, or (except as would not have a material adverse effect) or any
agreement, indenture or other instrument to which such Selling Stockholder
is a party or by which such Selling Stockholder or property of such
Selling Stockholder is bound, or (iii) (except as would not have a
material adverse effect) violate or conflict with any laws, administrative
regulation or ruling or court decree applicable to such Selling
Stockholder or property of such Selling Stockholder.
(h) Such Selling Stockholder has reviewed such part of the
Registration Statement included in the table and the footnotes thereto
under the caption "Principal and Selling Stockholders" which specifically
relate to such Selling Stockholder and such part of the Registration
Statement does not, and will not on the Closing Date, contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(i) At any time during the period described in Section 5(e), if there
is any change in the information referred to in paragraph (h) above with
respect to any Selling Stockholder, then such Selling Stockholder will
promptly notify you of such change.
8. Representations and Warranties of the Hvide Trust. The Hvide Trust
represents and warrants to each Underwriter that:
(a) It is duly formed and validly existing as a trust under the laws
of the State of Florida and has all necessary power and authority to own,
lease and operate its properties and is duly registered to do business in
each jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on the Hvide
Trust.
(b) It is the lawful owner of the Shares to be sold by it pursuant to
this Agreement and has, and on each Option Closing Date will have, good
and valid title to such Shares, free of all restrictions on transfer,
liens, encumbrances, security interests and claims whatsoever other than
those imposed by the Securities Act or Blue Sky Laws.
(c) Upon delivery of and payment for such Shares pursuant to this
Agreement, good and valid title to such Shares will pass to the
Underwriters, free of
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<PAGE> 15
all restrictions on transfer, liens, encumbrances, security
interests and claims whatsoever other than those imposed by the Securities
Act or Blue Sky Laws.
(d) It has, and on each Option Closing Date will have, full legal
right, power and authority to enter into this Agreement and the Custody
Agreement, and to sell, assign, transfer and deliver such Shares in the
manner provided herein and therein, and this Agreement and the Custody
Agreement have been duly authorized, executed and delivered by the Hvide
Trust and each of this Agreement and the Custody Agreement is a valid and
binding agreement of the Hvide Trust enforceable in accordance with its
terms, except as rights to indemnity and contribution hereunder may be
limited by applicable law other than those imposed by the Securities Act
or Blue Sky Laws.
(e) The Power of Attorney signed by the Hvide Trust appointing J.
Erik Hvide and John H. Blankley, or any of them acting singly, as its
attorney-in-fact to the extent set forth therein with regard to the
transactions contemplated hereby and by the Registration Statement and the
Custody Agreement has been duly authorized, executed and delivered by or
on behalf of the Hvide Trust and is a valid and binding instrument of the
Hvide Trust in accordance with its terms, and, pursuant to such Power of
Attorney, the Hvide Trust has authorized J. Erik Hvide and John H.
Blankley, or any of them acting singly, to execute and deliver on its
behalf this Agreement and any other document necessary or desirable in
connection with transactions contemplated hereby and to deliver the Shares
to be sold by the Hvide Trust pursuant to this Agreement.
(f) it has not taken, and will not take, directly or indirectly, any
action designed to, or which might reasonably be expected to, cause or
result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares pursuant to the
distribution contemplated by this Agreement, and other than as permitted
by the Securities Act, the Hvide Trust has not distributed and will not
distribute any prospectus or other offering material in connection with
the offering and sale of the Shares.
(g) The execution, delivery and performance of this Agreement by the
Hvide Trust, compliance by it with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require
any consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body (except
as such may be required under the Securities Act or Blue Sky Laws), (ii)
conflict with or constitute a breach of any of the terms or provisions of,
or a default under, organizational documents of the Hvide Trust, if not an
individual, or any agreement, indenture or other instrument to which the
Hvide Trust is a party or by which the Hvide Trust or its property is
bound, or (iii) violate or conflict with any laws, administrative
regulation or ruling or court decree applicable to the Hvide Trust or its
property.
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<PAGE> 16
(h) it has reviewed such parts of the Registration Statement under
the caption "Principal and Selling Stockholders" which specifically relate
to the Hvide Trust and such part of the Registration Statement does not,
and will not on the Closing Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(i) At any time during the period described in Section 5(e), if there
is any change in the information referred to in paragraph (h) above, the
Hvide Trust will immediately notify you of such change.
9. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages, liabilities and judgments
caused by any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or the Prospectus (as amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any
Underwriters furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use therein.
(b) Each Selling Stockholder, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, to the same extent as to the
foregoing indemnity from the Company, but only with reference to
information furnished to the Company by the Selling Stockholders expressly
for use in the Registration Statement, the Prospectus or any preliminary
prospectus. The Company, the Underwriters, the Hvide Trust and the Selling
Stockholders agree that, for all purposes of this Agreement, the only
information so furnished to the Company by each such Selling Stockholder is
the information which specifically relates to such Selling Stockholder
included in the table and footnotes related thereto under the caption
"Principal and Selling Stockholders." Notwithstanding anything to the
contrary contained in this paragraph (b), the indemnity provided by each
Selling Stockholder and the Hvide Trust hereunder shall be limited to the
total amount received by it pursuant to Section 2 hereof for the Shares
sold by it hereunder.
(c) The Hvide Trust agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, to the same extent as to the foregoing indemnity from the
Company, but only with reference to information
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<PAGE> 17
furnished to the Company by the Hvide Trust expressly for use in the
Registration Statement, the Prospectus or any preliminary prospectus. The
Company, the Underwriters, the Selling Stockholders and the Hvide Trust
agree that, for all purposes of this Agreement, the only information so
furnished to the Company by the Hvide Trust is the information which
relates to the Hvide Trust under the caption "Principal and Selling
Stockholders."
(d) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and any person controlling the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, each Selling Stockholder, the Hvide Trust, and each person, if any,
controlling such Selling Stockholder or the Hvide Trust within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to each
Underwriter, but only with reference to information relating to such
Underwriter furnished in writing by or on behalf of such Underwriter
through you expressly for use in the Registration Statement, the Prospectus
or any preliminary prospectus. In case any action shall be brought against
the Company, any of its directors, any such officer or any person
controlling the Company, any Selling Stockholder or any person controlling
such Selling Stockholder based on the Registration Statement, the
Prospectus or any preliminary prospectus and in respect of which indemnity
may be sought against any Underwriter, the Underwriter shall have the
rights and duties given to the Sellers (except that if any Seller shall
have assumed the defense thereof such Underwriter shall not be required to
do so, but may employ separate counsel therein and participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of such Underwriter), and the Company, its directors, any such
officers and any person controlling the Company, the Selling Stockholders
and any person controlling such Selling Stockholders and the Hvide Trust
and any person controlling the Hvide Trust shall have the rights and duties
given to the Underwriters, by Section 9(e).
(e) In case any action shall be brought against any Underwriter or any
person controlling such Underwriter, based upon any preliminary prospectus,
the Registration Statement or the Prospectus or any amendment or supplement
thereto and with respect to which indemnity may be sought against the
Company or any Selling Stockholder or the Hvide Trust, such Underwriter
shall promptly notify the Company and the Selling Stockholders and the
Hvide Trust in writing and the Company or the Selling Stockholders or the
Hvide Trust, as appropriate, shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such indemnified party
and payment of all fees and expenses. Any Underwriter or any such
controlling person shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the employment of such counsel has been
specifically authorized in writing by the Company, (ii) the Company, the
Hvide Trust and the Selling Stockholders shall have failed to assume the
defense and employ counsel or (iii) the named parties to any such action
(including any impleaded
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<PAGE> 18
parties) include both such Underwriter or such controlling person
and the Company, the Hvide Trust or any Selling Stockholder, as the case
may be, and such Underwriter or such controlling person shall have been
advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to the Company, the Hvide Trust or the Selling Stockholders, as the case
may be, (in which case the Company, the Hvide Trust and the Selling
Stockholders shall not have the right to assume the defense of such action
on behalf of such Underwriter or such controlling person, it being
understood, however, that the Company, the Hvide Trust and the Selling
Stockholders shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all such Underwriters and controlling
persons, which firm shall be designated in writing by Donaldson, Lufkin &
Jenrette Securities Corporation and that all such fees and expenses shall
be reimbursed as they are incurred). A Seller shall not be liable for any
settlement of any such action effected without the written consent of such
Seller but, if settled with the written consent of such Seller, such
Seller agrees to indemnify and hold harmless any Underwriter and any such
controlling person from and against any loss or liability by reason of
such settlement. Notwithstanding the immediately preceding sentence, if in
any case where the fees and expenses of counsel are at the expense of the
indemnifying party and an indemnified party shall have requested the
indemnifying party to reimburse the indemnified party for such fees and
expenses of counsel as incurred, such indemnifying party agrees that it
shall be liable for any settlement of any action effected without its
written consent if (i) such settlement is entered into more than ten
business days after the receipt by such indemnifying party of the
aforesaid request and (ii) the indemnifying party shall have failed to
reimburse the indemnified party in accordance with such request for
reimbursement prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which
any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such
proceeding.
(f) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Sellers on the one hand and the Underwriters on the other
hand from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Sellers and the
Underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or
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<PAGE> 19
judgments, as well as any other relevant equitable considerations.
The relative benefits received by the Sellers and the Underwriters shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Sellers, and the
total underwriting discounts and commissions received by the Underwriters,
bear to the total price to the public of the Shares, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
of the Sellers and the Underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the Company, the Hvide Trust, the Selling
Stockholders or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9(f) were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities or judgments referred
to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9, (x) no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and (y) no Selling
Stockholder or the Hvide Trust shall be required to contribute any amount
in excess of the amount by which the total amount received by it pursuant
to Section 2 hereof for the Shares sold by it hereunder exceeds the amount
of any damages which such Selling Stockholder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to
this Section 9(f) are several in proportion to the respective number of
Shares purchased by each of the Underwriters hereunder and not joint.
(g) Each of the Company and the Hvide Trust hereby designates the
General Counsel of the Company at the address listed on the cover of the
Registration Statement, and each other Seller hereby designates Kevin A.
Macdonald at the address for the Selling Stockholders listed in Section 13
herein, in each case as its authorized agent, upon which process may be
served in any action, suit or proceeding which may be instituted in any
state or federal court in the State of New York by any Underwriter or
person controlling an Underwriter asserting a claim for indemnification or
contribution under or pursuant to this Section 9, and each Seller will
accept the jurisdiction of such
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<PAGE> 20
court in such action, and waives, to the fullest extent permitted by
applicable law, any defense based upon lack of personal jurisdiction or
venue. A copy of any such process shall be sent or given to such Seller,
at the address for notices specified in Section 13.
10. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters to purchase the Firm Shares under this Agreement are subject
to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the Closing Date with the
same force and effect as if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective not later
than 5:00 p.m. (and in the case of a Registration Statement filed under
Rule 462(b) under the Securities Act, not later than 10:00 p.m.), New York
City time, on the date of this Agreement or at such later date and time as
you may approve in writing, and at the Closing Date no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been commenced or
shall be pending before or contemplated by the Commission.
(c) (i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, affairs or business prospects, whether or not arising in the
ordinary course of business, of the Company, (ii) since the date of the
latest balance sheet included in the Registration Statement and the
Prospectus there shall not have been any change, or any development
involving a prospective material adverse change, in the capital stock or
in the long-term debt of the Company from that set forth in the
Registration Statement and Prospectus, (iii) the Company and the
Subsidiaries shall have no liability or obligation, direct or contingent,
which is material to the Company and the Subsidiaries, taken as a whole,
other than those reflected in the Registration Statement and the
Prospectus and (iv) on the Closing Date you shall have received a
certificate dated the Closing Date, signed by J. Erik Hvide and John H.
Blankley, in their capacities as the Chief Executive Officer and Chief
Financial Officer of the Company, respectively, confirming the matters set
forth in paragraphs (a), (b), and (c) of this Section 10.
(d) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the
Closing Date and you shall have received a certificate to such effect,
dated the Closing Date, from each Selling Stockholder (which certificate
may be signed on behalf of each Selling Stockholder by any Attorney
pursuant to a Power of Attorney).
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<PAGE> 21
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Dyer Ellis & Joseph PC, counsel for the Company, to the effect
that:
(i) each of the Company, the Subsidiaries and the Hvide
Trust has been duly incorporated or formed, is validly
existing as a corporation, limited liability company,
partnership or trust, in good standing under the laws of its
jurisdiction of incorporation or formation and has the power
and authority required to carry on its business as it is
currently being conducted and to own, lease, charter and
operate its properties and assets, including, without
limitation, the Vessels;
(ii) each of the Company, the Subsidiaries and the Hvide
Trust is duly qualified and is in good standing as a foreign
corporation, limited liability company, partnership or trust
authorized to do business in each jurisdiction in which the
nature of its business or its ownership, chartering or leasing
of property requires such qualification, except where the
failure to be so qualified would not have a material adverse
effect on the Company and the Subsidiaries, taken as a whole;
(iii) all of the outstanding shares of capital stock of,
or other ownership interests in, each of the Company's
subsidiaries have been duly and validly authorized and issued
and are fully paid and non-assessable, and are owned by the
Company, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature;
(iv) all the outstanding shares of Common Stock
(including the Shares to be sold by the Selling Stockholders
and the Hvide Trust) have been duly authorized and validly
issued and are fully paid, non-assessable and not subject to
any preemptive or similar rights;
(v) the Shares to be issued and sold by the Company
hereunder have been duly authorized, and when issued and
delivered to the Underwriters against payment therefor as
provided by this Agreement, will have been validly issued and
will be fully paid and non-assessable, and the issuance of
such Shares is not subject to any preemptive or similar
rights;
(vi) this Agreement has been duly authorized, executed
and delivered by the Company and the Hvide Trust, and is a
valid and binding agreement of the Company and the Hvide Trust
enforceable in accordance with its terms (except as rights to
indemnity and contribution hereunder may be limited by
applicable law);
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<PAGE> 22
(vii) the authorized capital stock of the Company,
including the Common Stock, conforms as to legal matters to
the description thereof contained in the Prospectus;
(viii) the Registration Statement has become effective
under the Securities Act, no stop order suspending its
effectiveness has been issued and no proceedings for that
purpose are, to the knowledge of such counsel, pending before
or contemplated by the Commission;
(ix) the statements under the captions "Business-Legal
Proceedings," "Business-Environmental and Other Regulation,"
"Certain Transactions," "Description of Certain Indebtedness,"
"Description of Capital Stock" and "Shares Eligible for Future
Sale" in the Prospectus and Items 14 and 15 of Part II of the
Registration Statement insofar as such statements constitute a
summary of legal matters, documents or proceedings referred to
therein, fairly present the information called for with
respect to such legal matters, documents and proceedings;
(x) To the best of such counsel's knowledge after due
inquiry, none of the Company, any of the Subsidiaries or the
Hvide Trust is in violation of its respective Constituent
Documents and none of the Company, any of the Subsidiaries or
the Hvide Trust is in default in the performance of any
obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in
any other agreement, indenture or instrument material to the
conduct of the business of the Company and the Subsidiaries,
taken as a whole, or the Hvide Trust, to which any of such
entities is a party or by which any of such entities or their
respective property is bound;
(xi) the execution, delivery and performance of this
Agreement by the Company and the Hvide Trust, compliance by
the Company and the Hvide Trust with all the provisions hereof
and the consummation of the Current Acquisitions and the
transactions contemplated hereby will not require any consent,
approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental
body (except as such may be required under the Securities Act
or other securities or Blue Sky laws) and will not conflict
with or constitute a breach of any of the terms or provisions
of, or a default under, the Constituent Documents of the
Company, any of the Subsidiaries or the Hvide Trust or any
agreement, indenture or other instrument to which the Company,
any of the Subsidiaries or the Hvide Trust is a party or by
which the Company, any of the Subsidiaries, the Hvide Trust or
their respective properties are bound, or violate or conflict
with any laws, administrative regulations or rulings or
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<PAGE> 23
court decrees applicable to the Company, any of the
Subsidiaries, the Hvide Trust or their respective properties;
(xii) each of the Company and any Subsidiaries that owns
any of the Vessels is, and during all relevant times has been,
a citizen of the United States within the meaning of Section 2
of the Shipping Act and qualified to own and operate vessels
engaged in U.S. coastwise trade; each of the Vessels
identified in the Prospectus as being owned, operated or
managed by the Company and engaged in U.S. coastwise trade is
properly documented under the laws of the United States with
all necessary endorsements to operate in the U.S. coastwise
trade; the Company is the owner of record of each Vessel
identified in the Prospectus as being owned by it, free and
clear of all liens, claims and encumbrances of record, other
than those described in the Prospectus;
(xiii) after due inquiry, such counsel does not know of
any legal or governmental proceeding pending or threatened to
which the Company or any of the Subsidiaries is a party or to
which any of their respective property is subject which is
required to be described in the Registration Statement or the
Prospectus and is not so described, or of any contract or
other document which is required to be described in the
Registration Statement or the Prospectus or is required to be
filed as an exhibit to the Registration Statement which is not
described or filed as required;
(xiv) to the best of such counsel's knowledge, after due
inquiry, neither the Company nor any of the Subsidiaries has
violated any Environmental Laws, nor any federal or state law
relating to discrimination in the hiring, promotion or pay of
employees nor any applicable federal or state wages and hours
laws, nor any provisions of ERISA or the rules and regulations
promulgated thereunder, which in each case might result in any
material adverse change in the business, prospects, financial
condition or results of operation of the Company and the
Subsidiaries, taken as a whole;
(xv) each of the Company and the Subsidiaries has such
Permits, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, charter
and operate its respective Vessels and other properties and to
conduct its business in the manner described in the
Prospectus; to the best of such counsel's knowledge, after due
inquiry, each of the Company and the Subsidiaries has
fulfilled and performed all of its material obligations with
respect to such Permits and no event has occurred which
allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such
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<PAGE> 24
Permit, subject in each case to such qualification as may be
set forth in the Prospectus; and, except as described in the
Prospectus, such Permits contain no restrictions that are
materially burdensome to the Company or any of the
Subsidiaries;
(xvi) the Company is not an "investment company" or a
company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(xvii) to the best of such counsel's knowledge, after due
inquiry, no holder of any security of the Company has any
right to require registration of shares of Common Stock or any
other security of the Company, except as disclosed in the
Prospectus;
(xviii) to the best of such counsel's knowledge after
due inquiry, all leases and vessel charters to which the
Company or any of the Subsidiaries is a party are valid and
binding and, to the best of such counsel's knowledge after due
inquiry, no default has occurred or is continuing thereunder,
which might result in any material adverse change in the
business, prospects, financial condition or results of
operation of the Company and the Subsidiaries taken as a
whole, and the Company and the Subsidiaries enjoy peaceful and
undisturbed possession under all such leases and vessel
charters to which any of them is a party as lessee or
charterer with such exceptions as do not materially interfere
with the use made by the Company or such Subsidiary;
(xix) (i) the Registration Statement (including a
Registration Statement, if any, filed pursuant to Rule 462(b)
under the Securities Act) and the Prospectus and any
supplement or amendment thereto (except for financial
statements as to which no opinion need be expressed) comply as
to form in all material respects with the Securities Act, and
(ii) such counsel believes that (except for financial
statements, as aforesaid) the Registration Statement and the
prospectus included therein at the time the Registration
Statement became effective did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and that the Prospectus, as
amended or supplemented, if applicable (except for financial
statements, as aforesaid) does not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading;
(xx) the provisions set forth in Article VI, Section 7 of
the Company's Articles of the Incorporation which provide that
any purported transfer to non-U.S. citizens of shares or an
interest in shares
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<PAGE> 25
of the Company represented by a "Citizen" certificate in
excess of 24.99% of the outstanding shares of each class of
capital stock are enforceable in accordance with their terms
under applicable law;
(xxi) a Custody Agreement has been duly authorized,
executed and delivered by the Hvide Trust and is a valid and
binding agreement of the Hvide Trust enforceable in accordance
with its terms, except as rights to indemnity and contribution
may be limited by applicable law or by general equity
principles;
(xxii) the Hvide Trust has full legal right, power and
authority, any approval required by law (other than any
approval imposed by Blue Sky Laws) to sell, assign, transfer
and deliver the Shares to be sold by it in the manner provided
in this Agreement and the Custody Agreement;
(xxiii) the Hvide Trust has good and valid title to the
certificates for the Shares to be sold by it and upon delivery
thereof, pursuant hereto and payment therefor, good and valid
title will pass to the Underwriters, severally, free of all
restrictions on transfer, liens, encumbrances (except as
imposed by the Securities Act or Blue Sky Laws), security
interests and claims whatsoever other than those created by
the Underwriters; and
(xxiv) the Power of Attorney signed by the Hvide Trust
appointing J. Erik Hvide and John H. Blankley, or any of them
acting singly, as its attorney-in-fact to the extent set forth
therein with regard to the transactions contemplated hereby
and by the Registration Statement has been duly authorized,
executed and delivered by or on behalf of the Hvide Trust and
is a valid and binding instrument of the Hvide Trust
enforceable in accordance with its terms, except as to rights
to indemnity and contribution may be limited by applicable law
or by general equity principles, and pursuant to such Power of
Attorney, the Hvide Trust has authorized J. Erik Hvide and
John H. Blankley, or any of them acting singly, to execute and
deliver on its behalf this Agreement and any other document
necessary or appropriate in connection with transactions
contemplated hereby and to deliver the Shares to be sold by it
pursuant to this Agreement.
In giving such opinion with respect to the matters covered by clause (xix)
such counsel may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification except as
specified. In giving such opinion with respect to the matters covered by clause
(xii), such counsel may state that their opinion relies upon the Company's most
recent affidavit of citizenship filed with the U.S. Maritime Administration. In
giving such opinions with respect to matters of Florida law and certain of such
opinions set forth in subparagraphs (i) through (iv)
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<PAGE> 26
above, such counsel may state that their opinion relies upon the opinion of
Florida counsel to the Company, and in giving certain of such opinions set forth
in subparagraphs (i) through (iv) and (xxi) through (xxiv) above, such counsel
may state that their opinion relies upon the opinion of Gene Douglas,
Vice-President - Legal and General Counsel of the Company. In each instance,
Dyer Ellis & Joseph shall deliver to the Underwriters a copy of the opinion
relied upon and state that they are justified in relying thereon. In giving such
opinions, such counsel (i) may state that when a statement is qualified by "to
the best of such counsel's knowledge" or a similar phrase, it is intended to
indicate that those attorneys in such firm who have rendered significant legal
services in connection with such firm's representation of the Company do not
have actual knowledge and (ii) may state that when a statement is qualified by
"after due inquiry" or similar phrase, it is intended to indicate that attorneys
in such firm have participated in conferences with officers and other
representatives of the Company and such firm has received written
representations from the Company or its officers regarding the subject matter
referenced in such statement.
The opinion of Dyer Ellis & Joseph described in paragraph (e) above shall
be rendered to you at the request of the Company and shall so state therein.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of counsel to each of the Selling Stockholders, to the effect that:
(i) such Selling Stockholder is duly formed, validly existing
and in good standing as a limited partnership under the laws of the
State of Delaware and has all necessary partnership power and
authority to own, lease and operate its properties and to enter into
this Agreement and is duly qualified and is in good standing as a
foreign partnership registered to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of
property requires such qualification, except where the failure to be
so qualified would not have a material adverse effect on such
Selling Stockholder.
(ii) this Agreement has been duly authorized, executed and
delivered by such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder enforceable in accordance with
its terms, except as rights to indemnity and contribution hereunder
may be limited by applicable law, and subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability affecting creditors' rights
and to general equity principles;
(iii) the execution, delivery and performance of this Agreement
by such Selling Stockholder, compliance by such Selling Stockholder
with all the provisions hereof and the consummation of the
transactions contemplated hereby by such Selling Stockholder will
not require any consent, approval, authorization or other order of
any court, regulatory body, administrative agency or other
governmental body (except as such may be required under the
Securities Act or
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<PAGE> 27
other securities or Blue Sky laws) and will not conflict with
or constitute a breach of any of the terms or provisions of, or a
default under, the Constituent Documents of each Selling Stockholder
or (except as would not have a material adverse effect) any
agreement, indenture or other instrument to which such Selling
Stockholder is a party or by which each Selling Stockholder or its
properties are bound, or (except as would not have a material
adverse effect) violate or conflict with any laws, administrative
regulations or rulings or court decrees applicable to such Selling
Stockholder or its properties;
(iv) the Custody Agreement has been duly authorized, executed
and delivered by such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder enforceable in accordance with
its terms, except as rights to indemnity and contribution may be
limited by applicable law or by general equity principles;
(v) such Selling Stockholder has full legal right, power and
authority, any approval required by law (other than any approval
imposed by Blue Sky Laws) to sell, assign, transfer and deliver the
Shares to be sold by it in the manner provided in this Agreement and
the Custody Agreement;
(vi) such Selling Stockholder has good and valid title to the
certificates for the Shares to be sold by it and upon delivery
thereof, pursuant hereto and payment therefor, good and valid title
will pass to the Underwriters, severally, free of all restrictions
on transfer, liens, encumbrances (except as imposed by the
Securities Act or Blue Sky Laws), security interests and claims
whatsoever other than those created by the Underwriters or described
in the Prospectus; and
(vii) the power of attorney signed by such Selling Stockholder
appointing Kevin A. Macdonald and Robert B. Calhoun, or any of them
acting singly, as its attorney-in-fact to the extent set forth
therein with regard to the transactions contemplated hereby and by
the Registration Statement (each, a "Power of Attorney") has been
duly authorized, executed and delivered by or on behalf of such
Selling Stockholder and is a valid and binding instrument of such
Selling Stockholder enforceable in accordance with its terms, except
as to rights to indemnity and contribution may be limited by
applicable law or by general equity principles, and pursuant to such
Power of Attorney, such Selling Stockholder has authorized Kevin A.
Macdonald and Robert B. Calhoun, or any of them acting singly, to
execute and deliver on its behalf this Agreement and any other
document necessary or appropriate in connection with transactions
contemplated hereby and to deliver the Shares to be sold by it
pursuant to this Agreement.
(g) You shall have received on the Closing Date an opinion, dated
the Closing Date, of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel
for the Underwriters, in form and substance satisfactory to the
Underwriters, and Akin, Gump,
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<PAGE> 28
Strauss, Hauer & Feld, L.L.P. shall have received such documentation
and information as it requests to enable it to pass upon the matters
covered in such opinion.
