SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1998
Commission File Number: 0-28732
HVIDE MARINE INCORPORATED
State of Incorporation: Florida I.R.S. Employer I.D. 65-0524593
2200 Eller Drive
P.O. Box 13038
Ft. Lauderdale, Florida 33316
(954) 524-4200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months, and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No
There were 12,821,709 and 2,547,064 shares of Class A Common Stock, par value
$0.001 per share, and Class B Common Stock, par value $0.001 per share,
respectively, outstanding at November 10, 1998.
<PAGE>
HVIDE MARINE INCORPORATED
Quarter ended September 30, 1998
Index
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Financial Statements.................................................................................. 1
Condensed Consolidated Balance Sheets at
December 31, 1997 and September 30, 1998 (unaudited)......................................................... 1
Unaudited Condensed Consolidated Income Statements
for the three and nine months ended September 30, 1997 and 1998.............................................. 3
Unaudited Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1997 and 1998................................................................ 4
Notes to Unaudited Condensed Consolidated Financial Statements............................................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........................................................21
Part II. Other Information
Item 1. Legal Proceedings.......................................................................................35
Item 6. Exhibits and Reports on Form 8-K.......................................................................35
Signature.......................................................................................................36
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 14,952 $ 13,729
Accounts receivable:
Trade, net of allowance for doubtful accounts of $1,093 and
$1,981, respectively..................................................... 36,903 64,344
Insurance claims and other................................................. 3,234 9,498
Inventory, spare parts and supplies.......................................... 8,162 15,326
Prepaid expenses............................................................. 3,085 7,570
Deferred costs, net.......................................................... 4,516 7,989
----------- -------------
Total current assets..................................................... 70,852 118,456
Property:
Construction in progress..................................................... 42,010 60,580
Vessels and improvements..................................................... 492,070 832,027
Less accumulated depreciation............................................ (45,463) (77,400)
Furniture and equipment...................................................... 7,366 16,449
Less accumulated depreciation............................................ (1,625) (2,967)
----------- ------------
Net property.......................................................... 494,358 828,689
Other assets:
Deferred costs, net.......................................................... 9,580 19,524
Investment in affiliates..................................................... 1,627 21,904
Goodwill, net................................................................ 25,361 85,809
Deposits and other........................................................... 2,783 1,989
----------- -------------
Total other assets....................................................... 39,351 129,226
----------- -------------
Total ................................................................ $ 604,561 $ 1,076,371
=========== =============
</TABLE>
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................................... $ 7,534 $ 30,919
Current obligations under capital leases.................................. 1,714 2,096
Accounts payable.......................................................... 17,187 15,446
Accrued interest payable.................................................. 826 4,131
Other..................................................................... 17,801 24,306
----------- -------------
Total current liabilities............................................... 45,062 76,898
Long-term liabilities:
Long-term debt, less current portion...................................... 177,573 573,944
Obligations under capital leases, less current portion.................... 10,726 18,981
Deferred income taxes..................................................... 25,649 32,521
Other..................................................................... 3,269 5,589
----------- -------------
Total long-term liabilities............................................. 217,217 631,035
----------- -------------
Total liabilities....................................................... 262,279 707,933
Company-obligated mandatorily redeemable preferred securities issued by a
subsidiary trust holding solely debentures issued by the
Company................................................................... 115,000 115,000
Minority partners' equity in subsidiaries.................................... 2,295 7,672
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, 12,382,435 and 12,817,411............... 12 12
Class B Common Stock--$.001 par value, authorized 5,000,000
shares, issued and outstanding, 2,906,465 and 2,547,064................. 3 3
Additional paid-in capital................................................ 195,522 196,476
Retained earnings......................................................... 29,450 49,275
----------- -------------
Total stockholders' equity.............................................. 224,987 245,766
----------- -------------
Total stockholders' equity and minority partners= equity in
subsidiaries ......................................................... 227,282 253,438
----------- -------------
Total............................................................... $ 604,561 $ 1,076,371
=========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Income Statements
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1998 1997 1998
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues.............................................. $ 56,906 $ 100,149 $ 142,853 $ 295,966
Operating Expenses:
Crew payroll and benefits.......................... 13,015 24,774 34,109 67,322
Charter hire and bond guarantee fee................ 3,198 5,989 7,087 14,455
Repairs and maintenance............................ 4,988 8,221 11,357 22,896
Insurance.......................................... 2,313 3,630 6,555 9,985
Consumables........................................ 4,078 9,093 9,210 24,324
Other.............................................. 3,225 6,027 8,816 21,718
----------- ----------- ----------- ----------
Total operating expenses......................... 30,817 57,734 77,134 160,700
Selling, general and administrative
expenses........................................... 6,516 10,874 17,568 31,170
Depreciation and amortization......................... 5,169 11,926 13,021 35,797
----------- ----------- ----------- ----------
Income from operations............................. 14,404 19,615 35,130 68,299
Interest, net......................................... 383 11,843 4,529 30,223
Other income (expense):
Minority interest and equity in earnings
of subsidiaries.................................. (1,801) (2,080) (1,807) (5,505)
Other .............................................. (134) 340 (286) 325
----------- ----------- ----------- ----------
Total other income (expense)....................... (1,935) (1,740) (2,093) (5,180)
----------- ----------- ----------- ----------
Income before provision for
income taxes and extraordinary item................ 12,086 6,032 28,508 32,896
Provision for income taxes............................ 4,586 2,128 10,662 12,336
----------- ----------- ----------- ----------
Income before extraordinary item...................... 7,500 3,904 17,846 20,560
Loss on early extinguishment of debt, net
of income tax benefit of $1,252
and $413........................................... -- -- 2,132 734
----------- ----------- ----------- ----------
Net income......................................... $ 7,500 $ 3,904 $ 15,714 $ 19,826
=========== =========== =========== ==========
Earnings (loss) per common share:
Income before extraordinary item................... $ 0.49 $ 0.25 $ 1.22 $ 1.34
Loss on early extinguishment of debt............... -- -- (0.15) (0.05)
----------- ----------- ----------- ----------
Net income per common share........................ $ 0.49 $ 0.25 $ 1.07 $ 1.29
=========== =========== =========== ==========
Earnings (loss) per common share--assuming dilution:
Income before extraordinary item................... $ 0.45 $ 0.25 $ 1.17 $ 1.24
Loss on early extinguishment of debt............... -- -- (0.13) (0.04)
----------- ----------- ----------- ----------
Net income per common share--assuming dilution...... $ 0.45 $ 0.25 $ 1.04 $ 1.20
=========== =========== =========== ==========
Weighted average common shares outstanding............ 15,238 15,329 14,620 15,309
=========== =========== =========== ==========
Weighted average common and common equivalent shares
Outstanding--assuming dilution ..................... 19,565 15,349 16,280 19,456
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1998
(In thousands)
<S> <C> <C>
Operating Activities:
Net income.......................................................................... $ 15,714 $ 19,826
Adjustments to reconcile net income to net cash provided by operating
activities:
Loss on early extinguishment of debt, net......................................... 2,132 734
Depreciation and amortization..................................................... 13,021 35,797
Provision for bad debts........................................................... 496 898
Loss on disposal of property...................................................... 63 --
Amortization of drydocking costs.................................................. 3,871 8,449
Amortization of discount on long-term debt and financing costs.................... 5 932
Provision for deferred taxes...................................................... 8,662 8,591
Minority partners' equity in (losses) earnings of subsidiaries, net............... (80) 23
Undistributed earnings of affiliates, net......................................... (64) (124)
Other non-cash items.............................................................. 464 177
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable............................................................... (15,087) (32,473)
Current and other assets.......................................................... (8,613) (14,995)
Accounts payable and other liabilities............................................ (2,447) 14,150
--------- ---------
Net cash provided by operating activities...................................... 18,137 41,985
Investing Activities:
Purchase of property................................................................ (42,560) (86,888)
Proceeds from disposal of property.................................................. 1,633 --
Capital contribution to affiliates.................................................. (182) (21,251)
Acquisitions, net of $2,819 and $33 escrow deposits used............................. (96,648) (346,278)
--------- ---------
Net cash used in investing activities.......................................... (137,757) (454,417)
Financing Activities:
Repayment of short-term borrowings, net............................................. (10,647) --
Proceeds of long-term borrowings.................................................... 59,210 412,700
Proceeds from issuance of senior notes, net of offering costs....................... -- 292,500
Repayments of long-term debt........................................................ (133,738) (292,944)
Payment of debt and other financing costs........................................... (984) (247)
Payments under capital leases....................................................... (1,090) (1,388)
Payment of notes payable to related parties......................................... (178) --
Proceeds from issuance of common stock, net of offering costs in 1997............... 94,111 588
Proceeds from issuance of preferred securities, net of offering costs............... 111,109 --
--------- ---------
Net cash provided by financing activities......................................... 117,793 411,209
--------- ---------
Decrease in cash and cash equivalents................................................ (1,827) (1,223)
Cash and cash equivalents at beginning of period..................................... 9,617 14,952
--------- ---------
Cash and cash equivalents at end of period........................................... $ 7,790 $ 13,729
========= =========
Supplemental schedule of noncash investing and financing activities:
Capital leases assumed in the acquisition of vessels................................ $ -- $ 10,025
========= =========
Capital stock issued to acquire vessels............................................. $ 3,650 $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
1. Basis of Presentation
The interim consolidated financial statements in this Report are
unaudited. In accordance with the rules and regulations of the Securities and
Exchange Commission (the "Commission"), certain information and footnote
disclosures have been condensed or omitted; therefore, such financial statements
should be read in conjunction with the consolidated financial statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 (the
"1997 Form 10-K"). The interim consolidated financial statements in this Report
reflect all adjustments and accruals that, in the opinion of management, are
necessary for a fair presentation of the results of the interim periods
presented; all such adjustments were of a normal recurring nature. The results
of operations for the three- and nine-month interim periods ended September 30,
1998 are not necessarily indicative of the results of operations for the fiscal
year ending December 31, 1998.
2. Offerings of Equity Securities
In February 1997, the Company completed a second public offering (the
"Second Offering") of 4,000,000 shares of its Class A Common Stock at $24.875
per share. The net proceeds to the Company were approximately $94.3 million,
after deducting underwriting commissions and other offering expenses. Of such
amount, approximately $36.2 million was used to repay certain indebtedness. Of
the balance of approximately $58.1 million, $5.5 million was used to fund vessel
acquisitions, $20.9 million was used to fund the remainder of the purchase price
of four supply boats and one crew boat acquired in the second quarter of 1997,
$1.8 million was used to fund the purchase of one crew boat in the fourth
quarter of 1997, $6.9 million was designated to fund the refurbishment and
lengthening of two supply boats put into service during the fourth quarter of
1997, and the remaining $23.0 million was available for general corporate
purposes and to fund a portion of the costs of vessels subsequently constructed.
In June 1997, Hvide Capital Trust, a wholly owned consolidated
subsidiary of the Company (the "Trust"), issued 2,300,000 6 1/2% Trust
Convertible Preferred Securities (the "Preferred Securities") with a principal
amount of $115.0 million to certain institutional purchasers in transactions
exempt from registration under the Securities Act (the "Private Offering") and
71,134 6 1/2% Trust Convertible Common Securities with a principal amount of
$3.6 million to the Company. The proceeds of these issuances were invested by
the Trust in $118.6 aggregate principal amount of the Company's newly issued 6
1/2% Convertible Subordinated Debentures due June 15, 2012 (the "Debentures").
The Debentures represent the sole assets of the Trust. The net proceeds to the
Company were approximately $111.6 million after deducting underwriting commis-
sions and other offering expenses. Of that amount, approximately $100.2 million
was used to repay certain indebtedness. The remaining $11.4 million was used for
general corporate purposes.
Holders of the Preferred Securities are entitled to receive
preferential cumulative cash distributions from the Trust at an annual rate of 6
1/2% of the liquidation preference of $50 per Preferred Security, accruing from
the date of the original issuance of the Preferred Securities and payable
quarterly in arrears on January 1, April 1, July 1 and October 1 of each year,
commencing on October 1, 1997. The distribution rate and the distribution and
other payment dates for the Preferred Securities correspond to the interest rate
and interest
<PAGE>
and other payment dates for the Debentures. The Preferred Securities are
convertible, prior to the maturity date of the Debentures or, in the case of
Preferred Securities called for redemption, prior to the close of business on
the business day prior to the redemption date, at the option of the holder, into
shares of Class A Common Stock at the rate of 1.7544 shares of Class A Common
Stock for each Preferred Security (equivalent to a conversion price of $28.50
per share of Class A Common Stock), subject to adjustment in certain
circumstances.
3. Debt
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
(Unaudited)
<S> <C> <C>
Borrowings outstanding under lines of credit................................ $ 135,000 $ 121,000
Term Loan................................................................... -- 139,286
Senior Notes................................................................ -- 300,000
Title XI Debt............................................................... 42,162 38,169
Notes payable............................................................... 7,945 6,408
---------- ------------
185,107 604,863
Less: Current maturities................................................... (7,534) (30,919)
---------- ------------
$ 177,573 $ 573,944
========== ============
</TABLE>
In February 1998, the Company completed an offering of $300.0 million
of senior notes (the "Senior Notes"). The net proceeds to the Company were
approximately $292.5 million, after deducting underwriting commissions and other
offering expenses. Of such amount, approximately $268.0 million was used to
repay certain indebtedness and approximately $22.9 million was used for general
corporate purposes. Interest on the Senior Notes accrues at the rate of 8 3/8%
per annum, payable semi-annually in arrears commencing on August 15, 1998. The
Senior Notes mature on February 15, 2008 and are redeemable, in whole or in
part, at the option of the Company on or after February 15, 2003. See note 9 for
further information.
In September 1997, the Company entered into a credit agreement (the
"Credit Agreement") that provided for a $175.0 million revolving line of credit
through September 1999, at which time availability was to decrease $6.0 million
per quarter through September 2002. In addition, in November 1997 the Company
entered into a term loan agreement (the "Term Loan Agreement") that provided for
$300.0 million of term loans to fund the cash portion of specified future
acquisitions. Advances under the Term Loan Agreement could be drawn at any time
prior to April 1998 and were to have been payable in 28 quarterly installments
from June 1998 through March 2005. Interest on borrowings under the Credit
Agreement and the Term Loan Agreement was based on one of two rates, at the
Company's election from time to time, plus a margin based on the Company's
compliance with certain financial ratios.
In February 1998, upon receipt of the proceeds from the Senior Notes,
the Company entered into an Amended and Restated Revolving Credit and Term Loan
Agreement (the "Restated Credit Agreement"), which merged the Credit Agreement
and the Term Loan Agreement and resulted in their termination. As in effect
prior to September 30, 1998, (1) the Restated Credit Agreement provided for a
$175.0 million revolving line of credit maturing in February 2003 and a $150.0
million term loan payable in 28 equal installments from June 1998 through March
2005; (2) borrowings under the Restated Credit Agreement were secured by
Company-owned vessels having an appraised value of at least $400.0 million, and
by certain other assets relating to such vessels, including accounts receivable,
spare parts, fuel and supplies; and (3) interest on borrowings under the
Restated Credit Agreement bore interest at the same rates as borrowings under
the Credit Agreement and the Term Loan Agreement. At September 30, 1998, the
Company's outstanding indebtedness under the Restated Credit Agreement was
approximately $260.3 million. Effective September 30, 1998, the Restated Credit
Agreement was amended; see note 11.
<PAGE>
4. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share before extraordinary item (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Numerator:
Income before extraordinary item .................. $ 7,500 $ 3,904 $ 17,846 $ 20,560
----------- ----------- ----------- ----------
Numerator for basic earnings per share--income
available to common shareholders................ 7,500 3,904 17,846 20,560
Effect of dilutive securities:
Payments on convertible preferred securities....... 1,208 -- (1) 1,246 3,476
----------- ----------- ----------- ----------
Numerator for diluted earnings per share--
income available to common shareholders
after assumed conversion........................... $ 8,708 $ 3,904 $ 19,092 $ 24,036
=========== =========== =========== ==========
Denominator:
Denominator for basic earnings per share--
weighted average shares outstanding................ 15,238 15,329 14,620 15,309
Effect of dilutive securities:
Convertible preferred securities................... 4,035 -- (1) 1,404 4,035
Deferred compensation.............................. -- 20 -- 11
Stock options...................................... 292 -- (2) 256 101
----------- ----------- ----------- ----------
Potentially dilutive common shares.................... 4,326 20 1,660 4,147
Denominator for diluted earnings per share--adjusted
weighted average shares outstanding and assumed ...
conversions........................................ 19,565 15,349 16,280 19,456
=========== =========== =========== ==========
Earnings per share before extraordinary item.......... $ 0.49 $ 0.25 $ 1.22 $ 1.34
=========== =========== =========== ==========
Earnings per share before extraordinary item--
assuming dilution.................................. $ 0.45 $ 0.25 $ 1.17 $ 1.24
=========== =========== =========== ==========
</TABLE>
- - -----------------
(1) Excludes assumed conversion of convertible preferred securities as the
effect is anti-dilutive for the period.
(2) Excludes assumed conversion of stock options as the effect is anti-dilutive
for the period.
<PAGE>
5. Change in Estimates
During the second quarter of 1998, the Company changed the estimated
useful lives of its offshore energy support vessels and the amortization period
for certain intangible assets. Management believes these changes more accurately
reflect the economic lives of the Company's assets. The change had the effect of
increasing net income by $2.0 and $3.1 million, or $0.13 and $0.16 per diluted
share, for the three and nine months ended September 30, 1998, respectively.
6. Acquisitions and Vessel Construction
In February 1998, the Company acquired a fleet of 37 offshore energy
support vessels, operating primarily offshore West Africa and Southeast Asia,
which now operate as Seabulk Offshore Operators, Inc. ("SOOP"), for a cash
purchase price of approximately $291.7 million. The acquisition was accounted
for under the purchase method and resulted in costs in excess of net assets
acquired ("goodwill") of approximately $60.6 million, which is being amortized
on a straight-line basis over 30 years.
