AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 1999
REGISTRATION NO. 333-52599
-333-52599-10
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE HOLT GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4400 23-2932358
(State or Incorporation) (Primary Standard (I.R.S. Employer
Industrial Identification Number)
Classification Code
Number)
------------------------
101 SOUTH KING STREET, GLOUCESTER CITY, NEW JERSEY 08030
(609) 742-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SEE TABLE OF ADDITIONAL REGISTRANTS
------------------------
JOHN A. EVANS, ESQUIRE
GENERAL COUNSEL, VICE PRESIDENT & SECRETARY
THE HOLT GROUP, INC.
101 SOUTH KING STREET
GLOUCESTER CITY, NEW JERSEY 08030
(609) 742-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
With a copy to:
Lisa D. Kabnick, Esquire
Robert A. Friedel, Esquire
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, Pennsylvania 19103
(215) 981-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: A soon as
practicable after this Registration Statement becomes effective.
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If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
ADDRESS, INCLUDING ZIP
CODE, AND TELEPHONE
EXACT NAME OF STATE OR OTHER PRIMARY STANDARD NUMBER, INCLUDING AREA
REGISTRANT AS JURISDICTION OF INDUSTRIAL IRS EMPLOYER CODE, OF REGISTRANTS'
SPECIFIED IN ITS CORPORATION OR CLASSIFICATION IDENTIFICATION PRINCIPAL EXECUTIVE
CHARTER ORGANIZATION CODE NUMBER NUMBER OFFICES
- --------------------- -------------------- -------------------- -------------------- ----------------------------
<S> <C> <C> <C> <C>
Holt Cargo Systems, Delaware 4491 23-1664146 101 South King Street
Inc. Gloucester City, New Jersey
(609) 742-3000
Holt Hauling and Pennsylvania 6519 22-1646716 101 South King Street
Warehousing System, Gloucester City, New Jersey
Inc. (609) 742-3000
Murphy Marine Delaware 4491 51-0355907 101 South King Street
Services, Inc. Gloucester City, New Jersey
(609) 742-3000
Wilmington Delaware 4491 51-0123806 101 South King Street
Stevedores, Inc. Gloucester City, New Jersey
(609) 742-3000
San Juan Delaware 6519 52-2098606 101 South King Street
International Gloucester City, New Jersey
Terminals, Inc. (609) 742-3000
SJIT, Inc. Delaware 4491 52-2098607 101 South King Street
Gloucester City, New Jersey
(609) 742-3000
NPR, Inc. Delaware 4424 22-3357134 212 Fernwood Ave.
Edison, NJ 08837
(732) 225-2121
NPR-Navieras Delaware 4499 22-3357120 212 Fernwood Ave.
Receivables, Inc. Edison, NJ 08837
(732) 225-2121
NPR Holding Delaware 4400 22-3351317 212 Fernwood Ave.
Corporation Edison, NJ 08837
(732) 225-2121
NPR S.A., Inc. Delaware 4412 22-3549966 212 Fernwood Ave.
Edison, NJ 08837
(732) 225-2121
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 26, 1999
PROSPECTUS
OFFER TO EXCHANGE
9 3/4% SENIOR NOTES DUE 2006
($140,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR ANY AND ALL OUTSTANDING
9 3/4% SENIOR NOTES DUE 2006 OF
THE HOLT GROUP, INC.
GUARANTEED BY HOLT CARGO SYSTEMS, INC.,
HOLT HAULING AND WAREHOUSING SYSTEM, INC.,
MURPHY MARINE SERVICES, INC., WILMINGTON STEVEDORES, INC.,
SAN JUAN INTERNATIONAL TERMINALS, INC., SJIT, INC., NPR, INC.,
NPR-NAVIERAS RECEIVABLES, INC., NPR HOLDING CORPORATION
AND NPR S.A., INC. (COLLECTIVELY, THE "GUARANTORS")
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
[ , 1999] (AS SUCH DATE MAY BE EXTENDED, THE "EXPIRATION DATE").
The Holt Group, Inc., a Delaware corporation (the "Company"), hereby offers
(the "Exchange Offer"), upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying Letter of Transmittal (the"Letter of
Transmittal") to exchange its outstanding 9 3/4% Senior Notes Due 2006 (the "Old
Notes"), of which $140,000,000 aggregate principal amount is outstanding as of
the date hereof, for a like aggregate principal amount of its newly issued
9 3/4% Senior Notes Due 2006, which have been registered under the Securities
Act of 1933, as amended (the "New Notes"). The New Notes are being offered
hereby in order to satisfy certain obligations of the Company under the
Registration Rights Agreement (the "Registration Rights Agreement"), dated
January 21, 1998, among Donaldson, Lufkin & Jenrette Securities Corporation (the
"Initial Purchaser"), the Company and the Guarantors. The form and terms of the
New Notes will be the same as those of the Old Notes except that the New Notes
will have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and consequently will not be subject to certain transfer
restrictions, registration rights and related liquidated damages provisions
applicable to the Old Notes. The New Notes will evidence the same debt as the
Old Notes and will be entitled to the benefits of an indenture (the
"Indenture"), dated as of January 21, 1998, among the Company, the Guarantors
and The Bank of New York, as trustee (the "Trustee"). The Indenture provides for
the issuance of both the Old Notes and the New Notes. The Old Notes and the New
Notes are referred to herein collectively as the "Notes" and holders of the
Notes are sometimes referred to herein as the "Holders."
The Company will accept for exchange any and all Old Notes that are validly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date. Tenders
of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Offer is not conditioned upon any
minimum principal amount of the Old Notes being tendered for exchange. However,
the Exchange Offer is subject to certain customary conditions, which may be
waived by the Company, and to the terms and provisions of the Registration
Rights Agreement. The Old Notes may be tendered only in multiples of $1,000. See
"The Exchange Offer."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD NOTES IN THE
EXCHANGE OFFER.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
TABLE OF CONTENTS
Available Information....................................... 1
Disclosure Regarding Forward-Looking Statements............. 2
Prospectus Summary.......................................... 3
Risk Factors................................................ 17
The Acquisition and the Refinancings........................ 27
Reorganization of the Company............................... 28
The Exchange Offer.......................................... 29
Capitalization.............................................. 37
Selected Historical Financial Data.......................... 38
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 39
Business.................................................... 52
Management.................................................. 71
Certain Transactions........................................ 76
Sole Stockholder............................................ 77
Description of Certain Indebtedness......................... 77
Description of New Notes.................................... 82
Certain United States Federal Income Tax Considerations..... 109
Plan of Distribution........................................ 112
Legal Matters............................................... 113
Experts..................................................... 113
Change of Accountants....................................... 113
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement (which
term shall include any amendments thereto) on Form S-4 under the Securities Act
(the "Registration Statement") with respect to the securities offered by this
Prospectus. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto, to which reference is hereby
made. Each statement made in this Prospectus referring to a document filed as an
exhibit or schedule to the Registration Statement is not necessarily complete
and is qualified in its entirety by reference to the exhibit or schedule for a
complete statement of its terms and conditions. In addition, upon the
effectiveness of the Registration Statement filed with the Commission, the
Company and the Guarantors will become subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, the Company will file periodic reports and other
information with the Commission relating to its business, financial statements
and other matters, including therein, where applicable, financial statements of
the Guarantors. Any interested parties may inspect and/or copy the Registration
Statement, its schedules and exhibits, and other information filed in connection
therewith, at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the Commission's regional offices located at Citicorp Center, 500 W. Madison
Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such materials can be obtained at
prescribed rates by addressing written requests for such copies to the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The Commission also
maintains a site on the World Wide Web, the address of which is
http://www.sec.gov, that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The obligations of the Company and
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the Guarantors under the Exchange Act to file periodic reports and other
information with the Commission may, to the extent that such obligations arise
from the registration of the New Notes, be suspended, under certain
circumstances, if the New Notes are held of record by fewer than 300 holders at
the beginning of any fiscal year and are not listed on a national securities
exchange. The Company has agreed that, whether or not it is required to do so by
the rules and regulations of the Commission, for so long as any of the Notes
remain outstanding, it will furnish to the holders of the Notes and file with
the Commission (unless the Commission will not accept such a filing) all annual,
quarterly and current reports that the Company is or would be required to file
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act. In
addition, for so long as the Company or any Guarantor is subject to the
reporting requirements of Section 13 or 15 of the Exchange Act and any
registrable securities remain outstanding, the Company and the Guarantors have
agreed that they will comply with the reporting obligations under the Securities
Act and Section 13(a) or 15(d) of the Exchange Act and the rules and regulations
adopted by the Commission thereunder, and that if it ceases to be required to
file periodic reports thereunder, it will upon the request of any holder of
registrable securities (a) make publicly available such information as is
necessary to permit sales pursuant to Rule 144 under the Securities Act, (b)
deliver such information to a prospective purchaser as is necessary to permit
sales pursuant to Rule 144A under the Securities Act, and (c) take such further
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such holder to sell its registrable
securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
rule may be amended from time to time, (ii) Rule 144A under the Securities Act,
as such rule may be amended from time to time, or (iii) any similar rules or
regulations hereafter adopted by the Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION WITH RESPECT TO ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY OR AN OFFER TO OR SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including the "Prospectus Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" sections, contains "forward-looking statements," which can be
identified by the use of forward-looking terminology, such as "may," "intend,"
"will," "expect," "anticipate," "estimate" or "continue" or the negative thereof
or other variations thereon or comparable terminology. In particular, any
statement, express or implied, concerning future operating results or the
ability to generate revenues, income or cash flow to service the Notes are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to have been correct. All
forward-looking statements are expressly qualified by such cautionary
statements. See "Risk Factors."
2
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere
herein. This summary is qualified in its entirety by reference to such
information. Unless otherwise expressly stated or the context otherwise
requires, (i) the "Issuer" refers to The Holt Group, Inc.; (ii) "Holt" refers to
the following direct and indirect wholly owned subsidiaries of the Issuer (the
"Holt Subsidiaries"): Holt Hauling and Warehousing System, Inc., Holt Cargo
Systems, Inc., The Riverfront Development Corporation, Murphy Marine Services,
Inc., Wilmington Stevedores, Inc. (a wholly-owned subsidiary of Murphy Marine
Services, Inc.) San Juan International Terminals, Inc. and SJIT, Inc. and; (iii)
"NPR" refers to the following direct and indirect wholly owned subsidiaries of
the Issuer: NPR Holding Corporation, NPR-Navieras Receivables, Inc. and NPR,
Inc.; and (iv) the "Company" refers to the consolidated entity consisting of the
Issuer, Holt and NPR.
THE COMPANY
The Company is a leading provider of integrated cargo transportation and
logistics management services in the United States. The Company's predecessor
was founded in 1926 by Leo A. Holt, Sr., and the Company is wholly owned by his
son, Thomas J. Holt, Sr., the Company's Chairman, President and Chief Executive
Officer. Through Holt, the Company owns and operates marine terminal facilities,
including the largest private integrated marine terminal complex in the United
States, and provides related services. Through NPR, which commenced operations
through its predecessor in 1974 and was acquired by the Company on November 20,
1997 (the "Acquisition"), the Company is a leading operator of cargo ships in
the U.S.-Puerto Rico market under the trade name "Navieras." NPR provides
containerized cargo transportation and related services between the United
States, Puerto Rico, and the Caribbean. The Company's revenues, EBITDA (as
defined herein) and net income for the year ended December 31, 1998 were $370.5
million, $49.2 million and $10.6 million, respectively. At December 31, 1998,
the Company had outstanding $257.8 million of consolidated indebtedness, of
which $117.8 million was secured indebtedness to which the Notes were
effectively subordinated. In addition, at December 31, 1998, the Company had
outstanding guarantees of third-party debt totaling $47.6 million, all of which
was secured by assets of the Company, and to which the Notes were effectively
subordinated.
Through Holt, the Company offers a variety of cargo services, including
stevedoring (the loading and unloading of ships), warehousing (the storage of
cargo) and inland trucking. Holt also leases port facilities to third-party
stevedores, warehousemen and other lessees (the "Lessee-Operators"). These
services are performed at three facilities (the "Holt Facilities"), all of which
are located on the Delaware River, a key waterway for commerce on the East Coast
of the United States. The Gloucester Marine Terminal (the "Gloucester Facility")
in Gloucester City, New Jersey, is owned by the Company and is leased to the
Lessee-Operators. The Packer Avenue Marine Terminal (the "Packer Avenue
Facility") in Philadelphia, Pennsylvania, which is owned by an agency of the
Commonwealth of Pennsylvania, is subleased by the Company for a term expiring in
2040 (including all renewal options). At the Packer Avenue Facility, Holt
provides stevedoring, warehousing and inland transportation of containerized and
other cargoes. The Company provides stevedoring services at the Port of
Wilmington, Delaware (the "Wilmington Facility"), owned by an agency of the
State of Delaware, where the Company's subsidiary, Wilmington Stevedores, Inc.
("Wilmington Stevedores"), has operated since 1974. In 1998, the Company and the
Lessee-Operators loaded and/or discharged an aggregate of 823 ships and 6.0
million tons of cargo at the Holt Facilities.
Since inception, the Company has invested over $130.0 million in the
Gloucester Facility and the Packer Avenue Facility. The Gloucester Facility
features 4,200 lineal feet of deep water frontage, 18 warehouses with
approximately one million square feet of dry space and approximately one million
square feet of refrigerated space, and two container cranes. The Packer Avenue
Facility features 3,800 lineal feet of deep water frontage, three dry warehouses
with approximately 278,000 square feet of storage space, one refrigerated
warehouse with approximately 168,000 square feet of storage space and five
container cranes. With the most refrigerated warehouse space of any marine
terminal operator in
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the United States, the Company believes it is currently the leader in providing
refrigerated facilities and related services in the United States, with a
substantial portion of the frozen beef and fruit imported by ship to the East
Coast passing through the Holt Facilities. The Company believes it is the
leading contract stevedore in the Wilmington Facility, as it handled in excess
of 95% of the aggregate container volume and approximately 75% of the aggregate
tonnage of cargo handled in the Wilmington Facility during 1998.
Through NPR, the Company is a leading provider of containerized cargo
service between the United States, Puerto Rico, and the Caribbean. Containerized
cargo encompasses a variety of goods transported in standard sized containers.
NPR currently operates four ships to provide service three times per week
between San Juan, Puerto Rico and the United States via the port of
Jacksonville, Florida and weekly service between San Juan and the port of
Philadelphia, Pennsylvania. These two ports of entry provide efficient gateways
to major commercial areas throughout the United States and Canada, ranging from
the New York metropolitan area to the West Coast. In addition, through charter
arrangements, NPR provides service two times a week between San Juan and the
Dominican Republic and also, through a slot charter arrangement (i.e. the use of
space on another carrier's vessel), services the Caribbean island of Trinidad
and the United States Virgin Islands.