(h) You shall have received a letter on and as of the Closing Date,
in form and substance satisfactory to you, from Ernst & Young LLP,
independent public accountants, with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus and substantially in the form and substance of the
letter delivered to you by Ernst & Young LLP on the date of this
Agreement.
(i) The Company shall not have failed at or prior to the Closing Date
to perform or comply with any of the agreements herein contained and
required to be performed or complied with by the Company at or prior to
the Closing Date.
(j) You shall have received on the Closing Date a certificate of
class for each Vessel (dated not more than ten (10) days prior to the
Closing Date) evidencing that each such Vessel is in class and classed in
the highest classification for vessels of the same age and type by the
American Bureau of Shipping, free of any outstanding recommendations
affecting class.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
11. Effective Date of Agreement and Termination. This Agreement shall
become effective upon the later of (i) execution of this Agreement and (ii)
when notification of the effectiveness of the Registration Statement has been
released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date by
you by written notice to the Sellers if any of the following has occurred: (i)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, any adverse change or development involving a
prospective adverse change in the condition, financial or otherwise, of the
Company or any of the Subsidiaries or the earnings, affairs, or business
prospects of the Company or any of the Subsidiaries, whether or not arising in
the ordinary course of business, which would, in your judgment, make it
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus, (ii) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in your
judgment, is material and adverse and would, in your judgment, make it
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus, (iii) the suspension or material limitation of trading in
securities on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market or limitation on prices for securities on any such
exchange or Nasdaq National Market, (iv) the enactment, publication, decree or
other promulgation of any federal or state statute, regulation, rule or order of
any court or other
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governmental authority which in your opinion materially and adversely affects,
or will materially and adversely affect, the business or operations of the
Company or any Subsidiary, (v) the declaration of a banking moratorium by either
federal or New York State authorities or (vi) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it or they have agreed to
purchase hereunder on such date and the aggregate number of Firm Shares or
Additional Shares, as the case may be, which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase is
not more than one-tenth of the total number of Shares to be purchased on such
date by all Underwriters, each non-defaulting Underwriter shall be obligated
severally, in the proportion which the number of Firm Shares set forth opposite
its name in Schedule I bears to the total number of Firm Shares which all the
non-defaulting Underwriters, as the case may be, have agreed to purchase, or in
such other proportion as you may specify, to purchase the Firm Shares or
Additional Shares, as the case may be, which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase on
such date; provided that in no event shall the number of Firm Shares or
Additional Shares, as the case may be, which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 10
by an amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date or on an Option Closing Date, as the case may be, any
Underwriter or Underwriters shall fail or refuse to purchase Firm Shares, or
Additional Shares, as the case may be, and the aggregate number of Firm Shares
or Additional Shares, as the case may be, with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares to be purchased
on such date by all Underwriters and arrangements satisfactory to you and the
Sellers for purchase of such Shares are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter and the applicable Sellers. In any such case which
does not result in termination of this Agreement, either you or the Sellers
shall have the right to postpone the Closing Date or the applicable Option
Closing Date, as the case may be, but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of any such Underwriter under this
Agreement.
12. Agreements of the Selling Stockholders and the Hvide Trust. Each of
the Selling Stockholders and the Hvide Trust, severally and not jointly, agrees
with you and the Company:
(a) In the case of the Hvide Trust only, to pay or cause to be paid
all transfer taxes with respect to the Shares to be sold by such Seller
and, in the case of the
29
<PAGE> 30
Selling Stockholders, the Company agrees to pay all transfer taxes
with respect to the Shares to be sold by such Sellers; and
(b) To take all commercially reasonable actions in cooperation with
the Company and the Underwriters (i) to cause the Registration Statement
to become effective at the earliest possible time, (ii) to do and perform
all things to be done and performed by it under this Agreement prior to
the Closing Date and (iii) to satisfy all conditions precedent to be
satisfied by it to the delivery of the Shares pursuant to this Agreement.
13. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, to Hvide Marine
Incorporated, 2200 Eller Drive, Fort Lauderdale, Florida 33316, Attention: Chief
Financial Officer, (b) if to any Selling Stockholder, to such Selling
Stockholder c/o Clipper Capital Associates, L.P., Eleven Madison Avenue, 26th
Floor, New York, New York 10010, Attention: Kevin A. Macdonald, (c) if to the
Hvide Trust, c/o J. Erik Hvide, Trustee, 2200 Eller Drive, Fort Lauderdale,
Florida 33316 and (d) if to any Underwriter or to you, to you c/o Donaldson,
Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New York, New York
10172, Attention: Syndicate Department, or in any case to such other address as
the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Selling Stockholders, the Hvide Trust,
the Company and its officers and directors and of the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter or by or on behalf of the Sellers, the
officers or directors of the Company or any controlling person of the Sellers,
(ii) acceptance of the Shares and payment for them hereunder and (iii)
termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because of any
failure or refusal on the part of the Sellers to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
the several Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Sellers, the Underwriters, any
controlling persons referred to herein and their respective successors and
assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" shall not include a purchaser of any of the Shares
from any of the several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
30
<PAGE> 31
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
31
<PAGE> 32
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Hvide Trust, the Selling Stockholders and the several
Underwriters.
Very truly yours,
HVIDE MARINE INCORPORATED
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
THE SELLING STOCKHOLDERS NAMED
IN SCHEDULE II HERETO
By:
-----------------------------------
Attorney-in-Fact
THE HVIDE FAMILY TRUST II
By:
-----------------------------------
Attorney-in-Fact
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
Acting severally on behalf of themselves and the several
Underwriters named in Schedule I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
<PAGE> 33
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS FIRM SHARES
- ------------ -----------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation
Howard, Weil, Labouisse, Friedrichs Incorporated
---------
Total 4,000,000
=========
</TABLE>
<PAGE> 34
SCHEDULE II
<TABLE>
<CAPTION>
Number of Shares
to be Sold to the
Selling Stockholder Underwriters
- ------------------- ------------
<S> <C>
Metropolitan Life Insurance Company
Olympus Growth Fund II, L.P.
Total -----------------------
=======================
</TABLE>
<PAGE> 35
ANNEX I
Required Stockholder Lock-ups for 90 Days
-----------------------------------------
J. Erik Hvide
Hvide Family Trust I
Hvide Family Trust II
John H. Blankley
Eugene F. Sweeney
Gene Douglas
Donald L. Caldera
Andrew W. Brauninger
Robert B. Calhoun, Jr.
Gerald Farmer
Jean Fitzgerald
John J. Lee
Walter C. Mink
Robert Rice
Raymond B. Vickers
William R. Ludt
Robert A. Santos
John J. Krumenacker
Leo T. Carey
John J. O'Connell
Christopher D. Strong
<PAGE> 1
EXHIBIT 5
January 28, 1997
Hvide Marine Incorporated
2200 Eller Drive
Ft. Lauderdale, FL 33316
Ladies and Gentlemen:
We have acted as counsel for Hvide Marine Incorporated, a Florida corporation
(the"Company"), in connection with the issuance and sale pursuant to the
Company's registration statement on Form S-1, File No. 333-18525, (the
"Registration Statement") of up to 4,600,000 shares of its Class A Common Stock,
par value $0.001 per share (the "Shares"). Based upon our examination of such
corporate records and other documents and such questions of law as we have
deemed necessary and appropriate, we are of the opinion that the Shares have
been duly authorized and, when sold as provided in the Underwriting Agreement
described in the Registration Statement, will be validly issued, fully paid, and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Dyer Ellis & Joseph PC
/s/
By: Michael Joseph
<PAGE> 1
EXHIBIT 10.22 (d)
================================================================================
U.S. $134,100,000
AMENDED AND RESTATED
CREDIT AGREEMENT
DATED AS OF FEBRUARY 3, 1997
By and Among
HVIDE MARINE INCORPORATED
and the Persons listed in Schedule A
as Borrowers,
and
CITIBANK, N.A.,
as Administrative Agent and Co-Agent,
and
THE FIRST NATIONAL BANK OF BOSTON,
as Letter of Credit Agent and Co-Agent,
and
CITIBANK, N.A.
THE FIRST NATIONAL BANK OF BOSTON
BNY FINANCIAL CORPORATION
HIBERNIA NATIONAL BANK
AMSOUTH BANK OF FLORIDA
as Banks
================================================================================
<PAGE> 2
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of February 3, 1997 of
a Credit Agreement dated as of September 28, 1994 as subsequently amended by
Amendment No. 1 dated as of May 15, 1995, Amendment No. 2 dated as of March 26,
1996, the Amended and Restated Credit Agreement dated as of June 21, 1996 and
Amendment No. 1 dated as of December 17, 1996 to the Amended and Restated Credit
Agreement is made and entered into by and among HVIDE MARINE INCORPORATED, a
corporation organized and existing under the laws of the State of Florida
("Hvide" or a "Borrower"), and each of the other Borrowers, listed in Schedule A
(each a "Borrower" and together with each other Borrower, the "Borrowers") and
CITIBANK, N.A., a national banking association organized and existing under the
laws of the United States of America ("United States" or "U.S."), THE FIRST
NATIONAL BANK OF BOSTON, a national banking association organized and existing
under the laws of the United States and each of the other banks or other
institutions whose names may appear on the signature pages of this Agreement or,
if applicable, in the Register (each a "Bank" and, collectively, the "Banks")
for whom Citibank, N.A., subject to Article VII of this Agreement, acts as
Administrative Agent and Co-Agent and The First National Bank of Boston, subject
of Article VII of this Agreement acts as Letter of Credit Agent and Co-Agent.
Capitalized terms not otherwise herein defined shall have the respective
meanings set forth below in Section 1.01.
PRELIMINARY STATEMENTS
(1) As of the Effective Date, Hvide and the other Borrowers will repay the
Senior Subordinated Note.
(2) Hvide and the other Borrowers have requested the Banks to amend certain
covenants and to increase the amounts available under Facilities A and F.
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<PAGE> 3
(3) The Borrowers have requested that the Banks enter into this Agreement
to provide the following Facilities:
<TABLE>
<CAPTION>
Facility Principal Amount Purpose
<S> <C> <C>
A Twenty Million Dollars to finance seasonal working capital
($20,000,000) needs of Borrowers
B up to Fifty Six Million to finance acquisition of offshore
Seven Hundred Fifty supply vessels and to refinance
Thousand Dollars Crewboats' Note and to pay for a
($56,750,000) portion of the acquisition of the OMI
Vessels
C up to Five Million Six to replace an existing standby Letter
Hundred Thousand Dollars of Credit
($5,600,000)
D up to Six Million Dollars to provide other letters of
($6,000,000) (sublimit of credit
Facility A)
F up to Fifty Million Dollars to provide for acquisitions of
($50,000,000) vessels: If the sum of the undrawn
Commitment Facility F), all
Advances and Letters of Credit
is less than sixty five
percent (65%) of the Pledged Collateral,
availability of advances for an Acquisition
may be the lesser of:(x)up to one hundred
percent (100%) of the purchase price or
appraised value whichever is less) of the
Acquisition; or (y) a multiple of six times
EBITDA of the Acquisition. Otherwise,
availability of Advances for an Acquisition
is restricted to the lesser of:(x) sixty five
percent (65%) of the purchase price or appraised
value (whichever is less) of the Acquisition; or
(y) a multiple of six times EBITDA of the
Acquisition.
</TABLE>
(4) The Borrowers have agreed to grant a first priority security interest
in the Mortgaged Vessels and the Receivables for all Obligations of the
Borrowers pursuant to Section 5.01(e).
(5) Each of the Banks has agreed severally, and not jointly, for such
Bank's Aggregate Amount and in the Percentage Interest in each Facility and to
provide the Loan upon the terms and conditions set forth herein.
(6) The Banks have requested each of the Administrative Agent and the
Letter of Credit Agent, and each of the Administrative Agent and the Letter of
Credit Agent has agreed, to act on behalf of the Banks in accordance with the
terms and conditions set forth herein.
(7) The Borrowers, the Administrative Agent, the Letter of Credit Agent and
each of the Banks party hereto desire
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<PAGE> 4
to amend and restate this Credit Agreement in its entirety, following the
Effective Date, to reflect the changes occasioned by the Second Offering and by
the increase in the Facilities.
NOW, THEREFORE, the Borrowers, the Banks, the Administrative Agent and the
Letter of Credit Agent hereby agree among themselves as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.011 Definitions. As used in this Agreement, each of the following
terms shall have the respective meaning set forth below (such meanings, unless
otherwise indicated, to apply to both the singular and plural forms of the terms
defined) and all references to "Article", "Schedule", "Section" and "Exhibit"
shall mean an Article of, a Schedule to, a Section of, or Exhibit to, this
Agreement unless otherwise specified:
"Acquisition" means each of the Vessels or all of the equity interest in a
corporation or limited partnership or other entity acquired by Hvide which may
be funded with Advances under Facilities B or F subject to the terms of Section
2.01(a).
"Acquisition Documents" means each bill of sale, memorandum of agreement,
each invoice, each asset purchase agreement or stock purchase agreement and
related documentation in connection with an Acquisition by a Borrower.
"Acquisition Mortgage Supplement" means a mortgage supplement substantially
in the form of Exhibit N executed by the Mortgagee and a Borrower which is the
owner of a Vessel which is an Acquisition in order to mortgage the Vessel
pursuant to the terms of this Agreement.
"Administrative Agent" means Citibank, N.A., and any successor
administrative agent under this Agreement.
"Advance" means all amounts disbursed by the Banks and the Administrative
Agent to the Borrowers under this Agreement or owed to the Letter of Credit
Agent under Section 2.07(g).
"Affiliate" means, with respect to any Person, any other person
controlling, controlled by or under common control with, such Person. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling", "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of the
power to vote ten percent (10%) or more of the securities having voting power
for the election of directors of such Person, or otherwise to direct or cause
the direction of the management and
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<PAGE> 5
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Aggregate Amount" means, as to a Bank the Dollar amount opposite such
Bank's name in Exhibit M hereto or, if applicable, in the Register, opposite
each Facility, as such amount may be adjusted from time to time pursuant to this
Agreement.
"Agreement" means this Agreement, as it may be restated, amended,
supplemented or otherwise modified from time to time.
"Agreement Date" means February 3, 1997 on which the respective parties
hereto shall have executed and delivered the Agreement.
"Alternate Base Rate" means, for any Interest Period or any other period, a
fluctuating interest rate per annum as shall be in effect from time to time,
which rate per annum shall at all times be equal to the highest of:
(a) the rate of interest announced publicly by Citibank, N.A., in New
York, New York, from time to time, as its base rate;
(b) a rate equal to 1/2 of one percent per annum above the latest
three-week moving average of secondary market morning offering rates in the
United States for three-month certificates of deposit of major United
States money market banks, such three-week moving average determined weekly
on each Monday (or if such day is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the previous
Friday by Citibank, N.A., on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve Bank
of New York or, if such publication shall be suspended or terminated, on
the basis of quotations for such rates received by Citibank, N.A., from
three New York certificate of deposit dealers of recognized standing
selected by Citibank, N.A., in each case adjusted to the nearest 1/4 of one
percent, or, if there is not nearest 1/4 of one percent, to the next higher
1/4 of one percent; or
(c) a rate equal to 1/2 of one percent per annum above the then
current Federal Funds Rate.
"Amendment and Restatement Fee" shall have the meaning set forth in Section
2.10 (d).
"Applicable Law" means anything in Section 8.09(d) to the contrary
notwithstanding, (a) all applicable common law and principles of equity and (b)
all applicable provisions of all (i) constitutions, statutes, rules, regulations
and orders of
-4-
<PAGE> 6
governmental bodies, including without limitation all provisions relating to the
environment, hazardous substances, health or safety, (ii) governmental approvals
and (iii) orders, decisions, judgments and decrees of all courts (whether at
law, in equity or admiralty) and arbitrators.
"Applicable Margin" means as to the Advances and any Letter of Credit, (a)
for the calendar year 1997, 1.25% as to the LIBOR Rate and 0.25% as to the
Alternate Base Rate; and (b) thereafter as to the LIBOR Rate or the Alternate
Base Rate, as the case may be, the Applicable Margin determined by the
Administrative Agent pursuant to Section 2.04(b)(iii)(A).
"Applicable Rate" means the Alternate Base Rate or the LIBOR Rate.
"Application" means an application for a letter of credit executed by the
Borrowers and delivered to the Letter of Credit Agent.
"Assignment and Acceptance" means any Assignment and Acceptance Agreement,
substantially in the form of Exhibit I and executed and delivered pursuant to
Section 7.10.
"Available Collateral" means, at any time (i) all Mortgaged Vessels; (ii)
Eligible Receivables; and (iii) all products and proceeds thereof.
"Available Commitment" shall have the meaning set forth in Exhibit K
hereto.
"Bank Taxes" means (i) net income, capital, doing business and franchise
taxes imposed on the Administrative Agent, the Letter of Credit Agent or a Bank
by the jurisdiction (a) under the laws of which the Administrative Agent, the
Letter of Credit Agent or such Bank is organized or any political subdivision or
taxing authority thereof or therein, (b) in which such Bank's lending office is
located or any political subdivision or taxing authority thereof or therein or
(c) in which such Bank is doing business or any political subdivision or taxing
authority thereof or therein and (ii) any tax, charge, fee, levy, impost, duty,
deduction or withholding that would not have been imposed but for the existence
of any present or former connection between the Administrative Agent, the Letter
of Credit Agent or Bank, as relevant (or between shareholders of such
Administrative Agent, the Letter of Credit Agent or Bank), and the United States
or any political subdivision thereof imposing such tax, charge, fee, levy,
impost, duty, deduction or withholding including, without limitation, the
Administrative Agent, the Letter of Credit Agent or Bank (or shareholders
thereof) being or having been a resident thereof, being or having been present
therein, being or having been engaged in a trade or business therein, or having
had a permanent establishment or fixed place of business therein (but excluding
a connection
-5-
<PAGE> 7
arising from the Administrative Agent's, Letter of Credit Agent's or a Bank's
execution or enforcement of or performance of its obligations under or receipt
of payment under the Loan Documents).
"Breakage Costs" has the meaning defined in Section 8.04(b).
"Business Day" means any day other than a Saturday, Sunday or any other day
on which commercial banks are required or authorized by law to close in New
York, New York, Boston, Massachusetts, London, England or in the city where the
Lending Office is located.
"Capital Expenditures" means the aggregate of all expenditures (including
that portion of leases which is capitalized on the consolidated balance sheet of
the Borrowers and their Subsidiaries and capitalized interest thereon) by the
Borrowers and their Subsidiaries that, in conformity with GAAP, should be, has
been or should have been included in the property, plant or equipment reflected
in a consolidated balance sheet of the Borrowers and their Subsidiaries.
"Capital Lease" means, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as such in a note to such balance sheet, other than, in the case of
the Borrowers or a Subsidiary of the Borrowers, any such lease under which any
of the Borrowers or such Subsidiary is the lessor.
"Cash Collateral Account" has the meaning defined in Section 5.03.
"Change of Control" means any change in the share ownership of Class B
Common Stock of Hvide except as may be disclosed by the filings made with the
SEC or which is not in accordance with Hvide's Articles of Incorporation.
"Closing Date" means September 29, 1994 on which the original Credit
Agreement was executed and delivered.
"Co-Agent" means each of Citibank, N.A. and The First National Bank of
Boston, as Co-Agent under this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and rulings issued thereunder.
"Collateral" means, collectively, the collateral listed in Schedule D and
all proceeds of the same and any property which becomes subject to the Security
Agreement after the date of this Agreement.
-6-
<PAGE> 8
"Commitment" means the obligation of each Bank to lend the amounts set
forth in Section 2.01 hereof, as such amounts may be reduced from time to time
pursuant to this Agreement.
"Commitment Fee" shall have the meaning set forth in Section 2.10(a).
"Commitment Termination Date" means January 14, 2002 with respect to
Facilities A and F; August 14, 1996 with respect to Facility B.
"Consolidated Assets" means, at any time, the consolidated assets of the
Borrowers and their consolidated subsidiaries as of such time.
"Consolidated Cash Flow" means for any period, EBITDA less cash taxes paid
plus Rental Expense less Capital Expenditures (excluding Acquisitions).
"Consolidated Financial Obligations" means for any period, all scheduled
principal payments in respect of Indebtedness plus Interest Expense and Rental
Expense which are to be paid by the Borrowers and their Consolidated
Subsidiaries.
"Consolidated Indebtedness" means Indebtedness of Hvide and its
Subsidiaries on a consolidated basis.
"Country of Registry" means each country under which a Vessel is documented
in the name of a Borrower as the owner and where the Mortgage in respect of said
Vessel is recorded.
"Credit Agreement" shall mean this Agreement, as from time to time
restated, amended, supplemented or modified.
"Crewboats Note" means the promissory note dated March 8, 1995 in the
original aggregate principal amount of Three Million United States Dollars (U.S.
$3,000,000) granted by Hvide in favor of Crewboats, Inc. and secured by First
Preferred mortgages over the U.S. flag vessels GULF RUNNER II, STORM RUNNER,
RAPID RUNNER and BIG BLUE.
"Default" means any event or condition that, with the giving of notice, the
lapse of time or both, would become an Event of Default.
"Dollars" and "$" means the lawful and freely transferable currency of the
United States of America.
"Drawdown Date" has the meaning set forth in Section 2.02(a).
"Earnings Assignment" means any assignment of earnings of a Mortgaged
Vessel by a Borrower to the Administrative Agent on behalf of the Banks,
substantially in the form of Exhibit G,
-7-
<PAGE> 9
and as the same may be amended, supplemented or otherwise modified from time to
time.
"EBITDA" means for any period and Person, the net income without giving
effect to adjustments, accruals, deductions or entries resulting from any gains
or losses from sales or other dispositions of assets of such Person for such
period plus, to the extent deducted in the calculation of net income, Interest
Expense, income taxes paid, depreciation, amortization and other non-cash
adjustments to income for such period excluding amortized drydocking expenses.
"EBITDAR" means EBITDA plus Rental Expenses.
"Effective Date" means the Business Day on which Hvide has received gross
proceeds of at least Sixty Five Million Dollars ($65,000,000) from its Second
Offering.
"Eligible Assignee" means (i) a commercial bank, savings and loan
institution, insurance company or financial institution organized under the laws
of the United States, or any State thereof, which bank has both assets in excess
of One Billion Dollars ($1,000,000,000) and combined capital and surplus in
excess of One Hundred Million Dollars ($100,000,000), or which insurance company
or financial institution has total assets in excess of One Billion Dollars
($1,000,000,000), and (ii) a finance company, insurance company or other
financial institution or a fund which is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its business,
has total assets in excess of Five Hundred Million Dollars ($500,000,000), is
doing business in the United States and is organized under the laws of the
United States, or any State thereof, or under the laws of any member country of
the OECD.
"Eligible Receivable" has the meaning stated in the Security Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Event of Default" means any of the events specified as such in Section
6.01.
"Facility" means each of Facility A, B, C, D and F.
"Facility A" means, upon the Effective Date, the credit facility available
to the Borrowers pursuant to Section 2.01(a)(i).
"Facility B" means the credit facility available to the Borrowers pursuant
to Section 2.01(a)(ii).
-8-
<PAGE> 10
"Facility C" means the credit facility available to the Borrowers pursuant
to Sections 2.07(a)(i) and 2.07(b)(i).
"Facility D" means the credit facility available to the Borrowers pursuant
to Section 2.07(b)(ii).
"Facility F" means upon the Effective Date, the credit facility available
to the Borrowers pursuant to Section 2.01(a)(iii).
"Fair Market Value" has the meaning specified in Section 1.03.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations of such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and in the statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession for use in the United States; provided, however, that
if, as a result of any change in GAAP after the Closing Date, such change in the
opinion of the Banks adversely affects the basis or efficacy of the covenants
used in this Agreement to ascertain the financial condition of the Borrowers,
then the calculation of covenant compliance under this Agreement shall be
determined in accordance with GAAP, as applied as if such change had not
occurred.
"HMI Vessels" means each of HMI PETROCHEM, HMI DYNACHEM and HMI ASTRACHEM
acquired by Hvide from OMI Corp. as described in Exhibit L hereto.
"Home Port" means, as to each Vessel, the port of each Country of Registry
where documents of title and mortgages may be recorded in respect of such
Vessel.
"Hvide" means Hvide Marine Incorporated, formerly named Hvide Corp. as the
surviving corporation of the merger between Hvide Marine Incorporated and Hvide
Corp.
"Incorporation Jurisdiction" means the jurisdiction of incorporation or
legal organization of a Person.
-9-
<PAGE> 11
"Indebtedness" means (a) any liability of any Person (i) for borrowed
money, or under any reimbursement obligation related to a letter of credit or
bid or performance bond facility, or (ii) evidenced by a bond, note, debenture
or other evidence of indebtedness (including a purchase money obligation)
representing extensions of credit or given in connection with the acquisition of
any business, property, service or asset of any kind (other than a trade payable
or other current liability arising in the ordinary course of business) or (iii)
for obligations with respect to (A) an operating lease calculated on the basis
of the present value discounted at ten percent (10%) on the future payments from
such Person under such operating lease, or (B) a lease of real or personal
property that is or would be classified and accounted for as a Capital Lease;
(b) any liability of others either for any lease, dividend or letter of credit,
or for any obligation described in the preceding clause (a) that (i) the Person
has guaranteed or that is otherwise its legal liability (whether contingent or
otherwise or direct or indirect, but excluding endorsements of negotiable
instruments for deposit or collection in the ordinary course of business) or
(ii) is secured by any Lien on any property or asset owned or held by that
Person, regardless whether the obligation secured thereby shall have been
assumed by or is a personal liability of that Person; and (c) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (a) and (b), above.
"Insurance Assignment" means any assignment of insurance in respect of a
Mortgaged Vessel by any of the Borrowers to the Administrative Agent on behalf
of the Banks, substantially in the form of Exhibit H, and as the same may be
amended, supplemented or otherwise modified from time to time.
"Interest Expense" means interest expense net of interest income as
determined in accordance with GAAP.
"Interest Payment Date" means with respect to any Advance (1) the last day
of each Interest Period for such Advance, (2) the last day of each three-month
portion of each Interest Period which is longer than three months, and (3) the
day any principal amount of such Advance matures and becomes due and payable.