In March 1998, the Company acquired seven harbor tugs, two petroleum
product carriers, and a topside repair facility from Kirby Corporation ("Kirby")
for a cash purchase price of $31.4 million. The fair value of net assets
acquired approximated the purchase price paid by the Company.
During the first nine months of 1998, the Company also acquired two
vessels under various asset purchase agreements for an aggregate cash
consideration of approximately $6.4 million and completed the construction of
nine vessels at a total cost of $47.2 million.
In May 1997, the Company acquired substantially all of the assets of an
entity, which now operates as Seabulk Offshore International, Inc. ("SOII"), in
a transaction accounted for as a purchase. The consideration, valued at $58.7
million, consisted of $49.0 million cash, a $6.0 million note (repaid in June
1997) and 141,760 shares of Class A Common Stock valued at approximately $3.7
million. The fair value of net assets acquired approximated the purchase price
paid by the Company.
In October 1997, the Company acquired 100% of the outstanding common
stock of Bay Transportation Corporation ("Bay") for $36.5 million in cash and
the assumption of approximately $20.6 million of debt. The purchase agreement
provided for additional consideration based on specified changes in the working
capital of Bay, which resulted in the payment of approximately $500,000 in
January 1998. The acquisition was accounted for under the purchase method and
resulted in goodwill of approximately $17.4 million, which is being amortized on
a straight-line basis over 35 years.
The operations of the acquired vessels and businesses are included in
the accompanying condensed consolidated income statements for periods subsequent
to their acquisition dates.
The Company's unaudited pro forma condensed consolidated income
statements, assuming that the acquisition of SOOP had occurred on January 1,
1997, are summarized as follows (in thousands, except per share amounts):
<PAGE>
Nine Months Ended
September 30,
1997 1998
Revenues........................................$ 187,889 $ 303,554
Income before extraordinary item................ 10,781 20,627
Net income...................................... 8,649 19,893
Diluted earnings per common share, before
extraordinary item............................ 0.74 1.24
Diluted earnings per common share............... 0.69 1.20
This pro forma information does not purport to be indicative of the
results that may have been obtained had the acquisition been consummated at the
date assumed.
7. Extraordinary Item
In 1997 and 1998, the Company prepaid approximately $126.7 million and
$268.0 million, respectively, of its outstanding debt. As a result, the Company
recorded extraordinary losses of approximately $2.1 million and $0.7 million,
respectively, for the write-off of deferred financing costs associated with the
early extinguishment of debt, net of income tax benefits of $1.3 million and
$0.4 million, respectively.
8. Equity Investment in Affiliate
In June 1998, at a cost of $18.5 million, the Company increased from
0.8% to 50.8% its equity investment in five 45,300 dead weight ton double-hull
product carriers. Three of these vessels have been completed , and the remaining
two are currently under construction. This investment is accounted for under the
equity method rather than being consolidated, as it is management=s intention to
reduce the investment to less than 50%.
9. Supplemental Condensed Consolidating Financial Information (unaudited)
The Senior Notes described in note 3 are fully and unconditionally
guaranteed on a joint and several basis by substantially all of the Company's
consolidated subsidiaries. A substantial portion of the Company's cash flows is
generated by its subsidiaries. As a result, the funds necessary to meet the
Company's obligations are provided in substantial part by distributions or
advances from its subsidiaries. Under certain circumstances, contractual or
legal restrictions, as well as the financial and operating requirements of the
Company's subsidiaries, could limit the Company's ability to obtain cash from
its subsidiaries for the purpose of meeting its obligations, including the
payments of principal and interest on the Senior Notes. The following is
summarized condensed consolidating financial information for the Company,
segregating the parent, the guarantor subsidiaries (combined), the non-guarantor
subsidiaries (combined) and eliminations. Separate financial statements of the
guarantor subsidiaries are not presented because management believes that these
financial statements would not be material to investors.
Non-U.S. subsidiaries accounted for approximately 2.6% of the total
assets of the guarantor subsidiaries, on a combined basis, at September 30, 1998
and for approximately 20.7% of the total pretax income of the guarantor
subsidiaries, on a combined basis, for the nine months ended September 30, 1998.
<PAGE>
Condensed Consolidating Balance Sheet (unaudited)
(In thousands)
<TABLE>
<CAPTION>
December 31, 1997
Guarantor Non-guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents...... $ 2,510 $ 12,442 $ -- $ -- $ 14,952
Accounts receivable:
Trade, net................... 3,460 34,096 -- (653) 36,903
Insurance claims and other... 471 2,763 -- -- 3,234
Inventory, spare parts and
supplies .................... 2,498 5,671 -- (7) 8,162
Prepaid expenses............... 819 2,261 5 -- 3,085
Deferred costs (net)........... 2,300 2,216 -- -- 4,516
------------- ------------- -------------- ------------- -------------
Total current assets......... 12,058 59,449 5 (660) 70,852
Property (net)................... 89,925 403,035 3,611 (2,213) 494,358
Other assets:
Deferred costs (net)........... 2,903 2,919 3,758 -- 9,580
Due from affiliates............ 161,385 (160,779) (320) -- 286
Investments in affiliates...... 278,908 584,436 2,708 (864,425) 1,627
Goodwill (net)................. -- 25,361 -- -- 25,361
Other.......................... 1,304 1,193 118,557(1) (118,557) 2,497
------------- ------------- -------------- ------------- -------------
Total other assets........... 444,500 453,130 124,703 (982,982) 39,351
------------- ------------- -------------- ------------- -------------
Total.................... $ 546,483 $ 915,614 $ 128,319 $ (985,855) $ 604,561
============= ============= ============== ============= =============
Liabilities and Stockholders'
Equity
Current liabilities:
Current maturities of long-term
debt......................... $ 6,693 $ 841 $ -- $ -- $ 7,534
Current obligations under capital
leases....................... 356 1,358 -- -- 1,714
Accounts payable............... 3,046 14,141 -- -- 17,187
Other ......................... 7,063 12,272 -- (708) 18,627
------------- ------------- -------------- ------------- -------------
Total current liabilities.... 17,158 28,612 -- (708) 45,062
Long-term liabilities:
Long-term debt................. 279,507 16,623 -- (118,557) 177,573
Obligations under capital
leases...................... 4,986 5,740 -- -- 10,726
Deferred income taxes.......... 18,577 7,072 -- -- 25,649
Other ......................... 1,268 2,001 -- -- 3,269
------------- ------------- -------------- ------------- -------------
Total long-term liabilities.. 304,338 31,436 -- (118,557) 217,217
------------- ------------- -------------- ------------- -------------
Total liabilities............ 321,496 60,048 -- (119,265) 262,279
Company-obligated mandatorily
redeemable preferred securities
issued by a subsidiary trust holding
solely debentures issued by the
Company........................ -- -- 115,000 -- 115,000
Minority partners' equity in sub-
sidiaries...................... -- -- -- 2,295 2,295
Stockholders' equity............. 224,987 855,566 13,319 (868,885) 224,987
------------- ------------- -------------- ------------- -------------
Total.................... $ 546,483 $ 915,614 $ 128,319 $ (985,855) $ 604,561
============= ============= ============== ============= =============
</TABLE>
(1) Represents receivable for debentures of the Company held by the Trust.
<PAGE>
Condensed Consolidating Balance Sheet (unaudited)
(In thousands)
<TABLE>
<CAPTION>
September 30, 1998
Guarantor Non-guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents...... $ 6,530 $ 6,782 $ 417 $ -- $ 13,729
Accounts receivable:
Trade, net................... 4,735 56,180 3,626 (197) 64,344
Insurance claims and other... 1,474 6,329 1,695 -- 9,498
Inventory, spare parts and
supplies .................... 2,699 12,227 532 (1,327) 15,326
Prepaid expenses............... 4,927 2,397 246 -- 7,570
Deferred costs (net)........... 2,711 4,831 561 (114) 7,989
------------- ------------- -------------- ------------- -------------
Total current assets......... 23,076 88,746 7,077 (443) 118,456
Property (net)................... 129,881 642,097 59,597 (2,886) 828,689
Other assets:
Deferred costs (net)........... 10,705 4,780 4,039 -- 19,524
Due from affiliates............ 143,754 (141,238) (2,412) -- 104
Investments in affiliates...... 697,315 634,721 33,204 (1,343,369) 21,904
Goodwill (net)................. -- 83,801 2,007 -- 85,809
Other.......................... 1,449 325 118,668 (1) (118,557) 1,885
------------- ------------- -------------- ------------- -------------
Total other assets........... 853,223 582,423 155,506 (1,461,926) 129,226
------------- ------------- -------------- ------------- -------------
Total.................... $ 1,006,180 $ 1,313,266 $ 222,180 $ (1,465,255) $ 1,076,371
============= ============= ============== ============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term
debt......................... $ 30,064 $ 855 $ -- $ -- $ 30,919
Current obligations under capital
leases....................... 664 1,432 -- -- 2,096
Accounts payable............... 637 15,371 (562) -- 15,446
Other ......................... 10,634 15,284 2,771 (252) 28,437
------------- ------------- -------------- ------------- -------------
Total current liabilities.... 41,999 32,942 2,209 (252) 76,898
Long-term liabilities:
Long-term debt................. 676,356 16,145 -- (118,557) 573,944
Obligations under capital leases 14,327 4,654 -- -- 18,981
Deferred income taxes.......... 25,338 7,072 111 -- 32,521
Other ......................... 2,402 3,187 -- -- 5,589
------------- ------------- -------------- ------------- -------------
Total long-term liabilities.. 718,423 31,058 111 (118,557) 631,035
------------- ------------- -------------- ------------- -------------
Total liabilities............ 760,422 64,000 2,320 (118,809) 707,932
Company-obligated mandatorily
redeemable preferred securities
issued by a subsidiary trust
holding solely debentures issued by the
Company........................ -- -- 115,000 -- 115,000
Minority partners' equity in sub-
sidiaries...................... -- -- -- 7,672 7,672
Stockholders' equity............. 245,758 1,249,266 104,860 (1,354,118) 245,766
------------- ------------- -------------- ------------- -------------
Total.................... $ 1,006,180 $ 1,313,266 $ 222,180 $ (1,465,255) $ 1,076,371
============= ============= ============== ============ =============
</TABLE>
(1) Primarily represents receivable for debentures issued of the Company held by
the Trust.
<PAGE>
Condensed Consolidating Income Statement (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30, 1997
Guarantor Non-guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues......................... $ 13,765 $ 62,713 $ -- $ (19,572) $ 56,906
Operating expenses:
Crew payroll and benefits...... 4,079 9,074 -- (138) 13,015
Charter hire and bond guarantee
fee.......................... 1,068 15,953 -- (13,823) 3,198
Repairs and maintenance........ 1,649 3,339 -- -- 4,988
Insurance...................... 566 1,747 -- -- 2,313
Consumables.................... 913 4,391 -- (1,226) 4,078
Other.......................... 544 2,687 -- (6) 3,225
------------- ------------- -------------- ------------- -------------
Total operating expenses....... 8,819 37,191 -- (15,193) 30,817
Selling, general and administrative
expenses........................ 3,558 3,715 14 (771) 6,516
Depreciation and amortization.... 1,694 3,475 -- -- 5,169
Income (loss) from operations.. (306) 18,332 (14) (3,608) 14,404
------------- ------------- -------------- ------------- -------------
Interest, net.................... 2,091 173 (1,881) -- 383
Other income (expense):
Minority interest and equity
earnings of subsidiaries..... 14,526 30,537 (1,890) (44,974) (1,801)
Other ......................... (43) (3,330) -- 3,239 (134)
------------- ------------- -------------- ------------- -------------
Total other income (expense). 14,483 27,207 (1,890) (41,735) (1,935)
------------- ------------- -------------- ------------- -------------
Income (loss) before provision for
income taxes and extraordinary
item ......................... 12,086 45,366 (23) (45,343) 12,086
Provision for income taxes....... 4,586 -- -- -- 4,586
------------- ------------- -------------- ------------- -------------
Income (loss) before extraordinary
item ......................... 7,500 45,366 (23) (45,343) 7,500
Loss on early extinguishment of
debt ......................... -- -- -- -- --
------------- ------------- -------------- ------------- -------------
Net income (loss)................ $ 7,500 $ 45,366 $ (23) $ (45,343) $ 7,500
============= ============= ============== ============= =============
</TABLE>
<PAGE>
Condensed Consolidating Income Statement (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998
Guarantor Non-guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues......................... $ 17,735 $ 108,887 $ 6,931 $ (33,404) $ 100,149
Operating expenses:
Crew payroll and benefits...... 6,230 17,950 989 (395) 24,774
Charter hire and bond guarantee
fee.......................... 1,079 17,466 249 (12,805) 5,989
Repairs and maintenance........ 2,153 5,823 245 -- 8,221
Insurance...................... 550 2,933 147 -- 3,630
Consumables.................... 1,663 7,776 374 (720) 9,093
Other.......................... (483) 6,903 138 (531) 6,027
------------- ------------- -------------- ------------- -------------
Total operating expenses..... 11,192 58,851 2,142 (14,451) 57,734
Selling, general and administrative
expenses........................ 4,632 5,851 1,802 (1,411) 10,874
Depreciation and amortization.... 2,643 8,844 439 -- 11,926
------------- ------------- -------------- ------------- -------------
Income (loss) from operations.... (732) 35,341 2,548 (17,542) 19,615
Interest, net.................... 13,137 577 (1,871) -- 11,843
Other income (expense):
Minority interest and equity
earnings of subsidiaries..... 16,775 8,119 (1,904) (25,070) (2,080)
------------- ------------- -------------- ------------- -------------
Other ......................... 3,126 (18,479) (1,221) 16,914 340
------------- ------------- -------------- ------------- -------------
Total other income (expense). 19,901 (10,360) (3,125) (8,156) (1,740)
Income (loss) before provision for
income taxes and extraordinary
item ......................... 6,032 24,404 1,294 (25,698) 6,032
Provision for income taxes....... 2,128 -- -- -- 2,128
------------- ------------- -------------- ------------- -------------
Income (loss) before extraordinary
item ......................... 3,904 24,404 1,294 (25,698) 3,904
Loss on early extinguishment of
debt ......................... -- -- -- -- --
------------- ------------- -------------- ------------- -------------
Net income (loss)................ $ 3,904 $ 24,404 $ 1,294 $ (25,698) $ 3,904
============= ============= ============== ============= =============
</TABLE>
<PAGE>
Condensed Consolidating Income Statement (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
Guarantor Non-guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues......................... $ 39,139 $ 150,298 $ -- $ (46,584) $ 142,853
Operating expenses:
Crew payroll and benefits...... 11,947 22,300 -- (138) 34,109
Charter hire and bond guarantee
fee.......................... 3,132 43,391 -- (39,436) 7,087
Repairs and maintenance........ 4.283 7,074 -- -- 11,357
Insurance...................... 1,819 4,736 -- -- 6,555
Consumables.................... 2,190 8,246 -- (1,226) 9,210
Other.......................... 1,684 7,148 -- (16) 8,816
------------- ------------- -------------- ------------- -------------
Total operating expenses..... 25,055 92,895 -- (40,816) 77,134
Selling, general and administrative
expenses........................ 10,010 8,561 14 (1,017) 17,568
Depreciation and amortization.... 4,841 8,180 -- -- 13,021
------------- ------------- -------------- ------------- -------------
Income (loss) from operations.... (767) 40,662 (14) (4,751) 35,130
Interest, net.................... 4,750 1,702 (1,923) -- 4,529
Other income (expense):
Minority interest and equity
earnings of subsidiaries..... 34,008 78,083 (1,952) (111,946) (1,807)
Other ......................... 17 (4,685) -- 4,382 (286)
------------- ------------- -------------- ------------- -------------
Total other income (expense). 34,025 73,398 (1,952) (107,564) (2,093)
------------- ------------- -------------- ------------- -------------
Income (loss) before provision for
income taxes and extraordinary
item ......................... 28,508 112,358 (43) (112,315) 28,508
Provision for income taxes....... 10,662 -- -- -- 10,662
------------- ------------- -------------- ------------- -------------
Income (loss) before extraordinary
item ......................... 17,846 112,358 (43) (112,315) 17,846
Loss on early extinguishment of
debt ......................... 2,132 -- -- -- 2,132
------------- ------------- -------------- ------------- -------------
Net income (loss)................ $ 15,714 $ 112,358 $ (43) $ (112,315) $ 15,714
============= ============= ============== ============= =============
</TABLE>
<PAGE>
Condensed Consolidating Income Statement (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
Guarantor Non-guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues......................... $ 51,094 $ 328,295 $ 13,792 $ (97,215) $ 295,966
Operating expenses:
Crew payroll and benefits...... 16,123 49,548 2,232 (581) 67,322
Charter hire and bond guarantee
fee.......................... 2,866 50,501 464 (39,376) 14,455
Repairs and maintenance........ 6,450 15,807 639 -- 22,896
Insurance...................... 1,577 8,090 318 -- 9,985
Consumables.................... 4,359 19,995 887 (917) 24,324
Other.......................... 2,536 19,631 369 (818) 21,718
------------- ------------- -------------- ------------- -------------
Total operating expenses..... 33,911 163,572 4,909 (41,692) 160,700
Selling, general and administrative
expenses........................ 13,687 19,144 2,353 (4,014) 31,170
Depreciation and amortization.... 6,447 28,335 1,015 -- 35,797
------------- ------------- -------------- ------------- -------------
Income (loss) from operations.... (2,951) 117,244 5,515 (51,509) 68,299
Interest, net.................... 34,215 1,602 (5,594) -- 30,223
Other income (expense):
Minority interest and equity
earnings of subsidiaries..... 66,915 76,901 (5,632) (143,689) (5,505)
Other ......................... 3,147 (50,369) (3,049) 50,596 325
------------- ------------- -------------- ------------- -------------
Total other income (expense). 70,062 26,532 (8,681) (93,093) (5,180)
------------- ------------- -------------- ------------- -------------
Income (loss) before provision for
income taxes and extraordinary
item ......................... 32,896 142,174 2,428 (144,602) 32,896
Provision for income taxes....... 12,336 -- -- -- 12,336
Income (loss) before extraordinary
item ......................... 20,560 142,174 2,428 (144,602) 20,560
Loss on early extinguishment of
debt ......................... 734 -- -- -- 734
------------- ------------- -------------- ------------- -------------
Net income (loss)................ $ 19,826 $ 142,174 $ 2,428 $ (144,602) $ 19,826
============= ============= ============== ============= =============
</TABLE>
<PAGE>