NPR's predecessor was formed in 1974 by the Puerto Rico Government and was
sold to an investor group (including certain members of NPR's current
management) in March 1995 (the "Privatization"). Following the Privatization,
NPR's management team significantly improved the operating performance of NPR by
implementing a strategic turnaround plan which consisted of increasing its share
of the cargo transported between the United States and Puerto Rico and reducing
its operating costs. During 1998, NPR transported approximately 32.9% of the
fully containerized cargo carried between the United States and Puerto Rico, as
compared to approximately 31.8% of such cargo during 1997. After the
Privatization, NPR reduced the number of vessels in continuous operation from
five to four and the number of ports of call in the United States from five to
two while at the same time increasing the aggregate volume of cargo carried. In
addition, NPR consolidated customer service activities into one service center
located in Tampa, Florida, and trimmed corporate overhead by reducing the
headcount from 676 at the time of the Privatization to 387 at December 31, 1998.
Additional savings were realized through lower intermodal transportation costs
due to commitment of higher cargo volumes to railroads and trucking companies,
reduced advertising costs and elimination of excess container capacity. As a
result of these initiatives, NPR's EBITDA increased from $8.2 million for the
year ended January 5, 1997 to $13.1 million for the period beginning January 6,
1997 and ended November 20, 1997, while for the same periods its revenues
decreased from $269.1 million to $245.3 million and its net income increased
from a loss of $14.9 million to net income of $1.5 million.
The Company believes numerous benefits have resulted and will continue to
result from integration of the operations of Holt and NPR, including cost
savings and new revenue opportunities. Integration commenced immediately upon
consummation of the Acquisition when the Company relocated NPR's northeastern
port of call from Elizabeth, New Jersey to the Packer Avenue Facility, and the
integration is continuing. The Acquisition also provides opportunities for the
Company to cross-market its expanded services to Holt's and NPR's respective
customer bases. The Company believes that these expanded services create new
revenue opportunities both in its existing markets and through expansion into
new markets.
OPERATING STRENGTHS
The Company's objective is to maintain and enhance its position as a
leading provider of integrated cargo transportation and logistics management
services, and to expand its service offerings through controlled internal
growth. The Company intends to achieve its objective by capitalizing on the
following operating strengths:
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MARKET LEADERSHIP
Holt and NPR are leaders in their respective businesses and the Company
believes that each has significant opportunities to continue to enhance its
market position. Over its 70-year history, Holt has established itself as a
market leader by pursuing a niche-market strategy that focuses on certain
segments of the cargo handling industry. For example, the Holt Facilities
provide the largest amount of refrigerated warehouse space of any marine
terminal operator in the United States, handling a substantial portion of the
frozen beef and fruit imported by ship to the East Coast. The Holt Facilities
became leaders in the handling of refrigerated cargo as a result of Holt's
investment in extensive refrigerated warehousing facilities and development of
expertise in the optimal methods of handling such cargo. NPR also attained a
leading position by implementing a successful operational turnaround since the
Privatization which has resulted in an increase in its market share. During
1998, NPR ranked first overall, having transported approximately 32.9% of the
fully containerized cargo carried between the United States and Puerto Rico.
Further improvements in NPR's market position are expected both from continued
emphasis on elements of the turnaround plan and entry into new market segments.
In order to facilitate its expansion to the 53-foot "big-box" container market,
NPR has recently completed the modification of two of its vessels to accommodate
53-foot containers in addition to all other standard-sized containers, and the
Company expects to enter this market in late 1999. This "big box" segment, which
the Company believes has attractive growth prospects, currently constitutes
approximately 11.8% of the container market between the United States and Puerto
Rico. See "Business -- NPR -- Overview of Operations" and "Risk Factors --
Growth Strategies."
LONG-TERM COMPETITIVE ADVANTAGES
The Company possesses certain long-term competitive advantages to help
sustain its leading market positions. Holt's competitive advantages include the
following: (i) control of scarce waterfront property through its ownership of
the Gloucester Facility and its long-term lease of the Packer Avenue Facility;
(ii) availability of extensive warehouse space, especially refrigerated
warehouse space; (iii) efficient operations derived from years of experience and
expertise; and (iv) superior customer service driven primarily by advanced
capabilities in logistics and management information systems, such as the cargo
tracking system ("CTS") offered to customers at the Holt Facilities. NPR's
competitive advantages include the following: (i) the quality of its service,
including its high-speed vessel service and its efficient routing system; (ii)
long-term customer relationships; (iii) control of approximately 60% of the
available waterfront container terminal facilities at Puerto Nuevo, San Juan,
the largest container port in Puerto Rico, which allows for the growth of the
Company's third-party stevedoring business; and (iv) the requirement that only
vessels meeting the requirements of the Jones Act (the "Jones Act") be used in
the domestic trade (i.e., generally, the ships must be United States built,
owned and crewed). All of NPR's ships meet such requirements, and the limited
availability of such vessels in the marketplace creates a competitive advantage
for NPR.
HIGH QUALITY, VALUE-ADDED SERVICES
The Company provides high quality, value-added services to its customers.
CTS offers customers at the Holt Facilities a state-of-the-art bar coding system
to provide up-to-the-minute tracking of cargo that can be accessed by customers
remotely via modem. Services and facilities offered at the Holt Facilities are
attractive to customers due to (i) the ability to stevedore, warehouse and
transport cargo at the same facility, which gives customers flexibility and
convenience, (ii) the availability of specialized services, including extensive
refrigerated storage space, and (iii) the efficiency of the operations at the
Holt Facilities which provide reliability and cost efficiency for customers.
Holt's stevedoring operations at the Packer Avenue Facility achieve productivity
levels of up to 30 container lifts per hour and truck turnaround time of 30
minutes or less. The Company believes that these productivity measures are
superior to those of other operators in competing ports such as New York and
Baltimore. In addition, in connection with NPR's comprehensive operational
turnaround since the Privatization, NPR has improved the quality and enhanced
the value of its services by, among other things, (i) consolidating its customer
service functions in one location to monitor and maintain
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consistently high quality customer service, (ii) enhancing the on-time
performance of its high speed vessel service, and (iii) offering efficient
intermodal connections to trucking and rail carriers.
SIGNIFICANT BENEFITS OF THE ACQUISITION
The Company believes the Acquisition creates significant opportunities to
realize cost savings and capitalize on new revenue opportunities.
o Cost savings. The Company believes the combination of Holt and NPR has
created significant cost saving opportunities, including savings
resulting from the relocation of NPR's northeastern port of call from
Elizabeth, New Jersey to Philadelphia, Pennsylvania and efficiencies to
be realized from improving NPR's stevedoring operations in San Juan. NPR
initiated service on November 20, 1997 to the Packer Avenue Facility. In
addition, the Company believes that it can significantly improve the
efficiency of its stevedoring operations in San Juan, by, among other
things, the move in the third quarter of 1998 of two of Holt's high-speed
cranes to that terminal. These cranes are capable of lifting larger
containers, stacking containers on vessels an additional tier higher and
operating at greater speeds and with less maintenance than the cranes
previously operated by NPR.
o Revenue opportunities. The combination of Holt and NPR has created
significant opportunities for growth in revenues upon completion of the
integration of the operations of Holt and NPR, with little additional
capital investment. Foremost among these opportunities is the ability to
cross market Holt's and NPR's services to each other's customer base. The
Company now positions itself as a one-stop solution to its customers'
cargo transportation and handling needs. When CTS is integrated into
NPR's operations, the Company will have the ability to offer this feature
to all customers shipping to and from Puerto Rico, which the Company
believes will give NPR a competitive advantage. The CTS technology will
also enhance the Company's stevedoring business in San Juan, where it
currently handles third-party ships in addition to its own. In addition,
the move in the third quarter of 1998 of two of Holt's high-speed cranes
to San Juan will allow the Company to increase its third-party
stevedoring business, an incrementally profitable element of the
Company's strategic growth plan.
The Company intends to expand its services, grow its businesses and
increase its revenues and cash flow primarily through controlled internal growth
that capitalizes on the foregoing operating strengths. In addition, although the
Company is not seeking actively to make acquisitions, the Company may, from time
to time, make opportunistic acquisitions of complementary businesses that the
Company believes will enhance its ability to provide fully integrated and
value-added cargo transportation services to its customers.
THE ACQUISITION AND THE REFINANCINGS
On November 20, 1997, the Company acquired NPR's outstanding common stock
for an aggregate purchase price of $69.0 million. In connection with the
Acquisition, the Company also repaid $39.7 million of NPR's outstanding
indebtedness, repaid $31.6 million of Holt's outstanding indebtedness and
redeemed NPR's outstanding preferred stock for $0.7 million (collectively, the
"Refinancings"). The Company obtained the funds required to complete the
Acquisition and the Refinancings from (i) the issuance of 10.5% senior unsecured
increasing rate notes (the "Bridge Notes") to an affiliate of the Initial
Purchaser in the principal amount of $100.0 million, (ii) the issuance of 12.5%
subordinated unsecured increasing rate notes to the former shareholders of NPR
in the principal amount of $25.0 million (the "Seller Notes"), and (iii) the
sale/leaseback of certain NPR containers, gensets and chassis that generated
cash proceeds of $24.0 million. See "The Acquisition and the Refinancings."
The following table sets forth the sources and uses of funds in connection
with the Acquisition and the Refinancings. See "Description of Certain
Indebtedness."
6
<PAGE>
(DOLLARS IN MILLIONS)
---------------------
SOURCES OF FUNDS:
Sale/leaseback of equipment............................ $ 24.0
Seller Notes........................................... 25.0
Bridge Notes........................................... 100.0
------
Total Sources....................................... $149.0
======
USES OF FUNDS:
Purchase NPR common stock.............................. $ 69.0
Refinance NPR debt..................................... 39.7
Redeem NPR preferred stock............................. 0.7
Refinance Holt debt.................................... 31.6
Transaction expenses................................... 4.8
Working capital........................................ 3.2
------
Total Uses.......................................... $149.0
======
REORGANIZATION OF THE COMPANY
The Issuer was capitalized in October 1997 to consolidate the operations of
the Holt Subsidiaries under the Issuer. On October 31, 1997, Thomas J. Holt, Sr.
contributed all of the outstanding shares of capital stock of each of the Holt
Subsidiaries to the Issuer, all of the outstanding stock of which is owned by
Mr. Holt (the "Reorganization"). Following the Reorganization, each of the Holt
Subsidiaries became a direct or indirect wholly-owned subsidiary of the Issuer.
See "Reorganization of the Company."
The Issuer was incorporated under the laws of the State of Delaware in
1997. The Issuer and all of its subsidiaries are treated for federal and certain
state income tax purposes as S corporations under subchapter S of the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, the Company's
taxable income is reported by and taxed directly to the Company's sole
shareholder. The Company's headquarters are located at 101 South King Street,
Gloucester City, New Jersey 08030, and its telephone number is (609) 742-3000.
INVESTMENT IN ATLANTIC CONTAINER LINE AB
In early 1997, The Riverfront Development Corporation ("Riverfront"), a
wholly owned subsidiary of the Issuer, purchased approximately 1.1 million
shares (subsequently converted into 2.2 million shares as a result of a 2-for-1
stock split) (the "ACL Shares"), or approximately 17% of the outstanding shares,
of Atlantic Container Line AB ("ACL"), a Swedish shipping line publicly traded
on The Oslo Stock Exchange, for a total of approximately $23.5 million. ACL
operates five roll-on, roll-off container ships between North America and
Europe. Riverfront is not a Guarantor of the Notes.
In May and June, 1998, Riverfront purchased options to acquire up to an
aggregate of 1.5 million shares of ACL at 102.50 Norwegian krone (approximately
$13.30) per share. The options were scheduled to expire as to 1.2 million shares
on March 1, 1999 and as to 325,000 shares on March 18, 1999. Riverfront paid
39.1 million krone (approximately $5.2 million) for the option, approximating
the amount received by Riverfront in April 1998 as a dividend with respect to
the ACL shares. Prior to the expiration dates of the options, Riverfront entered
into new option agreements for the 1.5 million shares of ACL and paid 72.4
million krone (approximately $9.3 million) for the new options, which are now
scheduled to expire on December 1, 1999. It is Riverfront's intent to dividend
to the Issuer the ACL shares and options it owns subject to all indebtedness of
Riverfront related to the shares and options and also subject to receiving all
necessary governmental and third party consents for ultimate distribution to the
sole shareholder of the Issuer. As of March 31, 1999, such indebtedness amounted
to $24.4 million, of which $9.0 million was payable to a bank and $15.4 million
was payable to other subsidiaries of the Issuer. In conjunction with the
distribution, the sole shareholder of the Issuer shall
7
<PAGE>
assume such indebtedness and agree to pay the portion payable to the
Company ($15.4 million) prior to December 31, 1999. In the event Riverfront does
not complete the dividend, it would be the Company's intent to otherwise
liquidate these marketable securities.
The market value of the ACL shares as of April 14, 1999 was $11.00 per
share. The market value of the Company's investment in ACL (including the
options) as of April 14, 1999 was approximately $30.8 million, representing an
increase of $4.7 million from the December 31, 1998 value. Riverfront financed a
portion of its investment in ACL with funds borrowed from Finansbanken ASA, of
which $9.0 million was outstanding as of December 31, 1998.
ISSUANCE OF THE OLD NOTES
The Old Notes were issued in a transaction (the "Offering") pursuant to
which the Company issued an aggregate of $140.0 million principal amount of the
Old Notes to the Initial Purchaser on January 21, 1998 (the "Closing Date")
pursuant to a Purchase Agreement, dated January 21, 1998 (the "Purchase
Agreement") among the Company, the Guarantors and the Initial Purchaser. The net
proceeds of the Offering, after deducting underwriting discounts and offering
expenses, were approximately $135.0 million. Approximately $101.8 million of the
net proceeds was used to repay the Bridge Notes, including accrued interest of
$1.8 million and $25.5 million was used to repay the Seller Notes, including
accrued interest of $0.5 million. The balance of the net proceeds of the
Offering have been and are being used for working capital and general corporate
purposes. See "The Acquisition and the Refinancings." The Initial Purchaser
subsequently resold the Old Notes in reliance on Rule 144A under the Securities
Act and certain other exemptions under the Securities Act. The Company, the
Guarantors and the Initial Purchaser also entered into the Registration Rights
Agreement, pursuant to which the Company granted certain registration rights for
the benefit of the holders of the Old Notes. The Exchange Offer is intended to
satisfy certain of the Company's obligations under the Registration Rights
Agreement with respect to the Old Notes. See "The Exchange Offer -- Purpose and
Effect."