"Interest Period" means with respect to each Advance (or any tranche
comprising a part thereof), each respective and successive (i) one-, two-,
three- or six-month calendar period for any portion of the Loan bearing interest
at a rate based on the LIBOR Rate and (ii) period for any portion of the Loan
bearing interest at a rate based on the Alternate Base Rate. Each such period
shall be designated by the Borrowers or the Administrative Agent, as the case
may be, pursuant to Section 2.04(b), and shall commence on the Drawdown Date or
the last day of the immediately preceding Interest Period, as the case may be,
of such Advance (or tranche comprising a part thereof) and
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<PAGE> 12
continue until such date as the Advance (or such tranche) shall be paid in full,
provided, however, that (i) if any Interest Period (other than in respect of any
portion of the Loan bearing interest at a rate based on the Alternate Base Rate)
includes a Principal Payment Date but does not end on such date, then (x) the
principal amount of the Loan required to be paid on such date shall have an
Interest Period ending on such date and (y) the remainder (if any) of the Loan
shall have an Interest Period determined pursuant to Section 2.04, (ii) in all
cases each Interest Period shall commence on the expiry of the immediately
preceding Interest Period, and (iii) no Interest Period with respect to any
Facility shall commence on or extend past the Maturity Date of such Facility.
"IPO" means the initial public offering of Hvide stock described in that
certain Form S-1, Registration No. 33-78166, filed with the SEC on May 13, 1996
as amended by Amendments No. 1, No. 2 and No. 3.
"IPO Date" means August 14, 1996.
"Junior Subordinated Note" means the 8% Junior Subordinated Notes due 2014
in the principal amount of $25,000,000 purchased on or before September 29, 1994
under the Junior Subordinated Note and Common Stock Purchase Agreement dated as
of September 29, 1994.
"Lending Office" means the office of the Administrative Agent at One Court
Square, 7th Floor, Long Island City, New York, New York 11120-0001, or any other
office or affiliate of the Administrative Agent hereafter selected and notified
to the Borrowers from time to time by the Administrative Agent.
"Letter of Credit" means each Letter of Credit issued in respect of
Facilities C and D, substantially in the form of Exhibit A or in such form as
may be approved by the Letter of Credit Agent and as the same may be from time
to time amended, supplemented or otherwise modified.
"Letter of Credit Agent" means The First National Bank of Boston, and any
successor letter of credit agent under this Agreement.
"Letter of Credit Closing Date" means any date on which the Letter of
Credit Agent has issued one or more Letters of Credit pursuant to Facility C
and/or Facility D.
"Letter of Credit Renewal Date" means any date on which a Letter of Credit
by its terms, may be renewed.
"Leverage Ratio" means the ratio of Consolidated Indebtedness to Tangible
Net Worth as described in Section 5.01(d)(ii).
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"LIBOR Rate" means, for an Interest Period for any portion of the Loan
bearing interest at a rate based on the LIBOR Rate, the rate determined by the
Administrative Agent to be the rate of interest per annum equal to the average
(rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such
average is not such a multiple) of the rate per annum at which deposits in
United States Dollars are offered by the principal office of each of the
Reference Banks in London, England to prime banks in the London interbank market
at 11:00 A.M. (London time) as published by Reuters or Telerate two Business
Days before the first day of such Interest Period for a term equal to such
Interest Period and in an amount substantially equal to such portion of the
Loan. The LIBOR Rate for an Interest Period shall be determined by the
Administrative Agent on the basis of applicable rate furnished to and received
by the Administrative Agent from the Reference Banks two Business Days before
the first day of such Interest Period. If at any time the Administrative Agent
shall determine that by reason of circumstances affecting the London interbank
market (i) adequate and reasonable means do not exist for ascertaining the LIBOR
Rate for the succeeding Interest Period or (ii) the making or continuance of any
Loan at a rate based on the LIBOR Rate has become impracticable as a result of a
contingency occurring after the date of this Agreement which materially and
adversely affects the London interbank market, the Administrative Agent shall so
notify the Banks and the Borrowers. Failing the availability of the LIBOR Rate,
the LIBOR Rate shall mean the Alternate Base Rate thereafter in effect from time
to time until such time as a LIBOR Rate may be determined by reference to the
London interbank market.
"Lien" means any lien, charge, easement, claim, mortgage, option, pledge,
right of first refusal, right of usufruct, security interest, servitude,
transfer restriction or other encumbrance or any restriction or limitation of
any kind (including, without limitation, any adverse claim to title, conditional
sale or other title retention agreement, any lease in the nature thereof, and
any agreement to give any security interest).
"Liquidity" means as to any Borrower unrestricted cash and Permitted
Investments of such Borrower.
"Loan" means the aggregate amount of the Advances to the Borrowers by each
Bank and all amounts owed by the Borrowers in respect of drawings under the
Letter of Credit provided for in Section 2.01.
"Loan Documents" means this Agreement, the Notes, the Letter of Credit, the
Applications and the Security Documents.
"Majority Banks" means any Bank or Banks having an aggregate of not less
than a (65%) Sixty Five Percentage Interest
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and holding at least Sixty Five percent (65%) of the then aggregate unpaid
principal amount of the Advances.
"Master Vessel Trust Agreement" means the amended and restated Master
Vessel Trust Agreement between the Mortgagee and the Administrative Agent on
behalf of the Banks, substantially in the form of Exhibit J, and as the same may
be from time to time amended, restated, supplemented or otherwise modified.
"Maturity Date" means in respect of Advances made under Facilities A, B, D
and F, January 15, 2002, and in respect of Advances made under Facility C,
January 15, 2000.
"Mortgage" means a mortgage by a Borrower of any Vessel delivered to the
Mortgagee for the benefit of the Banks, substantially in the form of Exhibit F,
and as the same may be from time to time amended, supplemented or otherwise
modified.
"Mortgaged Vessel" means a Vessel as described in each granting clause of a
Mortgage.
"Mortgagee" means First Union National Bank (as successor by merger with
First Fidelity Bank, National Association), a national banking association
organized and existing under the laws of the United States, or such other Person
as the Administrative Agent on behalf of the Banks shall designate as trustee
under the Master Vessel Trust Agreement to act as Mortgagee under the Mortgage.
"New Money Commitment" means the obligation of each Bank to lend the
amounts set forth in Exhibit B hereto, as such amounts may be reduced from time
to time pursuant to this Agreement.
"New Money Fee" has the meaning stated in Section 2.10(d).
"Note" means any of, and "Notes" means all, the promissory notes executed
and delivered by the Borrowers in connection with this Agreement, substantially
in the form of Exhibits A-1, A-2 and A-3, respectively, and as any such note may
be replaced, amended, supplemented or otherwise modified from time to time.
"Notice of Borrowing" has the meaning stated in Section 2.02(a).
"Notice of Margin Adjustment" has the meaning stated in Section
2.04(b)(iii)(B).
"OECD" means the Organization for Economic Cooperation and Development.
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"Obligations" means all obligations, including but not limited to, all
principal, interest, fees, expenses and other obligations, of every nature of
the Borrowers, or any of their Subsidiaries or Affiliates from time to time owed
to the Administrative Agent, any of the Banks, the Letter of Credit Agent, or
all of them, under this Agreement or any of the Loan Documents.
"Percentage Interest" means, as to a Bank, the percentage set forth
opposite such Bank's name on Exhibit M of this Agreement and any amendment
hereto, or if applicable, in the Register.
"Permitted Investments" means (i) direct obligations of, or obligations
guaranteed by, the Government of the United States or any agency thereof, in
each case backed by the full faith and credit of the United States and having
maturities of not later than the Principal Payment Date next succeeding the date
of acquisition, (ii) commercial paper, maturing not later than the Principal
Payment Date next succeeding the date of acquisition, rated at least P-1 by
Moody's Investors Service, Inc. ("Moody's") or at least A-1 by Standard & Poor's
Corporation ("S&P"), (iii) Dollar denominated certificates of deposit, time
deposits and banker's acceptances maturing not later than the Principal Payment
Date next succeeding the date of acquisition, issued by (A) the Administrative
Agent, the Co-Agents or any one of the Banks hereunder, (B) a domestic
commercial bank that has a combined capital and surplus and undivided profits of
not less than $500,000,000, or (C) any bank whose short-term commercial paper
rating from Moody's is at least P-1 or from S&P is at least A-1, and (iv)
repurchase agreements having maturities of not later than the Principal Payment
Date next succeeding the date of acquisition (A) which are entered into with
major money center banks included in the commercial banking institutions
described in clause (iii), and (B) which are secured by readily marketable
direct obligations of the Government of the United States of America or any
agency thereof having maturities of not later than the Principal Payment Date
next succeeding the date of acquisition.
"Person" means any individual, corporation, limited partnership,
partnership, business trust, joint venture, association, joint stock company,
trust or other unincorporated organization, whether or not a legal entity, or
any government or agency or political subdivision thereof.
"Pledged Collateral" shall have the meaning set forth in Section
5.01(e)(i).
"Principal Payment Date" means (a) as to each Advance in respect of
Facility A, the Maturity Date, (b) as to each Advance in respect of Facility B
and Facility F, the Maturity Date for such advance and the 15th day of each of
January, April, July and October of each year commencing on the dates provided
in
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Section 2.03, (c) as to any Advance in respect of Facility C, the date on which
demand for repayment is made, or January 15, 2000, whichever is earlier, and (d)
as to any Advance in respect of Facility D, the date on which demand for
repayment is made, or January 15, 2002, whichever is earlier.
"Receivables" has the meaning stated in the Security Agreement.
"Reference Bank" means Citibank, N.A.
"Register" has the meaning stated in Section 7.10(d).
"Related Party Contract" means those contracts listed in Schedule B.
"Relevant Amount" has the meaning stated in Section 2.04(b)(iii).
"Rental Expense" means operating lease payments and other rental payments
as determined in accordance with GAAP.
"Reserve Percentage" has the meaning stated in Section 2.06(b).
"S-1" means the Form S-1, Registration No. 33-18525 filed with the SEC on
December 23, 1996 as amended by Amendment No. 1 thereto and such other future
amendments as may be required by the SEC.
"SEABULK AMERICA" means that U.S. flag vessel owned by Seabulk Tankers
Partnership, Ltd., and bearing Official Number 961357.
"Seal Fleet Vessels" means each of the eight vessels acquired by Hvide from
Seal Fleet Inc., Ross Seal Partners, Ltd., Bengal Seal Partners, Ltd., Indian
Seal Partners, Ltd., Baffin Seal Partners, Ltd., and Baltor Seal Partners, Ltd.,
as described in Exhibit L hereto.
"SEC" means the Securities and Exchange Commission of the United States and
its successors.
"Security Agreement" means the Security Agreement dated as of the date
hereof for the benefit of the Banks substantially in the form of Exhibit E, and
as the same may be from time to time amended, restated, supplemented or
otherwise modified.
"Security Documents" means the Master Vessel Trust Agreement, each
Mortgage, each Earnings Assignment, each Insurance Assignment, and the Security
Agreement.
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<PAGE> 17
"Senior Subordinated Note" means Hvide's 12% Senior Subordinated Notes due
2004 in the original principal amount of $25,000,000 purchased on or before the
Closing Date under the Senior Subordinated Note and Common Stock Purchase
Agreement dated as of September 29, 1994.
"Second Offering" means the public offering of Six Million shares of Class
A Common Stock of Hvide described in the S-1.
"Solvent" means with respect to any Person on a particular date, that on
such date (i) the fair market value of the assets of such Person is greater than
the total amount of liabilities (including contingent liabilities) of such
Person, (ii) the present fair salable value of the assets of such Person is
greater than the amount that will be required to pay the probable liabilities of
such Person for its debts as they become absolute and matured, (iii) such Person
is able to realize upon its assets and pay its debts and other liabilities,
including contingent obligations, as they mature, and (iv) such Person does not
have unreasonably small capital for the business in which it is engaged.
"Subsidiary" means, with respect to any Person, any corporation,
association, limited partnership, partnership or other business entity of which
a majority of the voting power entitled to vote in the election of directors,
managers or trustees thereof (or in the case of a limited partnership, in the
control of the general partner) is at the time owned, directly or indirectly, by
such Person or by one or more other Subsidiaries, or by such Person and one or
more other Subsidiaries, or a combination thereof.
"Tangible Net Worth" means the excess of the total assets of the Borrowers
on a consolidated basis over Total Liabilities, excluding, however, from the
determination of total assets (i) goodwill, organizational expenses, research
and development expenses, trademarks, trade names, copyrights, patents, patent
applications, licenses and rights in any thereof and other similar intangibles,
(ii) unamortized debt discount and expense, (iii) all reserves carried and not
deducted from assets, (iv) treasury stock and capital stock, obligations or
other securities of or capital contributions to or investments in any
Subsidiary, (v) sinking or other analogous funds established for the purpose of
redemption, retirement or prepayment of capital stock, (vi) any write up in the
book value of any assets resulting from a revaluation thereof subsequent to
December 31, 1993, (vii) capitalized expenses in connection with the issuance of
debt or equity and (viii) any items not included in clauses (i) through (vii)
above which are treated as intangibles in conformity with GAAP.
"Taxes" means all income, excise, stamp or franchise taxes and any other
tax, charge, fee, levy, impost, duty,
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<PAGE> 18
withholding, deduction or other assessment of any kind whatsoever, including any
interest, penalties or additions attributable thereto, imposed by any federal,
commonwealth, state, local or foreign taxing authority.
"Title XI Debt" means the United States Government Guaranteed Ship
Financing Bonds ("Title XI Bonds") issued pursuant to Title XI of the Merchant
Marine Act of 1936, as amended, which consist of approximately Four Million
Three Hundred Thousand Dollars ($4,300,000) in eight and one half percent (8.5%)
Title XI Bonds due 1999 relating to M/V SEABULK CHALLENGER and approximately Ten
Million Six Hundred Thousand Dollars ($10,600,000) in five and one quarter
percent (5.25%) Title XI Bonds due 2000 relating to M/V SEABULK MAGNACHEM and
five series of Title XI Bonds due 2006 totalling approximately Thirty Four
Million Seven Hundred Thousand Dollars ($34,700,000) and bearing interest at an
average rate of seven point sixty five percent (7.65%) relating to HMI PETROCHEM
and HMI DYNACHEM.
"Total Liabilities" means all the obligations in accordance with GAAP which
are included in determining the total liabilities as shown on the liabilities
side of the balance sheet of the Borrowers on a consolidated basis.
"Total Loss" means, in respect of any Vessel, any of the following events;
(x) the actual or constructive total loss of such Vessel or the agreed or
compromised total loss of such Vessel; or (y) the capture, condemnation,
confiscation, requisition, purchase, seizure or forfeiture of, or any taking of
title to, such Vessel. A Total Loss shall be deemed to have occurred (i) in the
event of an actual loss of such Vessel, on the date of such loss; (ii) in the
event of damage which results in a constructive or compromised or arranged total
loss of such Vessel, on the date of the event giving rise to such damage; or
(iii) in the case of any event referred to in clause (y) above, on the date of
the occurrence of such event. Notwithstanding the foregoing, if such Vessel is
subject to a Mortgage and such Vessel shall have been returned to the Borrowers
following any capture, requisition or seizure referred to in clause (y) above
prior to the date upon which payment is required to be made under Section
2.05(d), no Total Loss of such Vessel shall be deemed to have occurred by reason
of such capture, requisition or seizure.
"Total Outstandings" has the meaning stated in Section 5.01(e)(i).
"Transaction" means the financing contemplated by the Loan Documents.
"Uniform Customs" means Uniform Customs and Practice for Commercial
Documentary Credits of the International Chamber of Commerce, revision 500 of
1993 and as the same may be amended, modified or supplemented.
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"Unreimbursed Letter of Credit Obligations" means any amounts which the
Borrowers are obligated to reimburse the Letter of Credit Agent for drawings on
a Letter of Credit.
"Vessel" means any of, and "Vessels" mean all of, the vessels described in
Schedule D and any vessel which in the future may be owned by a Borrower and
covered by a Mortgage.
SECTION 1.012 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, consistently applied.
SECTION 1.013 Valuations. (a) "Fair Market Value" shall mean as to any
Vessel and any determination of "Fair Market Value" of a Vessel as the
Administrative Agent may require from time to time in accordance with this
Agreement, the fair market value of such Vessel determined as set forth in this
Section 1.03. All appraisers shall be selected from firms of independent
shipbrokers or marine surveyors of recognized standing and listed in Schedule C
to this Agreement, and as such schedule may be amended, modified or supplemented
from time to time.
(b) The Administrative Agent may at any time direct, and the Borrowers may,
and shall, if requested by the Administrative Agent, cause an appraiser
designated by the Administrative Agent to perform a valuation and such
determination will be binding; provided, however, if such appraisal is
challenged pursuant to (c) below, such determination shall be binding until the
resolution of the matter pursuant to (c) below. Except as otherwise provided in
paragraph (c) below, the cost of obtaining at the request of the Administrative
Agent up to two appraisals per calendar year for each Vessel shall be paid by
the Borrowers and the cost of appraisals obtained at the Borrowers' request
shall be paid by the Borrowers.
(c) In the event that the Borrowers or the Administrative Agent shall
dispute or challenge the fair market value determined by such appraiser, then
the Borrowers and the Administrative Agent shall each appoint a separate
appraiser (which need not be listed in Schedule C) and the two appraisers (which
need not be listed in Schedule C) appointed by the Administrative Agent and the
Borrowers shall appoint a third appraiser (which need not be listed in Schedule
C). Each appraiser so appointed shall make a separate determination of fair
market value on the same basis. The three determinations of fair market value
shall be averaged by the Administrative Agent and the determination which is
furthest from such average (whether higher or lower) shall be disregarded. The
remaining two determinations shall then be averaged by the Administrative Agent
with such average to be controlling for purposes of this Agreement with respect
to the then current fair market value of a Vessel. The cost of obtaining all
such opinions in the event of a dispute or challenge shall be payable by the
party disputing or challenging the original fair market value determination.
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(d) In the event the appraisers nominated by the parties fail to appoint a
third appraiser or any such appraiser, however appointed, fails to deliver a
valuation, unless otherwise agreed, the parties may petition the American
Arbitration Association in New York, New York to appoint a third appraiser. Upon
receipt of such appointed appraiser's appraisal, the Administrative Agent shall
determine the fair market value as provided in paragraph (c) above.
(e) All appraisals shall be made without, unless otherwise reasonably
required by the Administrative Agent, physical inspection and on the basis of an
arm's length purchase by a willing and able commercial buyer from a willing and
able commercial seller and without taking into account any charter party.
ARTICLE II.
AMOUNTS AND TERMS OF THE ADVANCES
AND LETTER OF CREDIT
SECTION 1.021 The Advances. (a) Upon the terms and subject to the
conditions set forth in this Agreement, the Banks agree, severally on the basis
of their respective Percentage Interests but not jointly, to make Advances as
follows:
(i) in respect of Facility A, subject to the terms of Section
2.07(b)(ii), in a maximum amount not to exceed at any time outstanding such
Bank's Aggregate Amount in respect of Facility A, and provided further that
any request for an advance under Facility A shall be in an aggregate amount
not less than $500,000 and an integral multiple of $100,000 if in excess
thereof;
(ii) in respect of Facility B, in an aggregate amount not to exceed at
any time outstanding such Bank's Aggregate Amount in respect of Facility B;
and
(iii) in respect of Facility F, in an aggregate amount not to exceed
at any time outstanding such Bank's Aggregate Amount in respect of Facility
F; PROVIDED HOWEVER, that amounts advanced under this Facility F are
restricted to Acquisitions which do not exceed: (A) the lesser of either
(x) one hundred percent (100%) of the purchase price or appraised value
(whichever is less) of the Acquisition being acquired or (y) a multiple of
six times the EBITDA of the Acquisition if the sum of the undrawn
Commitment (excluding Facility F) all Advances and Letters of Credit is
less than 65% of the Pledged Collateral; or (B)the lesser of either (x)
sixty five percent (65%) of the purchase price or appraised value
(whichever is less) of the Acquisition being acquired, or (y) a multiple of
six times EBITDA of the
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Acquisition if the sum of the undrawn Commitment (excluding Facility F) all
Advances and Letters of Credit is equal to or greater than 65% of the
Pledged Collateral .
(b) The total amount to be made available by each Bank as part of an
Advance for a Facility shall never exceed the Commitment of such Bank for
such Facility, and shall be proportionate always to such Bank's Percentage
Interest. The Banks are obligated to make Advances pursuant to this
Agreement until the relevant Commitment Termination Date. The obligation of
the Borrowers to repay each Advance shall be evidenced by this Agreement
and in the case of Facility A, Facility B, and Facility F, the Notes. In
respect of each Advance to the Borrowers under Facility A, Facility B, and
Facility F, the Borrowers shall issue in favor of each Bank a Note in
respect of each of such Facilities.
(c) The failure of any Bank to advance its Commitment in respect of
any Advance shall not relieve it or any other Bank of the obligation to
advance its Commitment, but no Bank or the Administrative Agent shall be
responsible for the failure of any other Bank to advance its Commitment to
the Borrowers.
SECTION 1.022 Disbursement of the Advances. (a) The Advance for each
Facility shall be made simultaneously, on at least three Business Days prior
written notice from the Borrowers to the Banks and the Administrative Agent
specifying the disbursement date therefor (a "Drawdown Date") which shall not be
later than the Business Day prior to the earlier of the Commitment Termination
Date or the Maturity Date. There shall be no more than three Drawdown Dates for
Facility B (except as to Advances made in respect of Facility C pursuant to
Section 2.03 (iii)). There shall be one Drawdown Date with respect to Facility
C. Each Drawdown Date shall be a Business Day. Not later than 10:00 A.M. (New
York City time) on such Drawdown Date, and upon fulfillment of the conditions in
Article III hereof, the Banks will make the Advances available to the
Administrative Agent for disbursement to the Borrowers in same day funds at the
Lending Office. Such notice of borrowing (the "Notice of Borrowing") shall be by
telex, telefacsimile or cable, confirmed immediately in writing signed by an
authorized officer of each of the Borrowers, in substantially the form of
Exhibit C, specifying therein (i) the requested date of such borrowing, (ii) the
aggregate Dollar amount to be borrowed and, but only to the extent the same may
be permitted or required in Section 2.04(b)(ii), the number of tranches and the
Dollar amount of each tranche and (iii) the Interest Period for such borrowing
(and each tranche thereof). The Commitment of each Bank shall terminate in an
amount equal to, and the Aggregate Amount of each Bank shall be reduced by, the
amount made available by such Bank in respect of each Advance.
(b) Each Notice of Borrowing sent shall be irrevocable and binding on the
Borrowers. If for any reason on a Drawdown
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Date specified in a Notice of Borrowing, any Advance is not made as a result of
any failure to fulfill on or before such Drawdown Date the applicable conditions
precedent, the Borrowers shall indemnify each Bank against any loss, cost or
expense incurred by such Bank as a result of such failure, including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Bank to fund the
Advances to be made by such Bank as part of such borrowing.
SECTION 1.023 Repayment. The Borrowers shall repay the aggregate principal
amount of each Advance in respect of each Facility as follows:
(i) Advances with respect to Facility A shall be paid on the Maturity
Date with respect to such Facility; PROVIDED HOWEVER, that, beginning in
the calendar year 1997, the Borrowers shall repay any and all Advances in
respect of Facility A (including amounts drawn under Facility D) in excess
of Ten Million Dollars (US$10,000,000) annually and shall not reborrow such
amounts for a period of no less than 30 consecutive calendar days in each
calendar year.
(ii) Advances with respect to Facility B shall be repaid in 21
consecutive quarterly payments commencing on January 21, 1997 and on each
subsequent, January 15th, April 15th, July 15th and October 15th, until the
Maturity Date according to the amortization schedule set forth in Exhibit K
hereto.
(iii) Advances with respect to Facility C shall be repayable on
demand; PROVIDED HOWEVER, that, subject to the terms of this Agreement, the
Borrowers may request, and if there is no existing Event of Default each
Bank shall make, an additional Advance under Facility B to reimburse any
amounts drawn under Facility C (and in such case, the Advances will be
repaid according to the Schedule provided in Section 2.03(ii) pro rated
over the then remaining Principal Payment Dates).
(iv) Advances with respect to Facility F shall be repaid in
consecutive quarterly installments according to the Schedule set forth in
Exhibit K hereto.
(v) The final payment of all outstanding principal amounts of a
Facility shall be made on the Maturity Date for such Facility.
SECTION 1.024 Interest. (a) The Borrowers shall pay interest on the unpaid
principal amount of each Advance from the Drawdown Date for such Advance until
the principal amount of such Advance is paid in full, payable on each Interest
Payment Date with respect to each such Advance. Notwithstanding the preceding
sentence of this Section 2.04(a), all interest accrued on any
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<PAGE> 23
Advance outstanding on the Maturity Date of such Advance shall be paid on the
Maturity Date for such Advance.