Condensed Consolidating Statement of Cash Flows (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
Guarantor Non-guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net Income (loss)................ $ 15,714 $ 112,358 $ (43) $ (112,315) $ 15,714
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Loss on extinguishment of
debt, net.................... 2,132 -- -- -- 2,132
Depreciation and amortization.. 4,841 8,180 -- -- 13,021
Provision for bad debts........ 114 382 -- -- 496
Loss on disposal of property... -- 63 -- -- 63
Amortization of drydocking
costs........................ 2,258 1,613 -- -- 3,871
Amortization discount on long-
term debt and financing costs 5 -- -- -- 5
Provision for deferred taxes... 8,662 -- -- -- 8,662
Minority partners= equity in
earnings (losses) of
subsidiaries, net -- -- -- (80) (80)
Undistributed (earnings) losses
of affiliates, net........... (34,008) (78,082) -- 112,026 (64)
Other non-cash items........... 464 -- -- -- 464
Changes in operating assets and
liabilities net of effect of acqusitions:
Accounts receivable............ (469) (14,172) -- (446) (15,087)
Current and other assets....... 135,408 (31,786) (111,066) (1,169) (8,613)
Accounts payable and other
liabilities (4,766) 704 -- 1,165 (2,447)
------------- ------------- -------------- ------------- -------------
Net cash provided (used) by operating
activities.................. 130,355 (742) (111,109) (369) 18,137
Investing Activities:
Purchase of property........... (15,597) (27,332) -- 369 (42,560)
Proceeds from disposal of property -- 1,633 -- -- 1,633
Capital contribution to affiliates (82,107) (216,363) -- 298,286 (182)
Acquisitions, net.............. (96,648) -- -- -- (96,648)
------------- ------------- -------------- ------------- -------------
Net cash used in investing activities (194,352) (242,060) -- 298,655 (137,759)
Financing Activities:
Repayment of short-term borrowings,
net.......................... (8,000) (2,647) -- -- (10,647)
Proceeds of long-term borrowings 59,210 -- -- -- 59,210
Repayments of long-term debt... (88,186) (45,552) -- -- (133,738)
Payment of debt and other
financing costs.............. (984) -- -- -- (984)
Payment under capital leases... (140) (950) -- -- (1,090)
Payment of notes to related parties (178) -- -- -- (178)
Proceeds from issuance of common
stock, net of offering costs. 94,111 -- -- -- 94,111
Proceeds from issuance of preferred
securities, net of offering costs -- -- 111,109 -- 111,109
Capital contributed from partners -- 298,286 -- (298,286) --
------------- ------------- -------------- ------------- -------------
Net cash provided by financing
activities................... 55,833 249,137 111,109 (298,286) 117,793
------------- ------------- -------------- ------------- -------------
(Decrease) increase in cash and cash
equivalents.................... (8,164) 6,337 -- -- (1,827)
Cash and cash equivalents at beginning
of period...................... 7,238 2,379 -- -- 9,617
------------- ------------- -------------- ------------- -------------
Cash and cash equivalents at end of
period......................... $ (926) $ 8,716 $ -- $ -- $ 7,790
============= ============= ============== ============= =============
</TABLE>
<PAGE>
Condensed Consolidating Statement of Cash Flows (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
Guarantor Non-guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net Income (loss)................ $ 19,826 $ 142,174 $ 2,428 $ (144,602) $ 19,826
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Loss on extinguishment of debt, net 734 -- -- -- 734
Depreciation and amortization.. 6,445 28,190 1,162 -- 35,797
Provision for bad debts........ 156 742 -- -- 898
Amortization of drydocking costs 3,503 4,583 363 -- 8,449
Amortization discount on long-
term debt and financing costs 737 -- 195 -- 932
Provision for deferred taxes... 8,591 -- -- -- 8,591
Minority partners= equity in
earnings of subsidiaries, net -- -- -- 23 23
Undistributed (earnings) losses
of affiliates, net........... (66,915) (67,753) (26) 134,518 (124)
Other non-cash items........... 177 -- -- -- 177
Changes in operating assets and
liabilities net of effect of acquisitions:
Accounts receivable............ (2,434) (26,452) (3,131) (456) (32,473)
Current and other assets....... (8,518) (34,703) (1,004) 10,186 (14,995)
Accounts payable and other liabilities 956 10,573 2,099 522 14,150
------------- ------------- -------------- ------------- -------------
Net cash (used) provided by
operating activities....... (19,706) 57,354 4,146 191 41,985
Investing Activities:
Purchase of property........... (29,355) (46,547) (17,079) 6,093 (86,888)
Capital contribution to affiliates (28,301) -- (30,510) 37,560 (21,251)
Acquisitions, net.............. (331,303) (14,999) -- 15 (346,278)
------------- ------------- -------------- ------------- -------------
Net cash used by investing activities (388,959) (61,546) (47,580) 43,668 (454,417)
Financing Activities:
Proceeds of long-term borrowings 412,700 -- -- -- 412,700
Proceeds from issuance of senior
notes, net of offering costs.. 292,500 -- -- -- 292,500
Repayments of long-term debt... (292,480) (464) -- -- (292,944)
Payment of debt and other
financing costs............... (247) -- -- -- (247)
Payment under capital leases... (376) (1,012) -- -- (1,388)
Capital contributed from partners -- 8 43,851 (43,859) --
Proceeds from issuance of common
stock......................... 588 -- -- -- 588
------------- ------------- -------------- ------------- -------------
Net cash provided (used) by
financing activities......... 412,685 (1,468) 43,851 (43,859) 411,209
------------- ------------- -------------- ------------- -------------
Increase (decrease) in cash and cash
equivalents.................... 4,020 (5,660) 417 -- (1,223)
Cash and cash equivalents at beginning
of period...................... 2,510 12,442 -- -- 14,952
------------- ------------- -------------- ------------- -------------
Cash and cash equivalents at end of
period......................... $ 6,530 $ 6,782 $ 417 $ -- $ 13,729
============= ============= ============== ============= =============
</TABLE>
<PAGE>
10. Prospective Accounting Changes
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted in years beginning after June 15, 1999. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on the Company's
earnings or financial position.
11. Subsequent Event
Effective September 30, 1998, the Company entered into Amendment No. 1
to the Restated Credit Agreement (the Restated Credit Agreement, as so amended,
the "Amendment"). Under the Amendment, borrowings under the revolving line of
credit may not initially exceed $150.0 million, increasing to (1) $166.0 million
subsequent to March 1, 1999, subject to repayment of a portion of the term loan
with proceeds from a specified sale and leaseback transaction or (2) $175.0
million, upon the Company's compliance with a leverage ratio specified in the
Amendment. The Amendment also provides that borrowings thereunder will be
secured by Company-owned vessels having an appraised value of at least $600.0
million and by substantially all other assets of the Company and its
subsidiaries. Interest on borrowings under both the Restated Credit Agreement
and the Amendment is based on one of two rates, at the Company's election from
time to time, plus a margin based on the Company's compliance with certain
financial ratios; however, the rates under the Amendment are higher than those
under the Restated Credit Agreement.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") should be read in conjunction with
the condensed consolidated financial statements and the related notes thereto
included elsewhere in this Report and the 1997 Form 10-K.
The MD&A contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact included in the MD&A, including statements
regarding the Company's operating strategy, plans, objectives and beliefs of
management for future operations, planned capital expenditures and vessel
acquisition and construction, are forward-looking statements. Although the
Company believes the expectations and beliefs reflected in such forward-looking
statements are reasonable, it can give no assurance that they will prove
correct.
<PAGE>
Operations Overview
The financial information presented below represents historical results
by major areas of operations.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1997 1998 1997 1998
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
Marine Support Services:
Offshore Energy Support.............................................. $ 31,791 $ 60,105 $ 72,727 $ 184,014
Offshore & Harbor Towing............................................. 4,507 11,662 12,992 32,953
--------- --------- --------- ---------
Marine Support Services Revenues.................................. 36,298 71,767 85,719 216,967
Marine Transportation Services:
Chemical Transportation.............................................. 16,110 17,270 44,053 51,100
Petroleum Product Transportation..................................... 4,498 11,112 13,081 27,899
--------- --------- --------- ---------
Marine Transportation Services.................................... 20,608 28,382 57,134 78,999
--------- --------- --------- ---------
Total Revenues........................................................ 56,906 100,149 142,853 295,966
Operating Costs:
Marine Support Services:
Offshore Energy Support.............................................. 13,648 32,663 30,622 87,939
Offshore & Harbor Towing............................................. 2,993 5,830 8,461 16,871
--------- --------- --------- ---------
Marine Support Services Operating Costs........................... 16,641 38,493 39,083 104,810
Marine Transportation Services:
Chemical Transportation.............................................. 11,075 11,523 29,324 37,172
Petroleum Product Transportation..................................... 3,101 7,718 8,727 18,718
--------- --------- --------- ---------
Marine Transportation Operating Costs............................. 14,176 19,241 38,051 55,890
--------- --------- --------- ---------
Total Operating Costs................................................. 30,817 57,734 77,134 160,700
Direct Overhead Expense:
Marine Support Services:
Offshore Energy Support.............................................. 1,793 3,217 3,792 10,197
Offshore & Harbor Towing............................................. 466 1,508 1,282 4,107
--------- --------- --------- ---------
Marine Support Services Direct Overhead........................... 2,259 4,725 5,074 14,304
Marine Transportation Services:
Chemical Transportation.............................................. 993 1,198 3,331 3,096
Petroleum Product Transportation..................................... 290 1,192 818 2,233
--------- --------- --------- ---------
Marine Transportation Direct Overhead............................. 1,283 2,390 4,149 5,329
--------- --------- --------- ---------
Total Direct Overhead................................................. 3,542 7,115 9,223 19,633
Fleet Operating EBITDA(1)
Marine Support Services:
Offshore Energy Support.............................................. 16,350 24,225 38,313 85,878
Offshore & Harbor Towing............................................. 1,048 4,324 3,249 11,975
--------- --------- --------- ---------
Marine Support Services Fleet EBITDA.............................. 17,398 28,549 41,562 97,853
Marine Transportation Services:
Chemical Transportation.............................................. 4,042 4,549 11,398 10,832
Petroleum Product Transportation..................................... 1,107 2,202 3,536 6,948
--------- --------- --------- ---------
Marine Transportation Fleet EBITDA.............................. 5,149 6,751 14,934 17,780
--------- --------- --------- ---------
Total Fleet EBITDA.................................................... 22,547 35,300 56,496 115,633
Corporate Overhead Expense............................................ 2,974 3,759 8,345 11,537
--------- --------- --------- ---------
EBITDA .............................................................. 19,573 31,541 48,151 104,096
Depreciation and Amortization Expense................................. 5,169 11,926 13,021 35,797
--------- --------- --------- ---------
Income from Operations................................................ $ 14,404 $ 19,615 $ 35,130 $ 68,299
========= ========= ========= =========
</TABLE>
(1)EBITDA is defined as net income from continuing operations before interest
expense, income tax expense, depreciation expense, amortization expense,
minority interest and other non-operating income.
<PAGE>
Historical Growth
Since December 31, 1994, when the Company's fleet consisted of 66
vessels, the Company has completed the acquisition or construction of 215
vessels at an aggregate cost of approximately $979 million, including four
vessels acquired or constructed during the 1998 third quarter at an aggregate
cost of $19.9 million. Of the Company's total of 281 vessels at September 30,
1998, 202 were offshore energy support vessels and the balance were employed in
the Company's offshore and harbor towing operations and marine transportation
services operations.
Revenue Overview
Marine Support Services
Revenue derived from 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, which are in turn heavily dependent upon the price of
crude oil.
Domestic Operations. 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>
1997 1998
Q1 Q2 Q3 Q4 Q1 Q2 Q3
<S> <C> <C> <C> <C> <C> <C> <C>
Number of supply boats at
end of period 19 21 25 26 28 29 28
Average supply boat day rates(1)..... $6,478 $7,176 $7,636 $8,032 $8,475 $8,214 $6,474
Average supply boat utilization(2).. 87% 90% 91% 93% 86% 80% 55%
Number of crew boats at
end of period(3) 39 39 39 39 39 40 39
Average crew boat day rates(1)(3)... $1,777 $1,940 $2,119 $2,294 $2,419 $2,477 $ 2,333
Average crew boat utilization(2)(3).. 95% 93% 95% 93% 89% 91% 78%
</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.
As indicated in the above table, average supply boat day rates and
utilization rates declined in the 1998 second quarter compared to the first
quarter and continued to decline in the third quarter. This decline began in
June 1998 due to the protracted decline in crude oil prices and is expected to
continue until oil prices improve. At October 29, 1998, supply boat day rates
averaged $5,200 per day.
In addition, while average crew boat day rates and utilization rates
improved slightly in the 1998 second quarter compared to the first quarter, such
rates declined in the third quarter, as well; at October 29, 1998, crew boat day
rates averaged $2,411 per day. As is the case with supply boat rates, no
substantial improvement in crew boat rates is anticipated until crude oil prices
improve.
International Operations. The Company derives substantial revenue from
international operations, primarily under dollar-denominated contracts with
major international oil companies. Foreign operations are conducted by the
Company in nearly every major offshore exploration and producing area throughout
the world, including the North Sea, Africa, South America, Mexico, Trinidad, the
West African coast, the Arabian Gulf countries, Egypt, India, Pakistan, Myanmar,
Southeast Asia, and occasionally the Far East. Additional international
opportunities are currently being analyzed by the Company. The diverse foreign
operations represented approximately 37% and 49% of the Company's revenue and
income from operations, respectively, for the nine months ended September 30,
1998.
<PAGE>
The following table shows rate and utilization information for foreign
operations:
<TABLE>
<CAPTION>
1997 1998
Q1 Q2 Q3 Q4 Q1 Q2 Q3
<S> <C> <C> <C> <C> <C> <C> <C>
Number of anchor handling tug/supply boats(1) -- 9 23 23 66 67 66
Average anchor/handling tub/supply
boat day rates(1)(2)........................... $ -- $2,900 $3,162 $3,357 $5,505 $6,008 $5,914
Average anchor handling tug/supply boat
utilization(1)(3)..................... -- 66% 80% 75% 75% 77% 77%
Number of crew/utility boats.......... -- 8 8 8 32 33 31
Average crew/utility boat day rates(2) $ -- $1,330 $1,365 $1,344 $1,549 $1,544 $1,588
Average crew/utility boat utilization(3) -- 100% 93% 90% 75% 76% 72%
</TABLE>
- - --------------------
(1)Includes anchor handling tug boats.
(2)Average day rates are calculated based on vessels operating internationally
by dividing total vessel revenue by the total number of days of vessel
utilization.
(3)Utilization is based on vessels operating internationally and determined on
the basis of a 365-day year. Vessels are considered utilized when they are
generating charter revenue.
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 currently maintains the following tugs:
No. of Tugs
Location at 9/30/98
Port Everglades, FL 5
Port Canaveral, FL 3
Tampa, FL 12
Mobile, AL 3
Lake Charles, LA 2
Port Arthur, TX 5
U.S. West Coast 2
Offshore Towing 9
Total 41
<PAGE>
Marine Transportation Services
Chemical Transportation. Generally, demand for industrial chemical
transportation services coincides with overall economic activity.
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 Oil Company. The current charter is
being terminated in November 1998, resulting in the payment of a $750,000
penalty to the Company. The Company anticipates that the Seabulk Challenger will
continue to operate in the future under short-term arrangements; however, the
Company can give no assurance that such arrangements will be entered into or as
to the terms thereof.
Revenue from the Company's towboats and fuel barges has been derived
primarily from contracts of affreightment with Florida Power & Light Co. ("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 principal contract with FPL expired in September 1998. A
subsidiary of the Company has entered into a contract to provide similar
services to FPL in the future; however, the extent of such services is expected
to be substantially less than under the prior contract.
In March 1998, HMI purchased two additional petroleum product carriers
from Kirby: the HMI Defender (ex-Willamette) and HMI Trader (ex-Concho). Both
carriers are currently employed under a contract of affreightment with CITGO
Petroleum Corporation providing for the transportation of refined products into
Florida through December 1999.
As discussed in note 8 to the condensed consolidated financial
statements, the Company currently has a 50.8% interest in five double-hull
product carriers. An affiliate of the Company has entered into agreements
providing for a two-year charter for one of these carriers, the HMI Nantucket
Shoals.
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, charter hire, maintenance and repairs, fuel, and insurance. For
general information concerning these categories of operating expenses as well as
capital expenditures, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Area of Operations Overview--Overview of
Operating Expenses and Capital Expenditures" in the 1997 Form 10-K.
Results of Operations
Three months ended September 30, 1998 compared with the three months
ended September 30, 1997
Revenue. Revenue increased 76% to $100.1 million for the three months
ended September 30, 1998 from $56.9 million for the three months ended September
30, 1997, primarily due to increased revenue from the Company's offshore energy
support and offshore and harbor towing operations.
<PAGE>
Revenue from offshore energy operations increased 89% to $60.1million
for the three months ended September 30, 1998 from $31.8 million for the three
months ended September 30, 1997, primarily due to acquisitions. During the 1998
period, domestic day rates for supply boats owned, operated, or managed by the
Company decreased 15.2% as compared to the 1997 period, and domestic day rates
for crew boats owned, operated, or managed by the Company increased 10.1% from
the 1997 period (but declined 5.8% as compared to the 1998 second quarter). As
indicated above under "Revenue Overview--Marine Support Services--Domestic
Operations," average supply boat day rates and utilization rates in the U.S.