8
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer................. The Company is offering, upon the terms and
subject to the conditions set forth herein
and in the accompanying letter of
transmittal (the "Letter of Transmittal"),
to exchange $1,000 in principal amount of
its 9 3/4% Senior Notes due 2006 (the "New
Notes," and together with the Old Notes,
sometimes collectively referred to herein as
the "Notes") for each $1,000 in principal
amount of the outstanding Old Notes (the
"Exchange Offer"). As of the date of this
Prospectus, $140.0 million in aggregate
principal amount of the Old Notes is
outstanding, the maximum amount authorized
by the Indenture for all Notes. As of March
31, 1999, CEDE & Co. ("CEDE") was the sole
registered holder of the Old Notes and held
$140.0 million of aggregate principal amount
of the Old Notes for 30 of its participants.
See "The Exchange Offer -- Terms of the
Exchange Offer."
Expiration Date.................... 5:00 p.m., New York City time, on
________________, 1999, as the same may be
extended. See "The Exchange Offer --
Expiration Date; Extensions; Amendments."
Conditions of the Exchange Offer... The Exchange Offer is not conditioned upon
any minimum principal amount of Old Notes
being tendered for exchange. However, the
Exchange Offer is subject to the condition
that it does not violate any applicable law
or interpretation of the staff of the
Commission. In addition, as a condition to
its participation in the Exchange Offer,
each Holder of Old Notes will be required to
furnish certain written representations to
the Company and the Guarantors. See "The
Exchange Offer -- Conditions of the Exchange
Offer."
Termination of Certain Rights...... Pursuant to the Registration Rights
Agreement and the Old Notes, Holders of Old
Notes (i) have rights to receive Liquidated
Damages (as defined herein) and (ii) have
certain rights intended for the holders of
unregistered securities. "Liquidated
Damages" means an amount equal to $0.05 per
week per $1,000 in principal amount of old
Notes held by such Holder (amounting to
$1,000 per day in the aggregate for the
$140.0 million principal amount of Notes
outstanding) for each week or portion
thereof that a Registration Default (as
defined herein) continues for the first
90-day period immediately following the
occurrence of such Registration Default. The
amount of the Liquidated Damages shall
increase by an additional $0.05 per week per
$1,000 in principal amount of Transfer
Restricted Securities with respect to each
subsequent 90-day period until all
Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages of
$0.50 per week, per $1,000 in principal
amount of Transfer Restricted Securities.
The Company shall not be required to pay
liquidated damages for more than one
Registration Default at any given time.
Following the cure of all Registration
Defaults, the accrual of Liquidated Damages
will cease. See "The Exchange Offer --
Termination of Certain Rights,"
"-- Procedures for Tendering Old Notes" and
9
<PAGE>
"Description of New Notes -- Registration
Rights; Liquidated Damages."
Accrued Interest on the Old Notes.. The New Notes will bear interest at a rate
equal to 9 3/4% per annum from and including
their date of issuance. Holders whose Old
Notes are accepted for exchange will have
the right to receive interest accrued
thereon from the date of original issuance
of the Old Notes or the last Interest
Payment Date, as applicable, to, but not
including, the date of issuance of the New
Notes, such interest to be payable with the
first interest payment on the New Notes.
Interest on the Old Notes accepted for
exchange, which accrues at the rate of
9 3/4% per annum, will cease to accrue on
the day prior to the issuance of the New
Notes.
Procedures for Tendering Old Notes. Unless a tender of Old Notes is effected
pursuant to the procedures for book-entry
transfer as provided herein, each Holder
desiring to accept the Exchange Offer must
complete and sign the Letter of Transmittal,
have the signature thereon guaranteed if
required by the Letter of Transmittal, and
mail or deliver the Letter of Transmittal,
together with the Old Notes and any other
required documents (such as evidence of
authority to act, if the Letter of
Transmittal is signed by someone acting in a
fiduciary or representative capacity), to
the Exchange Agent (as defined) at the
address set forth on the back cover page of
this Prospectus prior to 5:00 p.m., New York
City time, on the Expiration Date. Any
Beneficial Owner (as defined) of the Old
Notes whose Old Notes are registered in the
name of a nominee, such as a broker, dealer,
commercial bank or trust company and who
wishes to tender Old Notes in the Exchange
Offer, should instruct such entity or person
to promptly tender on such Beneficial
Owner's behalf. See "The Exchange Offer --
Procedures for Tendering Old Notes." By
tendering Old Notes for exchange, each
registered holder will represent to the
Company that, among other things, (i)
neither the Holder nor any Beneficial Owner
is an affiliate of the Company or any
Guarantor within the meaning of Rule 405
under the Securities Act, (ii) any New Notes
to be received by the Holder or any
Beneficial Owner are being acquired in the
ordinary course of business, and (iii)
neither the Holder nor any Beneficial Owner
has an arrangement or understanding with any
person to participate in the distribution of
the New Notes.
Guaranteed Delivery Procedures..... Holders of Old Notes who wish to tender
their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot
deliver their Old Notes or any other
documents required by the Letter of
Transmittal to the Exchange Agent prior to
the Expiration Date (or complete the
procedure for book-entry transfer on a
timely basis), may tender their Old Notes
according to the guaranteed delivery
procedures set forth in the Letter of
Transmittal. See "The Exchange Offer --
Procedures for Tendering Old Notes --
Guaranteed Delivery Procedures."
10
<PAGE>
Acceptance of Old Notes and Delivery
of New Notes..................... Upon satisfaction or waiver of all
conditions of the Exchange Offer, the
Company will accept any and all Old Notes
that are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will
be delivered as soon as practicable after
acceptance of the Old Notes. See "The
Exchange Offer -- Acceptance of Old Notes
for Exchange; Delivery of New Notes."
Withdrawal Rights.................. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on the Expiration Date. See "The Exchange
Offer -- Withdrawal Rights."
Certain Federal Income Tax
Considerations................... Generally, the exchange pursuant to the
Exchange Offer will not be a taxable event
for federal income tax purposes. See
"Certain United States Federal Income Tax
Considerations -- The Exchange Offer."
The Exchange Agent................. The Bank of New York is the exchange agent
(in such capacity, the "Exchange Agent").
The address and telephone number of the
Exchange Agent are set forth in "The
Exchange Offer -- The Exchange Agent;
Assistance."
Fees and Expenses.................. All expenses incident to the Company's
consummation of the Exchange Offer and
compliance with the Registration Rights
Agreement will be borne by the Company. See
"The Exchange Offer -- Solicitation of
Tenders; Fees and Expenses."
Resales of the New Notes........... Based on interpretations by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company
believes that New Notes issued pursuant to
the Exchange Offer to a Holder in exchange
for Old Notes may be offered for resale,
resold and otherwise transferred by such
Holder (other than (i) a broker-dealer who
purchased the Old Notes directly from the
Company for resale pursuant to Rule 144A
under the Securities Act or any other
available exemption under the Securities Act
or (ii) a person that is an affiliate of the
Company or any Guarantor within the meaning
of Rule 405 under the Securities Act),
without compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that the Holder is
acquiring the New Notes in the ordinary
course of business and is not participating,
and has no arrangement or understanding with
any person to participate, in a distribution
of the New Notes. Each broker-dealer that
receives New Notes for its own account in
exchange for Old Notes, where such Old Notes
were acquired by such broker as a result of
market making or other trading activities,
must acknowledge that it will deliver a
prospectus in connection with any resale of
such New Notes. See "Plan of Distribution."
11
<PAGE>
DESCRIPTION OF NEW NOTES
The Old Notes were issued under an indenture, dated as of January 21, 1998
(the "Indenture"), among the Company, the Guarantors and the Trustee. The New
Notes will be issued under the Indenture as it relates to the New Notes. The
form and terms of the New Notes will be identical in all material respects to
the form and terms of the Old Notes, except that (i) the New Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof, (ii) subject to certain limited exceptions,
holders of New Notes will not be entitled to Liquidated Damages otherwise
payable under the terms of the Registration Rights Agreement in respect of Old
Notes held by such holders during any period in which a Registration Default is
continuing, and (iii) holders of New Notes will not be, and upon the
consummation of the Exchange Offer Holders of Old Notes will no longer be,
entitled to certain rights under the Registration Rights Agreement intended for
the holders of unregistered securities. The Exchange Offer shall be deemed
consummated upon the delivery of New Notes by the Company to the Registrar under
the Indenture in the same aggregate principal amount as the aggregate principal
amount of Old Notes that are validly tendered by holders thereof pursuant to the
Exchange Offer. See "The Exchange Offer -- Termination of Certain Rights" and
"-- Procedures for Tendering Old Notes" and "Description of New Notes."
<TABLE>
<S> <C>
Notes Offered................................ $140.0 million aggregate principal amount of
9 3/4% Senior Notes due 2006.
Issuer....................................... The Holt Group, Inc. (for purposes of this
section, the "Company")
Maturity Date................................ January 15, 2006.
Interest Rate and Payment Dates.............. Interest on the New Notes will accrue at 9 3/4%
per annum, payable semi-annually in arrears on
January 15 and July 15 of each year, commencing
July 15, 1998.
Ranking...................................... The New Notes will be senior unsecured
obligations of the Company and will rank pari
passu with all existing and future
unsubordinated indebtedness of the Company and
senior in right of payment to all existing and
future subordinated indebtedness of the Company.
The New Notes, however, will be effectively
subordinated to secured indebtedness of the
Company and the Guarantors (including
indebtedness under the Revolving Credit Facility
and Other Indebtedness) with respect to the
assets securing such indebtedness. The New Notes
also will be effectively subordinated to claims
of creditors of the Company's subsidiaries,
except to the extent that such subsidiaries are
Guarantors. As of December 31, 1998 the Company
had outstanding $257.8 million of consolidated
indebtedness, of which $117.8 million was
secured indebtedness to which the Notes were
effectively subordinated. See "Description of
Certain Indebtedness."
Optional Redemption.......................... The New Notes will be redeemable in whole or in
part, at the option of the Company, at any time
on or after January 15, 2002, at the redemption
prices set forth herein, plus accrued and unpaid
interest and Liquidated Damages, if any, to the
date of redemption. See "Description of the New
Notes -- Optional Redemption." In addition, at
any
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
time on or before January 15, 2001, the Company
may redeem up to 35% of the sum of the
originally issued aggregate principal amount of
(i) the Notes and (ii) any Additional Notes (as
defined herein) with the net proceeds of a
Public Equity Offering (as defined herein), at a
redemption price equal to 109 3/4% of the
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
to the date of redemption; provided however,
that not less than 65% of the sum of the
originally issued aggregate principal amount of
(i) the Notes and (ii) any Additional Notes is
outstanding immediately after giving effect to
such redemption. See "Description of the New
Notes -- Optional Redemption."
Guarantees................................... The New Notes will be irrevocably,
unconditionally and fully guaranteed on a joint
and several basis, as to the payment of
principal, premium, if any, and interest by
certain of the Company's existing and future
subsidiaries. The guarantees will rank pari
passu with all existing and future
unsubordinated indebtedness of the Guarantors
and senior in right of payment to all existing
and future subordinated indebtedness of the
Guarantors. The obligations of each Guarantor
under its guarantee, however, will be limited in
a manner intended to avoid it being deemed a
fraudulent conveyance under applicable law. See
"Description of the New Notes -- General," "--
Guarantees; Certain Bankruptcy Limitations" and
"-- Certain Covenants."
Change of Control............................ Upon a Change of Control, each holder of New
Notes will have the right to require the Company
to repurchase all or a portion of such holder's
New Notes at a purchase price equal to 101% of
the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
to the date of repurchase. See "Description of
the New Notes -- Certain Covenants."
Certain Covenants............................ The Indenture under which the New Notes will be
issued (the "Indenture") contains certain
covenants that, among other things, limits: (i)
the incurrence of additional indebtedness and
the issuance of Disqualified Capital Stock (as
defined herein) by the Company and the
Guarantors; (ii) the payment of dividends on,
and redemption of, capital stock of the Company
and the Guarantors and the redemption of certain
subordinated obligations of the Company and
Guarantors; (iii) restrictions on the ability of
the Subsidiaries of the Company and the
Guarantors to pay dividends or make other
restricted payments; (iv) the incurrence of
liens securing indebtedness; (v) sales of assets
and Subsidiary stock; (vi) transactions with
affiliates; (vii) mergers, consolidations and
transfers of all or substantially all of the
Company's assets; (viii) investments; and (ix)
lines of business. These covenants are subject
to important exceptions and
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
qualifications. See "Description of the New
Notes -- Certain Covenants."
Registration Rights; Liquidated
Damages.................................... The Company, the Guarantors and the Initial
Purchaser have entered into a Registration
Rights Agreement pursuant to which the Company
and the Guarantors agreed, for the benefit of
the Holders of the Notes, that they would, at
their cost, (i) no later than April 21, 1998,
file a registration statement under the
Securities Act (an "Exchange Offer Registration
Statement") with the Commission with respect to
a registered offer to exchange (the "Exchange
Offer") the Old Notes for New Notes with terms
substantially identical to the Notes (including
the Guarantees), except that such New Notes will
not contain transfer restrictions, and (ii) use
their best efforts to cause such Exchange Offer
Registration Statement to be declared effective
under the Securities Act no later than July 20,
1998 and to consummate the Exchange Offer within
30 business days after the Exchange Offer
Registration Statement is declared effective.
The Registration Statement, of which this
Prospectus forms part, constitutes the Exchange
Offer Registration Statement. In certain
circumstances, the Company and the Guarantors
will, at their expense, be required to file and
use their best efforts to cause to be declared
effective a shelf registration statement
covering resales of the Notes. If the Company
and the Guarantors fail to satisfy their
registration obligations under the Registration
Rights Agreement, the Company will be required
to pay Liquidated Damages to holders of the Old
Notes under certain circumstances. Liquidated
Damages accrue in the amount of $1,000 per day
in the aggregate for the $140.0 million
principal amount of Notes outstanding during the
first 90 days (and at a greater rate thereafter)
following a Registration Default and cease
accruing when all Registration Defaults are
cured. As a result of the Registration Statement
not yet having been declared effective by the
Commission, Liquidated Damages are accruing,
currently at the rate of $3,000 per day in the
aggregate for the $140.0 million principal
amount of Notes outstanding. See "Description of
New Notes -- Registration Rights; Liquidated
Damages."
Absence of a Public Market for the
New Notes.................................. The New Notes are new securities for which there
is currently no established trading market. The
Company does not intend to apply for listing of
the New Notes on any securities exchange or for
quotation through The Nasdaq Stock Market.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the
New Notes.
Risk Factors................................. An investment in the New Notes involves a high
degree of risk. Prospective investors should
carefully consider the matters set forth under
"Risk Factors."