(b) As long as any Advance shall be outstanding, and payment of the
principal thereof and interest thereon shall not be in default, interest on the
Advance shall be payable at an interest rate which shall be adjusted as provided
in this Section, and in the case of the Alternate Base Rate and to reflect any
change in the Applicable Margin, as set forth herein during such Interest
Period, and which shall be determined as follows:
(i) with respect to each day of the period commencing on and following
a Drawdown Date and for each day of each successive Interest Period
thereafter, the Borrowers shall pay interest on each Advance in its
entirety or in one or more tranches permitted under Section 2.04(b)(ii) at
an interest rate equal to the sum of (y) the Applicable Margin plus (z) the
Alternate Base Rate or the LIBOR Rate, as the case may be, subject to
periodic adjustment as provided in Section 2.04(b)(iii);
(ii) with respect to each Interest Period, the Borrowers shall, by
telex notice to be received by the Administrative Agent by 10 A.M. New York
time at least four Business Days (one Business Day, in the case of an
Advance bearing interest at Alternate Base Rate) prior to the commencement
of each such successive period, elect the Applicable Rate and elect an
Interest Period of one, two, three or six months duration in the case of
LIBOR Rate, and such other period in the case of the Alternate Base Rate,
and one or more but no more than four tranches in total for all outstanding
Advances, provided each tranche shall be in an amount not less than the
scheduled principal amount due on the Maturity Date; provided the Borrowers
shall select Interest Periods, and if necessary shall select as the final
Interest Period for each Advance an Interest Period less than one month in
duration, so that the maturity date of each Advance shall be the last day
of the Interest Period for such Advance; provided that if the Borrowers
shall fail to elect the Applicable Rate or an Interest Period as herein
provided, and so long as any Event of Default has not occurred and is
continuing, the Administrative Agent shall elect the relevant Applicable
Rate and the Interest Period, which may be one day;
(iii) (A) the interest payable on each Advance during each successive
Interest Period shall be adjusted as set forth herein by the Administrative
Agent for any change in the Applicable Margin in addition to adjustments in
respect of the Alternate Base Rate, if such rate is then used. As to the
Letter of Credit and as to all other Advances beginning from January 1,
1998, the Applicable Margin for each Interest Period (and each day thereof)
shall
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<PAGE> 24
be determined by the Administrative Agent (or the Letter of Credit Agent,
as the case may be) subject to further adjustment from time to time
pursuant to paragraph (B) of this sub-section (iii). In respect of the
Advances the highest Applicable Margin shall be in effect unless the
following test is met on a rolling four quarter basis:
<TABLE>
<CAPTION>
Consolidated LIBOR and Alternate
Indebtedness/ Letter of Credit Base Rate
EBITDAR Applicable Margin Applicable Margin
- ------------ ----------------- -----------------
<S> <C> <C>
3.00 to 3.49 1.50% .50%
2.50 to 2.99 1.25% .25%
2.00 to 2.49 1.00% 0%
1.99 or Below 0.75% 0%
</TABLE>
For the first three quarters following the IPO, the Administrative Agent
shall use Hvide's Pro Forma Consolidated Historical Financial Statements as
presented in the S-1 for purposes of determining whether the foregoing
tests have been met. From the fourth quarter following the IPO Date until
the Maturity Date, the Administrative Agent shall use the Borrowers' most
recent quarterly financial statements for purposes of determining whether
the foregoing tests have been met.
(B) To the extent of any change in the Applicable Margin during any
Interest Period, the Administrative Agent shall give prompt written notice
to the Borrowers and the Banks (a "Notice of Margin Adjustment") specifying
the amount, if any, of additional interest payable by the Borrowers, or
excess interest paid by the Borrowers, as the case may be, as a result of
such change in the Applicable Margin (such amount, the "Relevant Amount").
The Borrowers shall immediately pay to the Administrative Agent any such
Relevant Amount specified as payable in the Notice of Margin Adjustment,
together with interest to the date of payment calculated as for an Advance;
any Relevant Amount specified in the Notice of Margin Adjustment as an
excess payment by the Borrowers shall be credited to interest payable by
the Borrowers on the next Interest Payment Date;
(iv) the Administrative Agent shall give prompt notice to the
Borrowers and the Banks of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.04(b) and the rates
published by each Reference Bank and used for the purpose of determining
the applicable LIBOR Rate hereunder; and
(v) if, with respect to any Advance bearing interest at a rate based
on the LIBOR Rate, any Bank shall
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<PAGE> 25
notify the Administrative Agent that the LIBOR Rate for any Interest
Period for such Advance will not adequately reflect the cost to such Bank
of making, funding or maintaining its portion of such Advance for such
Interest Period, the Administrative Agent shall forthwith so notify the
Borrowers and the Banks, whereupon
(A) each such Bank's portion of each such Advance bearing interest
at a rate based on the LIBOR Rate will automatically, on the last day of
the then existing Interest Period therefor, convert into an Advance
bearing interest at a rate based on the Alternate Base Rate, and
(B) the obligation of each such Bank to make Advances, or to convert
Advances into Advances, bearing interest at a rate based on the LIBOR
Rate shall be suspended until such Bank shall notify the Borrowers and
the Administrative Agent that the circumstances causing such suspension
no longer exist.
(c) In the event that the Administrative Agent or any Bank does not
receive on the due date any sum due under this Agreement or any of the other
Loan Documents in accordance with the terms hereof or thereof, or so long as any
Event of Default has occurred and is continuing, the Borrowers shall pay to the
Administrative Agent and such Banks, as the case may be, on demand in accordance
with Section 2.07 hereof, interest on all unpaid sums, from and including the
due date thereof or the date such Event of Default occurred, whichever is
earlier to but not including the date of actual payment (or date such Event of
Default is cured), at a rate per annum determined by the Administrative Agent
from time to time to be the sum of (a) two per cent (2%) and the Applicable
Margin plus (b) the Applicable Rate. Except as otherwise provided in the
following subsection (d), any such interest which is not paid when due shall be
compounded at the end of each Interest Period (both before and after any notice
of demand) by the Administrative Agent on behalf of the Banks under this
Agreement.
(d) Notwithstanding any provision contained in any of the Loan
Documents, none of the Banks, the Letter of Credit Agent nor the Administrative
Agent shall ever be entitled to receive, collect, or apply, as interest on the
Obligations, any amount in excess of the maximum rate of interest permitted to
be charged by Applicable Law. In the event any Bank, the Letter of Credit Agent
or the Administrative Agent ever receives, collects, or applies as interest, any
such excess, such amount which would be excessive interest shall be applied to
the reduction of the Obligations then outstanding. If the Obligations then
outstanding are paid in full, any remaining excess shall forthwith be paid to
the Borrowers. In determining whether or not the interest paid or payable, under
any specific contingency, exceeds the highest lawful rate, the Borrowers and any
Bank, the Letter of Credit Agent or the Administrative Agent, as the case
- 24 -
<PAGE> 26
may be, shall, to the maximum extent permitted under Applicable Law, (i)
characterize any non-principal payment as an expense, fee or premium rather
than as interest, (ii) exclude any voluntary prepayments and the effects
thereof, and (iii) spread the total amount of interest throughout the entire
contemplated term of the Obligations so that the interest rate is uniform
throughout the entire term of the Obligations.
SECTION 1.025 Prepayments. (a) Upon at least four Business Days' notice to
the Administrative Agent received by 10:00 A.M. New York time, the Borrowers may
prepay, subject to payment of Breakage Costs, if any, incurred by the Banks, the
outstanding amount of each Advance for a Facility, in whole or in part, on the
last day of any Interest Period for each such Advance or part thereof, with
accrued interest to the date of such prepayment on the amount prepaid, provided
that no such partial prepayment shall be in a principal amount of less than Two
Hundred Fifty Thousand Dollars ($250,000) and be in integral multiples of One
Hundred Thousand Dollars ($100,000) in addition to such minimum amount. The
Administrative Agent promptly shall give the Banks a copy of each such notice
received from the Borrowers. Optional repayments shall be applied to completely
repay the Facilities in the following order: Facility A, then Facility B, then
Facility F, and then, to the extent that the Borrowers have terminated the
Commitment under Facility A, to be deposited in the Cash Collateral Account as
security for Facility C and Facility D. Optional prepayments in respect of each
Facility shall be applied to such Facility (i) first to the next scheduled
payment of principal, (ii) then to the final payment due on the Maturity Date
and (iii) finally pro rata over the remaining scheduled principal payments.
Prepayments shall be applied pro rata to all Banks' Advances under the
respective Facility. If Facility B is prepaid, no part thereof may be
reborrowed. If Facility F is prepaid, amounts may be reborrowed to the extent of
the Available Commitment described in Exhibit K hereto.
(b) The Borrowers shall prepay the Advances as follows:
(i) an amount equal to one hundred percent (100%) of all proceeds
(net of Taxes and reasonable expenses in connection with the sale) from
the sale of any assets by the Borrowers in excess of One Hundred Thousand
Dollars ($100,000) in any one transaction or Five Hundred Thousand
Dollars ($500,000) in any calendar year; such prepayment to be made not
later than the date of such sale; any such prepayments shall be applied
ratably among all Advances of the Banks as follows (v) first, to repay to
the last installment due in respect of Advances for Facility B on the
Maturity Date and then pro rata over the remaining Principal Payment
Dates for Facility B, (w) second, to reduce Advances under Facility A to
the last installment due in respect of Advances (x) third, for Facility F
on the Maturity Date and
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<PAGE> 27
then pro rata over the remaining Principal Payment Dates for Facility F,
fourth, and (y) to the extent that the Borrowers have terminated the
Commitment under Facility A, to be deposited to the Cash Collateral
Account as security for Facility C and Facility D; and
(ii) an amount as shall be necessary to comply with the provisions
of Section 5.01(e); such prepayment to be applied first to Advances
outstanding in respect of Facility B, and then to Advances outstanding in
respect of Facility A and Facility F in inverse order of maturity and
ratably among the Banks.
(c) If it shall become unlawful for any Bank to continue to fund or
maintain any Advance or to perform its obligations hereunder, such Bank shall
notify and consult with the Borrowers and the Administrative Agent before making
any demand under this Section 2.05(c), and such Bank and the Administrative
Agent shall use all reasonable efforts to change its lending office or take
other measures so that it can perform its obligations hereunder; provided that
neither such Bank nor the Administrative Agent shall be obligated to change its
lending office or take any other measures if in its sole reasonable judgment it
would be disadvantageous to do so. If such Bank does not change its lending
office because it determines in its sole reasonable judgment that it is
disadvantageous to do so or because such change would not render such Advance
lawful, then such Bank shall notify the Administrative Agent and the Borrowers,
as the case may be, and shall make an Advance, and the Borrowers shall borrow
such Advance, at a rate based on the Alternate Base Rate in an amount equal to
the amount of the Advance currently outstanding and made by such Bank to the
Borrowers, if in the sole reasonable judgment of such Bank such Advance can
lawfully be extended at a rate based on the Alternate Base Rate. Simultaneously
with making such Advance at a rate based on the Alternate Base Rate, the Advance
then outstanding made available by such Bank to the Borrowers shall be repaid
with accrued interest thereon to the date of payment. If any Bank makes an
Advance at a rate based on the Alternate Base Rate to the Borrowers pursuant to
this Section, the Borrowers may prepay such Advance made by such Bank, without
penalty, at any time upon five Business Days notice. If despite such Bank's
compliance with the preceding provisions of this Section 2.05(c), or if the
Borrowers shall refuse to borrow an Advance at a rate based on the Alternate
Base Rate as herein provided, and if it shall become unlawful for any Bank to
fund or maintain any Advance or perform its obligations hereunder, upon demand
by such Bank, the Borrowers shall prepay in full the outstanding Advance made by
such Bank, with accrued interest thereon and all other amounts payable by the
Borrowers hereunder, and upon such demand or any notice of prepayment the
obligation of such Bank to make any Advance to the Borrowers shall terminate.
-26-
<PAGE> 28
(d) (1) If a Total Loss occurs, the Borrowers shall give prompt written
notice to the Administrative Agent of such Total Loss. Unless the Borrowers
provide a Substitute Vessel under Section 2.05 (d)(3) and to the extent
necessary to comply with Section 5.01(e), not more than 120 days (the "Loss
Termination Date") after the date such Total Loss occurred, the Borrowers shall
pay to or to the order of the Administrative Agent, the sum of (a) the product
of the then outstanding principal amount of the Notes multiplied by a fraction,
in which the numerator is the Fair Market Value of the Vessel subject to the
Total Loss as determined by the last appraisal obtained pursuant to Section
1.03 prior to such Total Loss and the denominator is the aggregate Fair Market
Value similarly determined for all Mortgaged Vessels immediately prior to such
Total Loss, (b) accrued and unpaid interest on the Notes being prepaid through
the Loss Termination Date, (c) an amount equal to all out-of-pocket third party
expenses (including legal and investigatory fees) incurred by and not otherwise
reimbursed to, the Administrative Agent or the Banks in connection with the
occurrence of the Total Loss, as set forth in a certificate of the
Administrative Agent to be delivered to the Borrowers not less than five
Business Days prior to the Loss Termination Date, and (d) any other amounts
which have become due and payable under the Loan Documents but shall not have
been paid prior to the Loss Termination Date minus the sum of all insurance
proceeds actually received by the Administrative Agent in connection with such
Total Loss. All prepayments received after such Total Loss shall be applied as
provided in Section 6.02 hereunder.
(2) If a Total Loss occurs, the Borrowers, not less than 30 days before
the Loss Termination Date, may notify the Administrative Agent of their
intention to replace the Vessel constituting the Total Loss with a substitute
vessel (the "Substitute Vessel"). Prior to or at the time of any substitution
under this Section, the Borrowers will at their own expense and cost furnish
the Administrative Agent with a satisfactory appraisal of the proposed
Substitute Vessel. If the Administrative Agent and the Banks in their
reasonable discretion, have agreed to permit the substitution, the Borrowers at
their own cost and expense shall cause a Mortgage covering the Substitute
Vessel to be duly executed and recorded at the Home Port of the Substitute
Vessel and shall make such amendments to the Loan Documents and Security
Documents as the Administrative Agent shall deem necessary or desirable to
reflect such substitution.
(3) If the Fair Market Value of the Substitute Vessel is less than the
Fair Market Value of the Vessel which constituted such Total Loss, the
Borrowers may grant the Administrative Agent on behalf of the Banks a perfected
first priority security interest in additional collateral satisfactory to the
Administrative Agent and the Banks, in their sole discretion, the Fair Market
Value of which (as determined by an appraisal of the type described in Section
1.03) shall be added
-27-
<PAGE> 29
to the Fair Market Value of the Substitute Vessel for the purposes of complying
with Section 5.01(e)(ii).
(4) If the Banks, in their sole discretion, permit the sale or other such
disposition of any Mortgaged Vessel and if as a result of such sale or
disposition the Borrowers no longer comply with Section 5.01(e)(ii), then all
proceeds of such sale or disposition shall be paid to the Administrative Agent
and the Administrative Agent shall apply all such proceeds to the payment of
all such amounts payable as if in respect of a Total Loss of such Vessel
pursuant to subsection (d)(1) above.
(e) If at any time the Borrowers shall, or may reasonably be expected to,
be required to deduct and withhold, or indemnify any Bank with respect to, any
Taxes (as defined in Section 2.09) (in each case, as evidenced by an opinion
reasonably satisfactory in form and substance to the Borrowers, the
Administrative Agent, the Letter of Credit Agent and the Banks from independent
tax counsel reasonably satisfactory to the Borrowers, the Administrative Agent,
the Letter of Credit Agent and the Banks) the Borrowers, upon at least four
Business Days' notice to the Administrative Agent and the Banks, may prepay at
any time, pro rata, the outstanding principal amount of each Advance, in whole
or in part, together with accrued interest to the date of prepayment on the
amount prepaid and all other amounts, including without limitation Breakage
Costs, then payable to the Banks by the Borrowers; provided that, if such Taxes
relate to payments to fewer than all the Banks (the "Affected Banks"), the
Borrowers, upon at least four Business Days' notice to the Administrative Agent
and the Affected Banks, may prepay, in whole or in part, pro rata (except as
set forth in the following provision), the outstanding principal amount of
Advances made by the Affected Banks, with accrued interest thereon and all
other amounts payable to the Affected Banks by the Borrowers (without
prepayment any portion of any Advance made by any Bank that is not any Affected
Bank); provided further, that if the rate of Taxes with respect to any Affected
Bank is higher than with respect to another Affected Bank, the Borrowers may
prepay any portion of the Advance made by the former Affected Bank without
prepaying any portion of the Advance made by the latter Affected Bank. The
Administrative Agent shall give prompt written notice to the Banks of any
prepayments made under this paragraph (e). No amount of principal paid or
prepaid, as the case may be, may be reborrowed except as otherwise explicitly
provided in this Agreement. Prepayments shall be applied first to outstanding
interest and Breakage Costs, if any, and then to installments of outstanding
principal in inverse order of maturity, except as otherwise expressly provided
herein.
SECTION 1.026 Increased Costs; Additional Interest. (a) If on or after the
Closing Date due to (i) the introduction of or any change (including, without
limitation, any change by way of imposition or increase of reserve or capital
adequacy requirements) in, or in the interpretation of, any law or
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<PAGE> 30
regulation, or (ii) the compliance by any Bank with any guideline or request
(including, with respect to reserve and capital adequacy requirements, those
Applicable Laws, policies, guidelines and directives and interpretations in
effect on the Closing Date) from any central bank or other governmental
authority, whether or not having the force of law, there shall be any increase
in the cost to, or reduction in the return on capital of any Bank in
consequence of, any Bank agreeing to make or making, funding or maintaining an
Advance, then the Borrowers shall from time to time, upon demand by such Bank,
pay to such Bank additional amounts sufficient to indemnify such Bank against
such increased cost (without duplication of any amounts pursuant to Section
2.06(b) herein).
(b) If any Bank shall determine that reserves under Regulation D of the
Board of Governors of the Federal Reserve System, as in effect from time to
time, are required to be maintained by it in respect of, or a portion of its
costs of maintaining reserves under Regulation D is properly attributable to,
one or more of its Advances, such Bank shall, subject to the provisions of
Section 2.06(d) below, give notice to the Borrowers, together with a
certificate as described below in Section 2.06(c) and the Borrowers, as the
case may be, shall pay to such Bank additional interest on the unpaid principal
amount of each such Advance, payable on the same day or days on which interest
is payable on such Advance, at an interest rate per annum equal at all times
during each Interest Period for such Advance to the excess of (i) the
Applicable Margin plus the rate obtained by dividing the LIBOR Rate for such
Interest Period by a percentage equal to 100% minus the Reserve Percentage
(defined in the next sentence), if any, applicable during such Interest Period
over (ii) the LIBOR Rate for such Interest Period. The "Reserve Percentage"
for any such period, with respect to any Advance, means the reserve percentage
applicable thereto under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, but not limited to, any emergency,
supplemental or other marginal reserve requirement) for a member bank of the
Federal Reserve System in New York City with respect to (i) liabilities or
assets consisting of or including eurocurrency liabilities, as defined in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time, and having a term equal to any such period, or (ii)
any other category of liabilities which includes deposits by reference to which
the interest rate on such Advance is determined and which have a term equal to
any such period.
(c) If any Bank determines that compliance with any law or regulation or
any guideline or request from any central bank or other governmental authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and that the amount of such capital is increased by or
based upon the existence of the Bank's
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<PAGE> 31
commitment to lend hereunder and other commitments of this type, then, upon
demand by the Bank made in accordance with the provisions of Section 2.06(d)
hereof, the Borrowers shall immediately pay to the Bank, from time to time as
specified by the Bank in a certificate delivered to the Borrowers, additional
amounts sufficient to compensate the Bank or such corporation in the light of
such circumstance, to the extent that the Bank reasonably determines such
increase in capital to be allocable to the existence of the Bank's commitment
to lend hereunder. A certificate as to the amount of any such increased cost,
increased interest or reduced return under this Section 2.06, submitted to the
Borrowers and the Administrative Agent by such Bank, setting forth calculations
in reasonable detail shall be conclusive and binding for all purposes, absent
manifest error.
(d) Before making any demand under this Section 2.06, the Bank shall
consult with the Borrowers and the Administrative Agent and such Bank and the
Administrative Agent shall designate as to itself a different lending office or
take such other measures if such designation or measures would avoid the need
for, or reduce the amount of such increased cost or interest, provided that
neither such Bank nor the Administrative Agent shall be obliged to change its
lending office or take any other measures if in its sole reasonable judgment it
would be disadvantageous to do so.
(e) The Borrowers may, upon at least four Business Days' notice to the
Administrative Agent and any such Bank requesting payment of any amounts
pursuant to this Section 2.06, prepay the outstanding principal amount of each
Advance together with accrued interest to the date of prepayment on the amount
prepaid and all other amounts, including without limitation Breakage Costs, if
any, then payable to such Bank by the Borrowers.
SECTION 1.027 Letter of Credit. (a) Subject to the terms and conditions of
this Agreement, the Letter of Credit Agent, in reliance on the Agreements of the
Banks set forth in Section 2.07(f), agrees to issue:
(i) a Letter of Credit in respect of Facility C for the account of
the Borrowers on the Closing Date and on each Letter of Credit Renewal
Date in such form as may be approved from time to time by the Letter of
Credit Agent; and
(ii) one or more Letters of Credit in respect of Facility D for the
account of the Borrowers on a Letter of Credit Closing Date and on each
Letter of Credit Renewal Date in such form as may be approved from time
to time by the Letter of Credit Agent.
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<PAGE> 32
(b) (i) The stated amount of a Letter of Credit in respect of Facility C
shall not exceed the following except to the extent cash collateral has been
provided pursuant to Section 5.01(o):
<TABLE>
<CAPTION>
Facility C Letter of Credit
Date Maximum Face Amount
---- -------------------
<S> <C>
September 30, 1994 $5,600,000
January 15, 1999 60% of Original Stated Amount
January 15, 2000 Zero (0).
</TABLE>
(ii) The aggregate stated amount of all issued and outstanding Letters of
Credit (including Unreimbursed Letter of Credit Obligations) in respect of
Facility D shall not exceed Six Million United States Dollars (US $6,000,000)
at any one time. Subject to the Six Million United States Dollar limit imposed
in the preceding sentence, Letters of Credit in respect of Facility D may be
issued only to the extent that the aggregate stated amount (including
unreimbursed Letter of Credit Obligations, if any) of such Letters of Credit
shall be equal or less than (x) the sum of the aggregate amounts available to
be drawn in respect of Facility A minus (y) the sum of the outstanding Advances
in respect of Facility A. The amounts that may be drawn and are permitted to
be outstanding in respect of Facility A are reduced by the aggregate stated
amounts of all Letters of Credit issued and outstanding pursuant to Facility D.
The aggregate stated amounts of all Letters of Credit issued and outstanding
under Facility D shall not include any expired or canceled Letters of Credit
which have been issued under Facility D unless the expired or canceled Letters
of Credit constitute Unreimbursed Letter of Credit Obligations.
(c) Any Letter of Credit shall be subject to the Uniform Customs and, to
the extent not inconsistent, with the laws of the state in which the principal
office of the Letter of Credit Agent is located.
(d) The Letter of Credit Agent shall not be obligated to issue any Letter
of Credit hereunder if (x) such issuance would conflict with, or cause the
Letter of Credit Agent to exceed any limits imposed by Applicable Law; or (y)
if the Letter of Credit by its terms, expires after the applicable Maturity
Date.
(e) The Borrowers may request that the Letter of Credit Agent issue a
Letter of Credit by delivering to the Letter of Credit Agent and the
Administrative Agent an Application completed to the satisfaction of the Letter
of Credit Agent, the certificate referred to in Section 3.02 dated the date of
such Application and such other certificates, documents and other papers and
information as may be customary for a letter of credit of the kind being
requested and as the Letter of Credit Agent may
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<PAGE> 33
reasonably request. Upon receipt of the Application, and the certificates,
documents and other papers and information delivered to it in connection
therewith in accordance with its customary procedures, the Letter of Credit
Agent shall promptly issue any Letter of Credit requested thereby issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise
may be agreed by the Letter of Credit Agent and the Borrowers.
(f) (i) Effective on the date of issuance of a Letter of Credit, the
Letter of Credit Agent irrevocably agrees to grant and hereby grants to each
Bank, and each Bank irrevocably agrees to accept and purchase and thereby
accepts and purchases from the Letter of Credit Agent, on the terms and
conditions hereinafter stated, for such Bank's own account and risk an
undivided participation equal to such Bank's Percentage Interest in the
Facility relating to such Letter of Credit and in the Letter of Credit Agent's
obligations and rights under such Letter of Credit issued by the Letter of
Credit Agent and the amount of each draft paid by the Letter of Credit Agent
thereunder. Each Bank unconditionally and irrevocably agrees with the Letter
of Credit Agent that, if a draft is paid whether prior to the Maturity Date or
after the Maturity Date, under any Letter of Credit for which the Letter of
Credit Agent is not reimbursed in full by the Borrowers in accordance with the
terms of this Agreement, each Bank shall pay to the Letter of Credit Agent upon
demand at the Lending Office an amount equal to such Bank's Percentage Interest
of the unreimbursed amount of such draft or any part thereof. The Banks'
obligations hereunder shall be absolute without regard to the occurrence of any
Default or Event of Default, the lapsing of Maturity Date or the occurrence of
any other condition precedent whatsoever.
(ii) If the Letter of Credit Agent does not receive any payment from a
Bank required under this section on the date such payment is due, such Bank
shall pay to the Letter of Credit Agent, on demand, an amount equal to the
product of (x) such amount, and (y) the daily average Federal Funds Rate during
the period from and including the date such payment is required to the date on
which such payment is immediately available to the Letter of Credit Agent
multiplied by (z) a fraction the numerator of which is the number of days that
have elapsed during such period and the denominator of which is 360. If any
unreimbursed amount required to be paid by any Bank pursuant to this Section is
not made available to the Letter of Credit Agent by such Bank within three
Business Days after the date such payment is due, the Letter of Credit Agent
shall be entitled to recover from such Bank, on demand, such amount with
interest thereon calculated from such due date at the rate per annum applicable
to Base Rate Advances hereunder. A certificate of the Letter of Credit Agent
submitted to any Bank with respect to any amounts owing under this Section
shall be conclusive in the absence of manifest error.
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<PAGE> 34
(iii) If, at any time after the Letter of Credit Agent has paid a draft
under a Letter of Credit and has received from any Bank its pro rata share of
such payment in accordance with this Section, the Letter of Credit Agent
receives any payment (excluding any fees and other amounts paid pursuant to
Section 2.07(g)) related to such Letter of Credit (whether directly from the
Borrowers or otherwise, including proceeds of collateral applied thereto by the
Administrative Agent), or any payment of interest on account thereof, then the
Letter of Credit Agent shall pay to the Administrative Agent, for the account
of such Bank, its pro rata share thereof; provided, however, that if any such
payment received by the Letter of Credit Agent is required to be returned by
the Letter of Credit Agent, such Bank shall return to the Administrative Agent
for the account of the Letter of Credit Agent, the portion thereof previously
distributed to such Bank.
(g) The Letter of Credit Agent shall notify the Borrowers of the date and
amount of any draft presented under a Letter of Credit. The Borrowers agree to
reimburse the Letter of Credit Agent on each such date for all amounts paid by
the Letter of Credit Agent for the account of (i) such drafts so paid and (ii)
any Taxes, fees, charges or other costs or expenses incurred by the Letter of
Credit Agent in connection with such payment. Each payment shall be made to
the Letter of Credit Agent at its address for notices specified herein and in
lawful money of the United States and immediately available funds. Interest
shall be payable on any or all amounts remaining unpaid by the Borrowers under
this subsection from the date such amounts become payable until payment in full
at the rate which will be payable on Base Rate Advances at such time.