Gulf of Mexico declined in the 1998 second and third quarters. This decline
began in June 1998 due to the protracted decline in crude oil prices and is
expected to continue until oil prices improve. At October 29, 1998, supply boat
day rates were approximately $5,200 per day as compared to $6,474 for the third
quarter. In addition, while average crew boat day rates and utilization rates
improved slightly in the 1998 second quarter compared to the first quarter, such
rates declined in the third quarter, as well. As is the case with supply boat
rates, no substantial improvement in crew boat rates is anticipated until oil
prices improve.
As the Company did not have significant international operations during
the 1997 period, a period-to-period comparison of international day rates would
not be meaningful.
Offshore and harbor towing revenue increased 159% to $11.7 million for
the three months ended September 30, 1998 from $4.5 million for the three months
ended September 30, 1997, primarily due to the October 1997 acquisition of Bay
and the March 1998 acquisition of seven harbor towing vessels from Kirby.
Revenue from chemical transportation operations increased 7% to $17.3
million for the three months ended September 30, 1998 from $16.1 million for the
three months ended September 30, 1997, primarily due to the chartering of
additional vessels.
Petroleum product transportation revenue increased 147% to $11.1
million for the three months ended September 30, 1998 from $4.5 million for the
three months ended September 30, 1997, primarily due to the March 1998
acquisition of two product tankers from Kirby Corporation.
Operating Expenses. Operating expenses increased 87% to $57.7 million
for the three months ended September 30, 1998 from $30.8 million for the three
months ended September 30, 1997, primarily due to increases in crew payroll and
benefits, maintenance and repair, and supplies and consumables resulting from
acquisitions and related increased business activity. As a percentage of
revenue, operating expenses increased to 58% for the three months ended
September 30, 1998 from 54% for the three months ended September 30, 1997 due to
the decrease in revenues caused by lower day rates in the offshore energy
segment.
Overhead Expenses. Overhead expenses increased 66.9% to $10.9 million
for the three months ended September 30, 1998 from $6.5 million for the three
months ended September 30, 1997, primarily due to increased staffing
requirements and other expenses due to acquisitions and related increased
business activity. As a percentage of revenue, overhead expenses decreased to
10.9% for the three months ended September 30, 1998 from 11.5% for the three
months ended September 30, 1997 due to a significant increase in revenues, due
to acquisitions, combined with a slightly lower increase in overhead expenses.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased 131% to $11.9 million for the three months ended September 30,
1998 compared with $5.2 million for the three months ended September 30, 1997 as
a result of an increase in fleet size due to acquisitions.
Income from Operations. Income from operations increased 36% to $19.6
million, or 20% of revenue, for the three months ended September 30, 1998 from
$14.4 million, or 25% of revenue, for the three months ended September 30, 1997
as a result of the factors noted above.
<PAGE>
Net Interest Expense. Net interest expense increased 2992% to $11.8
million, or 12% of revenue, for the three months ended September 30, 1998 from
$0.4 million, or 1% of revenue, for the three months ended September 30, 1997,
primarily as a result of the February 1998 offering of Senior Notes and debt
incurred in connection with acquisitions.
Net Income. The Company had net income of $3.9 million for the three
months ended September 30, 1998 compared to net income of $7.5 million for the
three months ended September 30, 1997, primarily as a result of the factors
noted above.
Nine months ended September 30, 1998 compared with the nine months
ended September 30, 1997
Revenue. Revenue increased 107% to $296 million for the nine months
ended September 30, 1998 versus $142.9 million for the nine months ended
September 30, 1997, primarily due to increased revenue in the Company's offshore
energy support and offshore and harbor towing operations.
Revenue from offshore energy operations increased 153% to $184 million
for the nine months ended September 30, 1998 from $72.7 million for the nine
months ended September 30, 1997, primarily due to acquisitions. During the 1998
period, domestic day rates for supply boats owned, operated, or managed by the
Company increased 9% from the 1997 period, and domestic day rates for crew boats
owned, operated, or managed by the Company increased 24% from the 1997 period.
However, as indicated above, average supply boat day rates and utilization rates
in the U.S. Gulf of Mexico began to decline in June due to the protracted
decline in crude oil prices, and this decline is expected to continue until oil
prices improve.
As the Company did not have significant international operations during
the 1997 period, a period-to-period comparison of international day rates would
not be meaningful.
Offshore and harbor towing revenue increased 154% to $33 million for
the nine months ended September 30, 1998 from $13 million for the nine months
ended September 30, 1997, primarily due to the October 1997 acquisition of Bay
and the March 1998 acquisition of seven harbor towing vessels from Kirby.
Revenue from chemical transportation operations increased 16% to $51.1
million for the nine months ended September 30, 1998 from $44.1 million for the
nine months ended September 30, 1997, primarily due to the chartering of
additional vessels.
Petroleum product transportation revenue increased 113% to $27.9
million for the nine months ended September 30, 1998 from $13.1 million for the
nine months ended September 30, 1997, primarily due to the March 1998
acquisition of two product tankers from Kirby.
Operating Expenses. Operating expenses increased 108% to $160.7 million
for the nine months ended September 30, 1998 from $77.1 million for the nine
months ended September 30, 1997, primarily due to increases in crew payroll and
benefits, maintenance and repair, and supplies and consumables resulting from
acquisitions and related increased business activity. As a percentage of
revenue, operating expenses were 54% for the nine months ended September 30,
1998 as well as for the nine months ended September 30, 1997.
Overhead Expenses. Overhead expenses increased 77.4% to $31.2 million
for the nine months ended September 30, 1998 from $17.6 million for the nine
months ended September 30, 1997, primarily due to increased staffing
requirements and other expenses due to acquisitions and related increased
business activity. As a percentage of revenue, overhead expenses decreased to
10.5% for the nine months ended September 30, 1998 from 12.3% for the nine
months ended September 30, 1997 due to a significant increase in revenues,
caused by acquisitions, combined with a slightly lower increase in overhead
expenses.
<PAGE>
Depreciation and Amortization Expense. Depreciation and amortization
expense increased 175% to $35.8 million for the nine months ended September 30,
1998 compared with $13.0 million for the nine months ended September 30, 1997 as
a result of an increase in fleet size due to acquisitions.
Income from Operations. Income from operations increased 94% to $68.3
million, or 23% of revenue, for the nine months ended September 30, 1998 from
$35.1 million, or 25% of revenue, for the nine months ended September 30, 1997
as a result of the factors noted above.
Net Interest Expense. Net interest expense increased 567% to $30.2
million, or 10% of revenue, for the nine months ended September 30, 1998 from
$4.5 million, or 3% of revenue, for the nine months ended September 30, 1997,
primarily as a result of the February 1998 offering of Senior Notes and debt
incurred in connection with acquisitions.
Other Income (Expense). Other expense increased to $5.2 million for the
nine months ended September 30, 1998 from $2.1 million for the nine months ended
September 30, 1997, primarily due to dividend payments relating to the Preferred
Securities.
Net Income. The Company had net income of $19.8 million for the nine
months ended September 30, 1998 compared to net income of $15.7 million for the
nine months ended September 30, 1997 primarily as a result of the factors noted
above.
Seasonality
The Company experiences slight seasonality in its 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 initial public offering in 1996, the Second Offering, the Private Offering
and the offering of Senior Notes. At September 30, 1998, the Company's
outstanding indebtedness under the Restated Credit Agreement was approximately
$260.3 million and the effective interest rate under the Restated Credit
Agreement was 6.6875%. Pursuant to the Restated Credit Agreement and the
Amendment, the Company is required to meet certain financial tests and is
subject to certain covenants. See notes 3 and 11 to the condensed consolidated
financial statements and the discussion below for additional information
regarding these offerings and the terms of the Restated Credit Agreement and the
Amendment.
<PAGE>
The following table shows the Company's cost for vessels acquired in
1998.
<TABLE>
<CAPTION>
Vessel Delivered Cost (millions)
<S> <C> <C>
1 205-foot supply boat January 1998 $ 8.2
37 offshore energy support vessels February 1998 291.6
2 petroleum product tankers March 1998 31.4
2 tractor tugs April 1998 9.1
1 Ship Docking Module ("SDM(TM)") April 1998 5.0
1 152-foot crew boat April 1998 2.4
1 geophysical boat April 1998 4.0
1 SDM(TM) May 1998 5.0
1 205-foot supply boat July 1998 9.0
1 double-skin barge September 1998 0.9
2 tractor tugs September 1998 10.0
1 crew boat October 1998 2.5
1 45,300 dead weight ton double-hull product carrier October 1998 25.9 (1)
TOTAL $ 405.0
</TABLE>
The following table shows delivery dates and estimated costs for vessels
to be delivered during the remainder of 1998 and 1999.
<TABLE>
<CAPTION>
Remaining
Expected Total Cost Cost at 9/30/98
Vessel Delivery Date (millions) (millions)
<S> <C> <C> <C>
1 45,300 dead weight ton double-hull product carrier November 1998 $ 25.9 (1) $ --
1 205-foot supply boat November 1998 8.8 --
1 205-foot supply boat November 1998 8.7 4.7
1 205-foot supply boat December 1998 8.8 6.4
1 205-foot supply boat February 1999 8.8 6.4
1 152-foot crew boat March 1999 2.5 2.5
1 152-foot crew boat May 1999 2.7 2.1
1 152-foot crew boat July 1999 2.7 2.1
1 SDM(TM) June 1999 5.4 4.9
1 SDM(TM) November 1999 5.4 4.9
1 SDM(TM) April 2000 5.4 --
1 279-foot construction/anchor handling tug/
supply vessel May 1999 21.7 11.8
1 45,300 dead weight ton double-hull product carrier December 1998 25.9 (1) --
1 45,300 dead weight ton double-hull product carrier January 1999 25.9 (1) --
1 45,300 dead weight ton double-hull product carrier June 1999 25.9 (1) --
TOTAL $ 184.6 $ 45.7
</TABLE>
- - --------------------------
(1)Represents the Company's 50.8% interest in partnerships. The Company expects
to reduce its interest to less than 50%; see note 8 to the condensed
consolidated financial statements.
<PAGE>
In June 1998, at a cost of $18.5 million, the Company increased from
0.8% to 50.8%, on a temporary basis, its stake in five 45,300 dead weight ton
double-hull product carriers (see note 8 to the condensed consolidated financial
statements). The aggregate cost of the five carriers is estimated to be $250.0
million, of which a substantial portion is expected to be financed with the
proceeds of U.S. government-guaranteed Title XI ship financing bonds issued in
March 1996 and September 1998. The Company has an exclusive option to purchase
the remaining 49.2% interest in these carriers at an estimated cost of $16.5
million.
The Company's future capital needs are expected to relate primarily to
debt service obligations, maintenance and improvements of its fleet. The
Company's principal and interest payment obligations for the remainder of 1998
are estimated to be approximately $38.0 million, and operating lease obligations
for the remainder of 1998 are estimated to be approximately $2.0 million.
Capital requirements for vessel maintenance and improvements, including
scheduled drydockings, are expected to be approximately $11.0 million for the
remainder of 1998.
The Company believes that cash generated from operations and amounts
available under the Amendment will be sufficient to fund debt service
requirements, planned capital expenditures, and working capital requirements for
the foreseeable future. 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.
In view of recent declines in average supply boat day rates and
utilization rates in the U.S. Gulf of Mexico and the Company's expectation that
such declines will continue until oil prices improve (as discussed above), the
Company has curtailed or deferred certain capital and other expenditures, as
well as acquisitions, and is considering whether further curtailments and/or
deferrals are advisable. In addition, the Company has redeployed and will
continue to redeploy vessels to international markets that have not exhibited
rate declines similar to those being experienced in the U.S. Gulf of Mexico.
As reported in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, the declines discussed above caused the Company to
evaluate whether and to what extent it would be unable to comply with certain
covenants in the Restated Credit Agreement and to discuss the possibility of
noncompliance with its bank lenders. As a result of these discussions, the
Company has entered into the Amendment, effective as of September 30, 1998; in
the absence of the Amendment, the Company would not have been in compliance with
the covenant in the Restated Credit Agreement that it maintain a maximum
Leverage Ratio (as defined in the Restated Credit Agreement) of 4.0:1.00.
Management believes that the Amendment will afford the Company
continued access to credit and the ability to maintain liquidity. However, among
other things, the Amendment provides for reduced availability of borrowings;
increased interest rates, fees and collateral; modified financial covenants; and
restraints on future capital and other expenditures. Additional information
regarding the Amendment is contained in note 11 to the condensed consolidated
financial statements and in the text of the Amendment, which is being filed as
an exhibit to, and is incorporated by reference in, this Report.
Based on the definitive terms of the Amendment, the Company believes
that it will not be required to record an extraordinary charge in the 1998
fourth quarter with respect to the Amendment.
The Company is also considering further modifications to its bank
credit arrangements, including modifications relating to the financial covenants
to be imposed after 1999. However, no assurance can be given that the Company
will be able to effect such modifications on acceptable terms.
<PAGE>
Prospective Accounting Changes
In September 1998, the Financial Accounting Standards Board issued
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities,
which is required to be adopted in years beginning after September 15, 1999.
Because of the Company's minimal use of derivatives, management does not
anticipate that the adoption of the new Statement will have a significant effect
on the Company's earnings or the financial position of the Company.
Impact of the "Year 2000 Issue"
The "Year 2000 Issue" is the result of the use by certain computer
software of a two-digit dating convention rather than a four-digit dating
convention (i.e., "00" rather than "2000"), causing a computer or similar
technology to recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or in other errors that could cause
disruptions of normal business activities.
The Company has implemented a program designed to assess the likely
impact of the Year 2000 Issue on the Company and its subsidiaries and to develop
and implement measures designed to minimize its impact. The program covers not
only the Company's computer equipment and software systems, but also other
systems containing so-called "embedded" technology, such as alarm systems,
elevators and fax machines.
The Company's Year 2000 program has focused on the two major components
of the Company's operations - land-based systems and vessel-based systems - with
separate teams for computer operations/information systems, facilities
management, and vessel operations. Each team is implementing the program in the
following four phases:
o Assessment, including taking physical inventories of all computer-based
equipment and software, as well as digital and analog control systems;
establishing testing procedures for checking Year 2000 compliance; and
carrying out those testing procedures. This phase has been
substantially completed for land-based systems, except to the extent
that the Company is in the initial stages of contacting third-party
suppliers and customers to determine whether and to what extent the
Company may face disruptions in supplies or services (such as ports and
utilities) provided by suppliers or cessation of operations by
customers. Vessel-based assessment efforts have proceeded more slowly,
since these efforts can only be conducted while a vessel is in port.
However, these efforts have been initiated and are expected to be
completed by year-end 1998.
o Remediation of all land-based and vessel-based issues identified in the
assessment phase. Remediation activities have been initiated with
respect to most land-based systems; these activities are expected to be
substantially completed by year-end 1998. Vessel-based remediation
efforts are currently expected to be completed during the first half of
1999.
o Compliance certification, including re-testing to assure that
remediation efforts have been successful. Assuming that remediation
efforts are successfully completed during the 1999 first half,
compliance certification is expected to be completed shortly
thereafter.
o Maintenance, including ongoing testing and remediation. This phase is
expected to commence at the end of the first half of 1999 and is
expected to continue until early 2000.
<PAGE>
The Company expects each of the above phases to be completed or
substantially completed by the times indicated above. However, the Company
cannot predict whether or to what extent the completion of these phases may be
delayed for various reasons. In particular, as indicated above, the Company is
in the initial stages of contacting third-party suppliers and customers with
regard to the Year 2000 Issue, and it is not possible to predict whether or to
what extent the information obtained from suppliers and customers may require
additional assessment, remediation and/or other activities. Further, the
completion of the Company's Year 2000 program could be adversely affected by the
unavailability of replacement components and equipment.
The Company estimates that its total cost for new systems and equipment
and related services will approximate $6.5 million, of which approximately $5.8
million had been expended through September 30, 1998. However, these amounts
include the costs of new systems and equipment that, while "Year 2000
compliant," were not acquired in connection with or as a result of the Year 2000
Issue. Further, these amounts do not include the Company's internal costs in
connection with the Year 2000 Issue (consisting primarily of payroll costs for
employees working on the Company's Year 2000 program), as the Company does not
separately track such costs. Consequently, it is not possible to determine the
precise amount expended by the Company directly in connection with the Year 2000
Issue. These expenditures are not expected to affect other expenditures by the
Company relating to information technology and systems.
The Company faces numerous potential risks in connection with the Year
2000 Issue. For the Company's land-based systems, these risks include the
possible loss of network integrity; failures with regard to accounting, finance
and other functions; potential damage to equipment; and possible loss of
communications. In addition, systems containing embedded technology could result
in the loss of building management control systems (including elevators, air
conditioning and generators); failure of fire and emergency and safety systems;
potential damage to equipment; and loss of power. In its vessel-based
operations, the Year 2000 Issue could result in vessel delays or stoppages;
damage to vessels and other equipment; risk of injury to crew members and
others; failure of navigation and/or communications equipment; and cargo
handling failures. It is not possible to determine whether or to what extent any
or all of these risks are likely to occur or the costs involved in any such
occurrence. However, such costs could be material.
The Company has developed a number of contingency plans to address the
Year 2000 Issue. Some of these plans will be implemented regardless of the
Company's expectations as to the likely impact of the Year 2000 Issue, while
others will be implemented only if the Company believes that it is likely to be
seriously affected by the Year 2000 Issue. These contingency plans include
maintaining backup systems with pre-2000 dates (including backups of all
critical systems); advance testing of critical systems; printing paper copies of
all critical data; establishing emergency response teams; and manually
overriding all mechanical systems. In addition, the Company may suspend cargo
operations; instruct vessels at sea to be in open sea, well away from shore or
shallows; instruct vessels in port to remain alongside or at anchor; insure that
all ships are fully provisioned with stores and fuel; and restrict crew changes.
In addition, as 2000 approaches, the Company will conduct safety drills, cargo
handling drills, and backup vessel handling drills.