</TABLE>
14
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following summary historical financial information was derived in part
from, and should be read in conjunction with the historical consolidated
financial statements of the Company and the historical consolidated financial
statements of NPR and the respective notes thereto, "Selected Historical
Financial Data," "NPR Selected Historical Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus. The historical consolidated financial
statements of the Company as of and for each of the years ended December 31,
1994 through 1998 have been audited. The historical consolidated financial
statements of NPR for the period beginning March 3, 1995 and ended December 31,
1995, the year ended January 5, 1997 and the period beginning January 6, 1997
and ended November 20, 1997 have been audited.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
COMPANY (1)
INCOME STATEMENT DATA:
Revenues................................................ $ 54,409 $ 69,350 $ 73,076 $118,998 $370,476
Operating income (loss)................................. 8,709 15,173 15,759 18,414 23,562
BALANCE SHEET DATA (END OF PERIOD):
Total assets............................................ 145,556 164,754 172,479 382,378 436,230
Total debt.............................................. 88,993 97,159 99,203 213,433 257,814
Equity.................................................. 38,455 44,172 49,422 72,729 59,827
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges (2).................. 1.4x 1.7x 1.7x 1.6x 1.3x
EBITDA (3).............................................. 12,839 19,548 19,784 27,066 49,176
Cash flows provided by (used in) operating activities... (4,039) (2,810) 17,205 24,533 15,510
Cash flows provided by (used in) investing activities... 9,743 (3,249) (16,365) (87,614) (57,832)
Cash flows provided by (used in) financing activities... (7,060) 6,426 (1,419) 67,918 39,137
Interest expense, net................................... 6,090 7,875 8,154 9,211 18,780
Depreciation and amortization........................... 4,130 4,375 4,025 8,652 16,598
Capital expenditures.................................... 11,922 6,034 6,936 9,674 19,058
MARGINS:
EBITDA (3).............................................. 23.6% 28.2% 27.1% 22.7% 13.3%
Operating income (loss)................................. 16.0 21.9 21.6 15.5 6.4%
</TABLE>
<TABLE>
<CAPTION>
MARCH 3, 1995 YEAR ENDED JANUARY 6, 1997
TO DECEMBER 31, JANUARY 5, TO NOVEMBER 20,
1995 1997 1997
--------------- ------------ ----------------
<S> <C> <C> <C>
NPR
INCOME STATEMENT DATA:
Revenues.................................................. $233,767 $269,097 $245,341
Operating income (loss)................................... (6,394) (6,354) 5,476
BALANCE SHEET DATA (END OF PERIOD):
Total assets.............................................. 161,035 146,135 130,603
Total debt................................................ 49,485 58,717 40,613
Equity (deficit).......................................... 2,890 (11,989) (10,496)
OTHER FINANCIAL DATA:
EBITDA(3)................................................. 4,305 8,170 13,094
Cash flows provided by (used in) operating activities..... 6,429 (7,736) 15,662
Cash flows provided by (used in) investing activities..... (63,352) 3,068 3,226
Cash flows provided by (used in) financing activities..... 58,946 4,495 (18,812)
Interest expense, net..................................... 5,812 7,171 5,973
Depreciation and amortization............................. 10,669 14,524 10,618
Capital expenditures...................................... 4,063 3,342 854
Investment Loss........................................... $ -- $ -- 500
MARGINS:
EBITDA(3)................................................. 1.8% 3.0% 5.3%
Operating income (loss)................................... (2.7) (2.4) 2.2
</TABLE>
15
<PAGE>
- ------------------
(1) Includes NPR from November 20, 1997, the date of its acquisition by the
Company. Also includes Riverfront, which is not a Guarantor, and which owns
the ACL Shares. At December 31, 1997 and 1998, Riverfront had total assets
of $44.1 million and $30.0 million, respectively, and stockholder's equity
of $20.0 million and $5.7 million, respectively (including unrealized
appreciation on marketable securities of $16.6 million and unrealized
holding losses on marketable securities of $2.6 million, respectively). For
the years ended December 31, 1997 and 1998, Riverfront had dividends from
marketable securities of $1.6 million and $5.8 million, respectively, and
net income of $1.0 million and $4.8 million, respectively. As of the end of
and for all other periods presented (i.e. 1994-1996), Riverfront had no
material amount of assets, stockholder's equity, revenues or net income. See
"-- Investment in Atlantic Container Line AB."
(2) For purposes of this computation, fixed charges consist of interest expense,
amortization of deferred financing costs and one-third of rental expenses,
representing an approximation of that portion of rental expenses
attributable to interest. Earnings consist of income before income taxes,
extraordinary items and cumulative effect of changes in accounting
principles, plus fixed charges.
(3) The term EBITDA as used herein represents operating income plus depreciation
and amortization, adjusted to exclude certain non-recurring revenues and
expenses. EBITDA has been presented because the Company believes it is
commonly used in this or a similar format by investors to analyze and
compare operating performance and to determine a company's ability to
service and/or incur debt. However, EBITDA should not be considered in
isolation or as a substitute for net income, cash flow from operations or
any other measure of income or cash flow that is prepared in accordance with
generally accepted accounting principles, or as a measure of a company's
profitability or liquidity. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Unaudited Pro Forma
Condensed Financial Data" and the historical financial statements of Holt
and NPR and the related notes thereto included elsewhere in this Prospectus.
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RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following factors before
purchasing the New Notes offered hereby. The matters set forth below constitute
cautionary statements identifying important factors with respect to certain
forward-looking statements appearing in this Prospectus, including certain risks
and uncertainties, that could cause actual results to differ materially from
those in such forward-looking statements.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
The Company has substantial indebtedness and significant debt service
obligations. The Company had outstanding $257.8 million of consolidated
indebtedness as of December 31, 1998, of which $117.8 million was senior to the
Notes. In addition, at December 31, 1998, the Company had outstanding guarantees
of third-party debt totaling $47.6 million. The Indenture permits the Company to
incur additional indebtedness, including guarantees, subject to certain
limitations, from time to time to finance working capital, capital expenditures
and other general corporate purposes. See "Capitalization" and "Description of
the New Notes -- Certain Covenants."
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including the following: (i) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of the principal of and interest on its outstanding indebtedness and
will not be available for other purposes; (ii) the Company's ability to obtain
additional financing in the future for working capital needs, capital
expenditures and general corporate purposes may be materially limited or
impaired or such financing may not be available on terms favorable to the
Company; (iii) indebtedness under the Revolving Credit Facility and certain of
the Other Indebtedness and Financings (as defined herein) will be secured and
will mature prior to the maturity of the Notes; (iv) certain of the Company's
borrowings may be at variable rates of interest, including future borrowings
under the Revolving Credit Facility and certain of the Other Indebtedness and
Financings, which will expose the Company to the risk of increased interest
rates; and (v) the Company's high degree of leverage may reduce its ability to
withstand competitive pressure and make it more vulnerable to a downturn in its
business or the economy in general. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The Company's ability to satisfy its interest payment obligations under its
indebtedness will depend largely on its future performance which, in turn, is
subject to prevailing economic conditions and to financial, business and other
factors beyond its control. In addition, certain amounts owed under the
Revolving Credit Facility and under certain Other Indebtedness and Financings
will become due before any principal payments on the Notes are scheduled to
become due and such amounts may need to be refinanced. Furthermore, the Company
does not expect to be able to repay the principal amount of the Notes at
maturity from available cash and, accordingly, will need to refinance the Notes,
or repay the Notes with the proceeds of an equity offering, at or prior to their
maturity. There can be no assurance that the Company will be able to generate
sufficient cash flow to service its interest payment obligations under its
indebtedness or that cash flows, future borrowings or equity financings will be
available for the payment or refinancing of the Company's indebtedness. To the
extent that the Company is not successful in repaying or negotiating renewals of
its borrowings or in arranging new financings, it may have to sell significant
assets, which would have a material adverse effect on the Company's business and
results of operations. Among the factors that will affect the Company's ability
to effect an offering of its capital stock or to refinance the Notes are
financial market conditions and the value and performance of the Company at the
time of such offering or refinancing. There can be no assurance that any such
offering or refinancing can be successfully completed. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" and "Description of Certain Indebtedness."
HOLDING COMPANY STRUCTURE
The Issuer is a holding company the only material assets of which are the
stock of its subsidiaries, which hold substantially all of the Company's
operating assets and generate its operating income. Accordingly, the Issuer is
dependent on dividends and other distributions from its subsidiaries to
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generate the funds necessary to meet its obligations, including the interest and
principal payments on the Notes. The ability of the Issuer's subsidiaries to pay
dividends to the Issuer is subject to, among other things, the terms of the
Revolving Credit Facility and the Other Indebtedness and Financings to which
they are subject, as well as future debt instruments of the subsidiaries and
applicable law. Certain of the Other Indebtedness and financings restrict
distributions from the Issuer's subsidiaries to the Issuer to a percentage of
cumulative net income, subject to certain adjustments. There can be no assurance
that any such distributions will be adequate to fund the interest and principal
payments of the Notes when due. The Guarantees provide that if the Issuer fails
to satisfy any payment obligation under the Notes, the holders of the Notes
would have a direct claim against the Guarantors. However, if a court were to
invalidate the Guarantees under fraudulent conveyance laws or other legal
principles or if, by the terms of such Guarantees, the obligations thereunder
were reduced as necessary to prevent such avoidance, the claims of the other
creditors of the Guarantors, including trade creditors, would to such extent
have priority as to assets of such Guarantor over the claims of the holders of
the Notes (except to the extent that the Issuer had an enforceable claim as a
creditor of such Guarantor). The Guarantee of the Notes by any Guarantor will be
discharged upon the sale of such Guarantor in accordance with the provisions of
the Indenture. See "-- Fraudulent Transfer Considerations" and "Description of
the New Notes -- Guarantees; Certain Bankruptcy Limitations."
The Guarantees are senior unsecured obligations of the Guarantors. The
Indenture provides that the Guarantors shall not incur any Indebtedness that is
senior in right of payment to the Guarantees, except as set forth therein. See
"Description of the New Notes -- Certain Covenants -- Limitation on Incurrence
of Additional Indebtedness and Issuance of Disqualified Capital Stock."
ASSET ENCUMBRANCES
As of December 31, 1998, the Company had outstanding $257.8 million of
consolidated indebtedness, of which $117.8 million was secured indebtedness to
which the Notes were effectively subordinated. The Revolving Credit Facility
currently is secured by the Company's vessels and accounts receivable and claims
of the holders of the Notes are effectively subordinated to the extent of such
assets. Upon repayment of a $17.3 million term loan, which is part of the
Revolving Credit Facility, due on December 31, 1999, the accounts receivable
will no longer secure the Revolving Credit Facility. The Other Indebtedness and
Financings are secured by mortgages on the Gloucester Facility, certain material
handling equipment and the ACL Shares. Claims of the holders of the Notes also
will be effectively subordinated to the extent of such assets. The claims of
holders of the Notes upon any distribution of assets of any subsidiary of the
Company in the event of liquidation or reorganization of such subsidiary will be
subordinated to the prior claims of present and future creditors of such
subsidiary to the extent such claims are secured. In such an event, there may
not be sufficient assets remaining to pay amounts due on any or all of the Notes
then outstanding. The Indenture permits subsidiaries of the Issuer, under
certain circumstances, to incur indebtedness and permits the Issuer and its
subsidiaries, under certain circumstances, to secure indebtedness. See
"Description of the New Notes -- Certain Covenants -- Limitation on Incurrence
of Additional Indebtedness and Issuance of Disqualified Capital Stock" and
"Description of Certain Indebtedness."
RESTRICTIVE COVENANTS
The Indenture, the Revolving Credit Facility and certain of the Other
Indebtedness and Financings contain certain financial and other covenants,
including covenants requiring the Company to maintain certain financial ratios
and restricting the ability of the Company to incur indebtedness or to create or
suffer to exist certain liens. The ability of the Company to comply with such
provisions may be affected by events beyond its control. Should the Company be
unable to comply with the financial or other restrictive covenants under the
Indenture, the Revolving Credit Facility or the Other Indebtedness and
Financings at any time in the future, there can be no assurance that the lenders
thereunder would agree to any necessary amendments or waivers. In such a case,
the failure to obtain amendments or waivers could have a material adverse effect
upon the Company and its ability to meet its obligations in respect of the
Notes. A failure to make any required payment under the Revolving Credit
Facility or the Other Indebtedness and Financings or to comply with any of the
financial and operating covenants included in the Revolving Credit Facility or
the Other Indebtedness and Financings could result in an event of default
thereunder, permitting the lenders to accelerate the maturity of the
indebtedness under
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the Revolving Credit Facility and the Other Indebtedness and Financings and,
depending upon the action taken by such lenders, delaying or precluding payment
of principal of or interest on the Notes. Such an acceleration also would permit
the acceleration of the other indebtedness of the Company which contain
cross-acceleration or cross-default provisions, including the Indenture. The
Indenture also has certain covenants which, if not complied with, would result
in an event of default thereunder permitting holders of the Notes, under certain
circumstances, to accelerate the Notes. Any such event of default or
acceleration also could result in an event of default or acceleration of other
indebtedness of the Company. If the lenders under the Revolving Credit Facility
or the Other Indebtedness and Financings or the holders of the Notes accelerate
the maturity of the indebtedness thereunder there can be no assurance that the
Company will have sufficient assets to satisfy its obligations under the Notes.
In addition, other indebtedness of the Company that may be incurred in the
future may contain financial or other covenants more restrictive than those
applicable to the Revolving Credit Facility, the Other Indebtedness and
Financings or the Notes. See "Description of the New Notes -- Certain Covenants
- -- Limitation on Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock."
CAPITAL REQUIREMENTS
Each of the Company's businesses is capital intensive, and the Company will
continue to require substantial capital in order to operate and expand its
business. The stevedoring, trucking and shipping industries each require
extensive investment in capital equipment. The Company historically has relied
upon vessel charters and on debt and equipment leases to finance capital
equipment, and it has granted its lenders liens on substantially all of its
tangible assets. Although NPR's five ocean-going vessels are subject to a
rigorous dry-docking program which is expected to permit such vessels to remain
in operation at least an additional five to ten years, the Company has begun to
consider the future acquisition of new vessels. If in the future the Company
were unable to borrow sufficient funds, enter into acceptable lease
arrangements, sell or trade its used equipment at acceptable prices, or raise
additional equity capital, the resulting capital shortage would limit the
Company's growth and force the Company to operate its capital equipment for
longer periods, which would be likely to adversely affect the Company's growth
and profitability.
RISKS RELATED TO THE ACQUISITION AND INTEGRATION OF NPR
The full benefits of a business combination of Holt and NPR require the
integration of NPR into the Company's operations and the implementation of
appropriate operations, financial and management systems and controls in order
to capture the efficiencies and the cost reductions that are expected to result
from the Acquisition. The process of integrating the operations commenced
immediately upon completion of the Acquisition with the relocation of NPR's
northeastern port of call from Elizabeth, New Jersey to the Packer Avenue
Facility, and the integration is continuing.