(h) Each of the Borrowers' obligations under this Section shall be
absolute and unconditional under any and all circumstances and without setoff,
counterclaim or defense to payment which any Borrower may have or have had
against the Letter of Credit Agent or any beneficiary of a Letter of Credit.
Each of the Borrowers also agrees with the Letter of Credit Agent that the
Letter of Credit Agent shall not be responsible for, and that the Borrowers'
obligations under this Section shall not be affected by, among other things,
the validity or genuineness of documents or any endorsements thereon, even
though such documents shall in fact prove to be invalid, fraudulent or forged
or any dispute between or among the Borrowers and any beneficiary of a Letter
of Credit or any other party to which such Letter of Credit may be transferred
or any claims whatsoever of the Borrowers against any beneficiary of a Letter
of Credit or any such transferee. The Letter of Credit Agent shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with a
Letter of Credit, except for errors or omissions caused by the Letter of Credit
Agent's gross negligence or willful misconduct. The Borrowers agree that any
action taken or omitted by the Letter of Credit Agent in
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connection with a Letter of Credit or the related drafts or documents, if done
in the absence of gross negligence or willful misconduct and in accordance with
the standards of care specified in the Uniform Commercial Code of the state in
which the principal office of the Letter of Credit Agent is located, shall be
binding on the Borrowers and shall not result in any liability of the Letter of
Credit Agent to the Borrowers.
(i) If any draft shall be presented for payment of a Letter of Credit, the
Letter of Credit Agent shall promptly notify the Borrowers, the Banks and the
Administrative Agent of the date and amount thereof. The responsibility of the
Letter of Credit Agent to the Borrowers in connection with any draft presented
for payment under a Letter of Credit shall, in addition to any payment
obligation expressly provided in a Letter of Credit, be limited to determining
that the documents (including each draft delivered under a Letter of Credit in
connection with such presentment) are in conformity on their face with such
Letter of Credit.
(j) To the extent that any provision of the Application, including any
reimbursement provisions contained therein, related to a Letter of Credit is
inconsistent with the provisions of this Section, the provisions of this
Section shall prevail.
SECTION 1.028 Payments and Computations. (a) The Borrowers shall make
each payment hereunder and under any instrument and other Loan Document
delivered hereunder (except as otherwise provided in any such instrument) due
to any Bank or the Administrative Agent not later than 12:00 noon New York City
time on the date when due, without set off or counterclaim, in lawful and
freely transferable United States Dollars to the Administrative Agent at the
Lending Office for the account of the Administrative Agent in same day funds.
The Administrative Agent shall promptly disburse to the Banks funds of such
type as it shall have received in the manner provided by this Agreement.
(b) The Borrowers hereby authorize the Administrative Agent and each Bank,
if and to the extent payment is not made when due hereunder or under any
instrument delivered hereunder and the Borrowers have been given, or otherwise
have, notice thereof, to charge from time to time against any or all of the
Borrowers' accounts with the Administrative Agent or the Banks, as the case may
be, any amounts so due, provided that, so long as a Default or Event of Default
has occurred and is continuing, no such notice to the Borrowers shall be
required. The Borrowers further agree that not later than 12:00 noon (New York
City time) on each day on which a payment is due hereunder with respect to the
Advance or under any Note, it will have in its account maintained with the
Administrative Agent in New York City a credit balance at least equal to the
total amount so due on such day.
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(c) All computations of interest and fees shall be made by the
Administrative Agent, the Letter of Credit Agent and the Banks on the basis of
a year of 360 days for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest or fee
is payable except that interest in respect of the Base Rate shall be calculated
on the basis of actual days elapsed over a 365/366 day year.
(d) Whenever any payment to be made hereunder or under the Loan Documents
shall be stated to be due, or the Interest Payment Date would otherwise occur
on a day other than a Business Day, such payment shall be made, and the
Interest Payment Date shall occur, on the next succeeding Business Day, and any
such extension of time shall in all cases be taken into account in the
computation of payment of interest due hereunder or otherwise; provided,
however, if such extension would extend the Maturity Date or would cause such
payment to be made, or, in respect of an Interest Payment Date for any Advance
bearing interest at a rate based on the LIBOR Rate, to occur in a new calendar
month, such payment shall be made, and the Interest Payment Date shall occur on
the preceding Business Day.
(e) All parties to this Agreement acknowledge and agree that the
Obligations shall be automatically decreased (without any further action of any
Person being required) to the extent of any amounts received pursuant to
Section 2.08(a) hereof by the Administrative Agent, the Mortgagee or any of the
Banks under the Security Documents, as the case may be, which amounts the
Administrative Agent or the Banks, as the case may be, may freely apply or
cause to be applied to the repayment of the Obligations as provided in the Loan
Documents. Except as otherwise expressly provided in the preceding sentence,
the Security Documents shall not in any way negate or adversely affect the
liabilities and Obligations which the Borrowers and any other party have under
this Agreement and the other Loan Documents to the Banks, the Letter of Credit
Agent or the Administrative Agent.
SECTION 1.029 Taxes. (a) Any and all payments made by the Borrowers under
this Agreement shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future Taxes, except as
required by Applicable Law. If any Taxes are required by Applicable Law to be
deducted or withheld from any payment hereunder to the Administrative Agent, the
Letter of Credit Agent or any Bank, the Borrowers shall (i) promptly notify the
Administrative Agent, the Letter of Credit Agent or such Bank, as applicable, of
such requirement, (ii) deduct or withhold the full amount of such Taxes in a
timely manner and pay such Taxes in a timely manner to the appropriate
authorities, (iii) promptly forward to the Administrative Agent for its own
account, the Letter of Credit Agent for its own account or the account of such
Bank, as applicable, an official receipt or certified copy thereof or other
documentary evidence
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satisfactory to the Administrative Agent, Letter of Credit Agent or such Bank
evidencing such payment and (iv) except in the case of Bank Taxes, pay such
additional amounts so that the amount received by the Administrative Agent, the
Letter of Credit Agent or such Bank with respect to such payment, after the
payment of such Taxes (including any Taxes on such additional amounts), equals
the full amount such Administrative Agent, the Letter of Credit Agent or such
Bank would have otherwise received with respect to such payment had no
deduction or withholding been required. Further, if any Taxes (other than Bank
Taxes) are asserted directly against the Administrative Agent, Letter of Credit
Agent or any Bank with respect to any payment hereunder to the Administrative
Agent, the Letter of Credit Agent or such Bank, the Administrative Agent, the
Letter of Credit Agent or such Bank may pay such Taxes and the Borrower shall
promptly pay such additional amounts (including any penalties, interest or
expenses) so that the amount received by the Administrative Agent, Letter of
Credit Agent or such Bank, after the payment of such Taxes (including any Taxes
on such additional amounts), equals the full amount the Administrative Agent,
the Letter of Credit Agent or such Bank would have otherwise received had no
such Taxes been asserted. If the Borrower fails to pay to the appropriate
authority any Taxes when due or fails to remit to the Administrative Agent, the
Letter of Credit Agent or such Bank, as applicable, the required receipts
evidencing payment of such Taxes, the Borrowers shall indemnify the
Administrative Agent, the Letter of Credit Agent or such Bank for any Taxes
that may become payable as a result of such failure.
(b) The Borrowers shall not be required to pay any additional amounts to
the Administrative Agent, Letter of Credit Agent or any Bank in respect of
United States federal withholding taxes pursuant to Section 2.09(a) above if
the obligation to pay such additional amounts would not have arisen but for a
failure by such Bank to comply with the provisions of Section 2.09(c). In the
event the Borrowers have actual knowledge that they are required to, or there
arises, in the Borrowers' reasonable opinion, a substantial likelihood that the
Borrowers will be required to, pay an increased amount or otherwise indemnify
the Administrative Agent, the Letter of Credit Agent or any Bank for or on
account of any Taxes pursuant to Section 2.09(a), the Borrowers shall promptly
notify the Administrative Agent, the Letter of Credit Agent and such Bank of
the nature of such Taxes and shall furnish such information to the
Administrative Agent, the Letter of Credit Agent and such Bank as the
Administrative Agent, the Letter of Credit Agent or such Bank may reasonably
request. In the event the Borrowers provide the notice described in the
preceding sentence, the Borrowers, the Administrative Agent, the Letter of
Credit Agent and each relevant Bank shall consult in good faith to determine
what may be required to avoid or reduce such Taxes and shall each use
reasonable efforts to avoid or reduce such Taxes (so long as such efforts
result in no incremental costs to the Administrative Agent, the Letter of
Credit Agent or such Bank, do not modify the terms of repayment
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of the Loans or materially disadvantage the Administrative Agent, the Letter of
Credit Agent or such Bank).
(c) Prior to the first payment to the Administrative Agent, the Letter of
Credit Agent or any Bank under this Agreement, each Bank that is not
incorporated under the laws of the United States, any State thereof or the
District of Columbia shall deliver to the Borrowers and the Administrative
Agent (i) two duly completed copies of United States Internal Revenue Service
Form 1001 or Form 4224 (or applicable successor form and any related forms as
may from time to time be adopted to document a claim to which such form
relates) and (ii) a duly completed copy of United States Internal Revenue
Service Form W-8 or W-9 (or applicable successor form and any related forms as
may from time to time be adopted to document a claim to which such form
relates). Such Bank shall certify that (x) in the case of any form provided
pursuant to clause (i) of the preceding sentence it is entitled to receive
payments hereunder without deduction or withholding of any United States
federal income taxes and (y) in the case of any form provided pursuant to
clause (ii) of the preceding sentence it is entitled to receive payments
hereunder without deduction or withholding of any United States federal backup
withholding taxes. Each such Bank also agrees to deliver further copies of
said Form 1001, 4224, W-8 or W-9 (or applicable successor form and any related
forms as may from time to time be adopted to document a claim to which such
form relates), and any related certification as described in the preceding
sentence, as the case may be, (i) on or before the date that any such form
previously provided expires or becomes obsolete, (ii) after the occurrence of
any event requiring a change in the most recent form previously provided
unless, in any case, an event (including, without limitation, any change in a
treaty, law or regulation) has occurred prior to the date on which delivery
would otherwise be required that renders all such forms inapplicable or that
would prevent such Bank from duly completing and delivering any such form with
respect to it and such Bank so advises the Borrowers and the Administrative
Agent and the Letter of Credit Agent and (iii) upon reasonable request of the
Borrower.
(d) The Borrowers will indemnify the Administrative Agent and each Bank
for the full amount of Taxes (other than Bank Taxes) payable by the
Administrative Agent or such Bank, as the case may be, on any and all payments
made hereunder or on any instrument delivered hereunder and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Administrative
Agent or the Bank, as the case may be, makes written demand therefor with
appropriate supporting documentation. The Administrative Agent or the Bank, as
the case may be, to the extent practicable, shall notify the Borrowers before
paying, or requiring the Borrowers to pay, any such Tax.
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(e) Within 30 days after the date of any payment of Taxes, the Borrowers
will deliver to the Administrative Agent and each Bank satisfactory evidence of
payment thereof. If no Taxes are payable in respect of any payment, the
Borrowers will, at the reasonable request of the Administrative Agent on behalf
of any Bank, as the case may be, deliver to the Administrative Agent a
certificate from each appropriate taxing authority or any political subdivision
thereof, or an opinion of counsel acceptable to the Administrative Agent, in a
form reasonably acceptable to the Administrative Agent, stating, or other
satisfactory evidence, that such payment is exempt from or not subject to
Taxes.
(f) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in subsections (a) through (f) of this Section 2.09 shall survive the payment
in full of the Obligations and the expiry of the Loan Documents.
SECTION 2.10 Fees. (a) On the Effective Date, the Borrowers shall pay
solely for the account of each Bank on the Effective Date $[ ] representing the
aggregate amount of any Commitment Fees and other fees owed the Banks accruing
prior to the Effective Date. The Borrowers shall pay the Administrative Agent,
solely for the account of each Bank, on the date which is three months from the
Effective Date and quarterly thereafter, a non-refundable commitment fee (as to
each Bank, its "Commitment Fee") of one-half of one percent (1/2%) per annum of
each such Bank's respective Commitment daily in respect of the unused portion of
the Bank's Commitment. The Commitment Fee shall be calculated quarterly in
arrears from the Effective Date. Notwithstanding anything to the contrary
contained in this Agreement or in any other agreement, each Bank's Commitment
Fee and the fees described in the first sentence of this subsection shall be
solely for the account of such Bank.
(b) The Borrowers shall pay the Co-Agents for their own accounts on the
Closing Date, and not later than the anniversary of such date of each year
thereafter so long as any amount payable by the Borrowers hereunder remains
outstanding, an annual agency fee in an amount mutually agreed between them.
(c) (i) The Borrower shall pay a letter of credit fee to the
Administrative Agent for the account of the Letter of Credit Agent. Upon
receipt of the letter of credit fee, the Letter of Credit Agent shall
distribute such fee to the Banks pro rata and without deduction. The letter of
credit fee shall be at the per annum rate equal to the Applicable Margin for
the LIBOR Rate (as determined in Section 2.04(b)(iii) on the average daily
aggregate amount available to be drawn under the Letter of Credit for the
period for which the fee is calculated. Such fee shall accrue from the date on
which the Letter of Credit is issued and shall be payable quarterly in arrears
commencing on December 31
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and quarterly thereafter until the termination of the Letter of Credit.
(ii) In addition to the foregoing fees and commissions, the Borrowers
shall pay or reimburse the Letter of Credit Agent for such normal and customary
costs and expenses as are incurred or charged by the Letter of Credit Agent in
issuing, effecting payment under or amending any Letter of Credit.
(d) On the Agreement Date, the Borrowers shall pay to the Administrative
Agent the Amendment and Restatement Fees of Two Hundred Ninety Seven Thousand
Dollars (US$297,000) and New Money Fees of Two Hundred Thousand Five Hundred
Dollars (US$200,500) which Amendment and Restatement Fees and New Money Fees
shall be shared by the Banks according to their respective Percentage
Interests.
SECTION 2.11 Optional Reduction. Upon at least four Business Days' notice,
the Borrowers shall have the right to terminate, in whole or in part, the
undrawn portion of Facility A. Any such partial terminations shall be in a
minimum amount of Two Hundred Fifty Thousand Dollars (US$250,000) and integral
multiples thereof. Reductions shall be applied ratably among the Banks'
Commitments. Once terminated, the Borrowers shall have no right to reinstate
such terminated Commitment.
ARTICLE III.
CONDITION PRECEDENT
SECTION 1.031 Conditions Precedent to an Advance on the Agreemenet Date.
(a) The obligations of the Banks to make an Advance on the Agreement Date is
subject to the conditions precedent that the Administrative Agent, the Letter
of Credit Agent and the Banks shall have received on or before such Date, the
following in form and substance satisfactory to the Administrative Agent, the
Letter of Credit Agent and the Banks:
(i) The Agreement, and the Notes each duly executed by the
Borrowers.
(ii) Each of the Security Documents, duly executed by the parties
thereto.
(iii) A certificate of each of the Secretary or an Assistant
Secretary of each of the Borrowers, dated such Date, as follows: (A)
certifying the Board of Directors has authorized, and approved the
Transaction, the Second Offering, the Loan Documents and all the other
transactions contemplated in and by this Agreement; (B) attaching a copy
of the organizational documents of such Borrowers certified by an
official of the relevant Incorporation Jurisdiction;
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(C) and attaching evidence of the good standing of such Borrowers in its
Incorporation Jurisdiction.
(iv) Copies of the Acquisition Documents.
(v) A certificate of each of the Secretary or an Assistant
Secretary of each Borrower dated such date, certifying the names and true
signatures of the officers of such Borrower who are fully authorized to
sign the Agreement and the other Loan Documents, and any other document
to be delivered by or in respect of such Borrowers hereunder.
(vi) Proper financing statements or other filings, duly executed by
each of the Borrowers under the Uniform Commercial Code or Applicable Law
of all jurisdictions as the Administrative Agent may deem necessary or
desirable in order to perfect the security interests created by the
Security Documents in the Collateral covered thereby.
(vii) Favorable opinions of Messrs. Dyer Ellis & Joseph, and
Panamanian counsel, special counsel for the Borrowers, dated such Date,
in form and as to such matters as the Administrative Agent, the Letter of
Credit Agent and the Banks may request.
(viii) A favorable opinion of Messrs. Winthrop, Stimson, Putnam &
Roberts, special counsel for the Administrative Agent, the Letter of
Credit Agent and the Banks, in form and substance satisfactory to the
Administrative Agent, the Letter of Credit Agent and the Banks.
(ix) Evidence that all other actions have been taken which are
necessary or, in the opinion of the Administrative Agent, desirable, to
perfect or protect the first priority Liens in favor of the
Administrative Agent or the Mortgagee for the benefit of the Banks in the
Collateral.
(x) Each of the Banks shall be satisfied with the final terms and
conditions of the transactions contemplated by the Second Offering,
including without limitation all legal and tax aspects thereof; all
documentation relating to such transactions shall be in form and
substance satisfactory to the Banks; and a copy certified, as true and
complete by the Secretary or an Assistant Secretary of Hvide, of each
such document or filing as of such Date (together with all documents and
consents, if any, to be delivered under each thereof), together with all
exhibits, schedules and other documents furnished in connection
therewith, and the opinions of counsel, if any, delivered to the
Borrowers thereunder, together with a letter of such
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counsel addressed to the Banks to the effect that they each may rely upon
such opinions as though an addressee thereof.
(xi) A certificate of the chief financial officer of the Borrowers,
as of the Agreement Date and, to the extent necessary supplemented as of
the Effective Date attaching: (1) a list of all agreements of the
Borrowers and of their Subsidiaries relating to any Indebtedness of the
Borrowers or any Subsidiary, which Indebtedness, singly or in the
aggregate, equals or exceeds Five Hundred Thousand Dollars ($500,000),
specifying the amount of Indebtedness outstanding and which may be
outstanding under each such agreement; (2) a list of all consensual Liens
and known Liens for Taxes, assessments or other governmental charges or
levies, in each case on any vessel or other properties or assets of any
kind, real or personal, tangible or intangible, of the Borrowers or any
of its Subsidiaries; (3) a list of any other Liens on any vessel or other
properties or assets of any kind, real or personal, tangible or
intangible, of the Borrowers or any of its Subsidiaries, having a value
in each case equal to or greater than Five Hundred Thousand Dollars
($500,000), specifying the amount of such Liens in each case; (4) as to
any Acquisition to be funded by Facility F, the calculations and
supporting documentation required under Section 2.01(iii) to determine
the amount which may be advanced; (5) the calculations and the supporting
documentation evidencing that the Borrowers are, and upon giving effect
to the making of the Loan hereunder shall be in compliance with the
financial covenants contained in Section 5.01(d) and (6) confirming that
the Borrowers are, and immediately upon giving effect to the making of
the Loan hereunder, shall be in compliance with their obligations under
Section 5.01(e).
(xii) As to each Vessel:
(A) evidence satisfactory to the Administrative Agent, that
each Borrower has good title to such Vessel owned by such Borrower
and that each such Vessel is duly documented in the name and
ownership of such Borrower under the laws and flag of the United
States for the trade in which it is to engage or under the laws and
flag of such other Country of Registry as may be approved by the
Administrative Agent at the direction of the Majority Banks, free
of recorded Liens except the Mortgage;
(B) evidence satisfactory to the Administrative Agent, that
such Vessel and such other risks as may be required to be covered
by the terms of the relevant Mortgage have been insured upon terms
and with underwriters in respect of such events as may be
acceptable to the Banks in their reasonable discretion and that the
interest of the Mortgagee in any such
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insurances as assignee has been effected and will be noted by all
underwriters, brokers and mutual clubs and associations concerned;
(C) letters of undertaking and opinions as to insurance
coverage addressed to the Mortgagee and the Banks by relevant
brokers, underwriters and mutual clubs and associations covering
such Vessel's insurance policies and mutual club entries, in each
case reasonably satisfactory to the Mortgagee and the
Administrative Agent;
(D) as to acquired Vessels which are classed, a certificate of
class (dated not more than ten (10) days prior to the date of the
Acquisition) evidencing that such Vessel is in class and classed in
the highest classification for vessels of the same age and type by
a classification society reasonably acceptable to the Banks, free
of any outstanding recommendations affecting class;
(E) an appraisal of any such acquired Vessel completed in
accordance with the provisions of Section 1.03 hereof not more than
30 days prior to the date of such Acquisition;
(F) evidence satisfactory to the Administrative Agent that
each of the Mortgages has been duly recorded at the Home Port of
each of the Mortgaged Vessels and constitute a first "Preferred
Mortgage" within the meaning of Chapter 313 of Title 46 of the
United States Code.
(xiii) all governmental and third party consents and approvals
necessary in connection with the Transactions and the transactions
contemplated by the Second Offering shall have been obtained (without the
imposition of any conditions that are not acceptable to the Banks) and
shall be in full force and effect; all applicable waiting periods shall
have expired without any action being taken by any competent authority;
and no law or regulation shall be applicable in the judgment of the Banks
that restrains, prevents or imposes materially adverse conditions upon
the Transactions or transactions contemplated by the Second Offering.
The Banks shall have completed a due diligence investigation of each
Borrower and its Subsidiaries in scope and with results satisfactory to
the Banks; and the Banks shall be satisfied with each Borrower's
management and with the arrangements between the Borrowers and their
respective managements including any management agreements, contracts,
consulting agreements or similar agreements.
(xiv) Each Borrower shall have satisfied the Banks that such
Borrower is in compliance with all material
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environmental statutes and regulations and maintains adequate reserves in
connection therewith, including without limitation if requested a Phase I
report in respect of any facilities to be acquired as part of the
transactions contemplated by the Acquisition Documents.
(xv) The Banks shall be satisfied that each Borrower and each of
their Affiliates shall be able to meet its obligations under all employee
and retiree welfare plans, that each Borrower's and each Affiliates'
employee benefit plans are funded in accordance with the minimum
statutory requirements, that no material "reportable event" (as defined
in ERISA) has occurred as to any such employee benefit plan and that no
termination of, or withdrawal from, any such employee benefit plan has
occurred or is contemplated that could result in a material liability.
(xvi) The Banks (A) shall be satisfied with the terms and
conditions of the Second Offering (B) shall have received a copy
certified as true and complete by the Secretary or an Assistant Secretary
or other appropriate officer of the S-1, the prospectus and all of the
other documents and consents, if any, delivered in connection therewith
(C) shall have received evidence of gross receipt by Hvide of at least
Sixty Five Million Dollars ($65,000,000) in connection with the Second
Offering (D) shall have received evidence that (x) the Senior
Subordinated Note and the Indebtedness related thereto has been retired
and (y) the Junior Subordinated Note have been redeemed or shall be
converted into Class A or Class B shares of Hvide stock, and (E) shall
have received evidence that the Acquisitions as described in Exhibit L
shall have been completed in form and substance acceptable to the Banks.
(xvii) Audited, consolidated financial statements of Hvide as of
December 31, 1995, (as updated on September 30, 1996).
SECTION 1.032 Conditions Precedent to Each Advance and Letter of Credit
Following the Agreement Date. The obligation of the Banks to make each Advance
on a Drawdown Date and the Letter of Credit Agent to renew the Letter of Credit
shall be subject to the conditions precedent in Section 3.01 hereof and the
following additional conditions precedent that on each Drawdown Date or Letter
of Credit Renewal Date:
(a) the following statements shall be true and correct, and the
Administrative Agent on behalf of the Banks shall have received a
certificate signed by a duly authorized officer of the Borrowers and
dated the Drawdown Date of the Advance or Letter of Credit Renewal Date,
as the case may be, to attest that:
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(i) The representations and warranties of the Borrowers
contained in this Agreement, the other Loan Documents are true and
correct on and as of the Drawdown Date, as though made on and as of
such date, and no Default or Event of Default has occurred and is
continuing, or would result from such Advance, Letter of Credit or
the Transaction; and
(ii) The Borrowers are, and immediately upon giving effect to
the making of the Loan hereunder, shall be in compliance with their
obligations under Section 5.01(e) and the financial covenants
contained in Section 5.01(d) hereof;
(b) the Borrowers shall have paid or caused to be paid all fees
required to be paid under this Agreement on prior to such Drawdown Date
or Letter of Credit Renewal Date;
(c) no material adverse change shall have occurred since December
31, 1995 (as updated on September 30, 1996), in the business, operations,
properties, prospects or condition (financial or otherwise) of any of the
Borrowers or their Subsidiaries taken as a whole;
(d) the Advance when added to previous Advances and such Letter of
Credit when renewed are in an aggregate amount not greater than the
aggregate available on undisbursed or undrawn sum of the then available
Commitments of the Banks;
(e) all corporate, organizational or other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by the Loan Documents and the Transaction shall
be satisfactory in form and substance to the Administrative Agent, the
Banks and their counsel;
(f) the Banks shall have received copies of the Acquisition
Documents and the calculations required under Section 2.01(iii) for each
Acquisition;
(g) the Administrative Agent shall have received two notarized
Mortgage Supplements (in the form of Exhibit N hereto), duly executed by
the Borrower which is the owner of any Acquisition which is funded in
whole or in part by an Advance and which is not a Mortgage Vessel but
which is required to be mortgaged pursuant to Section 5.01(m) hereof;
(h) the Administrative shall receive an executed amendment to the
Credit Agreement and such other documentation in connection therewith as
it deems necessary or desirable in connection with an Acquisition; and
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(i) such other approvals, financial information, vessel information,
opinions, or documents as the Banks may reasonably request.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 1.041 Representations and Warranties of the Borrowers. Each of the
Borrowers represents and warrants as follows:
(a) Due Existence; Compliance. Each of the Borrowers is a corporation or
limited partnership duly organized, validly existing and in good standing, where
applicable under the laws of its Incorporation Jurisdiction and has all
requisite power and authority under such laws to own or lease and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and to execute, deliver and perform its obligations under the Loan
Documents to which it is, or will be, a party. Each of the Borrowers and its
Subsidiaries is duly qualified or licensed to do business as a foreign
corporation or entity and is in good standing, where applicable, in all
jurisdictions in which it owns or leases property (including vessels), or
proposes to own or lease property (including vessels), or in which the conduct
of its business, and the conduct of its business upon consummation of the
Transaction, requires it to so qualify or be licensed, except to the extent that
the failure to so qualify or be in good standing would have no material adverse
effect on the business, operations, properties, prospects or condition
(financial or otherwise) of any of the Borrowers and its Subsidiaries or the
ability of any such Person to perform its obligations under any of the Loan
Documents to which it is or may be a party. Each of the Borrowers and their
Subsidiaries is in compliance in all material respects with all Applicable Law,
rules, regulations and orders.