<PAGE>
Euro Conversion Issues
On January 1, 1999, certain member nations of the European Economic and
Monetary Union ("EMU") will adopt a common currency, the "Euro." For a
three-year transition period, both the Euro and individual participants'
currencies will remain in circulation; after January 1, 2002, the Euro will be
the sole legal tender for EMU countries. The adoption of the Euro will affect
numerous financial systems and business applications.
While the Company's subsidiaries do business in many countries around
the world, substantially all of such business is U.S. dollar-denominated. Thus,
while the Company is reviewing the impact of the introduction of the Euro on
various aspects of its business (including information systems, currency
exchange rate risk, taxation, contracts, competitive position and pricing), such
introduction is not expected to have a material impact on the Company.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
As reported in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, in July 1998 a subsidiary of the Company was
charged with criminal violations of Florida statutes relating to commercial
dumping and willful pollution, as well as violation of a rule, regulation or
order of the Florida Department of Environmental Regulation (State of Florida
vs. Sun State Marine Services, Inc., Circuit Court of the Fourth Judicial
Circuit in and for Clay County, Florida). The proceeding alleged that marine
repairs conducted by the subsidiary resulted in the discharge of waste from a
vessel sandblasting operation in the St. John=s River.
In October 1998, this proceeding was dismissed, contingent upon the
performance of certain actions by the subsidiary, including taking reasonable
steps to avoid pollution and conducting environmental training for specified
employees. The proceeding may be reopened if, after one year, the subsidiary has
not performed as specified. The resolution of this proceeding did not result in
the imposition of significant fines or in other material penalties.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
10.1 - Amendment No. 1, dated as of September 30, 1998, to the
Amended and Restated Revolving Credit and Term Loan Agreement,
dated as of February 12, 1998, by and among Hvide Marine
Incorporated, the Guarantors party thereto, Citibank, N.A.,
BankBoston, N.A. and the lending institutions named therein.
10.2 - Indemnification Agreement, dated as of October 22, 1998, between
Hvide Marine Incorporated and J. Erik Hvide.
10.3 - Indemnification Agreement, dated as of October 30, 1998, between
Hvide Marine Incorporated and Hans J. Hvide.
27 - Financial Data Schedule
b. Reports on Form 8-K.
None.
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HVIDE MARINE INCORPORATED
/s/ JOHN J. KRUMENACKER
John J. Krumenacker
Controller and Chief Accounting Officer
November 13, 1998
AMENDMENT NO. 1
This AMENDMENT NO. 1 (this "Amendment"), dated as of September 30,
1998, is by and among HVIDE MARINE INCORPORATED (the "Borrower"), the Guarantors
party to the Credit Agreement referred to below (the "Guarantors"), CITIBANK,
N.A., as Administrative Agent (the "Administrative Agent"), BANKBOSTON, N.A., as
Documentation Agent (the "Documentation Agent" and together with the
Administrative Agent, the "Agents"), and the lending institutions party to the
Credit Agreement referred to below (collectively, the "Banks").
WHEREAS, the Borrower, the Guarantors, the Banks and the Agents are
parties to that certain Amended and Restated Revolving Credit and Term Loan
Agreement, dated as of February 12, 1998 (the "Credit Agreement"), pursuant to
which the Agents and the Banks, upon certain terms and conditions, have agreed
to make loans and otherwise extend credit to the Borrower; and
WHEREAS, the Borrower and the Guarantors have requested that the Banks
and the Agents agree to amend certain provisions of the Credit Agreement; and
WHEREAS, the Banks and the Agents have agreed, subject to the
satisfaction of the conditions precedent set forth herein, to so amend the
Credit Agreement;
WHEREAS, capitalized terms which are used herein without definition and
which are defined in the Credit Agreement shall have the same meanings herein as
in the Credit Agreement.
NOW, THEREFORE, the Borrower, the Guarantors, the Banks and the Agents
hereby agree as follows:
ss.1. Amendments to the Credit Agreement. Subject to the
satisfaction of the conditions precedent set forth in ss.4 hereof, the Credit
Agreement is hereby amended as follows:
ss.1.1 Definitions.
(a) Section 1.1. of the Credit Agreement is hereby amended by deleting
the definition of "Applicable Margin" set forth therein and substituting in lieu
thereof the following new definition:
"Applicable Margin. For each period commencing on an
Adjustment Date through the date immediately preceding the next
Adjustment Date (each a "Rate Adjustment Period"), the Applicable
Margin shall be the applicable percentage set forth below with respect
to the Leverage Ratio, determined on a Pro Forma Basis as of the end of
the fiscal quarter of the Borrower immediately preceding the date of
the Compliance Certificate relating to such Adjustment Date:
<TABLE>
<CAPTION>
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
Base Eurodollar Commitment
Level Leverage Ratio Rate Loans Rate Loans Fee
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
<S> <C> <C> <C> <C>
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
I Greater than 4.00 to 1.00 1.00% 2.00% 0.40%
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
II Less than or equal to 4.00 to 1.00 and 0.75% 1.75% 0.40%
greater than or equal to 3.50 to 1.00
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
III Less than 3.50 to 1.00 and greater than 0.50% 1.50% 0.40%
or equal to 3.00 to 1.00
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
IV Less than 3.00 to 1.00 and greater than 0.25% 1.25% 0.40%
or equal to 2.25 to 1.00
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
V Less than 2.25 to 1.00 and greater than 0.25% 1.00% 0.40%
or equal to 1.50 to 1.00
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
VI Less than 1.50 to 1.00 0.25% 0.75% 0.40%
- - ----------- -- ------------------------------------------- -------------- ----------------- --------------------
</TABLE>
Notwithstanding the foregoing, (i) if the Borrower fails to deliver any
Compliance Certificate pursuant to ss.11.4(d) hereof, then for the
period commencing on the date such Compliance Certificate was due
through the date immediately preceding the Adjustment Date that occurs
immediately following the date on which such Compliance Certificate is
delivered, the Applicable Margin shall be that percentage corresponding
to Level I in the table above, and (ii) subject to the provisions of
the preceding clause (i), for purposes of calculating the commitment
fee payable pursuant to ss.2.9, the commitment fee on the Restricted
Amount (defined below) shall be equal to 0.25%. As used herein, the
"Restricted Amount" at any time shall mean the amount equal to
$175,000,000 minus the Available Commitment at such time.".
(b) The definition of "Subsidiary" set forth in Section 1.1 of the
Credit Agreement is hereby amended by adding the following new text immediately
before the period at the end of such definition: "provided that Lightship Tanker
Holdings, LLC, Hvide Aker Holdings, LLC, and Hvide Aker Chartering I, LLC and
their respective Subsidiaries, shall not be considered Subsidiaries of the
Borrower hereunder."
(c) The definition of "Consolidated EBITDA" set forth in Section 1.1 of
the Credit Agreement is hereby amended by deleting the text "income taxes paid"
from the fifth line of such definition and substituting in lieu thereof the text
"income tax expense".
(d) Section 1.1 of the Credit Agreement is hereby further amended by
inserting the following new definitions therein in the correct alphabetical
sequence:
"Available Commitment. $150,000,000; provided that in the event
that the Leverage Ratio, determined as of the end of any fiscal quarter
and as demonstrated by a Compliance Certificate delivered pursuant to
Section 11.4(d), is less than 3.0:1.0, the Available Commitment shall,
commencing on the Adjustment Date corresponding to such Compliance
Certificate, be an amount equal to $175,000,000. In addition, in the
event that the Borrower prepays the Term Loan pursuant to Section 4.6(i)
with the Net Cash Proceeds received from a Specified Sale Leaseback, the
Available Commitment shall be increased by an amount equal to the amount
of the Term Loan so prepaid; provided that no increase in the Available
Commitment pursuant to this sentence shall (A) be effective prior to
March 1, 1999 or (B) result in an increase of the Available Commitment
to an amount in excess of $166,000,000."
"Capital Assets. Fixed assets, both tangible (such as land,
buildings, fixtures, machinery and equipment) and intangible (such as
patents, copyrights, trademarks, franchises and good will); provided
that Capital Assets shall not include any item customarily charged
directly to expense or depreciated over a useful life of twelve (12)
months or less in accordance with generally accepted accounting
principles."
"Capital Expenditures. Amounts paid or Indebtedness incurred by
the Borrower or any of its Subsidiaries in connection with the purchase,
lease, improvement, maintenance, or repair by the Borrower or any of its
Subsidiaries of Capital Assets that would be required to be capitalized
and shown on the balance sheet of such Person in accordance with
generally accepted accounting principles."
"Existing Fleet Capital Expenditures. Capital Expenditures incurred in
connection with the maintenance, repair and equipping of Vessels and facilities
used in connection with the maintenance, repair and equipping of vessels, and
the replacement of Vessels which are subject to a total casualty loss."
"Investment Capital Expenditures. Capital Expenditures incurred in
connection with the construction and completion of Vessels to be delivered to
the Borrower or one of its Subsidiaries and which are, as of September 30, 1998,
under construction."
"Net Cash Proceeds. With respect to any sale of assets, the
cash proceeds received from such sale, net of all reasonable costs of
sale and taxes paid or payable as a result thereof by the Borrower and
its Subsidiaries, and with respect to the incurrence of any
Indebtedness, the cash proceeds received from such incurrence, net of
all reasonable costs thereof and reasonable fees and all expenses
payable in connection therewith by the Borrower and its Subsidiaries."
"Specified Sale Leaseback. A sale leaseback transaction
permitted pursuant to Section 12.6 hereof entered into by the Borrower
or one of its Subsidiaries relating to the Vessel Seabulk Arizona,
Official Number 1066216, or the Vessel Seabulk Wisconsin, Official
Number 1069832"
(e) The definition of "Permitted Acquisition" set forth in Section 1.1
of the Credit Agreement is hereby amended by (i) deleting the period occurring
at the end of paragraph (c) thereof following the word "hereunder" and
substituting in lieu thereof the text: "; and" and (ii) inserting the following
new paragraph (d) at the end of such definition:
"(d) the Capital Expenditures relating to such acquisition are permitted
pursuant to Section 13.6 hereof."
(f) The definition of "Security Agreements" set forth in Section 1.1 of
the Credit Agreement is hereby amended by deleting the text "and those
Guarantors owning Vessels which, pursuant to ss.9 hereof, are subject to a
perfected first priority mortgage in favor of the Documentation Agent" and
substituting in lieu thereof the text "the Guarantors".
ss.1.2 Commitment to Lend. Section 2.1 of the Credit Agreement is
hereby amended by inserting the text "the lesser of the Available Commitment
and" immediately after the word "exceed" occurring in the fifteenth line
thereof.
ss.1.3 Mandatory Repayments of Revolving Credit Loans. Section 3.2 of
the Credit Agreement is hereby amended by (i) inserting the text "the lesser of
the Available Commitment and" immediately after the word "exceeds" occurring in
the fourth line thereof and (ii) inserting the following sentence at the end of
such Section: "In addition, the Borrower shall, immediately upon the receipt
thereof, prepay the outstanding Revolving Credit Loans in an amount equal to the
Net Cash Proceeds of additional Indebtedness incurred by the Borrower and its
Subsidiaries which is permitted pursuant to Section 12.1(c) hereof and which is
secured by a lien that is permitted under the Senior Note Indenture pursuant to
clause (i) of the definition of "Permitted Liens" contained in the Senior Note
Indenture.".
ss.1.4 Commitment to Issue Letters of Credit. Section 5.1.1. of the Credit
Agreement is hereby amended by inserting the text "the lesser of the Available
Commitment and" immediately after the word "exceed" occurring in the last line
thereof.
ss.1.5 Mandatory Prepayments of Term Loan. The Credit Agreement is hereby
further amended by inserting the following new Section 4.6 thereto in the
correct numerical order:
"4.6. Mandatory Prepayments of Term Loan. The Borrower shall
prepay the Term Loan in an amount equal to the Net Cash Proceeds
received by the Borrower and its Subsidiaries from (i) sales of assets
pursuant to Section 12.5.2., and (ii) additional Indebtedness incurred
pursuant to Section 12.1(c) or (g); provided that, the Net Cash
Proceeds from Indebtedness incurred by the Borrower and its
Subsidiaries which is secured by a lien that is permitted under the
Senior Note Indenture pursuant to clause (i) of the definition of
"Permitted Liens" contained in the Senior Note Indenture will be
applied to repay outstanding Revolving Credit Loans pursuant to Section
3.2. Prepayments of the Term Loan pursuant to this Section 4.6 shall be
made contemporaneously with the receipt of such Net Cash Proceeds by
the Borrower or such Subsidiary and shall be applied pro rata to the
remaining scheduled installment payments of the Term Loan; provided
that, prepayments of the Term Loan pursuant to this Section 4.6 made
with the proceeds of a Specified Sale Leaseback shall be applied to the
remaining scheduled installment payments of the Term Loan in the
inverse order of maturity."
ss.1.6 Collateral Security and Guarantees. (a) Section 9(a) of the Credit
Agreement is hereby amended by inserting the following text immediately before
the period occurring at the end of such Section: "or (iii) any of the
Subsidiaries listed on Schedule 9(a) hereto".
(b) The Credit Agreement is hereby further amended by deleting Section
9(b)(ii) thereof in its entirety and substituting in lieu thereof the following
new text: "(ii) in substantially all of the other assets, whether now owned or
hereafter acquired (other than the vessels subject to a Specified Sale
Leaseback, the revenues arising out of the operation thereof, and the proceeds
of such vessels and such revenues) of the Borrower and its Subsidiaries,
pursuant to the terms of the Security Documents, and".
(c) The Credit Agreement is hereby further amended by deleting the text
"which owns a Vessel which is subject to a Vessel Mortgage" from Section
9(b)(iii) thereof and substituting in lieu thereof the text: "of the Borrower,
other than those Subsidiaries set forth on Schedule 9(b) hereto".
(d) The Credit Agreement is hereby further amended by adding the
following new Section 9(c) thereto in the correct numerical location:
"(c) The parties hereto agree that, in connection with (i) any
sale leaseback transaction which is permitted pursuant to Section 12.6,
(ii) the incurrence by the Borrower and its Subsidiaries of additional
Indebtedness which is permitted pursuant to Section 12.1(c), or (iii)
the sale of assets by the Borrower and its Subsidiaries pursuant to
Section 12.5.2., and provided that (x) the Borrower shall,
contemporaneously with the receipt thereof, apply the Net Cash Proceeds
of such sale leaseback transaction, incurrence of Indebtedness, or sale
of assets to the prepayment of the Loans as required pursuant to
Sections 4.6 and Section 3.2, and (y) no Default or Event of Default
shall then exist, the Documentation Agent shall release its lien on the
asset(s) subject to such sale leaseback or asset sale, or which have
been acquired with the proceeds of such additional Indebtedness, and
the revenues arising out of the operation thereof, and the proceeds of
such assets and such revenues."
ss.1.7 Concerning the Vessels. Section 10.19 of the Credit Agreement is
hereby amended by inserting the following text immediately after the word
"Vessel" occurring in the second line thereof: "which is subject to a Vessel
Mortgage".
ss.1.8 Financial Statements, Certificates and Information. Section 11.4
of the Credit Agreement is hereby amended by (a) inserting the text "after the
end of each of the fiscal quarters of the Borrower" immediately after the word
"practicable" occurring in the first line of paragraph (b) thereof, (b) deleting
the text "forty-five (45) days after the end of each of the fiscal quarters of
the Borrower" set forth in paragraph (b) thereof and substituting in lieu
thereof the text "February 5, in the case of each fiscal quarter ending on
December 31, May 5, in the case of each fiscal quarter ending on March 31,
August 5, in the case of each fiscal quarter ending on June 30, and November 5,
in the case of each fiscal quarter ending on September 30", (c) deleting the
text "; and" occurring at the end of paragraph (g) thereof and substituting in
lieu thereof the text: "(it being understood that the Agents may, upon notice to
the Borrower, obtain such appraisals and that the cost of all such appraisals
will be paid by the Borrower);", (d) deleting the period occurring at the end of
paragraph (h) thereof and substituting in lieu thereof the text: "; and", and
(e) inserting the following new paragraph (i) at the end of such Section:
"(i) as soon as practicable, but in any event within thirty
(30) days after the end of each month in each fiscal year of the
Borrower, a consolidated thirteen (13) week rolling cash flow forecast
of the Borrower and its Subsidiaries in form and substance satisfactory
to the Agents."
ss.1.9 Collateral Valuation. Section 11.15 of the Credit Agreement is
hereby amended by (a) deleting the date "March 15, 1998" set forth in the second
line of such Section and substituting in lieu thereof the date "November 30,
1998", (b) deleting the amount "$400,000,000" set forth in the last line of such
Section and substituting in lieu thereof the amount "$600,000,000" and (c)
inserting the following new text immediately after the period at the end of such
Section: "It is agreed that the Agents may, upon notice to the Borrower, obtain
such appraisals and that the cost of all such appraisals will be paid by the
Borrower.".
ss.1.10 Restrictions on Indebtedness. Section 12.1 of the Credit Agreement
is hereby amended by
(a) deleting paragraph (c) thereof and substituting in lieu thereof the
following new paragraph (c):
(c) Indebtedness (x) incurred in connection with the
acquisition after the date hereof of any real or personal property by
the Borrower or such Subsidiary, (y) under any Capitalized Lease, or
(z) or in respect of any operating lease which is entered into by the
Borrower or any of its Subsidiaries in connection with any
sale-leaseback transaction pursuant to Section 12.6, provided that (i)
the aggregate principal amount of such Indebtedness of the Borrower and
its Subsidiaries shall not exceed the aggregate amount of $100,000,000
at any one time, (ii) immediately after the incurrence of such
Indebtedness, and after giving effect thereto, no Default or Event of
Default shall have occurred and be continuing, and (iii) the Net Cash
Proceeds of such Indebtedness are used to prepay the Term Loan in
accordance with Section 4.6 or, in the case of Indebtedness which is
secured by a lien that is permitted under the Senior Note Indenture
pursuant to clause (i) of the definition of "Permitted Liens" contained
in the Senior Note Indenture, to repay outstanding Revolving Credit
Loans pursuant to Section 3.2;",
(b) deleting the amount "$350,000,000 set forth in paragraph (f) thereof
and substituting in lieu thereof the amount "$300,000,000", and
(c) adding the following new text immediately before the period
occurring at the end of paragraph (g) of such Section: "and the Net Cash
Proceeds of such Indebtedness are used to prepay the Term Loan in accordance
with Section 4.6".