However, the integration of NPR into the Company's operations will involve
a number of risks, including the possible diversion of management's attention
from other business concerns, the possible loss of key employees of NPR,
potential difficulties in integrating the operations of NPR with those of the
Company and the potential inability to replicate successfully Holt's operating
efficiencies in NPR's operations. Furthermore, the Company may not be able to
realize some or all of the anticipated cost savings or to successfully pursue
some or all of the anticipated revenue opportunities. Consequently, no assurance
can be given as to the effect of the integration of NPR on the Company's
business or results of operations or as to when the integration will be
completed. In addition, the Company's contractual recourse against the former
shareholders of NPR under the Acquisition agreement is extremely limited.
Accordingly, unanticipated events or liabilities related to NPR's business could
materially and adversely affect the Company.
UNIONIZED WORK FORCE
At December 31, 1998, all of Holt's non-supervisory work force, 28.9% of
NPR's office workers and all of NPR's shipboard and non-supervisory stevedoring
employees were covered under collective bargaining agreements, and the number of
employees of the Company covered by collective bargaining agreements could
increase in the future. In the past, Holt has experienced labor strikes, the
most recent of which was with the International Longshoreman's Association
("ILA") and took place in 1996. In
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addition, Holt has in the past engaged in legal proceedings with labor unions
and its subsidiary, Holt Cargo Systems, Inc. ("Holt Cargo") is currently the
claimant in an arbitration with the ILA. Although Holt Cargo and certain of the
other Holt Subsidiaries currently have "no strike" clauses in all of their
collective bargaining agreements, there can be no assurance that the unions will
not engage in a work stoppage or strike in the future. Although the Company
believes that relations with the unions are satisfactory, a prolonged work
stoppage or strike by its unionized work force could have a material adverse
effect on the Company's results of operations. See "Business -- Holt --
Employees" and "-- NPR -- Employees and Labor Relations."
POTENTIAL WITHDRAWAL LIABILITY AT PORT OF NEW YORK
NPR has an obligation to contribute to the NYSA-ILA Pension Fund for the
benefit of unionized stevedores who handle NPR's ships in the port located in
Elizabeth, New Jersey. The Pension Fund is a multiemployer pension plan subject
to the withdrawal liability provisions of ERISA. In the event NPR incurs a
complete withdrawal from the Pension Fund, either by completely terminating all
contributing operations in the Port of New York, or by permanently ceasing to
have a legal obligation to contribute to the Pension Fund, NPR will incur a
withdrawal liability that currently is estimated at up to approximately $17.1
million plus interest, payable over an eight-year period.
In the event NPR does not make contributions to the Pension Fund during
three consecutive years equal to at least 30% of the highest yearly level in
effect during the prior five years, NPR will incur a partial withdrawal
liability equal to a fraction of the complete withdrawal liability. The fraction
will be based on a comparison of NPR's contributing operations in the year after
the partial withdrawal to the five-year average level of operations prior to the
year of withdrawal (or prior to the three-year decline). Partial withdrawal also
would be payable over the same period as a complete withdrawal, commencing at
least one full year after the year of partial withdrawal.
Pursuant to a settlement agreement with NPR's predecessor, the Puerto Rico
government has established an escrow account with the Pension Fund. If NPR
incurs a complete withdrawal or partial withdrawal and does not pay the assessed
liability when due, the Pension Fund is entitled to collect against the escrow
account. NPR is required to indemnify the Puerto Rico government for its
liability in this regard and the Puerto Rico government is entitled to confess
judgement against NPR for such liability. In addition, any withdrawal liability
obligations are joint and several liabilities of all members of NPR's control
group, including the Company, pursuant to ERISA.
Although the Company plans to structure the relocation of NPR's
northeastern port of call from Elizabeth, New Jersey to the Packer Avenue
Facility in a manner designed to ensure that a partial or complete withdrawal
will not occur, there can be no assurance that such plans will be successful or
that such plans will not change. Accordingly, there can be no assurance (i) that
the Company will not incur a partial withdrawal liability or the full withdrawal
liability (currently estimated at up to approximately $17.1 million plus
interest, payable over eight years), (ii) that the full withdrawal liability
will not exceed $17.1 million plus interest or (iii) that any withdrawal
liability incurred would not be required to be paid over less than eight years.
NPR'S RELIANCE ON LIMITED MARKETS
Most of NPR's revenues currently are attributable to freight moving either
to or from Puerto Rico, accounting for 88.8% of NPR's ocean revenues in 1997 and
90.3% in 1998. Accordingly, NPR's results are affected by economic conditions
and business cycles in Puerto Rico that may or may not be similar to those in
the continental United States. NPR's reliance on the Puerto Rico market makes it
susceptible to changes to which it would not otherwise be exposed if it operated
in a more geographically diverse market, including a downturn in the local
economy, local competitive factors, changes in government regulations and
changes in government administrations and other political changes. For example,
over time, there has been a significant increase in the amount of foreign (non-
United States) exports into Puerto Rico such that, based on the Company's
estimates, foreign cargo (containerized and non-containerized), has grown from
approximately 24% of total imports to Puerto Rico in 1992 to approximately 29%
in 1996. In addition, the United States Congress has passed legislation that
establishes a phase-out of Section 936 of the Code which allows for favorable
United States tax treatment of profits resulting from manufacturing operations
in Puerto Rico. The phase-out began in January 1996 and continues until January
2006. This favorable tax provision has contributed
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to economic growth in Puerto Rico in the past by enticing United States
corporations to establish manufacturing operations in Puerto Rico. Furthermore,
any change in Puerto Rico's political status with the United States, or the
ongoing debate on such status, could affect the economy of Puerto Rico. The
ultimate effect of the phase-out of Section 936 or of possible changes in Puerto
Rico's governmental and political status is uncertain and, accordingly, there
can be no assurance that such issues will not adversely affect NPR.
POTENTIAL LOSS OF JONES ACT PROTECTION
The Company's marine operations are conducted primarily in the United
States domestic trade, which, by virtue of a set of federal laws known as the
Jones Act, require that only United States built, owned and crewed vessels move
freight between ports in the United States, including the non-contiguous areas
of Puerto Rico, Alaska, Hawaii and Guam. There have been repeated attempts to
modify these laws, and efforts to effect such modifications are expected to
continue in the future. The Company already is subject to vigorous competition,
and modification or relaxation of Jones Act requirements could lead to potential
additional competition in its marine operations, including competition by
companies with financial resources greater than the Company that could be
committed to the construction of new vessels. While the Company believes that
the modification or relaxation of the Jones Act is unlikely at this time,
significant modification or relaxation of the Jones Act could result in
additional competition from larger or lower cost carriers. There is no assurance
that any modification or relaxation of the Jones Act would not have a material
adverse effect on the value of the Company's vessels or on the results of
operations of the Company in the domestic trades it now serves or expects to
serve in the future.
GROWTH STRATEGIES
The Company intends to expand its services and grow its businesses
primarily through controlled internal growth and pursuit of growth opportunities
created by the Acquisition. See "Business -- The Company -- Operating
Strengths." The Company also may, from time to time, make opportunistic
acquisitions of complementary businesses. Each of these growth strategies
requires both capital investments and commitment of management resources, and
there can be no assurance that, even after such investments and commitment of
resources, such strategies will be successful.
In order to facilitate its expansion to the 53-foot "big box" container
market, NPR has recently completed the modification of two of its vessels to
accommodate 53-foot containers in addition to all other standard-sized
containers, and the Company expects to enter this market in late 1999. There can
be no assurance that new business opportunities will be developed to justify
this investment. See "Business -- NPR -- Overview of Operations."
RELATED ENTITY TRANSACTIONS
Significant assets utilized by the Company, including the lease for the
Packer Avenue Facility and the ownership of the management information systems
used in Holt's operations, including CTS, are held by Astro Holdings, Inc.
("AHI") or SLS Services, Inc. ("SLS"), both of which are controlled by Leo A.
Holt and Michael J. Holt, each of whom is a director of the Company and a son of
Thomas J. Holt, Sr., the Chairman, President and Chief Executive Officer of the
Company. AHI subleases the Packer Avenue Facility (which includes four container
cranes) and leases certain additional equipment to Holt. SLS provides the
Company with certain administrative services such as accounting, billing, MIS
(including CTS) and risk management services. In addition, certain other
companies which are majority owned by Thomas J. Holt, Sr. (the "Non-consolidated
Affiliates") provide to or procure from the Company various assets and services,
including warehouse space, building and equipment maintenance and stevedoring
services. See "Certain Transactions" and Notes 10 and 11 of "Notes to
Consolidated Financial Statements" of the Company.
The Company may enter into other material transactions and agreements with
these companies (or other companies under the control of such directors and
executive officers of the Company) from time to time in the future. The terms of
any future transactions and agreements may be more or less favorable to the
Company than the terms of the arrangements and agreements currently in effect.
The ability of the Company to enter into transactions with related parties is
limited pursuant to the
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Indenture. See "Description of the New Notes -- Certain Covenants -- Limitation
on Transactions with Affiliates."
The interests of certain of the Company's directors in AHI, SLS and/or the
Non-consolidated Affiliates (or other companies under their control) could give
rise to conflicts of interest. Such conflicts could arise for example, in
transactions involving business dealings between the Company and such companies
or in connection with potential acquisitions or other business opportunities.
There can be no assurance that any such conflicts of interest would be resolved
in a manner satisfactory to the holders of the Notes.
DEPENDENCE ON CERTAIN CUSTOMERS
For the years ended December 31, 1996, 1997 and 1998, Holt's 15 largest
customers accounted for 50.1%, 48.8% and 54.3%, respectively, of total revenues.
No customer accounted for more than 10% of Holt's total revenues for the years
ended December 31, 1996, 1997 or 1998, other than Columbus Line, Inc., which
accounted for 10.5% of such revenue during 1996 and 1997. For the period from
March 3, 1995 to December 31, 1995, the year ended January 5, 1997 and the
period beginning January 6, 1997 and ended November 20, 1997, NPR's 15 largest
customers accounted for 26.6%, 28.5% and 27.5%, respectively, of NPR's total
revenues. No customer accounted for more than 10% of NPR's total revenues in any
such period.
Most of Holt's customer contracts have terms of one to five years, but are
terminable on notice of between 30 and 180 days by either party. There can be no
assurance that existing customer contracts will not be terminated prior to the
end of their term or that such customer contracts will be renewed or that new
customer contracts will be entered into on terms favorable to the Company. A
majority of NPR's customers are parties to Time-Volume Agreements ("TVAs") or
fixed rate contracts which are generally one year in duration and terminable by
the customer at any time upon payment of a specified penalty. The sudden loss of
or reduction in demand for its services from a significant group of customers of
any of the Company's subsidiaries could have a material adverse effect on the
Company's or such subsidiary's business and results of operations. See "Business
- -- Holt -- Customers" and "-- NPR -- Customers."
EFFECTS OF ECONOMIC FACTORS
Economic recession, changes in fuel prices and the supply of fuel,
increases in fuel or energy taxes, interest rate fluctuations, changes in the
cost of insurance and customers' business cycles are economic factors that
affect the Company's business, but over which the Company has little or no
control. NPR, like its competitors, currently passes fuel price increases
through to substantially all of its customers, including customers who are
parties to TVAs or fixed rate contracts. To the extent that increased expenses
resulting from these factors cannot be passed through to customers, there could
be a material adverse effect on the Company's profitability. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COMPETITION
Each of the industries in which the Company operates is highly competitive.
Competition in the cargo handling and transportation industry is based upon,
among other things, price, timeliness of delivery, adequacy and location of
facilities and quality of service. NPR faces price competition from competitors
in the Puerto Rico market some of which are part of larger transportation
organizations which possess greater financial resources than the Company. There
can be no assurance that the Company will be able to compete successfully
against current and future sources of competition or that the current and future
competitive pressures faced by the Company will not adversely affect its
profitability or financial performance. See "Business -- Holt -- Competition"
and "-- NPR -- Competition."
RISK MANAGEMENT AND CLAIMS EXPOSURE
The Company's current operations utilize a limited number of major items of
capital equipment, including container cranes and oceangoing vessels, the loss
of any of which could have a material adverse effect on the Company. The
operation of any marine vessel involves the risk of catastrophic events due to
various perils of the sea. In addition, certain of the Company's ports are
vulnerable to the
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risk of hurricanes. The hazards associated with these events include (i) the
risk of loss of or damage to the Company's facilities, vessels or third parties
(including customers) from impact, fire or explosion, (ii) loss or contamination
of cargo, (iii) personal injury of employees or third parties, and (iv)
pollution and other environmental damages. In the event of either a total loss
of or major damage to any vessel, container crane or port facility, there can be
no assurance that the Company could locate a suitable replacement or, if
available, that such replacement could be obtained on suitable terms. Although
the Company maintains insurance coverage against these hazards, there can be no
assurance that such insurance will be adequate to cover any losses or damages
resulting from such hazards. Although the Company owns a fifth vessel which can
be made available to be rotated into service when one of the four others vessels
currently in operation is in need of maintenance or repair, there can be no
assurance that the loss of, damage to or significant required repair to any of
the Company's vessels, container cranes or port facilities in the future would
not have a material adverse effect on the Company. In addition, to the extent
that the Company experiences a significant increase in the frequency or severity
of accidents or workers' compensation claims, or unfavorable developments on
existing claims, the Company's operating results and financial condition could
be materially adversely affected. Significant increases in the Company's claims
and insurance cost, to the extent not offset by rate increases, would reduce the
Company's profitability.
ENVIRONMENTAL MATTERS
The Company's operations are subject to various environmental laws and
regulations dealing with the transportation, storage, presence, use, disposal
and handling of hazardous materials and hazardous wastes, discharge of storm
water and vessel fuel delivery. The Company is not aware of any material fuel
spills on land or at sea or any material hazardous substance contamination on
its properties and believes that its operations are in material compliance with
existing environmental laws and regulations. However, if any material hazardous
substance contamination were found on the Company's properties or if the Company
were found to be in material violation of applicable laws and regulations, the
Company could be responsible for material clean-up costs, property damage, and
fines or other penalties, any one of which could have a material adverse effect
on the Company. See "Business -- Holt -- Environmental Matters" and "-- NPR --
Environmental Matters."
GOVERNMENT REGULATION
The Company is subject to regulation by various federal and state agencies,
including the Surface Transportation Board, the United States Maritime
Administration ("MARAD"), the Federal Maritime Commission and the United States
Coast Guard. These regulatory authorities have broad powers, generally governing
activities such as authority to engage in motor carrier operations, operational
safety, accounting systems, tariff filings of freight rates, certain mergers,
consolidations and acquisitions, contraband, environmental contamination and
financial reporting. NPR's containerized shipping operations are conducted
primarily in the United States domestic trade, which, by virtue of the Jones
Act, require that only United States built, owned and crewed vessels move
freight between ports in the United States, including the noncontiguous areas of
Puerto Rico, Alaska, Hawaii and Guam. The Company also is subject to regulations
promulgated by the United States Environmental Protection Agency ("EPA") and
similar state agencies. Although the Company believes that its operations are in
material compliance with current laws and regulations, there can be no assurance
that current regulatory requirements will not change or that any noncompliance
with such requirements will not occur or be discovered. See "Business -- Holt --
Government Regulation" and "-- NPR -- Government Regulation."