(b) Corporation Authorities; No Conflicts. The execution, delivery and
performance by each of the Borrowers of this Agreement, the other Loan Documents
and the Acquisition Documents to which it is or will be a party are within its
corporate or limited partnership powers and have been duly authorized by all
necessary corporate and stockholder approvals or partnership approvals and (i)
do not contravene its organizational documents or any law, rule, regulation,
judgment, order or decree applicable to or binding on any of the Borrowers or
their Subsidiaries and (ii) do not contravene, and will not result in the
creation of any lien under, any provision of any contract, indenture, mortgage
or agreement to which any of the Borrowers or their Subsidiaries is a party, or
by which it or any of its properties are bound.
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(c) Government Approvals and Authorizations. No authorization or approval
or other action by, and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution, delivery and performance
by or enforcement against each of the Borrowers of the Loan Documents or the
Acquisition Documents (except such governmental approvals or authorizations as
have been duly obtained or made and remain in full force and effect).
(d) Legal, Valid and Binding. Each of the Loan Documents and the
Acquisition Documents to which any of the Borrowers is a party is, or upon
delivery will be, the legal, valid and binding obligation of such Borrowers,
enforceable against such Borrowers in accordance with its terms.
(e) Financial Information. The consolidated annual audited balance sheet of
the Borrowers as of December 31, 1995 (as updated on September 30, 1996) and the
related statements of operations and changes in financial position of the
Borrowers for the fiscal year then ended, copies of which have been furnished to
the Administrative Agent, fairly present the consolidated financial condition of
the Borrowers as of such date and the results of the operations of the Borrowers
for the period ended on such date, all in accordance with GAAP consistently
applied. There has been no material adverse change in the business, operations,
properties or condition (financial or otherwise) of any of the Borrowers or any
of its Subsidiaries taken as a whole since December 31, 1995.
(f) Litigation. There is no pending or threatened action or proceeding
affecting any of the Borrowers or any of their Subsidiaries by or before any
court, governmental agency or arbitrator, which may materially adversely affect
the condition, operations, business, prospects, properties or assets of the
Borrowers or their Subsidiaries taken as a whole, or prohibit, limit in any way
or materially adversely affect the consummation of the Transaction, including,
without limitation, the ability of any of the Borrowers or their Subsidiaries to
perform its respective obligations under the Loan Documents or Acquisition
Documents to which it is or may be a party, except as disclosed to the Banks in
Schedule E.
(g) Immunities. None of the Borrowers or any of their Subsidiaries, or the
property of any of them, has any immunity from jurisdiction of any court or from
any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) under
Applicable Law.
(h) No Taxes. There is no Tax or similar item imposed by the United States,
the States of New York or Florida or any other jurisdiction in which the
Borrowers conduct business, or by any political subdivision of any of the
foregoing, on or by virtue of the execution or delivery or enforcement of this
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<PAGE> 48
Agreement or the Loan Documents or any other document to be furnished
hereunder, including without limitation any document included in the Collateral
or any Acquisition Document.
(i) No Filing. To ensure the legality, validity, enforceability or
admissibility in evidence of this Agreement and the other Loan Documents in each
of the Incorporation Jurisdictions and the States of New York or Florida or any
other jurisdiction in which the Borrowers conduct business, it is not necessary
that any Loan Document, or any other document related to any thereof except the
Mortgages, be filed or recorded with any court or other authority in such
jurisdiction, or that any stamp or similar tax be paid on or with respect to
this Agreement or any of the other Loan Documents.
(j) Loan Document Representations and Warranties. The representations and
warranties of the Borrowers in the Loan Documents were true and correct in all
material respects when made, and are true and correct in all material respects
on the date hereof as if made as of the date hereof.
(k) No Defaults. There does not exist (i) any event of default, or any
event that with notice or lapse of time or both would constitute an event of
default, under any agreement to which any of the Borrowers or any of their
Subsidiaries is a party or by which any of them may be bound, or to which any of
their properties or assets may be subject which default would have a material
adverse effect on the Borrowers and their Subsidiaries taken as a whole, or
would materially adversely affect any of the Borrowers' ability to perform its
obligations under the Loan Documents to which it is or may be a party, or (ii)
any event which is a Default or Event of Default.
(l) Margin Regulations. No part of the proceeds of the Loan will be used
for any purpose that violates the provisions of any of Regulations G, T, U or X
of the Board of Governors of the Federal Reserve System of the United States or
any other regulation of such Board of Governors. Neither the Borrowers nor any
of their Subsidiaries is engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock, within the meaning of
Regulations G, T, U and X issued by the Board of Governors of the Federal
Reserve System of the United States.
(m) Investment Company Act. None of the Borrowers is an "investment
company" or a company "controlled" by an "investment company" (as each of such
terms is defined or used in the Investment Company Act of 1940, as amended) of
the United States.
(n) Taxes Paid. (i) Each of the Borrowers and their Subsidiaries (A) has
filed or caused to be filed, or has timely requested an extension to file or has
received from the relevant governmental authorities an extension to file, all
material tax
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<PAGE> 49
returns which are required to have been filed, and (B) has paid all Taxes shown
to be due and payable on said returns or extension requests or on any
assessments made against it or any of its properties, and all other Taxes, fees
or other charges imposed on it or any of its properties by any governmental
authority (other than those the amount or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
appropriate reserves in conformity with GAAP have been provided on its books);
and (ii) no tax liens have been filed and no claims are being asserted with
respect to any such Taxes, fees or other charges other than those the amount or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which appropriate reserves in accordance with
GAAP have been provided on its books.
(o) Disclosure. No representation, warranty or statements made or document
or financial statement provided by any of the Borrowers or any Affiliate or
Subsidiary thereof, in or pursuant to this Agreement, any other Loan Document,
or in any other document furnished in connection with this Agreement, any other
Loan Document or the Transaction, is untrue or incomplete in any material
respect or contains any misrepresentation of a material fact or omits to state
any material fact necessary to make any such statement herein or therein not
misleading.
(p) The Security Documents. The provisions of each of the Security
Documents create in favor of the Administrative Agent or the Mortgagee under the
Master Vessel Trust Agreement for the Banks a valid, binding and enforceable
security interest and Lien in all right, title and interest in the Collateral
therein described, and shall, upon execution by the parties thereto constitute a
fully perfected first priority security interest in favor of the Banks and the
Mortgagee on behalf of the Banks in all right, title and interest in such
Collateral, subject in the case of (x) each Mortgage, to the recordation of the
Mortgage as described in the following sentence, (y) each Earnings Assignment,
to notice being given to charterers and account parties and (z) each Insurance
Assignment to notice being given to underwriters and protection and indemnity
clubs, and their consent being obtained where policy provisions or club rules so
require. Upon execution and delivery of a Mortgage by each of the Borrowers who
are owners of a Mortgaged Vessel and the recordation of a Mortgage in the Home
Port of such Vessel, the Mortgage for each such Vessel will be a first
"preferred mortgage" within the meaning of Chapter 313 of Title 46 of the United
States Code and will qualify for the benefits accorded a "preferred mortgage"
under Chapter 313 of Title 46 of the United States Code and no other filing or
recording or refiling or rerecording or any other act is necessary or advisable
to create or perfect such security interests under such Mortgage or in the
mortgaged property therein described. No consent, approval or authorization of
any Person is necessary or desirable for the realization of the benefits
afforded by the Security Documents or
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for enforcement of the rights and remedies therein contained by the
Administrative Agent, the Mortgagee or the Banks.
(q) Good Title. Each of the Borrowers has good title to its properties and
assets, except for (i) as created hereby and permitted hereunder, existing or
future Liens, security interests, mortgages, conditional sales arrangements and
other encumbrances either securing Indebtedness or other liabilities of any of
the Borrowers or any of their Subsidiaries; (ii) other than in respect of
Collateral, Liens which the Borrowers in their reasonable business judgment has
determined would not be reasonably expected to materially interfere with the
business or operations of the Borrowers or their Subsidiaries as conducted from
time to time, (iii) minor irregularities therein which do not materially
adversely affect their value or utility; and (iv) Liens disclosed in Schedule F.
(r) ERISA. None of the Borrowers nor any of their Subsidiaries, is or has
been subject to, or has any liability, or has incurred any liability of any sort
whatsoever to any Person in respect of any plan within the meaning of, ERISA or
the Code.
(s) Solvency. Each of the Borrowers is on the date hereof, and at all times
will be, Solvent.
(t) Chief Executive Offices. The chief executive offices of the Borrowers
are located at Fort Lauderdale, Florida.
(u) Burdensome Provisions. None of the Borrowers or any of their
Subsidiaries is a party to or bound by any contract or applicable law,
compliance with which will have a materially adverse effect on (a) the Borrowers
and their consolidated Subsidiaries taken as a whole, or (b) any Loan Document
to which any of the Borrowers is a party or (c) the Collateral.
(v) Pari Passu Status. The Obligations of the Borrowers to the Banks under
the Loan Documents will at all times rank at least pari passu in priority of
payment with all of the Borrowers' other Indebtedness.
(w) Citizenship. Each of Hvide and each Borrower owning a Vessel engaged in
the coastwise trade of the United States is a "citizen of the United States"
within the meaning of Section 2 of the Shipping Act, 1916, as amended, for
purposes of engaging in the coastwise trade of the United States.
ARTICLE V.
COVENANTS OF THE BORROWERS
SECTION 1.051 Affirmative Covenants. So long as an Advance or any other
Obligation shall remain unpaid or any Bank shall have any Commitment under this
Agreement, each of the
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Borrowers shall, unless the Administrative Agent on behalf of the Banks shall
otherwise consent in writing in accordance with Section 7.04, comply with each
of the following affirmative covenants:
(a) Compliance With Laws. Each of the Borrowers shall comply, and cause
each of their Subsidiaries to comply, in all material respects with Applicable
Law, and to pay when due all Taxes, assessments and governmental charges imposed
upon it or upon its properties, and all lawful claims and liabilities which, if
unpaid, might by law become a Lien upon its properties, provided, however, that
the Borrowers shall not be required to pay or discharge any such Tax,
assessment, charge or claim that is being contested in good faith by appropriate
proceedings properly instituted, diligently conducted and for which adequate
reserves in conformity with GAAP have been provided. Each of the Borrowers will
take such action and make such payments which may be required by any change in
applicable laws affecting any of the Loan Documents, in whole or in part, so
that it may continue to perform this Agreement, the Loan Documents and the other
related documents in compliance with such laws.
(b) Use of Proceeds. The Borrowers shall use all proceeds of the Advances
under this Agreement for the purposes set out in Recital 1 of this Agreement.
(c) Financial Information; Defaults.
(i) Each of the Borrowers shall promptly inform the Administrative
Agent of any event which is a Default or Event of Default, or any event
which materially adversely affects its ability fully to perform any of its
obligations under any Loan Document, or any Event of Default which has
occurred and is continuing under any material agreement to which such
Borrower or any of its Subsidiaries is a party;
(ii) As soon as the same become available, but in any event within 90
days after the end of each fiscal year, the Borrowers shall deliver to the
Administrative Agent on behalf of the Banks (x) audited consolidated
financial statements of the Borrowers and their Subsidiaries in accordance
with GAAP (y) unaudited consolidating financial statements reconciled to
the audited financial statements and certified by Hvide's Chief Financial
Officer and (z) a certificate of the chief financial officer of Hvide
setting forth an audited calculation of the financial tests specified in
Sections 5.01(d),(e) and Section 5.02 (i) in accordance with GAAP showing
compliance therewith and stating that no Event of Default or Default has
occurred and is continuing, or setting forth in detail any such Event of
Default or Default and any steps being taken by the Borrowers to cure the
same; all such audited consolidated financial statements shall be
accompanied by an opinion thereon of independent certified public
accountants of
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recognized national standing acceptable to the Administrative Agent,
which opinion shall state that said financial statements fairly
present the consolidated financial condition and results of operations
of the Borrowers and their Subsidiaries as at the end of, and for,
such fiscal year;
(iii) As soon as the same become available and in any event
within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, the Borrowers shall deliver to the
Administrative Agent on behalf of the Banks unaudited consolidated and
consolidating financial statements of the Borrowers and their
Subsidiaries including statements of income, retained earnings and
cash flow and consolidated balance sheets for such quarter in
accordance with GAAP and (z) a certificate of the chief financial
officer of Hvide, which certificate shall state that such financial
statements fairly present the consolidated financial condition and
results of the operations of the Borrowers and their Subsidiaries, as
at the end of, and for, such period (subject to normal year end audit
adjustments) in accordance with GAAP, consistently applied and set
forth in reasonable detail a calculation of the financial tests
specified in Sections 5.01(d) and (e) and Section 5.02 (i) in
accordance with GAAP, showing compliance therewith and stating that no
Event of Default or Default has occurred and is continuing, or setting
forth in detail any such Event of Default or Default and any steps
being taken by the Borrowers to cure the same;
(iv) Not later than 30 days after the close of each month,
beginning with the month ended December 31, 1994, monthly financial
statements on a consolidating and consolidated basis of the Borrowers
showing income statements, balance sheets, cash flows and actual cash
position, together with a certificate of the Chief Financial Officer
of Hvide stating that no Event of Default or Default has occurred and
is continuing, or setting forth in detail any such Event of Default or
Default and any steps being taken by the Borrowers to cure the same;
(v) As soon as the same become available and in any event not
later than January 15 of each year, the Borrowers shall deliver to the
Administrative Agent on behalf of the Banks an annual business plan of
the Borrowers on a consolidated basis for such fiscal year, financial
projections for the Borrowers on a consolidated basis for three years
including statements of income and cash flow, and balance sheets and
the assumptions underlying such plan in reasonable detail, certified
by the chief financial officer of the Borrowers as a reasonable
forecast of the anticipated financial condition of the Borrowers and
their Subsidiaries on a consolidated basis and business segment basis
in respect of such fiscal years;
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(vi) Promptly upon their becoming available, the Borrowers shall
deliver to the Administrative Agent copies of any registration
statements and periodic reports which the Borrowers shall have filed
with the SEC or any national securities exchange or market and, to the
extent any of the Borrowers has notice of the same, any ratings (and
changes thereto) of its debt by any rating agency or service in the
United States;
(vii) Promptly upon obtaining knowledge of the same give notice
to the Administrative Agent, the Letter of Credit Agent and the Banks
of any material litigation against, any of the Borrowers or their
Affiliates or Subsidiaries;
(viii) As soon as reasonably possible, in the event any of the
Borrowers or any of their Subsidiaries incurs any liability under
ERISA the Borrowers shall deliver to the Administrative Agent copies
of all reports and notices which it or any of its Subsidiaries files
under ERISA; and
(ix) From time to time on request, the Borrowers shall furnish
the Administrative Agent, the Letter of Credit Agent and the Banks
with such information and documents respecting the condition of
operations, financial or otherwise, of each of the Borrowers and its
Subsidiaries, and provide access to the properties, accounts, books,
records and agreements of such Borrowers or any Subsidiary or
Affiliate, as the Administrative Agent or any of the Banks may
reasonably require.
(d) Financial Covenants. The Borrowers shall ensure that on a
consolidated basis:
(i) From the Effective Date, at all times Hvide's minimum
Liquidity shall be not less than Six Million United States Dollars
($6,000,000).
(ii) At all times Hvide's maximum Leverage Ratio shall be no
greater than the ratios listed below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
12/31/95 to 6/29/96 5.25
6/30/96 to 12/31/96 3.00
1/1/97 and thereafter 1.75
</TABLE>
(iii) At the end of each of Hvide's fiscal quarters, for such
quarter taken together with the immediately preceding three fiscal
quarters; the ratio of Hvide's Consolidated Indebtedness to EBITDAR
shall not be greater than the amount shown below for the respective
periods:
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<PAGE> 54
<TABLE>
<CAPTION>
Test Period
(Fiscal Quarters Ending) Ratio
------------------------ -----
<S> <C>
12/31/95 to 2/28/96 7.00
2/29/96 to 6/29/96 6.50
6/30/96 to 12/31/96 5.50
1/1/97 to thereafter 3.50
</TABLE>
(iv) At the end of each of Hvide's fiscal quarters, for such
quarter taken together with the three immediately preceding fiscal
quarters, the ratio of Hvide's Consolidated Cash Flow to Consolidated
Financial Obligations shall not be less than the amount shown below
for the respective period:
<TABLE>
<CAPTION>
Test Period
(Quarters Ending) Ratio
----------------- -----
<S> <C>
12/31/95 to 6/29/96 1.00
6/30/96 to 12/30/97 1.10
12/31/97 and thereafter 1.20
</TABLE>
(v) Notwithstanding the foregoing, for the period from the IPO
Date until the first day of the last quarter following the IPO Date,
all calculations made under this Section 5.01(d) shall be made using
Hvide's Pro Forma Consolidated Historical Financial Statements as
presented in the S-1 giving effect to the proposed Second Offering and
Acquisitions. Thereafter, the Administrative Agent shall use the
Borrowers' most recent quarterly financial statements for purposes of
determining whether the foregoing tests have been met.
(e) Collateral Maintenance and Valuation. (i) The
Borrowers shall ensure that at all times on and after the first Drawdown Date
the aggregate amount of unpaid principal in respect of Facilities A, B, and F
and the undrawn amounts of any Letters of Credit, issued in respect of
Facilities C and D and Unreimbursed Letter of Credit Obligations ("Total
Outstandings") will be less than the sum of (1) 70% of the Aggregate Fair
Market Value of all Mortgaged Vessels (provided that as to the SEABULK AMERICA,
the value for such Vessel shall not be greater than the maximum amount of the
Mortgage on such Vessel), (2) 70% of all Eligible Receivables and (3) other
such unencumbered material assets reasonably acceptable to the Banks and
pledged to the Banks on a first priority basis as security at such advance
rates as shall be determined reasonably by the Banks (collectively the "Pledged
Collateral"). At any time the Borrowers fail to satisfy the test prescribed in
the preceding sentence, the Borrowers will promptly either (a) provide
additional collateral reasonably acceptable to the Banks or (b) make a
mandatory prepayment in
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respect of Facilities A, B, or F or cause any Letter of Credit to be reduced or
terminated in the case of Facilities C and D sufficient to comply with the test
in the preceding sentence.
(ii) For purposes of covenant testing the Fair Market Value of each such
Mortgaged Vessel shall be the most recent value determined pursuant to Section
1.03 hereof provided that the value of a Mortgaged Vessel which is a Total Loss
shall be zero unless (a) such Total Loss is covered by valid and effective
uncontested insurance complying with the requirements of the Mortgage for such
Mortgaged Vessel and the Loss Termination Date has not passed; or (b) such Total
Loss has been replaced by a Substitute Vessel pursuant to Section 2.05(d)(2) and
such additional collateral as may be required by Section 2.05(d)(3) hereof and
all of the requirements of the Administrative Agent in connection therewith have
been fulfilled and complied with to the satisfaction of the Administrative
Agent.
(iii) At any time that the Borrowers demonstrate to the reasonable
satisfaction of the Banks for each fiscal quarter after the Effective Date that
the ratio of Total Outstandings to the Pledged Collateral is less than fifty
percent (50%), the Banks agree that in respect of the then next following
quarter (A) the requirement for a pledge or mortgage on all Vessels acquired
after the Closing Date (except for the Vessels listed in Exhibit L hereto which
are required to be mortgaged) is waived (provided, however, that there shall be
no release of existing Mortgaged Vessels) and (B) the restriction on
contributing Mortgaged Vessels to joint ventures and partnerships will be
relaxed for such next following quarter from two percent (2%) to five percent
(5%). However, if the ratio of Total Outstandings to the Pledged Collateral is
equal to or greater than fifty percent (50%) in successive quarters, the
requirement for a pledge or mortgage on all Vessels acquired after the Closing
Date will be re-imposed and the restriction on future contributions of Mortgaged
Vessels to joint ventures and partnerships will be reduced to two percent (2%).
(f) Insurance. Each of the Borrowers shall, and shall cause each of its
Subsidiaries to, insure and keep insured, with financially sound and reputable
insurers, so much of its properties, in such amounts and against such risks, as
to all the foregoing, in each case, reasonably satisfactory to the
Administrative Agent on behalf of the Banks and as are usually and customarily
insured by companies engaged in a similar business with respect to properties of
a similar character (other than with respect to Vessels which shall be insured
as provided in the Mortgages).
(g) Access to Books and Records. Each of the Borrowers shall permit the
Administrative Agent or its authorized representatives, promptly upon request,
to make such inspection, examination, copy and audit of its properties, books,
records and accounts and those of its Subsidiaries as the Administrative
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<PAGE> 56
Agent or its authorized representative may reasonably deem necessary or
appropriate in connection with this Agreement or any of the Loan Documents or
the Acquisition Documents.
(h) Good Standing. Each of the Borrowers shall remain a corporation or
limited partnership duly organized and in good standing under the laws of its
Incorporation Jurisdiction.
(i) Keeping of Books and Records. The Borrowers shall keep proper books of
record and accounts, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Borrowers and its
Subsidiaries, respectively, in accordance with GAAP consistently applied, or as
otherwise required by applicable rules and regulations of any governmental
agency or regulatory authority having jurisdiction over the Borrowers and its
Subsidiaries, respectively, and as required.
(j) Solvency. The Borrowers shall procure that each of them is, and shall
be, at all times Solvent.
(k) Notice of Litigation. The Borrowers shall promptly give notice in
writing to the Administrative Agent of all litigation and of all proceedings
before any governmental or regulatory agency affecting itself which, if
adversely determined, would materially adversely affect the condition, financial
or otherwise, of the Borrowers.
(l) Further Assurances. The Borrowers shall, from time to time upon the
request of the Administrative Agent on behalf of any Bank, accept for
cancellation any Note or Notes held by and payable to such Bank, and thereupon
the Borrowers shall execute and deliver to the Administrative Agent on behalf of
such Bank, payable to it and its registered assigns, a substitute Note or Notes,
prepared and delivered to the Borrowers by the Administrative Agent, in like
form and total aggregate amount as the canceled Note or Notes, but in any
denomination not smaller than One Million Dollars ($1,000,000) or such lesser
amount as such Bank may request as shall constitute the outstanding principal of
all outstanding Notes held by such Bank. The Borrowers shall do all things
necessary to grant to, and maintain in favor of, the Administrative Agent or the
Mortgagee on behalf of the Banks a valid, first priority security interest in
the Collateral, and to maintain each of the Loan Documents as legal, valid and
binding obligations, enforceable in accordance with their respective terms by
the Administrative Agent, the Mortgagee, the Banks, as the case may be. The
Borrowers shall take such other actions and deliver such instruments as may be
necessary or advisable, in the opinion of the Administrative Agent on behalf of
the Banks, to protect the security interest created in the Collateral, and the
rights and remedies of the Banks and the Mortgagee as the case may be, under the
Loan Documents.
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<PAGE> 57
(m) Acquired Vessels. All vessels acquired by any of the Borrowers after
the Closing Date will be pledged or mortgaged to the Banks as Mortgaged Vessels
except as otherwise provided in Section 5.01(e) hereof. The Borrowers shall
deliver to the Administrative Agent within five days of any Acquisition, two
original executed and acknowledged Mortgage Supplements (in the form of Exhibit
N hereto) in order to mortgage any Vessels acquired pursuant to the Acquisition.
(n) Cash Management. The Borrowers shall maintain cash management systems
acceptable to the Administrative Agent, and the collection accounts for payment
of earnings of Mortgaged Vessels shall be subject to a first perfected priority
lien in favor of the Administrative Agent on behalf of the Banks.
(o) Cash Collateral. In the event the face amount of the Letter of Credit
exceeds the amount to which the Letter of Credit should have been reduced as set
forth in Section 2.07(b), the Borrowers shall deposit additional funds in the
Cash Collateral Account equal to such excess amount.
(p) Contracts. The Borrowers shall comply with the terms of all contracts
to which any of them is a party or by which any of them or any of their
properties may be bound, except that this Section 5.01(p) shall not apply to any
non-compliance that (a) has been excused or waived under the relevant contract
or (b) either alone or when aggregated with all other such non-compliances,
would not have a materially adverse effect on the Borrowers and their
consolidated Subsidiaries taken as a whole.
(q) Corporate Structure. The Borrowers shall (i) maintain Hvide as a
publicly traded company as contemplated by the S-1; and (ii) ensure that the
Hvide stock is always entitled to be traded on public markets of the United
States and is not censored by any exchange, the SEC or comparable organization.