ss.1.11 Restrictions on Liens. Section 12.2 of the Credit Agreement is
hereby amended by adding the following new text immediately after the words
"Capitalized Leases" occurring in paragraph (h) thereof: "or operating leases".
ss.1.12 Restrictions on Investments. Section 12.3 of the Credit
Agreement is hereby amended by (a) deleting the word "and" occurring at the end
of paragraph (h) of such Section, (b) deleting the period occurring at the end
of paragraph (i) of such Section and substituting in lieu thereof the text ";
and", and (c) adding the following new paragraph (j) at the end of such Section:
"(j) Investments by the Borrower and its Subsidiaries
consisting of the purchase of up to either (i) 32.32% of the equity
interests of Lightship Limited Partner Holdings, LLC or (ii) 25% of the
equity interests of each of Lightship Tankers I LLC, Lightship Tankers
II LLC, Lightship Tankers III LLC, Lightship Tankers IV LLC, or
Lightship Tankers V LLC, in each case on or before December 31, 1999;
provided that (i) prior to the making of such Investment, the Borrower
and/or one of its Subsidiaries has received Net Cash Proceeds from the
sale of equity interests in Lightship Partners, L.P. which exceed the
consideration paid and payable for such Investment and (ii) the making
of such Investment does not result in the Borrower and its Subsidiaries
owning more than 49.99% of the equity interests of each of Lightship
Tankers I LLC, Lightship Tankers II LLC, Lightship Tankers III LLC,
Lightship Tankers IV LLC, and Lightship Tankers V LLC."
ss.1.13 Distributions. The Credit Agreement is hereby further amended by
deleting Section 12.4(a) thereof in its entirety and substituting in lieu
thereof the following new Section 12.4(a): "(a) The Borrower will not make any
Distributions.".
ss.1.14 Mergers and Acquisitions. The Credit Agreement is hereby
further amended by (a) deleting the word "and" occurring in the twelfth line
thereof and substituting in lieu thereof a comma, (b) inserting the words
"(other than vessels)" immediately after the word "assets" occurring in the
penultimate line of Section 12.5.1, and (c) inserting the following new text
immediately before the period occurring at the end of such Section: ", and (iii)
the acquisition described on Schedule 12.5.1 hereto".
ss.1.15 Disposition of Assets. Section 12.5.2 of the Credit Agreement
is hereby amended by deleting paragraph (c) thereof (including the proviso set
forth at the end of such Section) and substituting in lieu thereof the following
new text: "(c) the sale of assets by the Borrower and its Subsidiaries not
otherwise permitted pursuant to the foregoing clauses of this Section 12.5.2
(including, without limitation, a sale of assets pursuant to a sale leaseback
transaction which is permitted pursuant to Section 12.6); provided that (i) each
such sale is made to a third party which is not an Affiliate of the Borrower,
(ii) as consideration for such sale, the Borrower receives cash in an amount not
less than the fair market value of such assets, and (iii) in the event that the
Borrower and/or its Subsidiaries sell, transfer or otherwise dispose of assets
with an aggregate fair market value in excess of an aggregate of $5,000,000 in
any period of twelve (12) consecutive calendar months, the Borrower shall apply
the Net Cash Proceeds in excess of $5,000,000 received from all such sales,
transfers or other dispositions to the prepayment of the Term Loan in accordance
with Section 4.6."
ss.1.16 Sale and Leaseback. Section 12.6 of the Credit Agreement is
hereby amended by adding the following new text immediately before the period
occurring at the end of such Section: "provided that the Borrower and its
Subsidiaries may enter into such a sale and leaseback transaction with respect
to any Vessel so long as (i) the Indebtedness incurred with such transaction is
permitted pursuant to Section 12.1(c) hereof, (ii) the Net Cash Proceeds
received from such transaction are used to prepay the Term Loan in accordance
with Section 4.6 hereof, (iii) the sale of such Vessel is to a third party which
is not an Affiliate of the Borrower and for fair market value, (iv) after giving
effect of such transaction the Borrower would be in compliance with the
borrowing limitations set forth in Section 2.1 and Section 13.4, and (v)
immediately before and immediately after, and after giving effect to such
transaction, no Default or Event of Default shall then exist and be continuing."
ss.1.17 Leverage Ratio. The Credit Agreement is hereby further amended by
deleting Section 13.1 thereof in its entirety and substituting in lieu thereof
the following new Section 13.1:
"13.1 Leverage Ratio. The Borrower will not permit the
Leverage Ratio, determined on a Pro Forma Basis at the end of each
fiscal quarter of the Borrower set forth in the table below, to exceed
the ratio set forth opposite such fiscal quarter in such table:
Fiscal Quarter Ending Maximum Ratio
9/30/98 and 12/31/98 4.8:1
3/31/99 5.1:1
6/30/99 and 9/30/99 5.5:1
12/31/99 5.4:1
3/31/00 and thereafter 4.0:1"
ss.1.18 Debt Service Coverage Ratio. The Credit Agreement is hereby
further amended by deleting Section 13.2 thereof in its entirety and
substituting in lieu thereof the following new Section 13.2:
"13.2 Debt Service Coverage Ratio. The Borrower will not
permit the Debt Service Coverage Ratio, determined on a Pro Forma Basis
at the end of each fiscal quarter of the Borrower set forth in the
table below, to be less than the ratio set forth opposite such fiscal
quarter in such table:
Fiscal Quarter Ending Minimum Ratio
9/30/98 3.0:1
12/31/98 2.8:1
3/31/99 2.5:1
6/30/99, 9/30/99 and 12/31/99 2.3:1
3/31/00 and thereafter 3.0:1"
ss.1.19 Indebtedness to Net Worth Ratio. The Credit Agreement is hereby
further amended by deleting Section 13.3 thereof in its entirety and
substituting in lieu thereof the following new Section 13.3:
"13.3 Indebtedness to Net Worth Ratio. The Borrower will not
permit the ratio of (a) Consolidated Total Indebtedness to (b)
Consolidated Net Worth, at any time during a fiscal quarter of the
Borrower set forth in the table below, to be greater than the ratio set
forth opposite such fiscal quarter in such table:
Fiscal Quarter Ending Maximum Ratio
9/30/98 2.25:1
12/31/98, 3/31/99 and 6/30/99 1.8:1
9/30/99 and thereafter 1.75:1"
ss.1.20 Collateral Coverage Ratio. Section 13.4 of the Credit Agreement is
hereby amended by deleting the ratio "1.25:1.00" set forth therein and
substituting in lieu thereof the ratio "1.80:1.00".
ss.1.21 Minimum Consolidated EBITDA. The Credit Agreement is hereby
further amended by adding the following new Section 13.5 thereto in the correct
numerical sequence:
"13.5. Minimum Consolidated EBITDA. The Borrower will not
permit Consolidated EBITDA, determined at the end of each fiscal
quarter set forth in the table below for the period of the two fiscal
quarters ended on such date (other than for the fiscal quarter ending
on December 31, 1998, in which case Consolidated EBITDA shall be
determined for the one fiscal quarter ending on such date), to be less
than the amount set forth opposite such fiscal quarter in such table:
Fiscal Quarter Ending Minimum EBITDA
12/31/98 $28,000,000
3/31/99 $56,500,000
6/30/99 and 9/30/99 $57,500,000
12/31/99 and for each fiscal quarter ending $56,500,000"
thereafter
ss.1.22 Capital Expenditures. The Credit Agreement is hereby further
amended by adding the following new Section 13.6 thereto in the correct
numerical sequence:
"13.6. Capital Expenditures. The Borrower will not make, and
will not permit its Subsidiaries to make, any Capital Expenditures
other than (a) during fiscal year 1998, Capital Expenditures in an
aggregate amount not to exceed the amount set forth in the Arthur
Anderson LLP Earnings Model for the Borrower dated October 26, 1998 and
delivered to the Banks, (b) commencing with fiscal year 1999 and for
each fiscal year thereafter, Existing Fleet Capital Expenditures in an
aggregate amount not to exceed in any one fiscal year $40,000,000 (net
of Existing Fleet Capital Expenditures which are made with insurance
proceeds received by the Borrower or its Subsidiaries from a casualty
or loss), and (c) during any fiscal year set forth in the table below,
Investment Capital Expenditures in an aggregate amount not to exceed
the amount set forth opposite such fiscal year in such table:
Fiscal Year Maximum Investment
Capital Expenditures
1999 $30,000,000
2000 and each
fiscal year ending thereafter $10,000,000"
ss.1.23 Consents, Amendments, Waivers, Etc. Section 29 of the Credit
Agreement is hereby amended by (i) deleting the following text from such
Section: "the rate of interest on the Notes (other than interest accruing
pursuant to ss.8.9.2 following the effective date of any waiver by the Required
Banks of the Default or Event of Default relating thereto),", (ii) deleting the
following text from such Section ", and the amount of commitment fee or Letter
of Credit Fees", and (iii) substituting the following new text immediately after
the word "changed" occurring in the sixteenth line thereof: ", and the rate of
interest on the Notes (other than interest accruing pursuant to ss.8.9.2
following the effective date of any waiver by the Required Banks of the Default
or Event of Default relating thereto) and the amount of commitment fee or Letter
of Credit fees hereunder may not be reduced,".
ss.1.24 Schedules. The Credit Agreement is hereby further amended by
(i) adding Schedule 9(a), Schedule 9(b) and Schedule 12.5.1 hereto as Schedules
to the Credit Agreement and (ii) deleting Schedule 10.18, Schedule 10.19 and
Schedule 12.3 to the Credit Agreement and substituting in lieu thereof,
respectively, revised Schedule 10.18, Schedule 10.19 and Schedule 12.3 hereto.
ss.2. Representations and Warranties. The Borrower and each of the
Guarantors represent and warrant to the Banks and the Agents as follows:
(a) Representations and Warranties in Credit Agreement. The
representations and warranties of the Borrower and each of the Guarantors
contained in the Credit Agreement, as amended hereby, (a) were true and correct
in all material respects when made, and (b) except to the extent such
representations and warranties by their terms are made solely as of a prior
date, continue to be true and correct in all material respects on the date
hereof.
(b) Authority, Etc. The execution and delivery by the Borrower and each
of the Guarantors of this Amendment and the performance by the Borrower and each
of the Guarantors of all of their agreements and obligations under this
Amendment and the Credit Agreement as amended hereby (i) are within the
corporate or limited partnership, as the case may be, authority of the Borrower
and each of the Guarantors, (ii) have been duly authorized by all necessary
corporate or limited partnership proceedings or actions, as the case may be, by
the Borrower and each of the Guarantors, (iii) do not conflict with or result in
any breach or contravention of any provision of law, statute, rule or regulation
to which the Borrower or any of the Guarantors is subject or any judgment,
order, writ, injunction, license or permit applicable to the Borrower or any of
the Guarantors, and (iv) do not conflict with any provision of the corporate
charter, by-laws or partnership agreement of, or any agreement or other
instrument binding upon, the Borrower or any of the Guarantors.
(c) Enforceability of Obligations. This Amendment, and the Credit
Agreement as amended hereby, and the other Loan Documents constitute the legal,
valid and binding obligations of the Borrower and each of the Guarantors
enforceable against each such Person in accordance with their respective terms.
After giving effect to this Amendment, no Default or Event of Default exists
under the Credit Agreement.
ss.3. Affirmation of Borrower and the Guarantors.
(a) The Borrower hereby affirms its absolute and unconditional promise
to pay to each Bank and the Agents the Obligations under the Notes and the
Credit Agreement as amended hereby, at the times and in the amounts provided for
therein.
(b) Each of the Guarantors hereby acknowledges that it has read and is
aware of the provisions of this Amendment. Each of the Guarantors hereby
reaffirms its absolute and unconditional guaranty of the Borrower's payment and
performance of the Obligations under the Credit Agreement as amended hereby.
ss.4. Conditions to Effectiveness. This Amendment shall be effective as of
the date hereof upon the satisfaction of the following conditions precedent, on
or before November 13, 1998 (each of the following to be in form and substance
satisfactory to the Agents):
(i) receipt by the Agents of an original counterpart signature to this
Amendment, duly executed and delivered by the Borrower, each of the Guarantors,
the Banks and the Agents;
(ii) receipt by the Agents of original copies of (a) a Guaranty, (b) a
Security Agreement, (c) a Perfection Certificate, and (d) UCC financing
statements from each of the Subsidiaries of the Borrower listed on Annex A
hereto (the "Additional Guarantors");
(iii) receipt by the Documentation Agent of a fully executed mortgage
on each of the Vessels listed on Annex B hereto;
(iv) receipt by the Documentation Agent of certificates representing
one hundred percent (100%) (or, in the case of non-wholly-owned Subsidiaries,
such lower percentage as is owned by the Borrower and its Subsidiaries) of the
capital stock or other equity interests of each of the Persons listed on Annex C
hereto, together with stock transfer powers or other appropriate transfer powers
for each of such certificates, duly executed in blank;
(v) receipt by the Documentation Agent of a Stock Pledge Agreement
executed by each pledgor and pledgee of the capital stock and other equity
interests listed on Annex C hereto;
(vi) receipt by the Documentation Agent of amendments to the existing
Security Agreements, executed by the Borrower and the Guarantors (other than the
Additional Guarantors), together with UCC-3 financing statements relating to the
existing financing statements on file against such Persons in favor of the
Documentation Agent, such amendments and financing statements to grant and
perfect a security interest in favor of the Documentation Agent, for the benefit
of the Banks and the Agents, in substantially all of the assets of the Borrower
and each such Guarantor;
(vii) receipt by the Documentation Agent of appropriate corporate or
limited partnership authority documentation for the Borrower and each of the
Guarantors, including copies (to the extent not already furnished to the
Documentation Agent) of each such Person's organizational documents, bylaws, if
any, and resolutions authorizing the transactions contemplated by this
Amendment;
(viii) receipt by the Agents of one or more legal opinions from United
States counsel to the Borrower and the Guarantors covering the authorization,
execution, delivery and enforceability of this Amendment;
(ix) receipt by the Administrative Agent, for the pro rata account of
each Bank, of an amendment fee in an amount for each such Bank equal to
one-eighth of one percent (0.125%) of such Bank's Total Commitment;
(x) receipt by the Agents of a fully-executed copy of the letter
agreement (the "Letter Agreement") to be entered into among the Borrower and the
Agents and receipt by the Agents, for their own account, of the fees payable
pursuant to the Letter Agreement; and
(xi) payment by the Borrower of the legal, appraisal, and out-of-pocket
fees and expenses of the Agents incurred in connection with the preparation and
negotiation of this Amendment, and the Agents' collateral appraisal of the
Borrower and its Subsidiaries, in each case, to the extent that invoices for the
same have been presented to the Borrower.
ss.5. Covenants of the Borrower and the Guarantors. As an inducement to
the Banks and the Agents to enter into this Amendment, each of the Borrower and
the Guarantors hereby covenants and agrees that they shall, on or before
November 30, 1998, (i) deliver to the Agents appraisals of each of the Vessels
listed on Annex B hereto, (ii) take all such steps and execute all such
documents as the Agents shall request in order to grant to the Documentation
Agent, for the benefit of the Banks and the Agents, a perfected first-priority
mortgage on each of the Vessels listed on Annex B hereto such that the
Documentation Agent shall have a perfected, first-priority mortgage on Vessels
with a fair market value (as determined pursuant to appraisals as shall be in
form and substance satisfactory to the Agents) of not less than $600,000,000,
and (iii) to the extent not already delivered pursuant to Section 4(viii) above,
deliver to the Agents one or more legal opinions from counsel to the Agents or
the Borrower and the Guarantors covering the transactions contemplated by this
Amendment, including, with respect to the perfection of the Documentation
Agent's security interest in the additional Collateral to be granted pursuant to
Section 4 and this Section 5. In addition, the Borrower covenants and agrees
that it shall comply with the provisions of the Letter Agreement. In addition,
the Borrower agrees that it shall, on or before November 30, 1998, deliver all
of the documents and instruments set forth on Annex D hereto (the Banks hereby
agreeing that this Amendment shall be effective as of the date hereof pursuant
to Section 4 hereof notwithstanding that such items have not been delivered by
November 13, 1998). The Borrower and the Guarantors agree that the failure to
perform or observe the covenants set forth in this Section 5 shall constitute a
Default and an Event of Default under the Credit Agreement.
ss.6. Miscellaneous Provisions. (a) Except as otherwise expressly
provided by this Amendment, all of the terms, conditions and provisions of the
Credit Agreement shall remain the same. It is declared and agreed by each of the
parties hereto that the Credit Agreement, as amended hereby, shall continue in
full force and effect, and that this Amendment and the Credit Agreement shall be
read and construed as one instrument.
(b) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED ACCORDING TO,
THE LAWS OF THE STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW).
(c) This Amendment may be executed in any number of counterparts, but
all such counterparts shall together constitute but one instrument. In making
proof of this Amendment it shall not be necessary to produce or account for more
than one counterpart signed by each party hereto by and against which
enforcement hereof is sought.
(d) Headings or captions used in this Amendment are for convenience of
reference only and shall not define or limit the provisions hereof.
(e) The Borrower hereby agrees to pay to the Agents, on demand by the
Agents, all reasonable out-of-pocket costs and expenses incurred or sustained by
the Agents in connection with the preparation of this Amendment (including
reasonable legal fees and expenses).