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent upon its senior management team, as
well as its ability to attract and retain qualified personnel. The Company's
Chairman, President and Chief Executive Officer, Thomas J. Holt, Sr., and
certain of the Company's other executive officers have extensive experience in
the maritime cargo handling industry. The Company does not maintain "key man"
life insurance on Mr. Holt or any other member of the Company's senior
management team. Loss of the services of certain of these individuals could have
a material adverse effect on the Company's operations. Additionally, there is
substantial competition for qualified personnel in the cargo handling
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and transportation industry. There can be no assurance that the Company will be
able to retain its existing senior management team or attract additional
qualified personnel. See "Management."
CONTROLLING STOCKHOLDER; CHANGE OF CONTROL
Thomas J. Holt, Sr. owns 100% of the outstanding common stock of the
Company, which is the only class of capital stock of the Company outstanding.
See "Sole Stockholder." As a result, Mr. Holt has the ability to elect the Board
of Directors of the Company, to approve or disapprove other matters requiring
stockholder approval, and to control the affairs and policies of the Company.
The interests of Mr. Holt as the sole equity holder of the Company may differ
from the interests of holders of Notes.
There can be no assurance that Mr. Holt will continue to control the
Company. A change of control would be an event of default under the Revolving
Credit Facility and certain of the Other Indebtedness and Financings, permitting
the lenders under the Revolving Credit Facility and certain Other Indebtedness
and Financings to exercise remedies, and would require the Company to make an
offer to purchase all of the outstanding Notes under the Indenture. The
inability to repay indebtedness under the Revolving Credit Facility and certain
Other Indebtedness and Financings, if accelerated, or to purchase all of the
Notes, would also constitute an event of default under the Indenture. See
"Description of Certain Indebtedness" and "Description of the Notes -- Certain
Covenants." No assurance can be given that the Company will be able to comply
with its obligations under the Revolving Credit Facility and Other Indebtedness
and Financings in the event of a change of control or to refinance any of its
obligations thereunder or other obligations that might become due by the reason
of these provisions. Thus, in the event the Company was unable to meet its
obligations, there may not be any resources available to meet claims for payment
on the Notes.
PENDING LITIGATION
NPR is the defendant in a lawsuit filed in November 1996 in the United
States District Court for the District of Puerto Rico (Ocean Logistics
Management, Inc. v. NPR, Inc., No. 96-2388 DRD). The plaintiff seeks damages
arising out of an agreement between the plaintiff and NPR whereby NPR offered a
discounted freight rate to the plaintiff in exchange for shipment of a
guaranteed volume of containers between the mainland United States and Puerto
Rico. The plaintiff claims that NPR unilaterally terminated the agreement
approximately two and one-half months before its termination date, allegedly
causing damages to the plaintiff. In its first amended complaint, the plaintiff
asserted causes of action claiming breach of contract, breach of a distribution
contract pursuant to Puerto Rico law, tortious interference with contractual
relations, liability for outstanding commissions and trucking claims and $12
million for the fifth claim (presumably because of the treble damages provisions
of the Sherman act). On February 26, 1999, the Court ordered the Plaintiff to
show cause why its cause of action claiming liability for outstanding
commissions and trucking claims should not be dismissed in light of the fact
that the Court on the same date dismissed all of the Plaintiff's other causes of
action. Although the Company believes that any liability of NPR in connection
with the lawsuit will be substantially less than $4 million, there can be no
assurance in that regard or that the resolution of this lawsuit will not have a
material adverse effect on the Company's financial condition or results of
operations. See "Business -- NPR -- Legal Proceedings."
FRAUDULENT TRANSFER CONSIDERATIONS
The obligations of any Guarantor under its Guarantee may be subject to
avoidance under state fraudulent transfer or conveyance laws or federal
bankruptcy law. If a court were to find, in a lawsuit by an unpaid creditor of a
Guarantor or a representative of creditors, such as a trustee in bankruptcy, (i)
that such Guarantor incurred the indebtedness represented by its Guarantee with
the intent to hinder, delay or defraud present or future creditors, or received
less than a reasonably equivalent value or fair consideration for any such
indebtedness and (ii) at the time of such incurrence (a) was insolvent, (b) was
rendered insolvent by reason of such incurrence, (c) was engaged or about to
engage in a business or transaction for which its remaining assets constituted
unreasonably small capital to carry on its business, or (d) intended to incur,
or believed or reasonably should have believed that it would incur debts beyond
its ability to pay as such debts matured, such court could avoid such
Guarantor's obligations under its Guarantee, subordinate such Guarantee to all
other indebtedness of such Guarantor or take other action detrimental to the
holders of the Notes. In such an event, there can be no
24
<PAGE>
assurance that any payment on such Guarantee could ever be recovered by holders
of the Notes. In addition, any payments by any Guarantor pursuant to such
Guarantor's Guarantee could be avoided and may be required to be returned to
such Guarantor or to a fund for the benefit of its creditors.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, a Guarantor would be considered insolvent if the
sum of its debts, including contingent liabilities, were greater than the fair
salable value of all of its assets at a fair valuation or if the present fair
salable value of its assets were less than the amount that would be required to
pay its probable liability on its existing debts, including contingent
liabilities, as they become absolute and mature. Although the Company believes
that each of the Guarantors is solvent under the foregoing standards, there can
be no assurance as to what standard a court would apply in making such
determination or that a court would reach the same conclusion. See "Description
of the Notes -- Guarantees; Certain Bankruptcy Limitations."
In rendering their opinions with respect to the validity of the Notes and
the Guarantees, counsel for the Issuer and the Guarantors and counsel for the
Initial Purchaser will not express any opinion as to the applicability of
federal or state statutes relating to fraudulent conveyances and obligations.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The New Notes are a new issue of securities, have no established trading
market, and may not be widely distributed. The Company does not intend to list
the New Notes on any national securities exchange or to seek the admission
thereof to trading in The Nasdaq Stock Market. The Initial Purchaser has advised
the Company that it intends to make a market in the Notes as permitted by
applicable laws and regulations; however, the Initial Purchaser is not obligated
to do so, and may discontinue any such market making activities at any time
without notice. In addition, such market making activity may be limited during
the Exchange Offer. Therefore, no assurance can be given that an active public
or other market will develop for the New Notes or as to the liquidity of or the
trading market for the New Notes. If a trading market does not develop or is not
maintained, holders of the New Notes may experience difficulty in reselling the
New Notes or may be unable to sell them at all. If a market for the New Notes
develops, any such market may be discontinued at any time. If a public trading
market develops for the New Notes, future trading prices of the New Notes will
depend on many factors, including, among other things, prevailing interest
rates, the Company's results of operations and the market for similar
securities, and the price at which the holders of New Notes will be able to sell
such New Notes is not assured and the New Notes could trade at a premium or
discount to their purchase price or face value. Depending on prevailing interest
rates, the market for similar securities and other facts, including the
financial condition of the Company, the New Notes may trade at a discount from
their principal amount.
ABSENCE OF REGISTRATION UNDER STATE SECURITIES LAWS
The New Notes have not been registered or qualified under any state
securities laws. The Exchange Offer is being made both to U.S. institutional
investors, pursuant to exemptions from such laws for sales to such investors,
and to non-U.S. persons (within the meaning of Regulation S under the Securities
Act), as state securities laws do not apply to sales to persons who are not
residents of any state. In order to acquire the Old Notes, each Holder of Old
Notes was required to represent to the Company that it was either (i) a
"qualified institutional buyer" within the meaning of the Rule 144A under the
Securities Act, (ii) an institutional "accredited investor" within the meaning
of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act or
(iii) a non-U.S. person within the meaning of Regulation S under the Securities
Act. Holders who wish to exchange their Old Notes for New Notes pursuant to the
Exchange Offer will be required to represent to the Company that they remain
institutional investors or non-U.S. persons, as they represented at the time
they acquired their Old Notes. Any Holder who no longer qualifies as such an
institutional investor (e.g., a bank whose charter has been revoked) or who is
no longer a non-U.S. person, as the case may be, will not be entitled to
exchange such Old Notes for New Notes in the Exchange Offer, unless another
state securities law exemption is available. If no such exemption is available,
the Holder will continue to hold the Old Notes, which will continue to be
subject to the restrictions on transfer as set forth in the legend thereon.
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<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes for resale under the Securities Act. New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold or otherwise transferred by holders thereof (other than any
such holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act and other than any broker-dealer who purchased Old
Notes directly from the Company for resale pursuant to Rule 144A under the
Securities Act or any other available exemption under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such Notes. Each broker-dealer that
acquired Old Notes for its own account as a result of market making or other
trading activities and that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that, by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
effective date of this Prospectus, it will make this Prospectus, as it may be
amended or supplemented from time to time, available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution." However, to
comply with the securities laws of certain jurisdictions, if applicable, the New
Notes may not be offered or sold unless they have been registered or qualified
for sale in such jurisdictions or an exemption from registration or
qualification is available and is complied with. To the extent that Old Notes
are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes will be adversely affected.
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<PAGE>
THE ACQUISITION AND THE REFINANCINGS
On November 20, 1997, the Issuer acquired NPR pursuant to a Stock Purchase
Agreement dated September 25, 1997, with NPR Holding Corporation and the former
shareholders (the "Sellers") of NPR Holding Corporation (as amended, the
"Agreement"). Pursuant to the Agreement, on November 20, 1997, the Issuer paid
to the Sellers $44.0 million in cash and issued to the Sellers $25.0 million in
aggregate principal amount of Seller Notes. In connection with the Acquisition,
the Issuer also contributed $39.7 million to NPR which was used to repay
outstanding indebtedness of NPR, repaid $31.6 million of Holt's outstanding
indebtedness and redeemed NPR's outstanding preferred stock for $0.7 million
(collectively, the "Refinancings"). The Issuer obtained the funds required to
complete the Acquisition and the Refinancings from: (i) the issuance by the
Company of Bridge Notes to an affiliate of the Initial Purchaser in the
principal amount of $100.0 million; (ii) the issuance of $25.0 million of Seller
Notes to the Sellers; and (iii) the sale/leaseback of certain NPR containers,
gensets and chassis which generated cash proceeds of $24.0 million.
In addition, in connection with the Acquisition, NPR entered into five-year
employment agreements with certain members of NPR management ("NPR Senior
Management"). In addition, NPR granted NPR Senior Management "Phantom Stock
Units" representing the right to receive, in the aggregate, the fair market
value of up to 10% of the NPR common stock outstanding on the grant date,
computed on a fully diluted basis as if the Phantom Stock Units were outstanding
shares of NPR common stock, subject to vesting based on the achievement of
specified performance goals and subject to certain conditions. See "Management
- -- NPR 1997 Phantom Stock Plan." Pursuant to the terms of the Agreement, NPR
also distributed to the Sellers 10% of the outstanding capital stock of TNX and
retained a 40% ownership interest in TNX. Contemporaneous with the closing, NPR
caused $670,000 in cash bonuses to be distributed to certain management
employees of NPR (excluding NPR Senior Management).
The Issuer's contractual recourse against the Sellers under the Agreement
is extremely limited. The Agreement does not provide for contractual
indemnification from the Sellers and provides that no representations and
warranties of the Sellers survive closing, except as to title to the acquired
shares.
The following table sets forth the sources and uses of funds in connection
with the Acquisition and the Refinancings. See "Description of Certain
Indebtedness."
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
---------------------
<S> <C>
SOURCES OF FUNDS:
Sale/leaseback of equipment........................ $ 24.0
Seller Notes....................................... 25.0
Bridge Notes....................................... 100.0
------
Total Sources................................... $149.0
======
USES OF FUNDS:
Purchase NPR common stock.......................... $ 69.0
Refinance NPR debt................................. 39.7
Redeem NPR preferred stock......................... 0.7
Refinance Holt debt................................ 31.6
Transaction expenses............................... 4.8
Working capital.................................... 3.2
------
Total Uses...................................... $149.0
======
</TABLE>
27
<PAGE>
REORGANIZATION OF THE COMPANY
The Issuer was capitalized in October 1997 to consolidate the operations of
the Holt Subsidiaries under the Issuer. On October 31, 1997, pursuant to the
Reorganization, Thomas J. Holt, Sr. contributed all of the outstanding shares of
capital stock of each of the Holt Subsidiaries to the Issuer, all of the
outstanding stock of which is owned by Mr. Holt. Following the Reorganization,
each of the Holt Subsidiaries became a direct or indirect wholly-owned
subsidiary of the Issuer. The Holt Subsidiaries remain liable for all of their
existing and contingent liabilities relating to periods prior to the
Reorganization. The Issuer is a holding company and conducts no business and
holds no assets other than the outstanding capital stock of Holt and NPR. See
"Risk Factors -- Holding Company Structure." Upon consummation of the
Acquisition, NPR became a wholly owned subsidiary of the Issuer. See "The
Acquisition and the Refinancings."
Historically, the Holt Subsidiaries and the Non-consolidated Affiliates
were operated as a group under the common control of Thomas J. Holt, Sr. The
Non-consolidated Affiliates are engaged in businesses which are not directly
related to the Company's business, including steamship agency and chartering,
ice manufacturing, real estate rental and warehouse labor subcontracting. The
Non-consolidated Affiliates will continue to be controlled by Thomas J. Holt,
Sr. after completion of the Offering. Holt and the Non-consolidated Affiliates
provide services and goods to each other. See "Risk Factors -- Related Entity
Transactions" and "Certain Transactions."
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<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company to the Initial Purchasers on January
21, 1998, pursuant to the Purchase Agreement. The Initial Purchaser subsequently
resold the Old Notes in reliance on Rule 144A under the Securities Act and
certain other exemptions under the Securities Act. The Company and the Initial
Purchaser also entered into the Registration Rights Agreement, pursuant to which
the Company agreed, with respect to the Old Notes, to (i) cause to be filed, on
or prior to April 21, 1998, a registration statement with the Commission under
the Securities Act concerning the Exchange Offer, (ii) use its reasonable best
efforts to cause such registration statement to be declared effective by the
Commission on or prior to July 20, 1998 and (iii) to cause the Exchange Offer to
remain open for a period of not less than 30 days. This Exchange Offer is
intended to satisfy the Company's exchange offer obligations under the
Registration Rights Agreement.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal, to exchange $1,000
in principal amount of the New Notes for each $1,000 in principal amount of the
outstanding Old Notes. The Company will accept for exchange any and all Old
Notes that are validly tendered on or prior to 5:00 p.m., New York City time, on
the Expiration Date. Tenders of the Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to the conditions, terms
and provisions of the Registration Rights Agreement. The form and terms of the
New Notes will be identical in all material respects to the form and terms of
the Old Notes, except that (i) the New Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof, (ii) subject to certain limited exceptions, holders of New Notes will
not be entitled to Liquidated Damages, and (iii) holders of New Notes will not
be, and upon consummation of the Exchange Offer, Holders of Old Notes will no
longer be, entitled to certain rights under the Registration Rights Agreement
intended for holders of unregistered securities. See "-- Conditions of the
Exchange Offer."