SECTION 1.052 Negative Covenants. So long as any Advance or any other
Obligation shall remain unpaid or any Bank shall have any Commitment, the
Borrowers shall not, unless the Administrative Agent on behalf of the Banks
shall otherwise consent in writing in accordance with Section 7.04:
(a) Mergers, Acquisitions, etc. Acquire the capital stock of any Person, or
merge or consolidate with or into, or permit any of its Subsidiaries to do so,
except that (x) any Subsidiary of the Borrowers may merge or consolidate with or
into, or transfer assets to the Borrowers, or (y) any Subsidiary of the
Borrowers may merge or consolidate with or into, or transfer assets to, or
acquire assets of, any other Subsidiary of the Borrowers, and any Borrower may
cause the change of its Incorporation Jurisdiction by way of merger or
otherwise, upon consent of the Majority Banks;
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<PAGE> 58
(b) Liens. Permit Liens on the Consolidated Assets of the Borrowers other
than (i) those existing on the Closing Date which are approved by the Banks,
(ii) those permitted under the Mortgages, and (iii) anticipated Indebtedness
described in Exhibit D hereto;
(c) Restricted Payments. Make any payment of cash, property or other assets
in respect of any shares of any class of capital stock; including but not
limited to, dividends or other distribution or payment of assets property,
rights, obligations or securities on account of any of its shares of capital
stock except that Hvide may pay dividends to its Class A and Class B Common
Stock shareholders, the total of which may not exceed half of Hvide's net income
for the fiscal year in which the dividend is to be paid;
(d) Business Change. Make or permit any material change to occur in the
nature, or conduct of business of the Borrowers and their Subsidiaries, taken as
a whole, as conducted on the date hereof;
(e) Guarantees. Assume, guarantee, endorse, agree to purchase or repurchase
or provide funds in respect of, or otherwise become or be, or remain directly or
contingently liable upon any Indebtedness, obligation or dividend of, any other
Person, firm, corporation or enterprise, except (i) those which when aggregated
with the additional indebtedness permitted under Section 5.02(j), do not exceed
the requirements set forth in 5.02(j) in principal amount or on a present value
discounted basis; (ii) endorsements of negotiable instruments for deposit or
collection in the ordinary course of business; (iii) the Hvide indemnity of up
to the principal amount of Six Million Eight Hundred Thousand Dollars
($6,800,000) in favor of the 3R Trusts as sellers of the Seal Fleet Vessels; and
(iv) guarantees of the obligations of Subsidiaries which are not otherwise
prohibited by this Agreement;
(f) Transactions with Officers, Directors and Shareholders. Enter or permit
any of its Subsidiaries to enter into any transaction or agreement, including
but not limited to any lease, Capital Lease, purchase or sale of real property,
purchase of goods or services, with any Subsidiary, Affiliate or any officer, or
director of the Borrowers or of any such Subsidiary or Affiliate, or any record
or known beneficial owner of equity securities of any such Subsidiary, any known
record or beneficial owner of equity securities of any such Affiliate or the
Borrowers, or any record or beneficial owner of at least five percent (5%) of
the equity securities of the Borrowers, except (i) on terms that are no less
favorable to the Borrowers or the relevant Subsidiary than those that could have
been obtained in a comparable transaction by the Borrowers or such Subsidiary
with an unrelated Person; (ii) between Subsidiaries or between the Borrowers and
Subsidiaries which are consolidated for financial reporting purposes with the
Borrowers;
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(g) Compliance with ERISA. Become party to any prohibited transaction,
reportable event, accumulated funding deficiency or plan termination with
respect to any plan as to which there is an insufficiency, all within the
meaning of ERISA and the Code, nor permit any Subsidiary to do so;
(h) Investment Company. Be or become an investment company subject to the
registration requirements of the Investment Company Act of 1940, as amended, or
permit any Subsidiary to do so;
(i) Additional Indebtedness. Incur additional Indebtedness except for (i)
existing Indebtedness listed in Schedule F; (ii) trade debt and similar
obligations incurred in the ordinary course of business; (iii) anticipated
Indebtedness listed in Exhibit D hereto; (iv) Indebtedness not to exceed Thirty
Million Dollars ($30,000,000) in principal amount which is permitted in
connection with Permitted Capital Expenditures.
(j) Place of Business, Etc. Change its principal place of business or chief
executive offices without first (i) giving the Administrative Agent at least 30
days advance written notice thereof and (ii) executing and filing Uniform
Commercial Code financing statements, in form and substance satisfactory to the
Administrative Agent, in such jurisdiction or jurisdictions as the
Administrative Agent shall request;
(k) Organizational Documents. Amend its articles of incorporation (or
similar organizational documents) or by-laws, or permit any Subsidiary to do any
of the foregoing (except for such amendments as shall not adversely affect the
rights and remedies of the Administrative Agent or any Bank);
(l) Management Contracts. Enter into any material changes to the management
or management contracts in connection with any Vessels without the consent of
the Administrative Agent, which consent shall not unreasonably be withheld;
(m) Contribution to Joint Ventures. Contribute Mortgaged Vessels to joint
ventures or partnerships except for those Vessels in joint ventures at the
Closing Date and (over the life of the Transaction) vessels valued at no more
than a two percent (2%) in the aggregate of the total value of Mortgaged Vessels
at the time of their contribution to such joint venture or partnership.
SECTION 1.053 Cash Collateral Account. (a) When required by the terms of
this Agreement, the Borrowers will establish and maintain at Citibank, N.A. at
399 Park Avenue, New York, New York, 10043 under the Administrative Agent's sole
dominion and control, a special cash account (the "Cash Collateral Account").
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(b) For so long as no Default or Event of Default has occurred or is
continuing hereunder, the Administrative Agent agrees to make Permitted
Investments with the funds in such account upon the instruction of the
Borrowers. Absent instruction from the Borrowers, the Administrative Agent shall
have no obligation to make such Permitted Investments. Any losses which result
in a shortfall of the amount necessary to pay the next maturing installment of
principal and interest shall be for the account of the Borrowers.
(c) The Administrative Agent on behalf of the Banks and the Letter of
Credit Agent shall have rights of setoff and a security interest and charge in
the Cash Collateral Account. If any Default or Event of Default shall have
occurred and be continuing, all amounts then on deposit or at any time
thereafter deposited in the Cash Collateral Account in lieu of being released
shall, in the sole discretion of the Administrative Agent, be retained by the
Administrative Agent, and/or from time to time applied by the Administrative
Agent against, any or all of the Obligations as such Obligations become due and
payable, whether by acceleration or otherwise.
(d) Any funds remaining in the Cash Collateral Account or after the Loan
and all Obligations have been repaid shall be released to the Borrowers.
ARTICLE VI.
DEFAULT
SECTION 1.061 Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) Any of the Borrowers shall fail to pay any installment of principal of
the Loan when due, or interest with respect to the Loan within three Business
Days after an Interest Payment Date, or fees with respect to the Loan within
three Business Days after the date on which such fee is due or any other amounts
with respect to the Loan within three Business Days of the notice demanding
payment thereof; or
(b) Any representation or warranty made by or on behalf of any of the
Borrowers under or in connection with this Agreement or any of the other Loan
Documents shall prove to have been incorrect in any material respect when made;
or
(c) Any of the Borrowers shall fail to perform or observe any covenant
contained in Section 5.01(d), (e), (f), (j), (k), (l), (n) or (q), Section 5.02,
or Section 5.03 of this Agreement on its part to be performed or observed; or
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(d) Any of the Borrowers shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or any of the other Loan
Documents (other than any Mortgage) on its part to be performed or observed and,
in each case, any such failure shall remain unremedied for 30 days after written
notice thereof shall have been given to the Borrowers by the Administrative
Agent or any Bank; or
(e) Any of the Borrowers shall fail to pay any amount or amounts due in
respect of material Indebtedness of such Borrower when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Indebtedness; or any other default
under one or more agreements or instruments relating to Indebtedness of such
Borrower or such Subsidiary, or any other event, shall occur and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Indebtedness; or any such
Indebtedness shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), redeemed, purchased
or defeased, or an offer to prepay, redeem, purchase or defease shall be
required to be made, in each case prior to the stated maturity thereof; or
(f) (1) Any of the Borrowers shall (A) generally not pay its debts as such
debts become due, (B) threaten to stop making payments generally, (C) admit in
writing its inability to pay its debts generally, (D) make a general assignment
for the benefit of creditors, (E) not be Solvent or (F) be unable to pay its
debts;
(2) Any proceeding shall be instituted in any jurisdiction by or against
any of the Borrowers or any of its material Subsidiaries (A) seeking to
adjudicate it a bankrupt or insolvent, (B) seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
its debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or (C) seeking the entry of an administration order, an order
for relief, or the appointment of a receiver, trustee, or other similar
official, for it or for any substantial part of its property; or
(3) Any of the Borrowers or any of their Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in subparagraph
(f)(2) of this Section 6.01; or
(g) One or more judgments or orders shall be rendered against any of the
Borrowers or any of their Subsidiaries for the payment of money, singly or in
the aggregate, in excess of Five Hundred Thousand Dollars ($500,000) which
amounts are not covered by valid insurance policies and either (i) enforcement
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proceedings to sell assets have been commenced by any creditor upon such
judgment or order or (ii) there shall have elapsed any period of 30 consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not have been in effect; or
(h) Any governmental authority or any Person or entity acting or purporting
to act under governmental authority shall have taken any action to condemn,
seize or appropriate, or to assume custody or control of, all or substantially
all of the property of any of the Borrowers or of any of their Subsidiaries
which are material to the assets or business of the Borrowers on a consolidated
basis, or shall have taken any action to displace the management of the
Borrowers or of any of their Subsidiaries which are material to the assets or
business of the Borrowers on a consolidated basis, or to curtail its authority
in the conduct of the business of any of the Borrowers or of any of their
Subsidiaries which are material to the assets or business of the Borrowers on a
consolidated basis; or
(i) After delivery thereof to the Administrative Agent, the Banks, or the
Mortgagee, the Administrative Agent, the Banks or the Mortgagee shall for any
reason (except to the extent permitted by the terms thereof) not have a valid
and perfected first priority security interest in any of the Pledged Collateral
purported to be covered by any of the Security Documents which results in a
default in the performance of the Borrowers' obligations under Section 5.01(e);
or
(j) An "event of default" shall have occurred and be continuing under any
Mortgage; or
(k) The Borrowers shall take any action in connection with any charter or
other operation of any Mortgaged Vessel which shall impair the security
interests of the Administrative Agent or the Mortgagee created or purported to
be created by any related Earnings Assignment or Insurance Assignment; or
(l) Any material provision of the Loan Documents after delivery thereof
shall for any reason cease to be in full force and effect, or any party thereto
shall so state in writing; or
(m) There shall have occurred a Change of Control.
SECTION 1.062 Application of Proceeds. All payments received and amounts
held or realized by the Administrative Agent, or delivered to the Administrative
Agent by the Mortgagee, in respect of any of the Loan Documents and the
Collateral (or any proceeds thereof) after an Event of Default shall have
occurred and so long as an Event of Default shall be continuing shall promptly
be distributed by the Administrative Agent in the following order of priority:
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First, so much of such payments or amounts as shall be required to pay
the Administrative Agent, the Letter of Credit Agent and the Mortgagee for
any Tax, expense, charge or other loss incurred by the Administrative
Agent, the Letter of Credit Agent or the Mortgagee to the extent not
previously reimbursed (including, without limitation, the expenses of any
sale, taking or other possession, attorneys' fees and expenses, court costs
and any other expenditures incurred or expenditures or advances made by the
Administrative Agent, the Letter of Credit Agent or the Mortgagee in the
protection, exercise or enforcement of any right, power, or remedy or any
damages sustained by the Administrative Agent or the Mortgagee, liquidated
or otherwise upon such Event of Default) and to pay any other Obligations
arising hereunder or under any of the other Loan Documents to the
Administrative Agent, the Letter of Credit Agent and the Mortgagee shall be
applied by the Administrative Agent in payment of such expenses;
Second, so much of such payments or amounts as shall be required to
reimburse the Banks ratably in accordance with their respective Percentage
Interests for all outstanding amounts in respect of (i) accrued and unpaid
interest, Breakage Costs, and then (ii) outstanding principal of each
Advance until paid in full, with any amounts remaining to be applied in
accordance with clause Third below;
Third, so much of such payments or amounts as shall be required to
reimburse the Banks ratably in accordance with their respective Percentage
Interests for all other amounts owing in respect of any Obligations other
than those specified in paragraph Second above; and
Fourth, the balance, if any, of such payments or amounts remaining
thereafter shall be distributed to the Borrowers.
ARTICLE VII.
RELATION OF BANKS, ASSIGNMENT
AND PARTICIPATIONS
SECTION 1.071 Banks and Administrative Agent. The general administration of
this Agreement and the Loan Documents shall be by the Administrative Agent, and
each Bank hereby authorizes and directs the Administrative Agent to take such
action (including without limitation retaining lawyers, accountants, surveyors
or other experts) or forbear from taking such action as in the Administrative
Agent's reasonable opinion may be necessary or desirable for the administration
hereof (subject to any direction of the Majority Banks and to the other
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requirements of Section 7.04 hereof). The Administrative Agent shall inform each
Bank, and each Bank shall inform the Administrative Agent, of the occurrence of
any Event of Default promptly after obtaining knowledge thereof; however, unless
it has actual knowledge of an Event of Default, each of the Administrative
Agent, the Letter of Credit Agent and the Banks may assume that no Event of
Default has occurred.
SECTION 1.072 Pro Rata Sharing. All commissions, fees, interest and
payments received by the Administrative Agent or any Bank under the terms of
this Agreement and the other Loan Documents and all expenses arising from the
administration hereof or the enforcement of any security and any sum realized
therefrom or from any setoff (other than sums applied to the payment of expenses
or for reimbursement of expenses paid) for which provision for allocation and
payment is not otherwise provided for herein or therein shall be divided pro
rata among the Banks in accordance with their Percentage Interests set forth in
Exhibit M hereto or, if applicable, in the Register. Notwithstanding the
foregoing, nothing herein shall be construed to prevent Citibank, N.A. or The
First National Bank of Boston from receiving solely for its own account as
neither Bank, Administrative Agent, Co-Agent nor Letter of Credit Agent
hereunder, such other fees and payments in respect of the Transaction as it may
mutually agree with the Borrowers. Each Bank shall pay to the Administrative
Agent promptly on demand any sums payable by such Bank hereunder. Under no
circumstances shall the Administrative Agent be obligated to expend its own
funds for the protection of the interests of the Banks, but the Administrative
Agent shall be entitled to be indemnified hereunder by the Banks in accordance
with their Percentage Interest prior to taking any action or expending any
funds.
SECTION 1.073 Setoff. Any Bank which shall receive payment of or on account
of all or part of its claim against the Borrowers hereunder through the exercise
of any right of setoff, counterclaim, banker's lien, or secured claim under any
bankruptcy statute in a greater proportion than its Percentage Interest shall
promptly notify the Administrative Agent thereof as set forth in Section 8.05
hereof and shall be deemed to have purchased immediately prior to such payment a
ratable proportion of the claims of the other Banks so that all recoveries of
principal and interest shall be shared by the Banks in accordance with their
respective Percentage Interests. If all or any portion of such excess payment is
thereafter recovered from such Bank, such purchase shall be rescinded and the
purchase price restored of such recovery, but without interest.
SECTION 1.074 Approvals. Upon any occasion requiring or permitting an
approval of any amendment or modification or any consent, waiver, declaring an
Event of Default or taking any action thereafter, or any other action on the
part of the Administrative Agent or the Banks under any of the Loan Documents,
(1) action may (but shall not be required to) be taken
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by the Administrative Agent for and on the behalf or for the benefit of all
Banks, provided (A) that no contrary direction of the Majority Banks shall have
been previously received by the Administrative Agent, and (B) that the
Administrative Agent shall have received consent of the Majority Banks to enter
into any written amendment, waiver or modification of the provisions of any of
the Loan Documents, or to consent in writing to any material departure from the
terms of any Loan Documents by the Borrowers or any other party thereto or (2)
action shall be taken by the Administrative Agent upon the direction of the
Majority Banks, and any such action shall be binding on all Banks; provided
further, however, that unless all of the Banks agree in writing thereto, no
amendment, modification, waiver, consent or other action with respect to any of
the Loan Documents shall be effective which (a) increases the Commitment,
increases the Percentage Interest of any of the Banks or increases the Aggregate
Amount, (b) reduces any commission, fee, principal or interest owing to any Bank
hereunder or the method of calculation of any thereof, (c) extends Maturity
Date, the expiry date of any Letter of Credit or any other date on which any sum
is due hereunder, including, without limitation, the date or amount of any
prepayment required hereunder, (d) releases any Collateral, guaranty or other
security, (e) amends, waives or modifies the provisions of Section 5.01(e)
hereof, or (f) amends the provisions of this Section 7.04 or the definition of
Majority Banks.
SECTION 1.075 Exculpation. The Administrative Agent shall not be liable or
answerable for anything whatsoever in connection with any of the Loan Documents
or other instrument or agreement required hereunder or thereunder, including
responsibility in respect of the execution, delivery, construction or
enforcement of any of the Loan Documents or any such other instrument or
agreement, or for any action taken or not taken by the Administrative Agent in
any case involving exercise of any power or authority conferred upon the
Administrative Agent under any thereof, except for its wilful misconduct or
gross negligence, and the Administrative Agent shall have no duties or
obligations other than as provided herein and therein. The Administrative Agent
shall be entitled to rely on any opinion of counsel (including counsel for any
of the Borrowers or any of their Subsidiaries) in relation to any of the Loan
Documents or any other instrument or agreement required hereunder or thereunder
and upon writings, statements and communications received from the Borrowers or
any of its Subsidiaries (including any representation made in or in connection
with any Loan Document), or from any other party to any of the Loan Documents or
any documents referred to therein or any other Person, firm or corporation
reasonably believed by it to be authentic, and the Administrative Agent shall
not be required to investigate the truth or accuracy of any writing or
representation, nor shall the Administrative Agent be liable for any action it
has taken or omitted in good faith on such reliance.
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SECTION 1.076 Indemnification. Each Bank agrees to indemnify the
Administrative Agent, except to the extent reimbursed by the Borrowers and
except in the case of any suit by any Bank against the Administrative Agent
resulting in a final judgment against the Administrative Agent, ratably
according to its Percentage Interest against all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursement of any kind or nature whatsoever (except to the extent the
foregoing result from the Administrative Agent's gross negligence or wilful
misconduct) which may be imposed on, incurred by or asserted against the
Administrative Agent in any way relating to or arising out of (y) any of the
Loan Documents or any other instrument or agreement contemplated hereunder or
thereunder or (z) any action taken or omitted by the Administrative Agent under
any of the Loan Documents or such other instrument or agreement.
SECTION 1.077 Administrative Agent, Co-Agents and Letter of Credit Agent as
Bank. Each of the Administrative Agent, the Co-Agents and the Letter of Credit
Agent shall, in its individual capacity, have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not an
agent; the term "Banks" shall include each of the Administrative Agent, the
Co-Agents and the Letter of Credit Agent in its individual capacity to the
extent of its Percentage Interest. Each of the Administrative Agent, the
Co-Agents and the Letter of Credit Agent and its respective Subsidiaries and
Affiliates may accept deposits from, lend money to, and generally engage in any
kind of banking, trust or other business with each of the Borrowers, and their
respective Subsidiaries and Affiliates, as if it were not the Administrative
Agent, Co-Agents or Letter of Credit Agent, as the case may be.
SECTION 1.078 Notice of Transfer; Resignation; Successor Administrative
Agent. (a) The Administrative Agent may deem and treat a Bank party to this
Agreement as the owner of such Bank's interest in any Loan and any other
instrument or agreement of the assignment or transfer thereof, executed by such
Bank and otherwise in compliance with the requirements of Section 7.10 hereof,
shall have been received and accepted by the Administrative Agent. The
Administrative Agent shall resign if directed by the Majority Banks. The
Administrative Agent may resign at any time by notice to the Borrowers and the
Banks.
(b) Any successor Administrative Agent shall be appointed by the Majority
Banks and shall be a bank or trust company reasonably satisfactory to the
Majority Banks, and, so long as no Event of Default shall have occurred and be
continuing, appointment of any such successor Administrative Agent (whether by
the Majority Banks or by the retiring Administrative Agent) shall be subject to
the consent of the Borrowers, such consent not to be unreasonably denied or
withheld. If no successor Administrative Agent shall have been so appointed by
the Majority Banks, and shall have accepted such
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appointment, within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Bank's removal of the Administrative
Agent, then such retiring Administrative Agent may, on behalf of the Banks,
appoint a successor Administrative Agent, which shall be a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under this Agreement. After
any retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article VII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
SECTION 1.079 Credit Decision; Not Trustee. Each Bank represents that it
has made, and agrees that it shall continue to make its own independent
investigation of the financial condition of each of the Borrowers and their
Subsidiaries and its own appraisal of the creditworthiness of each of the
Borrowers and their Subsidiaries in connection with the making and performance
of the Loan Documents. The Administrative Agent has and shall have no duty or
responsibility whatsoever on the date hereof or, except as otherwise expressly
provided in this Agreement at any time hereafter, to provide any Bank with any
credit or other information. Nothing herein shall (nor shall it be construed so
as to) constitute the Administrative Agent or the Letter of Credit Agent a
trustee for each of the Borrowers or their Subsidiaries or impose on it any
duties or obligations other than those for which express provision is made in
this Agreement or under the other Loan Documents.
SECTION 7.10 Assignments and Participation; Termination. (a) Each Bank may
assign to one or more banks or other entities all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and the Note or Notes held
by it); provided, however, that (i) each such assignment shall be of a constant,
and not a varying, percentage of all rights and obligations under this
Agreement, (ii) unless the Borrowers shall otherwise agree with the assigning
Bank, the amount of the Commitment of the assigning Bank being assigned pursuant
to each such assignment (determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall in no event be less than Five
Million Dollars ($5,000,000) or such lesser amount as shall constitute all of
such assigning Bank's Commitment and the outstanding principal of Notes payable
to it, (iii) each such assignment shall be to an Eligible Assignee, and (iv) the
parties to each such assignment shall
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execute and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with any Note
or Notes subject to such assignment and a processing recordation fee of $3,000;
provided further, however, that so long as no Event of Default shall have
occurred and be continuing, each such assignment shall be subject to the consent
of the Borrowers, which consent shall not unreasonably be denied and which
consent shall be deemed given unless the Borrowers gives the assigning Bank and
the Administrative Agent written notice of and a reasonable basis for its denial
not later than ten (10) Business Days following telex, telefacsimile or cable
notice given to the Borrowers by the assigning Bank or the Administrative Agent
of the name of the proposed transferee, the amount of Commitment to be assigned
and such information as the Borrowers may reasonably request for purposes of
making an informed judgment. Prior to contacting a prospective assignee in
connection with a proposed assignment hereunder, the assignor Bank shall give
the Borrowers notice of the identity of any such prospective assignee. Any
consent to assignment untimely or unreasonably denied by the Borrowers shall be
void and of no effect, and shall not preclude or bar any assignment otherwise
permitted by this Section 7.10(a). Any assignment or purported assignment not in
compliance with this Section shall be void and of no effect. Without regard to
any of the other terms of this Agreement or of any other agreement, any Bank may
assign, as collateral or otherwise, any of its rights (including, without
limitation, rights to payments of principal and/or interest on the Notes) under
this Agreement to any Federal Reserve Bank of the United States without notice
to or consent of the Borrowers, the Agent or any other Person.
(b) Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance and subject to the foregoing, have the rights and obligations of a
Bank hereunder and (y) the Bank assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such Bank shall cease to be party hereto).
(c) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in connection with this Agreement or the
execution, legality,
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validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; (ii) such assigning
Bank makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any of the Borrowers or its Subsidiaries
or the performance or observance by any of the Borrowers or its Subsidiaries of
any of its obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this agreement, together with copies of the Borrowers' financial
statements referred to herein, and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Administrative Agent, such assigning Bank or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Bank.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee representing that it is an Eligible Assignee, the
Administrative Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit I hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
(including the transfer of Notes to such Eligible Assignee by the assigning
Bank) and (iii) give prompt notice and an execution counterpart thereof to the
Borrowers. Within five (5) Business Days after its receipt of such notice, the
Borrowers, at the expense of the assigning Bank, shall execute and deliver to
the Administrative Agent in exchange for the surrendered Note or Notes a new
Note or new Notes, as the case may be, of the same series to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance. Such new Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note or Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of Exhibit I hereto.
(e) The Administrative Agent shall maintain at its address referred to in
Section 8.02 of this Agreement a register for the recordation of the names and
addresses of the Banks and the Commitment of, and principal amount of the
Advance owing and
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each Note payable to, each Bank from time to time and a copy of each Assignment
and Acceptance delivered to and accepted by it (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrowers, the Administrative Agent, the Letter of Credit Agent
and the Banks may treat each Person whose name is recorded in the Register as a
Bank hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrowers or any Bank at any reasonable time and
from time to time upon reasonable prior notice and each shall be entitled to
make copies thereof at its expense.
(f) Each Bank may grant participations to one or more banks or other
entities in or to all or any part of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment and
the Advance owing to it); provided, however, that, notwithstanding the grant of
any such participation by any Bank, such participation, and the right to grant
such a participation, shall be expressly subject to the following conditions and
limitations: (i) such Bank's obligations under this Agreement (including without
limitation, its Commitment to the Borrowers hereunder) shall remain unchanged,
(ii) such Bank shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Bank shall remain the holder of
any such Note and Advance for all purposes of this Agreement, (iv) the
Borrowers, the Administrative Agent and the other Banks shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under the Agreement, (v) such Bank shall continue to be able to
agree to any modification or amendment of this Agreement or any waiver hereunder
without the consent, approval or vote of any such participant or group of
participants, other than modifications, amendments, and waivers which (a)
postpone the Maturity Date or any date fixed for any payment of, or reduce any
payment of, principal of or interest on such Bank's Advance or any fees or other
amounts payable under this Agreement, or (b) increase the amount of such Bank's
Commitment, or (c) change the interest rate payable under this Agreement, or (d)
release all or any substantial part of the Collateral, provided that if a Bank
agrees to any modification or waiver relating to items (a) through (d), the
Borrowers, the Administrative Agent and each other Bank may conclusively assume
that such Bank duly received any necessary consent of each of its participants,
and (vi) except as contemplated by the immediately preceding clause (v), no
participant shall be deemed to be or to have any of the rights or obligations of
a "Bank" hereunder.
(g) Any Bank may, in connection with any assignment, designation or
participation or proposed assignment, designation or participation pursuant to
this Section 7.10, disclose to the assignee or participant, or proposed
assignee, or participant, any information relating to any of the Borrowers or
their Subsidiaries that is otherwise publicly available and has been furnished
to such Bank by or on behalf of the Borrowers, provided
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that without the Borrowers' prior written or oral consent, no Bank shall
disclose to any proposed assignee or proposed participant, any such information
not otherwise publicly available relating to the Borrowers or its Subsidiaries
as has been furnished to such Bank by or on behalf of the Borrowers hereby;
provided, however, any Bank may disclose such information to a potential
assignee if prior to any disclosure, the potential assignee has signed a
confidentiality agreement in form and substance reasonably satisfactory to
Borrowers. Any Bank that sells or grants a participation pursuant to this
Section 7.10 shall (i) in a timely manner withhold or deduct from each payment
to the holder of such participation the amount of any Taxes required under
Applicable Law to be withheld or deducted from such payment that have not been
withheld or deducted by the Borrowers or the Administrative Agent or the Letter
of Credit Agent (ii) pay such Taxes in a timely manner to the appropriate
authorities and (iii) indemnify the Borrowers and the Administrative Agent or
the Letter of Credit Agent for any Taxes, losses, costs or expenses that they
may incur as a result of any failure to pay such Taxes to the appropriate
authority when due.