[Remainder of Page Intentionally Lefe Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
HVIDE MARINE INCORPORATED
By:
Title:
SEABULK TRANSMARINE
PARTNERSHIP, LTD., as
Guarantor By its general
partner Seabulk Tankers,
Ltd. By its general partner
Hvide Marine
Transport, Incorporated
By:
Title:
SEABULK OFFSHORE, LTD., as Guarantor
By its general partner Seabulk Tankers, Ltd.
By its general partner Hvide Marine Transport, Incorporated
By:
Title:
HVIDE MARINE TRANSPORT, INCORPORATED, as Guarantor
By:
Title:
<PAGE>
SEABULK TANKERS, LTD., as Guarantor
By its general partner Hvide Marine Transport, Incorporated
By:
Title:
SEABULK OFFSHORE HOLDINGS, INC., as Guarantor
By:
Title:
SEABULK OFFSHORE INTERNATIONAL, INC., as Guarantor
By:
Title:
SEABULK OCEAN SYSTEMS CORPORATION, as Guarantor
By:
Title:
SUN STATE MARINE SERVICES, INC., as Guarantor
By:
Title:
<PAGE>
CITIBANK, N.A., individually and as Administrative Agent
By:
Title:
BANKBOSTON, N.A., individually and as Documentation Agent
By:
Title:
BNY FINANCIAL CORPORATION
By:
Title:
HIBERNIA NATIONAL BANK
By:
Title:
AMSOUTH BANK
By:
Title:
<PAGE>
FIRST NATIONAL BANK OF COMMERCE
By:
Title:
UNION BANK OF CALIFORNIA, N.A.
By:
Title:
ABN AMRO BANK, N.V.
By:
Title:
By:
Title:
ARAB BANKING CORPORATION (B.S.C.)
By:
Title:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH
By:
Title:
By:
Title:
<PAGE>
FIRST UNION NATIONAL BANK
By:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:
Title:
SOUTHTRUST BANK, NATIONAL ASSOCIATION
By:
Title:
SUNTRUST BANK, SOUTH FLORIDA, N.A.
By:
Title:
UNION PLANTERS BANK OF FLORIDA
By:
Title:
<PAGE>
Each of the undersigned Guarantors hereby consents to the
above Amendment and confirms its unconditional guaranty of the Obligations under
the Credit Agreement, as amended hereby.
HVIDE MARINE TOWING, INC.
HVIDE MARINE TOWING
SERVICES,INC.
SEABULK CONDOR, INC.
SEABULK CORMORANT, INC.
SEABULK CARDINAL, INC.
SEABULK COOT II, INC.
SEABULK CYGNET I, INC.
SEABULK EAGLE II, INC.
SEABULK FALCON II, INC.
SEABULK GANNET I, INC.
SEABULK GANNET II, INC.
SEABULK HARRIER, INC.
SEABULK HAWAII, INC.
SEABULK KESTREL, INC.
SEABULK LARK, INC.
SEABULK MALLARD, INC.
SEABULK OFFSHORE GLOBAL
HOLDINGS, INC.
SEABULK OFFSHORE OPERATORS,
INC.
SEABULK OREGON, INC.
SEABULK OSPREY, INC.
SEABULK PENGUIN I, INC.
SEABULK PENGUIN II, INC.
SEABULK RAVEN, INC.
SEABULK ROOSTER, INC.
SEABULK SABINE, INC.
SEABULK SNIPE, INC.
SEABULK SWAN, INC.
SEABULK TOUCAN, INC.
SEABULK VERITAS, INC.
HMI OPERATORS, INC.
HVIDE MARINE INTERNATIONAL,
INC.
LONESTAR MARINE SERVICES,
INC.
OFFSHORE MARINE MANAGEMENT
INTERNATIONAL, INC.
SEABULK ALBANY, INC.
SEABULK ALKATAR, INC.
SEABULK ARABIAN, INC.
SEABULK ARZANAH, INC.
SEABULK ARCTIC EXPRESS, INC.
SEABULK ARIES II, INC.
SEABULK BARRACUDA, INC.
SEABULK BATON ROUGE, INC.
SEABULK BECKY, INC.
SEABULK BRAVO, INC.
SEABULK BUL HANIN, INC.
SEABULK CAMERON, INC.
SEABULK CAPRICORN, INC.
SEABULK CAROL, INC.
SEABULK CAROLYN, INC.
SEABULK CHAMP, INC.
SEABULK CLAIBORNE, INC.
SEABULK CLIPPER, INC.
SEABULK COMMAND, INC.
SEABULK CONSTRUCTOR, INC.
SEABULK COOT I, INC.
SEABULK CYGNET II, INC.
SEABULK DANAH, INC.
SEABULK DAYNA, INC.
SEABULK DEBBIE, INC.
SEABULK DEBORA ANN, INC.
SEABULK DEFENDER, INC.
SEABULK DIANA, INC.
SEABULK DISCOVERY, INC.
SEABULK DUKE, INC.
SEABULK EAGLE, INC.
SEABULK EMERALD, INC.
SEABULK ENERGY, INC.
SEABULK EXPLORER, INC.
SEABULK FALCON, INC.
SEABULK FREEDOM, INC.
SEABULK FULMAR, INC.
SEABULK GABRIELLE, INC.
SEABULK GAZELLE, INC.
SEABULK GIANT, INC.
SEABULK GREBE, INC.
SEABULK HABARA, INC.
SEABULK HAMOUR, INC.
SEABULK HATTA, INC.
SEABULK HAWK, INC.
SEABULK HERCULES, INC.
SEABULK HERON, INC.
SEABULK HORIZON, INC.
SEABULK HOUBARE, INC.
SEABULK IBEX, INC.
SEABULK ISABELLE, INC.
SEABULK JASPER, INC.
SEABULK JEBEL ALI, INC.
SEABULK KATIE, INC.
SEABULK KING, INC.
SEABULK KNIGHT, INC.
SEABULK LAKE EXPRESS, INC.
SEABULK LARA, INC.
SEABULK LINCOLN, INC.
SEABULK LULU, INC.
SEABULK MAINTAINER, INC.
SEABULK MARLENE, INC.
SEABULK MARTIN I, INC.
SEABULK MARTIN II, INC.
SEABULK MERLIN, INC.
SEABULK MUBARRAK, INC.
SEABULK NEPTUNE, INC.
SEABULK NIDDY, INC.
SEABULK OCEAN SYSTEMS
HOLDINGS CORPORATION
SEABULK OFFSHORE ABU DHABI,INC.
SEABULK OFFSHORE DUBAI, INC.
SEABULK ORYX, INC.
SEABULK PELICAN, INC.
SEABULK PENNY, INC.
SEABULK PERSISTENCE, INC.
SEABULK PETREL, INC.
SEABULK PLOVER, INC.
SEABULK POWER, INC.
SEABULK PRIDE, INC.
SEABULK PRINCE, INC.
SEABULK PRINCESS, INC.
SEABULK PUFFIN, INC.
SEABULK QUEEN, INC.
SEABULK SALIHU, INC.
SEABULK SAPPHIRE, INC.
SEABULK SARA, INC.
SEABULK SEAHORSE, INC.
SEABULK SENGALI, INC.
SEABULK SERVICE, INC.
SEABULK SHARI, INC.
SEABULK SHINDAGA, INC.
SEABULK SKUA I, INC.
SEABULK ST. TAMMANY, INC.
SEABULK SUHAIL, INC.
SEABULK SWIFT, INC.
SEABULK TAURUS, INC.
SEABULK TENDER, INC.
SEABULK TIMS I, INC.
SEABULK TITAN, INC.
SEABULK TOOTA, INC.
SEABULK TRADER, INC.
SEABULK TRANSMARINE II, INC.
SEABULK TREASURE ISLAND, INC.
SEABULK UMM SHAIF, INC.
SEABULK VIRGO I, INC.
SEABULK VOYAGER, INC.
SEABULK ZAKUM, INC.
SEAMARK LTD., INC.
By: __________________________
Name: Eugene F. Sweeney
Title: Executive Vice President
SEABULK OFFSHORE OPERATORS
NIGERIA LIMITED
SEABULK OFFSHORE U.K., LTD.
By: __________________________
Name: Eugene F. Sweeney
Title: Director
OCEAN SPECIALTY TANKERS
CORP.
By: __________________________
Name: James Talmage
Title: Vice President
SEABULK OFFSHORE S.A.
By: __________________________
Name: Peter Nielsen
Title: Administrator
LIGHTSHIP LIMITED PARTNER
HOLDINGS, LLC
By:
Name:
Title:
LIGHTSHIP TANKER HOLDINGS,
LLC
By:
Name:
Title:
SEABULK OFFSHORE LIMITED
By:
Name:
Title:
SEABULK OFFSHORE OPERATORS
TRINIDAD LIMITED
By:
Name:
Title:
<PAGE>
SEABULK RED TERN LIMITED
By:
Name:
Title:
Hvide Marine Incorporated
Indemnification Agreement
This Indemnification Agreement, dated as of October 22 , 1998, is entered
into by and between Hvide Marine Incorporated, a Florida corporation (the
"Corporation"), and J. Erik Hvide (the "Indemnitee").
W I T N E S S E T H:
WHEREAS, the Corporation and the Indemnitee have been contacted in
connection with a potential proceeding (the "Proceeding");
WHEREAS, the Indemnitee believes that the indemnity provisions of the
Corporation's Articles of Incorporation might not themselves provide sufficient
protection against personal liability, if any, that may arise out of the
Proceeding as a result of his service on behalf of the Corporation;
WHEREAS, as an inducement for the Indemnitee's continued service as a
director and officer of the Corporation, the Corporation desires to hold
harmless and indemnify the Indemnitee and to make arrangements by which the
Indemnitee may be advanced or reimbursed expenses incurred by him in connection
with the Proceeding, all to the fullest extent permitted by the Florida Business
Corporation Act and other applicable law;
NOW, THEREFORE, for and in consideration of the premises and agreements
contained herein, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Corporation and the Indemnitee
agree as follows:
Section 1. Mandatory Indemnification. Subject to the provisions of
Section 3, the Corporation shall indemnify and hold harmless the Indemnitee from
and against any and all claims, damages, expenses (including attorneys' fees),
judgments, penalties, fines (including excise taxes assessed with respect to
employee benefit plans), settlements, and all other liabilities incurred or paid
by him in connection with the Proceeding, defense, prosecution, settlement
and/or appeal of the Proceeding or any action, suit or proceeding arising out of
the Proceeding, whether civil, criminal, administrative or investigative, and to
which the Indemnitee was or is a party, or is threatened to be made a party, by
reason of the fact that the Indemnitee is or was an officer, director or
employee of the Corporation or is or was serving at the request of the
Corporation as an officer, director, partner, trustee, employee, adviser or
agent of another corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan or other enterprise, or by reason of
anything done or not done by the Indemnitee in any such capacity or capacities,
provided that the Indemnitee shall, with respect to the conduct subject to the
cause of action, have 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 (i) with
respect to any action by or in the right of the Corporation, the Indemnitee's
conduct shall not have been adjudged to have been material to the cause of
action adjudicated and to have constituted willful misconduct or conscious
disregard for the best interests of the Corporation and (ii) with
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<PAGE>
respect to any criminal action or proceeding, the Indemnitee shall have had no
reasonable cause to believe his conduct was unlawful.
Section 2. Indemnification of Expenses Incurred While Testifying. The
Corporation shall indemnify the Indemnitee against reasonable expenses,
including attorneys' fees, incurred or paid by the Indemnitee as a result of
providing testimony in any proceeding arising out of the Proceeding, whether
civil, criminal, administrative or investigative, including any action or suit
by or in the right of the Corporation, by reason of the fact that the Indemnitee
is or was a director, officer or employee of the Corporation, or is or was
serving at the request of the Corporation as an officer, director, partner,
trustee, employee, adviser or agent of another corporation, partnership, limited
liability company, joint venture, trust, employee benefit plan or other
enterprise.
Section 3. Authorization of Indemnification. (a) Any indemnification
under Section 1, 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 or reimbursement of the Indemnitee is proper in the
circumstances because the Indemnitee has met the applicable standards of conduct
set forth in Section 1 and that the amount thereof is reasonable (the
"Determination") made:
(i) by the Corporation's Board of Directors (the "Board") by
majority vote or consent of a quorum consisting of directors who are
not, at the time of the Determination, named parties to the proceeding
that is the subject of the Determination ("Disinterested Directors");
(ii) by majority vote or consent of a committee duly
designated by the Board (in which designation directors who are not
Disinterested Directors may participate) consisting solely of two or
more Disinterested Directors;
(iii) by independent legal counsel selected by the Board
pursuant to a majority vote as described in subparagraph (i), by the
committee described in subparagraph (ii), or, if the quorum
contemplated by subparagraph (i) cannot be obtained and the committee
cannot be designated, by a majority vote of the full Board in which
directors who are not Disinterested Directors may participate; or
(iv) by the Corporation's shareholders by a vote or consent of
a majority of a quorum consisting of shareholders who are not, at the
time of the Determination, parties to the proceeding subject to the
Determination or, if no such quorum is obtainable, by a majority vote
of shareholders who are not parties to such proceeding.
(b) The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the Indemnitee did
not act in good faith and in a manner that he reasonably believed to be in or
not opposed to the best interests of the
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<PAGE>
Corporation or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(c) The Indemnitee's conduct with respect to an employee benefit plan
for a purpose he reasonably believed to be in the interests of the participants
in and beneficiaries of the plan shall be deemed to be conduct that the
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation.
(d) For purposes of any Determination hereunder, the Indemnitee shall
be deemed to have acted in good faith and in a manner 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, to have had no reasonable cause to believe
his conduct was unlawful, if his action is based upon (i) the records or books
of account of the Corporation or another enterprise, including financial
statements, (ii) information supplied to him by the officers of the Corporation
or another enterprise in the course of their duties, (iii) the advice of legal
counsel for the Corporation or another enterprise, or (iv) information or
records given or reports made to the Corporation or another enterprise by an
independent certified public accountant or by an appraiser or other expert
selected with reasonable care by the Corporation or another enterprise. The term
"another enterprise" as used in this paragraph shall mean any other corporation
or any partnership, limited liability company, joint venture, trust, employee
benefit plan or other enterprise of which the Indemnitee is or was serving at
the request of the Corporation as an officer, director, partner, trustee,
employee, adviser or agent. The provisions of this paragraph shall not be deemed
to be exclusive or to limit the circumstances in which the Indemnitee may be
deemed to have met the applicable standard of conduct set forth in Section 1.
(e) Notwithstanding any other provision of this Agreement, to the
extent that the Indemnitee has been successful on the merits or otherwise in
defense of any action, suit or proceeding described in Section 1, or in defense
of any claim, issue or matter referred to therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the Proceeding, defense, settlement or appeal thereof.
For purposes of this paragraph, the term "successful on the merits or otherwise"
shall include (i) any termination, withdrawal, or dismissal (with or without
prejudice) of any claim, action, suit or proceeding against the Indemnitee
without any express finding of liability or guilt against him, (ii) the
expiration of 120 days after the making of any claim or threat of an action,
suit or proceeding without the institution of the same and without any promise
or payment made to induce a settlement, and (iii) the settlement of any action,
suit or proceeding described in Section 1 pursuant to which the Indemnitee pays
less than $25,000.
(f) If the Indemnitee is entitled under any provision of this Agreement
to indemnification or reimbursement by the Corporation for only a portion of the
claims, damages, expenses, judgments, penalties, fines or amounts paid in
settlement by the Indemnitee in connection with the Proceeding, defense,
settlement or appeal of, or testimony provided with respect to, any action
specified in Sections 1 or 2, the Corporation shall indemnify or reimburse the
Indemnitee for the portion thereof to which
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<PAGE>
the Indemnitee is entitled. The party or parties making the Determination shall
determine the portion (if less than all) of such claims, damages, expenses,
judgments, penalties, fines or amounts paid in settlement for which the
Indemnitee is entitled to indemnification or reimbursement under this Agreement.
Section 4. Procedures for Making Determination. (a) All costs of making the
Determination required by Section 3 shall be borne by the Corporation.
(b) The Corporation shall use its best efforts to make the
Determination contemplated by Section 3 promptly and in any event:
(i) if the Determination is to be made by the Board or a
committee thereof or by independent legal counsel, not later than 30
days after delivery of a written request therefor to the Corporation by
the Indemnitee;
(ii) if the Determination is to be made by the shareholders of
the Corporation, not later than 120 days after delivery of such
request.
The failure to make a Determination, either favorable or adverse, within such
time period shall constitute a Determination approving full indemnification or
reimbursement of the Indemnitee except, in the case of an action by or in the
right of the Corporation, to the extent that such indemnification or
reimbursement is inconsistent with an adjudication that the Indemnitee's conduct
was material to the cause of action adjudicated and constituted willful
misconduct or conscious disregard for the best interests of the Corporation.
(c) Immediately following a Determination that the Indemnitee is
entitled to indemnification or reimbursement, or the passage of time prescribed
in paragraph (b) for making such Determination, the Corporation shall pay to the
Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified or reimbursed without further authorization or action by the Board;
provided, however, that such payment shall be made only to the extent that the
expenses for which indemnification or reimbursement is sought have been incurred
by the Indemnitee.
(d) If the Determination is to be made by independent legal counsel,
such counsel shall, at the option of the Indemnitee, be selected by the
Indemnitee with the approval of the Board, which approval shall not be
unreasonably withheld and which shall be deemed a selection by the Board within
the meaning of clause (iii) of paragraph (a) of Section 3.
(e) In the event of a Determination that the Indemnitee did not meet
the applicable standards of conduct set forth in Section 1 or that the amount
for which indemnification or reimbursement is sought is not reasonable, the
Corporation shall, upon the written request of the Indemnitee, cause a new
Determination to be made by the Corporation's shareholders at the next regular
or special meeting of shareholders.
(f) If at any time a majority of the Board is not comprised of persons
who are members of the Board at the date of this Agreement or who were nominated
to serve on
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<PAGE>
the Board by a majority of such members ("Continuing Directors"), or there is
otherwise a change in control of the Corporation, the Corporation shall, upon
the request of the Indemnitee, cause the Determination required by Section 3 to
be made by independent legal counsel or by a majority vote or consent of a
committee of the Board consisting solely of Continuing Directors.