Old Notes may be tendered only in multiples of $1,000. Subject to the
foregoing, Holders may tender less than the aggregate principal amount
represented by the Old Notes held by them, provided that they appropriately
indicate this fact on the Letter of Transmittal accompanying the tendered Old
Notes (or so indicate pursuant to the procedures for book-entry transfer).
As of the date of this Prospectus, $140.0 million in aggregate principal
amount of the Old Notes is outstanding, the maximum amount authorized by the
Indenture for all Notes. As of March 31, 1999, CEDE was the sole registered
holder of the Old Notes and held $140.0 million of aggregate principal amount of
the Old Notes for 30 of its participants. Solely for reasons of administration
(and for no other purpose), the Company has fixed the close of business on
_________, 1999, as the record date (the "Record Date") for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially. Only a Holder of the Old Notes (or such Holder's legal
representative or attorney-in-fact) may participate in the Exchange Offer. There
will be no fixed record date for determining Holders of the Old Notes entitled
to participate in the Exchange Offer. The Company believes that, as of the date
of this Prospectus, no such the Holder is an affiliate (as defined in Rule 405
under the Securities Act) of the Company.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
of Old Notes and for the purposes of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted
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<PAGE>
Old Notes will be returned, without expense, to the tendering Holder thereof as
promptly as practicable after the Expiration Date.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Expiration Date shall be ___________, 1999 at 5:00 p.m., New York City
time, unless the Company, in its sole discretion, extends the Exchange Offer, in
which case the Expiration Date shall be the latest date and time to which the
Exchange Offer is extended (which will in no event exceed 90 days from the
commencement of the Exchange Offer).
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Such notice and
public announcement shall set forth the new Expiration Date of the Exchange
Offer.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, (ii) to extend the Exchange Offer, (iii) if any of the
conditions set forth below under "Conditions of the Exchange Offer" shall not
have been satisfied, to terminate the Exchange Offer by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, and (iv)
to amend the terms of the Exchange Offer in any manner. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will, in accordance with applicable law, file a post-effective
amendment to the registration statement (a "Post-effective Amendment") and
resolicit the registered holders of the Old Notes. If the Company files a
Post-effective Amendment, it will notify the Exchange Agent of an extension of
the Exchange Offer by oral or written notice, and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the effectiveness of such Post-effective Amendment. Such
notice and public announcement shall set forth the new Expiration Date, which
new Expiration Date shall be no less than five days after the then applicable
Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject to
the condition that it does not violate any applicable law or interpretation of
the staff of the Commission.
Further, as a condition to its participation in the Exchange Offer, each
Holder of Old Notes (including, without limitation, any Holder who is a
Broker-Dealer) will be required to furnish a written representation to the
Company and the Guarantors (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the effect that
(i) it is not an affiliate of the Company, (ii) it is not engaged in, or does
not intend to engage in, and has no arrangement or understanding with any person
to participate in, a distribution of the New Notes to be issued in the Exchange
Offer and (iii) it is acquiring the New Notes in its ordinary course of
business. Each Holder using the Exchange Offer to participate in a distribution
of the New Notes will be required to acknowledge and agree that, if the resales
are of New Notes obtained by such Holder in exchange for Old Notes acquired
directly from the Company or an affiliate thereof, it (1) could not, under
Securities and Exchange Commission policy as in effect on the date of the
Registration Rights Agreement, rely on the position of the Commission enunciated
in Morgan Stanley and Co., Incorporated (available June 5, 1991) and Exxon
Capital Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling (available July 2, 1993) and K-III
Communications Corporation (available May 14, 1993), or similar no-action or
interpretive letters, and (2) must comply with the registration and prospectus
delivery requirements of the Exchange Act in connection with a secondary resale
transaction and that such a secondary sale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K,
unless an exemption from registration is otherwise available.
In addition, each Holder of Old Notes will be required to furnish a written
representation to the Company and the Guarantors (which may be contained in the
Letter of Transmittal contemplated by the Exchange Offer Registration Statement)
to the effect that they are either (A) a "qualified
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<PAGE>
institutional buyer" within the meaning of Rule 144A under the Securities Act,
(B) an institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act or (C) a non-U.S.
person within the meaning of Regulation S under the Securities Act.
TERMINATION OF CERTAIN RIGHTS
The Registration Rights Agreement provides that, subject to certain
exceptions, in the event of a Registration Default (as defined herein), Holders
of Old Notes are entitled to receive Liquidated Damages. A Registration Default
will be deemed to have occurred if (i) any registration statement required by
the Registration Rights Agreement is not filed with the Commission on or prior
to the applicable filing deadline, (ii) any registration statement has not been
declared effective by the Commission on or prior to the applicable effectiveness
deadline, (iii) the Exchange Offer has not been consummated within 30 days after
the Exchange Offer Registration Statement is first declared effective by the
Commission or (iv) any registration statement required by the Registration
Rights Agreement is filed and declared effective but shall thereafter cease to
be effective or fail to be usable for its intended purpose without being
succeeded immediately by a post-effective amendment to such Registration
Statement that cures such failure and that is itself declared effective
immediately. Liquidated Damages shall be calculated as an amount equal to $.05
per week per $1,000 in principal amount of Old Notes held by a Holder for each
week or portion thereof that the Registration Default continues (amounting to an
aggregate of $1,000 per day for the $140.0 million principal amount of Notes
outstanding) for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of liquidated damages shall increase by an
additional $.05 per week per $1,000 in principal amount of Old Notes with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of liquidated damages of $.50 per week per
$1,000 in principal amount of Old Notes. As a result of the Registration
Statement of which this Prospectus forms a part not yet having been declared
effective by the Commission, Liquidated Damages are accruing, currently at the
rate of $3,000 per day in the aggregate for the $140.0 million principal amount
of Notes outstanding. The Exchange Offer shall be deemed consummated upon the
occurrence of the delivery by the Company to the Registrar under the Indenture
of New Notes in the same aggregate principal amount as the aggregate principal
amount of Old Notes that are validly tendered by holders thereof pursuant to the
Exchange Offer. See "Description of New Notes -- Registration Rights --
Liquidated Damages."
ACCRUED INTEREST ON THE OLD NOTES
The New Notes will bear interest at a rate equal to 9 3/4% per annum from
and including their date of issuance. Holders whose Old Notes are accepted for
exchange will have the right to receive interest accrued thereon from the date
of their original issuance or the last Interest Payment Date, as applicable, to,
but not including, the date of issuance of the New Notes, such interest to be
payable with the first interest payment on the New Notes. Interest on the Old
Notes accepted for exchange, which interest accrued at the rate of 9 3/4% per
annum, will cease to accrue on the day prior to the issuance of the New Notes.
See "Description of New Notes -- General."
PROCEDURES FOR TENDERING OLD NOTES
The tender of a Holder's Old Notes as set forth below and the acceptance
thereof by the Company will constitute a binding agreement between the tendering
Holder and the Company upon the terms and subject to the conditions set forth in
this Prospectus and in the accompanying Letter of Transmittal. Except as set
forth below, a Holder who wishes to tender Old Notes for exchange pursuant to
the Exchange Offer must transmit such Old Notes, together with a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to the Exchange Agent at the address set
forth on the back cover page of this Prospectus prior to 5:00 p.m., New York
City time, on the Expiration Date. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS
OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. INSTEAD OF DELIVERY BY
MAIL, IT IS RECOMMENDED
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<PAGE>
THAT THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant hereto are tendered (i) by a registered holder of the Old Notes who has
not completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in the Letter of Transmittal or (ii) by
an Eligible Institution (as defined). In the event that a signature on a Letter
of Transmittal or a notice of withdrawal, as the case may be, is required to be
guaranteed, such guarantee must be by a firm which is a member of a registered
national securities exchange or the Nasdaq Stock Market, a commercial bank or
trust company having an office or correspondent in the United States or
otherwise be an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). If the
Letter of Transmittal is signed by a person other than the registered holder of
the Old Notes, the Old Notes surrendered for exchange must either (i) be
endorsed by the registered holder, with the signature thereon guaranteed by an
Eligible Institution or (ii) be accompanied by a bond power, in satisfactory
form as determined by the Company in its sole discretion, duly executed by the
registered holder, with the signature thereon guaranteed by an Eligible
Institution. The term "registered holder" as used herein with respect to the Old
Notes means any person in whose name the Old Notes are registered on the books
of the Registrar.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
Old Notes not properly tendered and to reject any Old Notes the Company's
acceptance of which might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such period of time as the Company shall determine. The Company
will use reasonable efforts to give notification of defects or irregularities
with respect to tenders of Old Notes for exchange but shall not incur any
liability for failure to give such notification. Tenders of the Old Notes will
not be deemed to have been made until such irregularities have been cured or
waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company, in its sole discretion, of
such person's authority to so act must be submitted.
Any beneficial owner of the Old Notes (a "Beneficial Owner") whose Old
Notes are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender Old Notes in the Exchange
Offer should contact such registered holder promptly and instruct such
registered holder to tender on such Beneficial Owner's behalf. If such
Beneficial Owner wishes to tender directly, such Beneficial Owner must, prior to
completing and executing the Letter of Transmittal and tendering Old Notes, make
appropriate arrangements to register ownership of the Old Notes in such
Beneficial Owner's name. Beneficial Owners should be aware that the transfer of
registered ownership may take considerable time.
By tendering, each registered holder will represent to the Company that,
among other things (i) the New Notes to be acquired in connection with the
Exchange Offer by the Holder and each Beneficial Owner of the Old Notes are
being acquired by the Holder and each Beneficial Owner in the ordinary course of
business of the Holder and each Beneficial Owner, (ii) the Holder and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the New Notes, (iii) the Holder and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer for
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<PAGE>
the purpose of distributing the New Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes acquired by such person and cannot
rely on the position of the staff of the Commission set forth in no-action
letters that are discussed herein under "Resales of New Notes," (iv) that if the
Holder is a broker-dealer that acquired Old Notes as a result of market making
or other trading activities, it will deliver a prospectus in connection with any
resale of New Notes acquired in the Exchange Offer, (v) the Holder and each
Beneficial Owner understand that a secondary resale transaction described in
clause (iii) above should be covered by an effective registration statement
containing the selling security holder information required by Item 507 of
Regulation S-K of the Commission, and (vi) neither the Holder nor any Beneficial
Owner is an "affiliate," as defined under Rule 405 of the Securities Act, of the
Company except as otherwise disclosed to the Company in writing. In connection
with a book-entry transfer, each participant will confirm that it makes the
representations and warranties contained in the Letter of Transmittal.
Guaranteed Delivery Procedures. Holders who wish to tender their Old Notes
and (i) whose Old Notes are not immediately available or (ii) who cannot deliver
their Old Notes or any other documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date (or complete the procedure for
book-entry transfer on a timely basis), may tender their Old Notes according to
the guaranteed delivery procedures set forth in the Letter of Transmittal.
Pursuant to such procedures: (i) such tender must be made by or through an
Eligible Institution and a Notice of Guaranteed Delivery (as defined in the
Letter of Transmittal) must be signed by such Holder, (ii) on or prior to the
Expiration Date, the Exchange Agent must have received from the Holder and the
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the Holder, the certificate number or numbers of the
tendered Old Notes, and the principal amount of tendered Old Notes, stating that
the tender is being made thereby and guaranteeing that, within three business
days after the date of delivery of the Notice of Guaranteed Delivery, the
tendered Old Notes, a duly executed Letter of Transmittal and any other required
documents will be deposited by the Eligible Institution with the Exchange Agent,
and (iii) such properly completed and executed documents required by the Letter
of Transmittal and the tendered Old Notes in proper form for transfer (or
confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC) must be received by the Exchange Agent within three
business days after the Expiration Date. Any Holder who wishes to tender Old
Notes pursuant to the guaranteed delivery procedures described above must ensure
that the Exchange Agent receives the Notice of Guaranteed Delivery and Letter of
Transmittal relating to such Old Notes prior to 5:00 p.m., New York City time,
on the Expiration Date.
Book-Entry Delivery. The Exchange Agent will establish an account with
respect to the Old Notes at the DTC ("Book-Entry Transfer Facility") for
purposes of the Exchange Offer promptly after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Old Notes by causing such
facility to transfer Old Notes into the Exchange Agent's account in accordance
with such facility's procedure for such transfer. Even though delivery of Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility, a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof), with
any required signature guarantees, or an Agent's Message (as defined below) in
connection with a book-entry transfer, and other documents required by the
Letter of Transmittal, must, in any case, be transmitted to and received by the
Exchange Agent at one of its addresses set forth on the back cover of this
Prospectus before the Expiration Date, or the guaranteed delivery procedure set
forth above must be followed. Delivery of the Letter of Transmittal and any
other required documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent. The term "Agent's Message" means a message
transmitted by the Book-Entry Transfer Facility to, and received by, the
Exchange Agent and forming a part of a book-entry confirmation, which states
that such Book-Entry Transfer Facility has received an express acknowledgment
from the participant in such Book-Entry Transfer Facility tendering the Old
Notes that such participant has received and agrees to be bound by the terms of
the Letter of Transmittal and that the Company may enforce such agreement
against such participant.
33
<PAGE>
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all the conditions to the Exchange Offer,
the Company will accept any and all Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange Offer will be delivered as soon as
practicable after acceptance of the Old Notes. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted validly tendered Old Notes,
when, as, and if the Company has given oral or written notice thereof to the
Exchange Agent.
In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents (or of confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC);
provided, however, that the Company reserves the absolute right to waive any
defects or irregularities in the tender or conditions of the Exchange Offer. If
any tendered Old Notes are not accepted for any reason, such unaccepted Old
Notes will be returned without expense to the tendering Holder thereof as
promptly as practicable after the expiration or termination of the Exchange
Offer.