SECTION 7.11 Co-Agents. Each of the Co-Agents shall have no duties,
responsibilities, rights or liabilities as Co- Agent, as the case may be, under
this Agreement or any of the other Loan Documents and shall not be liable or
answerable for anything whatsoever in connection with any of the Loan Documents
or other instrument or agreement required hereunder or thereunder, including
responsibility in respect of the execution, delivery, construction or
enforcement of any of the Loan Documents or any such other instrument or
agreement, or for any action taken or not taken by any Person with respect
thereto. Each of the Co-Agents has and shall have no duty or responsibility
whatsoever on the date hereof or at any time hereafter, to provide any Bank with
any credit or other information. Nothing herein shall (nor shall it be construed
so as to) constitute the Co-Agents a trustee for the Borrowers or their
Subsidiaries or impose on it any duties or obligations whatsoever under this
Agreement, the other Loan Documents, or otherwise.
ARTICLE VIII.
MISCELLANEOUS
SECTION 1.081 Amendments. No amendment, restatement, supplement or
modification to this Agreement shall be enforceable against the Borrowers unless
the same shall be in writing and signed by the Borrowers. No amendment or waiver
of any provision of this Agreement or any instrument delivered hereunder, nor
consent to any departure by the Borrowers therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Administrative
Agent and, to the extent required by Section 7.04 hereof, the Majority Banks or
each Bank, as the case
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may be, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given, provided that in the
absence of actual notice to the contrary, the Borrowers may conclusively rely on
all writings purported to be delivered and actions taken by the Administrative
Agent on behalf of the Banks or the Majority Banks, as the case may be, without
inquiry as to the authority of the Administrative Agent with respect thereto.
SECTION 1.082 Notices. All notices, demands and other communications
provided for hereunder shall be in writing (including telegraphic communication)
telexed, telecopied or telegraphed or delivered, if to the Borrowers, at its
address set forth below its signature herein written; if to the Administrative
Agent, at its address set forth below its signature herein written; and if to a
Bank other than the Administrative Agent, the Letter of Credit Agent at its
address set forth below its signature herein written; or, as to each party, at
such other address as shall be designated by such party in a notice to the other
parties hereto. All such notices and communications shall, when telexed,
telecopied, or telegraphed, be effective upon the earliest of (i) actual receipt
or (ii) when (on a Business Day and during normal business hours at the
addressee's address) transmitted by telecopy or telex or delivered to the
telegraph company, respectively, except that notices and communications to the
Administrative Agent pursuant to Article II hereof shall not be effective until
received by the Administrative Agent.
SECTION 1.083 No Waiver; Remedies. Regardless of any fact known or
investigation undertaken by the Administrative Agent or any Bank, no failure on
the part of the Administrative Agent or any Bank to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 1.084 Costs, Expenses, Fees and Indemnities; Concerning the
Mortgagee and the Trustee. (a) Each Borrower agrees to pay on demand (i) in
connection with the preparation, execution, and delivery of this Agreement and
the instruments and other documents to be delivered hereunder, (x) the
reasonable fees and out-of-pocket expenses of Messrs. Winthrop, Stimson, Putnam
& Roberts, as special counsel for the Administrative Agent, the Letter of Credit
Agent and the Banks and Messrs. Bingham, Dana & Gould as special counsel to the
Letter of Credit Agent (and any local counsel retained by such firm) with
respect to the closing of the Transaction and (y) all other reasonable and
customary third party costs and expenses of the Banks and the Administrative
Agent (other than any other legal fees and related expenses incurred by them)
and (z) the reasonable fees and out- of-pocket expenses of the Mortgagee and the
Trustee (including
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reasonable attorney fees and out-of-pocket expenses) and (ii) after the Closing
Date, all reasonable and customary third party costs and expenses in connection
with the administration of this Agreement and the other instruments and
documents to be delivered hereunder, including, without limitation, (y) the
reasonable fees and out-of-pocket expenses of any counsel for the Administrative
Agent or the Banks in connection with advice given the Administrative Agent or
the Banks, from time to time, as to their rights and responsibilities under this
Agreement and in connection with the waiver, supplementation or amendment of
such instruments and documents and (z) the reasonable fees and out-of- pocket
expenses of the Mortgagee (including the reasonable fees and out-of-pocket
expenses of counsel to the Mortgagee) and the indemnities payable to the
Mortgagee as trustee under the Master Vessel and Collateral Trust Agreement,
respectively, pursuant to the terms hereof. The Borrowers further agree to pay
on demand all losses, costs and expenses, if any (including, without limitation,
counsel fees and expenses), in connection with the enforcement of this Agreement
and the instruments and other documents delivered hereunder, including, without
limitation, losses, costs and expenses sustained as a result of a Default by any
of the Borrowers in the performance of its obligations contained in this
Agreement or any instrument or document delivered hereunder.
(b) If, for any reason, including maturity or demand of the Loan under
Article VI, or prepayment of the Loan, in whole or in part, the Administrative
Agent or any of the Banks receives payment of principal of or interest on an
Advance on any day other than the Principal Payment Date or Interest Payment
Date for such Advance, the Borrowers shall pay to the Administrative Agent on
behalf of the Banks on demand any amounts required to compensate the Banks for
any breakage costs (including cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds in respect of such
payment) and any additional losses, costs or expenses which any Bank may incur
as a result of such payment, prepayment, purchase or acceleration in connection
with unwinding or liquidating of any deposits or funding or financing
arrangement with its funding sources (collectively, "Breakage Costs"), provided
that the Bank shall have delivered to the Administrative Agent and the Borrowers
a certificate as to the amount of such Breakage Costs, which certificate shall
be binding, absent manifest error, except that the failure of the Bank to
provide such certificate shall in no way relieve the Borrowers of their
obligations under this Section 8.04(b).
(c) Each Borrower agrees to indemnify and hold harmless each of the Banks
and the Administrative Agent, the Letter of Credit Agent and its and their
respective Affiliates, directors, officers, employees, agents, representatives,
counsel and advisors (each an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and disbursements
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<PAGE> 74
of counsel and the costs of investigation and defense thereof) which may be
incurred by or asserted or awarded against any Indemnified Party, in each case
based upon, arising out of or in connection with or by reason of, the
Transaction (including, without limitation, any act or failure to act by the
Administrative Agent, the Letter of Credit Agent or the Mortgagee where such act
or failure to act was taken pursuant to the Borrowers' request, any Transaction
contemplated by this Agreement, or any Loan Document), whether or not any
Advance hereunder is made, except to the extent that such claim, damage, loss,
liability or expense results from the gross negligence or willful misconduct of
such Indemnified Party. The indemnities of this Loan Agreement shall survive the
termination of this Loan Agreement and the other Loan Documents.
SECTION 1.085 Right of Setoff. Upon the occurrence and during the
continuance of an Event of Default, each of the Administrative Agent, the Letter
of Credit Agent, each Bank and their respective Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) any time held, and other Indebtedness at any time owing,
by the Administrative Agent, the Letter of Credit Agent, a Bank or their
respective Affiliates to or for the credit or the account of the Borrowers
against any and all of the obligations of the Borrowers now or hereafter
existing under the Agreement and any instrument delivered hereunder,
irrespective of whether or not the Bank shall have made any demand under this
Agreement or such instrument and although such obligations may be unmatured. The
Administrative Agent, the Letter of Credit Agent and each Bank agrees promptly
to notify the Borrowers, as the case may be, and the Administrative Agent, the
Letter of Credit Agent, as the case may be, after any such setoff and
application, provided that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of the Administrative Agent,
the Letter of Credit Agent, each Bank and their respective Affiliates under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Administrative Agent, the Letter
of Credit Agent or such Bank may have.
SECTION 1.086 Joint and Several Liability of Borrowers. Each Borrower
agrees with the Banks, the Letter of Credit Agent and the Administrative Agent
that such Borrower shall be jointly and severally liable for the Obligations
with the other Borrowers except that Seabulk Transmarine Partnership, Ltd.'s
liability hereunder shall be limited to such amounts as may be recovered
pursuant to the Mortgage and Assignments in respect of M/V SEABULK AMERICA.
SECTION 1.087 Judgment. (a) If for the purposes of obtaining judgment in
any court it is necessary to convert a sum due hereunder or under any instrument
delivered hereunder in
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<PAGE> 75
United States Dollars into another currency, the parties hereto agree, to the
fullest extent permitted by law, that the rate of exchange used shall be that at
which in accordance with normal banking procedures the Administrative Agent, the
Letter of Credit Agent or the Banks, as the case may be, could purchase United
States Dollars with such other currency on the Business Day preceding that on
which final judgment is given.
(b) The obligation of a Borrower in respect of any sum due from it to the
Administrative Agent, the Letter of Credit Agent or any Bank hereunder or under
such instrument shall, notwithstanding any judgment in a currency other than
United States Dollars, be discharged only to the extent that on the Business Day
following receipt by the Administrative Agent, the Letter of Credit Agent or
such Bank of any sum adjudged to be so due in such other currency the
Administrative Agent, the Letter of Credit Agent or such Bank, as the case may
be, may in accordance with normal banking procedures purchase United States
Dollars with such other currency; if the United States Dollars so purchased are
less than the sum originally due to the Administrative Agent, the Letter of
Credit Agent or such Bank, as the case may be, in United States Dollars, each
Borrower agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify the Administrative Agent, the Letter of Credit Agent or such Bank,
as the case may be, against such loss, and if the United States Dollars so
purchased exceed the sum originally due to the Administrative Agent, the Letter
of Credit Agent or such Bank in United States Dollars, the Administrative Agent,
the Letter of Credit Agent or such Bank shall remit such excess to such
Borrower.
SECTION 1.088 Consent to Jurisdiction; Waiver of Immunities. (a) Each
Borrower hereby irrevocably submits to the jurisdiction of any New York State
court sitting in New York County and to the jurisdiction of the United States
District Court for the Southern District of New York in any action or proceeding
arising out of or relating to this Agreement or the Notes or the other Loan
Documents, and each Borrower hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such New
York State or Federal court. Each Borrower irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding or the failure to join any other
Borrower as a necessary party to such action. The Borrowers hereby irrevocably
appoint CT Corporation (the "Process Agent"), with an office on the date hereof
at 1633 Broadway, New York, New York, 10019, United States, as their agent to
receive on behalf of each of them and their property service of copies of the
summons and complaint and any other process which may be served in any such
action or proceeding. Such service may be made by mailing or delivering a copy
of such process to the Borrowers in care of the Process Agent (or any successor
thereto, as the case may be) at such Process Agent's above address (or the
address of any successor thereto, as the
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<PAGE> 76
case may be), and the Borrowers hereby irrevocably authorize and direct the
Process Agent (and any successor thereto) to accept such service on their
behalf. The Borrowers shall appoint a successor agent for service of process
should the agency of CT Corporation terminate for any reason, and further shall
at all times maintain an agent for service of process in New York, New York, so
long as there shall be outstanding any Obligations under the Loan Documents. The
Borrowers shall give notice to the Administrative Agent of any appointment of
successor agents for service of process, and shall obtain for each successor
agent a letter of acceptance of appointment and promptly deliver the same to the
Administrative Agent. As an alternative method of service, each Borrower also
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing of copies of such process to it at its address
specified in Section 8.02 hereof. Without waiver of its rights of appeal
permitted by relevant law, each Borrower agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section 8.07 shall affect the right of the
Administrative Agent, the Letter of Credit Agent or any Bank to serve legal
process in any other manner permitted by law, or affect the right of the
Administrative Agent, the Letter of Credit Agent or any Bank to bring any action
or proceeding against any Borrower or its respective properties in the courts of
any other jurisdiction.
(c) To the extent that any Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, such
Borrower hereby irrevocably waives such immunity in respect of its obligations
under this Agreement and the Notes and each of the other Loan Documents.
SECTION 1.089 Binding Effect; Merger; Severability; GOVERNING LAW. (a) This
Agreement shall be binding upon, and shall inure to the benefit of, the
Borrowers, the Administrative Agent, the Letter of Credit Agent and each Bank,
and their respective successors and assigns, except that the Borrowers shall not
have the right to assign its rights hereunder or any interest herein. Each Bank
may, to the extent permitted under this Agreement, assign to any other financial
institution all or any part of, or any interest in, the Bank's rights and
benefits hereunder and under any instrument delivered hereunder, and to the
extent of such assignment such assignee shall have the same rights and benefits
against the Borrowers as it would have had if it were the Bank hereunder.
(b) The Loan Documents, together with all attachments and exhibits to each
of them and all other documents referenced
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<PAGE> 77
herein and therein, and delivered hereunder and thereunder and pursuant hereto
and thereto, constitute the entire agreement among the parties with respect to
the subject matter hereof and thereof, and supersede all prior and
contemporaneous written and oral understandings and agreements related thereto
among the parties.
(c) If any work, phrase, sentence, paragraph, provision or section of the
Loan Documents shall be held, declared, pronounced or rendered invalid, void,
unenforceable or inoperative for any reason by any court of competent
jurisdiction, governmental authority, statute, or otherwise, such holding,
declaration, pronouncement or rendering shall not adversely affect any other
word, phrase, sentence, paragraph, provision or section of the Loan Documents,
which shall otherwise remain in full force and effect and be enforced in
accordance with their respective terms.
(d) This Agreement has been delivered in New York, New York. THIS AGREEMENT
AND THE NOTES SHALL BE GOVERNED BY, AND BE CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 8.10 Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary or convenient and by each party hereto
on separate counterparts, each of which, when so executed, shall be deemed as
original, but all such counterparts shall constitute but one and the same
agreement.
SECTION 8.11 WAIVER OF JURY TRIAL. BY ITS SIGNATURE BELOW WRITTEN EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE LOAN DOCUMENTS HEREIN DESCRIBED OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
SECTION 8.12 Effectiveness. This Agreement shall not come into effect until
the Effective Date. Prior to the Effective Date, the Credit Agreement dated as
of September 28, 1994, as amended by Amendment No. 1 dated as of May 15, 1995
and Amendment No. 2 dated as of March 26, 1996 and as subsequently amended and
restated by an Amended and Restated Credit Agreement dated as of June 21, 1996
which was amended by Amendment No. 1 dated as of December 17, 1996, shall be
binding upon the parties hereto.
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<PAGE> 78
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
<TABLE>
<S> <C>
HVIDE MARINE INCORPORATED
By:
__________________________________
Name: John Blankley
Title: Executive Vice President -
Chief Financial Officer
Address: 2200 Eller Drive, Building 27
P.O. Box 13038
Port Everglades
Fort Lauderdale, FL 33316
Telephone: 954-524-4200
Facsimile: 954-527-1772
SEABULK TRANSMARINE PARTNERSHIP, LTD.
By its general partner Seabulk Tankers, Ltd.
By its general partner Hvide Marine
Transport, Incorporated
By: _________________________________
Name: John Blankley
Title: Executive Vice President -
Chief Financial Officer
Address: 2200 Eller Drive, Building 27
P.O. Box 13038
Port Everglades
Fort Lauderdale, FL 33316
Telephone: 954-524-4200
Facsimile: 954-527-1772
</TABLE>
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
<TABLE>
<S> <C>
SEABULK OFFSHORE LTD.
By its general partner Seabulk Tankers Ltd.
By its general partner Hvide Marine
Transport, Incorporated
By:
_____________________________________
Name: John Blankley
Title: Executive Vice President -
Chief Financial Officer
Address: 2200 Eller Drive, Building 27
P.O. Box 13038
Port Everglades
Fort Lauderdale, FL 33316
Telephone: 954-524-4200
Facsimile: 954-527-1772
</TABLE>
<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
<TABLE>
<S> <C>
HVIDE MARINE TRANSPORT, INCORPORATED
By:
__________________________________
Name: John Blankley
Title: Executive Vice President -
Chief Financial Officer
Address: 2200 Eller Drive, Building 27
P.O. Box 13038
Port Everglades
Fort Lauderdale, FL 33316
Telephone: 954-524-4200
Facsimile: 954-527-1772
SEABULK TANKERS, LTD.
By its general partner Hvide Marine
Transport, Incorporated
By:
__________________________________
Name: John Blankley
Title: Executive Vice President -
Chief Financial Officer
Address: 2200 Eller Drive, Building 27
P.O. Box 13038
Port Everglades
Fort Lauderdale, FL 33316
Telephone: 954-524-4200
Facsimile: 954-527-1772
HVIDE CHARTERING, LTD.
By its general partner Hvide Marine
Incorporated
By:
_________________________________
Name: John Blankley
Title: Executive Vice President -
Chief Financial Officer
Address: 2200 Eller Drive, Building 27
P.O. Box 13038
Port Everglades
Fort Lauderdale, FL 33316
Telephone: 954-524-4200
Facsimile: 954-527-1772
</TABLE>
<PAGE> 81
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
<TABLE>
<S> <C>
SEABULK OCEAN SYSTEMS CORPORATION
By: ____________________________________
Name: John Blankley
Title: Executive Vice President -
Chief Financial Officer
Address: 2200 Eller Drive, Building 27
P.O. Box 13038
Port Everglades
Fort Lauderdale, FL 33316
Telephone: 954-524-4200
Facsimile: 954-527-1772
</TABLE>
<PAGE> 82
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
<TABLE>
<S> <C>
SUN STATE MARINE SERVICES, INC.
By: ____________________________________
Name: Gene Douglas
Title: Secretary
Address: 2200 Eller Drive, Building 27
P.O. Box 13038
Port Everglades
Fort Lauderdale, FL 33316
Telephone: 954-524-4200
Facsimile: 954-527-1772
</TABLE>
<PAGE> 83
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
<TABLE>
<S> <C>
CITIBANK, N.A.
Administrative Agent, Co-Agent
By: ---------------------------
Name:
Title:
Address: Citibank, N.A.
NAGF Loan Processing
One Court Square, 7th Floor
Long Island City
New York, NY 11120-0001
Telephone: (718) 248-7180
Facsimile: (718) 248-4844
CITIBANK, N.A.
By: ---------------------------
Name:
Title:
Address: 399 Park Avenue
Global Shipping Division
8th Floor
New York, NY 10043
Telephone: (212) 559-3849
Facsimile: (212) 793-3588
Lending Office: The above address or such
other address or addresses
as may be notified to the
Administrative Agent and
the Borrowers from time to
time.
</TABLE>
<PAGE> 84
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
<TABLE>
<S> <C>
BNY FINANCIAL CORPORATION
By: ---------------------------
Name:
Title:
Address: 1290 Ave. of the Americas
Third Floor-Legal Depart.
New York, NY 10104
Telephone: 212-408-7272
Facsimile: 212-408-7372
Lending Office: The above address or such
other address or addresses
as may be notified to the
Administrative Agent and
the Borrowers from time to
time.
</TABLE>
<PAGE> 85
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
<TABLE>
<S> <C>
THE FIRST NATIONAL BANK OF BOSTON
as Letter of Credit Agent, Co-Agent
By: ---------------------------------------------
Name:
Title:
Address: The First National Bank of Boston
Transportation
Mail Stop: 01-08-01
100 Federal Street
Boston, MA 02106-2016
Telephone: 617-434-3066
Facsimile: 617-434-1955
THE FIRST NATIONAL BANK OF BOSTON
By: --------------------------------------------
Name:
Title:
Address: The First National Bank of Boston
Mail Stop: 01-08-01
100 Federal Street
Boston, MA 02106-2016
Telephone: 617-434-3066
Facsimile: 617-434-1955
Lending Office: The above address or such
other address or addresses
as may be notified to the
Administrative Agent and
the Borrowers from time to
time.
</TABLE>
<PAGE> 86
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
<TABLE>
<S> <C>
HIBERNIA NATIONAL BANK
By: ------------------------------------------
Name:
Title:
Address: 313 Carondelet Street,
Suite 1400
New Orleans, LA 70130
Telephone: 504-533-5395
Facsimile: 504-533-5434
Lending Office: The above address or such
other address or addresses
as may be notified to the
Administrative Agent and
the Borrowers from time to
time.
</TABLE>
<PAGE> 87
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
<TABLE>
<S> <C>
AMSOUTH BANK OF FLORIDA
By: -----------------------------------------
Name:
Title:
Address: 469 West 23rd Street
P.O. Box 550
Panama City, FL 32405
Telephone: 904-747-4543
Facsimile: 904-747-4675
Lending Office: The above address or such
other address or addresses
as may be notified to the
Administrative Agent and
the Borrowers from time to
time.
</TABLE>
<PAGE> 1
EXHIBIT 11
HVIDE MARINE INCORPORATED
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ ---------------
1993 1994 1995 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Income (loss) before extraordinary item and
cumulative effect............................... $1,818 $ 358 $ (360) $ (581) $2,709
Less: Class A Preferred Stock cash dividends...... 203 222 -- -- --
------ ------ ------ ------ ------
Adjusted income (loss) applicable to common
shares - primary................................ 1,615 136 (360) (581) 2,709
Plus: Interest on Junior Note net of income tax
effect.......................................... -- 192 807 598 536
------ ------ ------ ------ ------
Adjusted income applicable to common shares -fully
diluted......................................... $1,615 $ 328 $ 447 $ 17 $3,245
====== ====== ====== ====== ======
Weighted average shares outstanding............... 1,769 1,962 2,535 2,535 4,012
If-converted dilutive effect of Convertible
Class B Preferred Stock...................... 4,499 3,340 -- -- --
Dilutive effect of outstanding stock options.... -- -- -- -- 6
------ ------ ------ ------ ------
Common shares used in earnings (loss) per share
calculation - primary........................... 6,268 5,302 2,535 2,535 4,018
If-converted dilutive effect of Junior Note....... -- 314 1,244 1,244 1,026
Incremental dilutive effect of outstanding stock
options......................................... -- -- -- -- 5
------ ------ ------ ------ ------
Common shares used in earnings per share
calculation - fully diluted..................... 6,268 5,616 3,779 3,779 5,049
====== ====== ====== ====== ======
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 28, 1996, except the second paragraph of Note
10, as to which the date is May 10, 1996, in Amendment No. 1 to the Registration
Statement (Form S-1 No. 333-18525) and related Prospectus of Hvide Marine
Incorporated for the Registration of 4,000,000 shares of its common stock.
ERNST & YOUNG LLP
Miami, Florida
January 27, 1997
<PAGE> 2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 1, 1996, with respect to the statement of
assets to be sold and the related statements of vessel operations of Gulf Boat
Marine Services, Inc. and E & D Boat Rentals, Inc. included in Amendment No. 1
to the Registration Statement (Form S-1 No. 333-18525) and related Prospectus of
Hvide Marine Incorporated for the Registration of 4,000,000 shares of its common
stock.
ERNST & YOUNG LLP
New Orleans, Louisiana
January 27, 1997
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-18525 of Hvide Marine Incorporated on Form S-1 of our report dated January
26, 1996 (relating to the financial statements of the OMI Chemical Carrier Group
presented separately herein) appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
January 28, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Amendment No.
1 to Form S-1 of our reports dated April 12, 1996 (except for certain
disclosures presented in Footnote 1, as to which the date is August 1, 1996) on
our audits of (i) the statements of assets to be sold and related statements of
vessel operations of Seal Fleet, Inc. and Subsidiaries and (ii) the combined
statements of vessel operations of Indian Seal Partners, Ltd., Baffin Seal
Partners, Ltd., Baltic Seal Partners, Ltd., Bengal Seal Partners, Ltd., and Ross
Seal Partners, Ltd. appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to our firm under the caption "Experts" in
such Prospectus.
PANNELL KERR FORSTER OF TEXAS, P.C.
Houston, Texas
January 27, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Hvide Marine Incorporated, a
corporation organized under the laws of the State of Florida (the
"Corporation"), and the undersigned officers and directors of the Corporation,
individually and in their respective capacities indicated below, hereby make,
constitute and appoint Michael Joseph and John F. Kearney its and their true and
lawful attorneys, their separate or joint signatures sufficient to bind, with
power of substitution, to execute, deliver and file in its or their behalf, and
in each person's respective capacity or capacities as shown below, a
registration statement on Form S-1 under the Securities Act of 1933, any
amendments to and any and all documents in support of or supplemental to said
registration statement by the Corporation, and any additional registration
statements filed pursuant to Rule 462(b) to register additional shares; and the
Corporation and each said person hereby grant to said attorneys full power and
authority to do and perform each and every act and thing whatsoever as any one
of said attorneys may deem necessary or advisable to carry out the full intent
of this Power of Attorney to the same extent and with the same effect as the
Corporation or the undersigned officers and directors of the Corporation might
or could do personally in its or their capacity or capacities as aforesaid; and
the Corporation and each of said persons hereby ratify, confirm and approve all
acts and things that any one of said attorneys may do or cause to be done by
virtue of this Power of Attorney and its signature or their signatures as the
same may be signed by any one of said attorneys to said registration statement
and any and all documents in support of or supplemental to said registration
statement and any and all amendments thereto.
Dated as of January 7, 1997.
<TABLE>
<S> <C>
Hvide Marine Incorporated
Attest: /S/ GENE DOUGLAS By: /S/ J. ERIK HVIDE
----------------------------------------------- ------------------------------------------------
Gene Douglas J. Erik Hvide
Secretary Chairman, President, and Chief Executive Officer
/S/ J. ERIK HVIDE /S/ JOHN H. BLANKLEY
- ------------------------------------------------------ ------------------------------------------------
J. Erik Hvide John H. Blankley
Chairman of the Board of Directors, President, Executive Vice President -- Chief
Chief Executive Officer and Director Financial Officer, and Director
(Principal Executive Officer) (Principal Financial Officer)
/S/ DONALD L. CALDERA /S/ JOHN KRUMENACKER
- ------------------------------------------------------ ------------------------------------------------
Donald L. Caldera John Krumenacker
Executive Vice President and Director Controller
(Principal Accounting Officer)
/S/ EUGENE F. SWEENEY /S/ ROBERT B. CALHOUN, JR.
- ------------------------------------------------------ ------------------------------------------------
Eugene F. Sweeney Robert B. Calhoun, Jr.
Executive Vice President and Director Director
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
/S/ GERALD FARMER /S/ JEAN FITZGERALD
- ------------------------------------------------------ ------------------------------------------------
Gerald Farmer Jean Fitzgerald
Director Director
/S/ JOHN LEE /S/ WALTER C. MINK
- ------------------------------------------------------ ------------------------------------------------
John Lee Walter C. Mink
Director Director
/S/ ROBERT RICE /S/ RAYMOND B. VICKERS
- ------------------------------------------------------ ------------------------------------------------
Robert Rice Raymond B. Vickers
Director Director
</TABLE>
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