(g) The Corporation shall afford to the Indemnitee and his
representatives full opportunity to present evidence of the facts upon which the
Indemnitee relies for indemnification or reimbursement, together with other
information relating to any requested Determination. The Corporation shall also
afford the Indemnitee the reasonable opportunity to include such evidence and
information in any proxy statement of the Corporation relating to a
Determination by the shareholders of the Corporation.
Section 5. Exclusion from Right to Indemnification. Notwithstanding any
other provision of this Agreement, no indemnification or reimbursement shall be
made by the Corporation with respect to any claim against the Indemnitee under
Section 16(b) of the Securities Exchange Act of 1934, as amended, or any claim
as to which indemnification is held to be unlawful or against public policy.
Section 6. Advance of Expenses. (a) Expenses, including attorneys'
fees, incurred by the Indemnitee in investigating, defending, settling, or
appealing, or providing testimony in, any action, suit or proceeding described
in Sections 1 or 2 (including, without limitation, a suit or proceeding seeking
to require the Corporation to advance expenses to the Indemnitee pursuant to
this Agreement) shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding. The Corporation shall promptly
pay the amount of such expenses to the Indemnitee, in no event later than 10
days following the Indemnitee's delivery to the Corporation of a written request
for an advance, together with a reasonable accounting of such expenses.
(b) The Indemnitee hereby undertakes and agrees to repay to the
Corporation any advances made pursuant to this Section if and to the extent that
it shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Corporation for such amounts.
Section 7. Nondisclosure of Payments. Except as expressly required by
the federal securities or other applicable laws, neither party shall disclose
any payments under this Agreement without the prior approval of the other. Any
payments to the Indemnitee required to be disclosed shall, unless otherwise
required by law, be described only in proxy or information statements relating
to special and/or annual meetings of the Corporation's shareholders, and the
Corporation shall afford the Indemnitee the reasonable opportunity to review all
such disclosures and, if requested, to explain in such statement any mitigating
circumstances regarding the events reported.
Section 8. Miscellaneous. (a) All notices and other communications
pertaining to this Agreement shall be in writing and shall be deemed to have
been duly given upon the receipt thereof. Such notices shall be delivered by
hand or facsimile transmission, or
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<PAGE>
mailed, certified or registered mail with postage prepaid, or sent by overnight
courier or delivery service, to the Indemnitee at the address set forth
following the Indemnitee's signature hereto and to the Corporation at:
2200 Eller Drive
P.O. Box 13038
Ft. Lauderdale, FL 33316
Attention: General Counsel
Facsimile: (954) 527-1772
or to such other address as shall be furnished to the other party in writing.
(b) This Agreement constitutes the entire understanding of the parties
and supersedes all prior understandings, whether written or oral, between the
parties with respect to the subject matter of this Agreement.
(c) The rights of indemnification and reimbursement provided in this
Agreement shall be in addition to any rights to which the Indemnitee may
otherwise be entitled under the Corporation's Articles of Incorporation or
By-laws or any statute, agreement, vote of shareholders, or otherwise.
(d) In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and such
provision shall be ineffective only to the extent of such invalidity, illegality
or unenforceability. The parties shall endeavor in good faith to replace the
invalid, illegal or unenforceable provision with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provision.
(e) The Corporation shall cooperate in good faith with the Indemnitee
and use its best efforts to ensure that the Indemnitee is indemnified or
reimbursed for liabilities described herein to the fullest extent permitted by
law.
(f) This Agreement shall be governed by and construed under the laws of
the State of Florida regardless of laws that might otherwise govern under
applicable principles of conflict of laws.
(g) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement in writing between the
parties hereto.
(h) The obligations of the Corporation to the Indemnitee hereunder
shall survive and continue as to the Indemnitee although the Indemnitee may
cease to be a director or officer of the Corporation. Each and all of the
covenants, terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Corporation and, upon
the death or incapacity of the Indemnitee, to the benefit of his estate, heirs,
executors, administrators and personal representatives.
-6-
<PAGE>
(i) The provisions of this Agreement shall apply to claims, actions,
suits and proceedings whether now pending or hereafter commenced and shall be
retroactive to apply to acts or omissions that have occurred prior to the
execution of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
HVIDE MARINE INCORPORATED
By:
INDEMNITEE:
Name: J. Erik Hvide
Address:
Facsimile:
-7-
Hvide Marine Incorporated
Indemnification Agreement
This Indemnification Agreement, dated as of October 30 , 1998, is
entered into by and between Hvide Marine Incorporated, a Florida corporation
(the "Corporation"), and Hans J. Hvide (the "Indemnitee").
W I T N E S S E T H:
WHEREAS, the Corporation and the Indemnitee have been contacted in
connection with a potential proceeding (the "Proceeding");
WHEREAS, the Indemnitee believes that the indemnity provisions of the
Corporation's Articles of Incorporation might not themselves provide sufficient
protection against personal liability, if any, that may arise out of the
Proceeding as a result of his service on behalf of the Corporation;
WHEREAS, the Corporation desires to hold harmless and indemnify the
Indemnitee and to make arrangements by which the Indemnitee may be advanced or
reimbursed expenses incurred by him in connection with the Proceeding, all to
the fullest extent permitted by the Florida Business Corporation Act and other
applicable law;
NOW, THEREFORE, for and in consideration of the premises and agreements
contained herein, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Corporation and the Indemnitee
agree as follows:
Section 1. Mandatory Indemnification. Subject to the provisions of
Section 3, the Corporation shall indemnify and hold harmless the Indemnitee from
and against any and all claims, damages, expenses (including attorneys' fees),
judgments, penalties, fines (including excise taxes assessed with respect to
employee benefit plans), settlements, and all other liabilities incurred or paid
by him in connection with the Proceeding, defense, prosecution, settlement
and/or appeal of the Proceeding or any action, suit or proceeding arising out of
the Proceeding, whether civil, criminal, administrative or investigative, and to
which the Indemnitee was or is a party, or is threatened to be made a party, by
reason of the fact that the Indemnitee is or was an officer, director or
employee of the Corporation or is or was serving at the request of the
Corporation as an officer, director, partner, trustee, employee, adviser or
agent of another corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan or other enterprise, or by reason of
anything done or not done by the Indemnitee in any such capacity or capacities,
provided that the Indemnitee shall, with respect to the conduct subject to the
cause of action, have 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 (i) with
respect to any action by or in the right of the Corporation, the Indemnitee's
conduct shall not have been adjudged to have been material to the cause of
action adjudicated and to have constituted willful misconduct or conscious
disregard for the best interests of the Corporation and (ii) with
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<PAGE>
respect to any criminal action or proceeding, the Indemnitee shall have had no
reasonable cause to believe his conduct was unlawful.
Section 2. Indemnification of Expenses Incurred While Testifying. The
Corporation shall indemnify the Indemnitee against reasonable expenses,
including attorneys' fees, incurred or paid by the Indemnitee as a result of
providing testimony in any proceeding arising out of the Proceeding, whether
civil, criminal, administrative or investigative, including any action or suit
by or in the right of the Corporation, by reason of the fact that the Indemnitee
is or was a director, officer or employee of the Corporation, or is or was
serving at the request of the Corporation as an officer, director, partner,
trustee, employee, adviser or agent of another corporation, partnership, limited
liability company, joint venture, trust, employee benefit plan or other
enterprise.
Section 3. Authorization of Indemnification. (a) Any indemnification
under Section 1, 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 or reimbursement of the Indemnitee is proper in the
circumstances because the Indemnitee has met the applicable standards of conduct
set forth in Section 1 and that the amount thereof is reasonable (the
"Determination") made:
(i) by the Corporation's Board of Directors (the "Board") by
majority vote or consent of a quorum consisting of directors who are
not, at the time of the Determination, named parties to the proceeding
that is the subject of the Determination ("Disinterested Directors");
(ii) by majority vote or consent of a committee duly
designated by the Board (in which designation directors who are not
Disinterested Directors may participate) consisting solely of two or
more Disinterested Directors;
(iii) by independent legal counsel selected by the Board
pursuant to a majority vote as described in subparagraph (i), by the
committee described in subparagraph (ii), or, if the quorum
contemplated by subparagraph (i) cannot be obtained and the committee
cannot be designated, by a majority vote of the full Board in which
directors who are not Disinterested Directors may participate; or
(iv) by the Corporation's shareholders by a vote or consent of
a majority of a quorum consisting of shareholders who are not, at the
time of the Determination, parties to the proceeding subject to the
Determination or, if no such quorum is obtainable, by a majority vote
of shareholders who are not parties to such proceeding.
(b) The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the Indemnitee did
not act in good faith and in a manner that he reasonably believed to be in or
not opposed to the best interests of the
-2-
<PAGE>
Corporation or, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(c) The Indemnitee's conduct with respect to an employee benefit plan
for a purpose he reasonably believed to be in the interests of the participants
in and beneficiaries of the plan shall be deemed to be conduct that the
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation.
(d) For purposes of any Determination hereunder, the Indemnitee shall
be deemed to have acted in good faith and in a manner 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, to have had no reasonable cause to believe
his conduct was unlawful, if his action is based upon (i) the records or books
of account of the Corporation or another enterprise, including financial
statements, (ii) information supplied to him by the officers of the Corporation
or another enterprise in the course of their duties, (iii) the advice of legal
counsel for the Corporation or another enterprise, or (iv) information or
records given or reports made to the Corporation or another enterprise by an
independent certified public accountant or by an appraiser or other expert
selected with reasonable care by the Corporation or another enterprise. The term
"another enterprise" as used in this paragraph shall mean any other corporation
or any partnership, limited liability company, joint venture, trust, employee
benefit plan or other enterprise of which the Indemnitee is or was serving at
the request of the Corporation as an officer, director, partner, trustee,
employee, adviser or agent. The provisions of this paragraph shall not be deemed
to be exclusive or to limit the circumstances in which the Indemnitee may be
deemed to have met the applicable standard of conduct set forth in Section 1.
(e) Notwithstanding any other provision of this Agreement, to the
extent that the Indemnitee has been successful on the merits or otherwise in
defense of any action, suit or proceeding described in Section 1, or in defense
of any claim, issue or matter referred to therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the Proceeding, defense, settlement or appeal thereof.
For purposes of this paragraph, the term "successful on the merits or otherwise"
shall include (i) any termination, withdrawal, or dismissal (with or without
prejudice) of any claim, action, suit or proceeding against the Indemnitee
without any express finding of liability or guilt against him, (ii) the
expiration of 120 days after the making of any claim or threat of an action,
suit or proceeding without the institution of the same and without any promise
or payment made to induce a settlement, and (iii) the settlement of any action,
suit or proceeding described in Section 1 pursuant to which the Indemnitee pays
less than $25,000.
(f) If the Indemnitee is entitled under any provision of this Agreement
to indemnification or reimbursement by the Corporation for only a portion of the
claims, damages, expenses, judgments, penalties, fines or amounts paid in
settlement by the Indemnitee in connection with the Proceeding, defense,
settlement or appeal of, or testimony provided with respect to, any action
specified in Sections 1 or 2, the Corporation shall indemnify or reimburse the
Indemnitee for the portion thereof to which
-3-
<PAGE>
the Indemnitee is entitled. The party or parties making the Determination shall
determine the portion (if less than all) of such claims, damages, expenses,
judgments, penalties, fines or amounts paid in settlement for which the
Indemnitee is entitled to indemnification or reimbursement under this Agreement.
Section 4. Procedures for Making Determination. (a) All costs of making the
Determination required by Section 3 shall be borne by the Corporation.
(b) The Corporation shall use its best efforts to make the
Determination contemplated by Section 3 promptly and in any event:
(i) if the Determination is to be made by the Board or a
committee thereof or by independent legal counsel, not later than 30
days after delivery of a written request therefor to the Corporation by
the Indemnitee;
(ii) if the Determination is to be made by the shareholders of
the Corporation, not later than 120 days after delivery of such
request.
The failure to make a Determination, either favorable or adverse, within such
time period shall constitute a Determination approving full indemnification or
reimbursement of the Indemnitee except, in the case of an action by or in the
right of the Corporation, to the extent that such indemnification or
reimbursement is inconsistent with an adjudication that the Indemnitee's conduct
was material to the cause of action adjudicated and constituted willful
misconduct or conscious disregard for the best interests of the Corporation.
(c) Immediately following a Determination that the Indemnitee is
entitled to indemnification or reimbursement, or the passage of time prescribed
in paragraph (b) for making such Determination, the Corporation shall pay to the
Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified or reimbursed without further authorization or action by the Board;
provided, however, that such payment shall be made only to the extent that the
expenses for which indemnification or reimbursement is sought have been incurred
by the Indemnitee.
(d) If the Determination is to be made by independent legal counsel,
such counsel shall, at the option of the Indemnitee, be selected by the
Indemnitee with the approval of the Board, which approval shall not be
unreasonably withheld and which shall be deemed a selection by the Board within
the meaning of clause (iii) of paragraph (a) of Section 3.
(e) In the event of a Determination that the Indemnitee did not meet
the applicable standards of conduct set forth in Section 1 or that the amount
for which indemnification or reimbursement is sought is not reasonable, the
Corporation shall, upon the written request of the Indemnitee, cause a new
Determination to be made by the Corporation's shareholders at the next regular
or special meeting of shareholders.
(f) If at any time a majority of the Board is not comprised of persons
who are members of the Board at the date of this Agreement or who were nominated
to serve on
-4-
<PAGE>
the Board by a majority of such members ("Continuing Directors"), or there is
otherwise a change in control of the Corporation, the Corporation shall, upon
the request of the Indemnitee, cause the Determination required by Section 3 to
be made by independent legal counsel or by a majority vote or consent of a
committee of the Board consisting solely of Continuing Directors.
(g) The Corporation shall afford to the Indemnitee and his
representatives full opportunity to present evidence of the facts upon which the
Indemnitee relies for indemnification or reimbursement, together with other
information relating to any requested Determination. The Corporation shall also
afford the Indemnitee the reasonable opportunity to include such evidence and
information in any proxy statement of the Corporation relating to a
Determination by the shareholders of the Corporation.
Section 5. Exclusion from Right to Indemnification. Notwithstanding any
other provision of this Agreement, no indemnification or reimbursement shall be
made by the Corporation with respect to any claim against the Indemnitee under
Section 16(b) of the Securities Exchange Act of 1934, as amended, or any claim
as to which indemnification is held to be unlawful or against public policy.
Section 6. Advance of Expenses. (a) Expenses, including attorneys'
fees, incurred by the Indemnitee in investigating, defending, settling, or
appealing, or providing testimony in, any action, suit or proceeding described
in Sections 1 or 2 (including, without limitation, a suit or proceeding seeking
to require the Corporation to advance expenses to the Indemnitee pursuant to
this Agreement) shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding. The Corporation shall promptly
pay the amount of such expenses to the Indemnitee, in no event later than 10
days following the Indemnitee's delivery to the Corporation of a written request
for an advance, together with a reasonable accounting of such expenses.
(b) The Indemnitee hereby undertakes and agrees to repay to the
Corporation any advances made pursuant to this Section if and to the extent that
it shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Corporation for such amounts.
Section 7. Nondisclosure of Payments. Except as expressly required by
the federal securities or other applicable laws, neither party shall disclose
any payments under this Agreement without the prior approval of the other. Any
payments to the Indemnitee required to be disclosed shall, unless otherwise
required by law, be described only in proxy or information statements relating
to special and/or annual meetings of the Corporation's shareholders, and the
Corporation shall afford the Indemnitee the reasonable opportunity to review all
such disclosures and, if requested, to explain in such statement any mitigating
circumstances regarding the events reported.
Section 8. Miscellaneous. (a) All notices and other communications
pertaining to this Agreement shall be in writing and shall be deemed to have
been duly given upon the receipt thereof. Such notices shall be delivered by
hand or facsimile transmission, or
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<PAGE>
mailed, certified or registered mail with postage prepaid, or sent by overnight
courier or delivery service, to the Indemnitee at the address set forth
following the Indemnitee's signature hereto and to the Corporation at:
2200 Eller Drive
P.O. Box 13038
Ft. Lauderdale, FL 33316
Attention: General Counsel
Facsimile: (954) 527-1772
or to such other address as shall be furnished to the other party in writing.
(b) This Agreement constitutes the entire understanding of the parties
and supersedes all prior understandings, whether written or oral, between the
parties with respect to the subject matter of this Agreement.
(c) The rights of indemnification and reimbursement provided in this
Agreement shall be in addition to any rights to which the Indemnitee may
otherwise be entitled under the Corporation's Articles of Incorporation or
By-laws or any statute, agreement, vote of shareholders, or otherwise.
(d) In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and such
provision shall be ineffective only to the extent of such invalidity, illegality
or unenforceability. The parties shall endeavor in good faith to replace the
invalid, illegal or unenforceable provision with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provision.
(e) The Corporation shall cooperate in good faith with the Indemnitee
and use its best efforts to ensure that the Indemnitee is indemnified or
reimbursed for liabilities described herein to the fullest extent permitted by
law.
(f) This Agreement shall be governed by and construed under the laws of
the State of Florida regardless of laws that might otherwise govern under
applicable principles of conflict of laws.
(g) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement in writing between the
parties hereto.
(h) The obligations of the Corporation to the Indemnitee hereunder
shall survive and continue as to the Indemnitee although the Indemnitee may
cease to be a director or officer of the Corporation. Each and all of the
covenants, terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Corporation and, upon
the death or incapacity of the Indemnitee, to the benefit of his estate, heirs,
executors, administrators and personal representatives.
-6-
<PAGE>
(i) The provisions of this Agreement shall apply to claims, actions,
suits and proceedings whether now pending or hereafter commenced and shall be
retroactive to apply to acts or omissions that have occurred prior to the
execution of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
HVIDE MARINE INCORPORATED
By:
INDEMNITEE:
Name: Hans J. Hvide
Address:
Facsimile:
-7-
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