WITHDRAWAL RIGHTS
Tenders of the Old Notes may be withdrawn by delivery of a written notice
to the Exchange Agent, at its address set forth on the back cover page of this
Prospectus, at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes, as applicable), (iii) be signed
by the Holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by a bond power in the name of the
person withdrawing the tender, in satisfactory form as determined by the Company
in its sole discretion, duly executed by the registered holder, with the
signature thereon guaranteed by an Eligible Institution together with the other
documents required upon transfer by the Indenture, and (iv) specify the name in
which such Old Notes are to be re-registered, if different from the Depositor,
pursuant to such documents of transfer. Any questions as to the validity, form
and eligibility (including time of receipt) of such notices will be determined
by the Company, in its sole discretion. The Old Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Old Notes which have been tendered for exchange but which
are withdrawn will be returned to the Holder thereof without cost to such Holder
as soon as practicable after withdrawal. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "The Exchange
Offer -- Procedures for Tendering Old Notes" at any time on or prior to the
Expiration Date.
THE EXCHANGE AGENT; ASSISTANCE
The Bank of New York is the Exchange Agent. All tendered Old Notes,
executed Letters of Transmittal and other related documents should be directed
to the Exchange Agent. Questions and requests for assistance and requests for
additional copies of the Prospectus, the Letter of Transmittal and other related
documents should be addressed to the Exchange Agent as follows:
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Hand/Overnight Facsimile Transmission:
Express:
The Bank of New York The Bank of New York (212) 815-6339
101 Barclay Street 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286 To confirm receipt:
Ground Level Attention: (212) 815-5924
Reorganization
New York, New York 10286 Section
Attention: Jackie Warren
</TABLE>
34
<PAGE>
SOLICITATION OF TENDERS; FEES AND EXPENSES
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will offers be
accepted from or on behalf of) holders of Notes in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Notes in
such jurisdiction.
All expenses incident to the Company's consummation of the Exchange Offer
and compliance with the Registration Rights Agreement will be borne by the
Company, including, without limitation: (i) all registration and filing fees
(including, without limitation, fees and expenses of compliance with state
securities laws), (ii) printing expenses (including, without limitation,
expenses of printing certificates for the New Notes in a form eligible for
deposit with DTC and of printing Prospectuses), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company and
the Guarantors, (v) fees and disbursements of independent certified public
accountants, (vi) rating agency fees, (vii) internal expenses of the Company and
the Guarantors (including, without limitation, all salaries and expenses of
officers and employees of the Company performing legal or accounting duties),
and (ix) fees and expenses incurred in connection with the listing, if any, of
the New Notes on a securities exchange.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss will be recognized by the Company for accounting
purposes. The expenses of the Exchange Offer will be amortized over the term of
the New Notes.
RESALES OF THE NEW NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that the New
Notes issued pursuant to the Exchange Offer to a Holder in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by such Holder
(other than (i) a broker-dealer who purchased Old Notes directly from the
Company for resale pursuant to Rule 144A under the Securities Act or any other
available exemption under the Securities Act, or (ii) a person that is an
affiliate of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that the Holder is acquiring the New Notes in
the ordinary course of business and is not participating, and has no arrangement
or understanding with any person to participate, in the distribution of the New
Notes. The Company has not requested or obtained an interpretive letter from the
Commission staff with respect to this Exchange Offer, and the Company and the
Holders are not entitled to rely on interpretive advice provided by the staff to
other persons, which advice was based on the facts and conditions represented in
such letters. However, the Exchange Offer is being conducted in a manner
intended to be consistent with the facts and conditions represented in such
letters. If any Holder acquires New Notes in the Exchange Offer for the purpose
of distributing or participating in a distribution of the New Notes, such Holder
cannot rely on the position of the staff of the Commission
35
<PAGE>
enunciated in Morgan Stanley & Co., Incorporated (available June 5, 1991) and
Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in
the Commission's letters to Shearman and Sterling (available July 2, 1993) and
K-III Communications Corporation (available May 14, 1993), or similar no-action
or interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, unless an exemption from registration is otherwise
available. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Company has agreed that for a period of 180 days after the effective date of
this Prospectus, it will make this Prospectus, as amended and supplemented,
available to any broker-dealer who receives New Notes in the Exchange Offer for
use in connection with any such resale. See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the offer or sale of the Old Notes pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exception from, or in a transaction not subject to, the
Securities Act and applicable states securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. See "Risk Factors -- Consequences of Failure to Exchange."
OTHER
Participation in the Exchange Offer is voluntary, and holders of Old Notes
should carefully consider whether to participate. Holders of the Old Notes are
urged to consult their financial and tax advisers in making their own decisions
on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Notes and will be entitled to all the
rights, and limitations applicable thereto, under the Indenture, except for any
such rights under the Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a result of the making of
this Exchange Offer. See "Description of New Notes." All untendered Old Notes
will continue to be subject to the restrictions on transfer set forth in the
Indenture. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered Old Notes could be adversely
affected.
The Company may in the future seek to acquire untendered Old Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Company has no present plan to acquire any Old Notes which are
not tendered in the Exchange Offer.
36
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1998 the capitalization
of the Company. This table should be read in conjunction with the historical
consolidated financial statements of the Company, together with the notes
thereto, and the information contained in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1998
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Cash and cash equivalents.................................. $ 4,821
Marketable securities...................................... 26,143(1)
--------
Total.................................................... $ 30,964
========
Debt (including current maturities)
Revolving Credit Facility................................ $ 37,000
Senior secured debt...................................... 80,814
Notes issued in the Offering............................. 140,000
--------
Total debt............................................ 257,814
Total stockholder's equity................................. 59,827(2)
--------
Total capitalization....................................... $317,641
========
</TABLE>
- ------------------
(1) It is Riverfront's intent to dividend the ACL shares and options it owns to
the Issuer, for ultimate distribution to the sole shareholder of the Issuer
or otherwise liquidate these marketable securities. See "Prospectus Summary
-- Investment in Atlantic Container Line AB."
(2) Includes $5.7 million of stockholder's equity of Riverfront, which is not a
Guarantor.
37
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth the selected historical consolidated
financial and operating data of the Company as of and for each of the five years
ended December 31, 1998 which have been derived in part from the audited
historical consolidated financial statements of the Company and the notes
thereto included elsewhere in this Prospectus. The selected historical
consolidated financial and operating data as of and for the years ended December
31, 1994 and 1995 are also audited and not included elsewhere herein. The data
presented below should be read in conjunction with the historical consolidated
financial statements of the Company and the related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (1):
Revenues.................................................. $ 54,409 $ 69,350 $ 73,076 $ 118,998 $ 370,476
Operating expenses:
Terminal expenses......................................... 13,102 19,753 24,125 30,431 103,960
General and administrative expenses....................... 7,875 9,591 8,865 26,112 55,517
Equipment maintenance..................................... 7,722 9,470 10,720 15,796 50,228
Insurance and safety...................................... 5,415 4,291 4,797 2,998 6,493
Vessel.................................................... -- -- -- 5,815 45,761
Transportation............................................ 2,506 2,857 2,917 9,346 58,048
Depreciation and amortization............................. 4,130 4,375 4,025 8,652 16,598
Losses on investment in joint venture..................... -- -- -- -- 9,016
Other operating expenses.................................. 4,950 3,840 1,868 1,434 1,293
---------- ---------- ---------- ---------- ----------
Total operating expenses.................................. 45,700 54,177 57,317 100,584 346,914
---------- ---------- ---------- ---------- ----------
Operating income (loss)................................... 8,709 15,173 15,759 18,414 23,562
Interest expense, net..................................... 6,090 7,875 8,154 9,211 18,780
Other (income)............................................ (1,212) (19) (694) (1,552) (5,777)
---------- ---------- ---------- ---------- ----------
Net income................................................ $ 3,919 $ 7,317 $ 8,299 $ 10,755 $ 10,559
========== ========== ========== ========== ==========
BALANCE SHEET DATA (END OF PERIOD) (1):
Fixed assets, net......................................... $ 85,327 $ 87,013 $ 90,056 $ 194,427 $ 195,265
Total assets.............................................. 145,556 164,754 172,479 382,378 436,230
Total debt................................................ 88,993 97,159 99,203 213,433 257,814
Stockholder's equity...................................... 38,455 44,172 49,422 72,729 59,827
OTHER DATA(1):
Ratio of earnings to fixed charges (2).................... 1.4x 1.7x 1.7x 1.6x 1.3x
EBITDA (3)................................................ $ 12,839 $ 19,548 $ 19,784 $ 27,066 $ 49,176
EBITDA margin (3)......................................... 23.6% 28.2% 27.1% 22.7% 13.3%
Cash flows provided by (used in) operating activities..... (4,039) (2,810) 17,205 24,533 15,510
Cash flows used in investing activities................... (9,743) (3,249) (16,365) (87,614) (57,832)
Cash flows provided by (used in) financing activities..... (7,060) 6,426 (1,419) 67,918 39,137
Capital expenditures...................................... $ 11,922 $ 6,034 $ 6,936 $ 9,674 $ 19,058
Number of ship calls...................................... 317 481 706 689 823
Tonnage of cargo handled.................................. 1,251,160 3,099,226 5,048,135 5,456,721 5,980,290
</TABLE>
- ------------------
(1) Includes NPR from November 20, 1997, the date of its acquisition by the
Company. Also includes Riverfront, which is not a Guarantor, and which owns
the ACL Shares. At December 31, 1997 and 1998, Riverfront had total assets
of $44.1 million and $30.0 million, respectively, and stockholder's equity
of $20.0 million and $5.7 million, respectively (including unrealized
appreciation on marketable securities of $16.6 million and unrealized
holding losses on marketable securities of $2.6 million, respectively). For
the years ended December 31, 1997 and 1998, Riverfront had dividends from
marketable securities of $1.6 million and $5.8 million, respectively, and
net income of $1.0 million and $4.8 million, respectively. As of the end of
and for all other periods presented (i.e. 1994-1996), Riverfront had no
material amount of assets, stockholder's equity, revenues or net income. See
"Prospectus Summary -- Investment in Atlantic Container Line AB."
(2) For purposes of this computation, fixed charges consist of interest expense,
amortization of deferred financing costs and one-third of rental expenses,
representing an approximation of that portion of rental expenses
attributable to interest. Earnings consist of income before income taxes,
extraordinary items and cumulative effect of changes in accounting
principles, plus fixed charges.
(3) The term EBITDA as used herein represents operating income plus depreciation
and amortization, adjusted to exclude certain non-recurring revenues and
expenses. EBITDA has been presented because the Company believes it is
commonly used in this or a similar format by investors to analyze and
compare operating performance and to determine a company's ability to
service and/or incur debt. However, EBITDA should not be considered in
isolation or as a substitute for net income, cash flow from operations or
any other measure of income or cash flow that is prepared in accordance with
generally accepted accounting principles, or as a measure of a company's
profitability or liquidity. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical financial
statements of Holt and NPR and the related notes thereto included elsewhere
in this Prospectus.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the "Unaudited Pro Forma
Condensed Financial Data" and the historical consolidated financial statements
of the Company and the historical consolidated financial statements of NPR and
the related notes thereto included elsewhere in this Prospectus.
OVERVIEW
Holt began operations in Philadelphia, Pennsylvania in 1926 as a one
man/one truck cargo hauling operation run by its founder, Leo A. Holt, Sr. In
the early 1950s, Holt entered the warehousing business with the acquisition of
its first warehouse in Philadelphia, Pennsylvania. As management of Holt passed
from the founder to his sons, Leo A. Holt, Jr. and Thomas J. Holt, Sr., Holt
continued to expand its warehousing business with the acquisition of additional
warehouses in Philadelphia and Camden, New Jersey. In 1967, Holt entered the
stevedoring business through the acquisition of the Gloucester Facility. Holt
has continued the expansion of its services since then through upgrades of its
existing facilities and additions of new facilities. In 1973, Holt broadened the
types of cargo it handled to include perishables, including meat and fruit, by
acquiring its first refrigerated warehouse. In recognition of a significant
trend toward containerization in the cargo transportation business, Holt
undertook a major construction program from 1977 to 1984 that enabled the
Gloucester Facility to handle containerized cargo. Upon the retirement of Leo A.
Holt, Jr. in 1982, Thomas J. Holt, Sr. became the majority stockholder of Holt,
and Thomas J. Holt, Sr. currently owns 100% of the capital stock of the Company.
The Packer Avenue Facility, owned by an agency of the Commonwealth of
Pennsylvania, is leased by AHI pursuant to a lease expiring in 2040, including
all renewal options. AHI subleases the Packer Avenue Facility to Holt. See "Risk
Factors -- Related Entity Transactions" and "Certain Transactions." In 1991,
Holt consolidated its container operations at the Packer Avenue Facility. In
1993, Holt began to lease the Gloucester Facility to Lessee-Operators. In 1994,
Holt established a base in the port of Wilmington, Delaware through its
formation of Murphy Marine Services, Inc. ("Murphy Marine") which, subsequent to
its acquisition of Wilmington Stevedores, Inc. in July 1995, has grown to become
that port's largest stevedore.
Holt has been an innovator in the methods of properly handling refrigerated
cargo, enabling the Lessee-Operators to reduce labor costs and pass through some
of their savings to their customers. In 1994, Holt implemented an intra-terminal
transit system to directly discharge refrigerated cargo in one movement from the
ship into the warehouse via a transit shed, while maintaining the product at a
constant temperature. This bypasses the need to truck the cargo from the pier to
an offsite warehouse, which helps minimize handling costs. Holt has constructed
three warehouse extensions to existing transit sheds, one each in 1994, 1996 and
1997. The implementation of this system has resulted in increases in rental fees
paid to Holt by the Lessee-Operators at the Gloucester Facility, as customers
find it increasingly attractive to transport and store their refrigerated cargo
through that facility.
In addition, CTS is available at the Holt Facilities and utilizes a special
bar-coding technology that provides customers with an innovative tracking system
for their cargo. The system is especially effective when the cargo is unitized
or characterized by contents of different weights, moisture content, or other
unique characteristics.
Today, Holt offers a broad range of services, including stevedoring,
warehousing and inland trucking of cargo. Holt also leases port facilities to
the Lessee-Operators at the Gloucester Facility. Through their operations at the
Holt Facilities, the Company and its Lessee-Operators handle various types of
cargoes, including refrigerated perishables, wood, steel, automobiles and
containerized cargo. Stevedoring and warehousing services are billed on a per
container basis for containerized cargo and a per weight or per unit basis for
breakbulk cargo. Holt's stevedoring services, which are charged for each
movement of cargo, consist of the loading or unloading of a ship and may include
pick-up of cargo from or delivery of cargo to, a destination in the marine
terminal. Fees for Holt's warehousing services, which consist of the handling
and storage of cargo, are based on a handling charge (both in
39
<PAGE>
and out of the warehouse) and a storage charge. Holt's trucking services are
billed on either a tonnage or a per load basis. In addition, the Gloucester
Facility is leased to the Lessee-Operators for periods of one to five years on
the basis of a fixed lease charge and, in some cases, a variable charge based on
the tonnage of cargo moved through the marine terminal. Holt also receives
revenues from ancillary activities, such as the maintenance and repair of
customer equipment.
The following table sets forth, for the periods indicated, the Company's
revenues, in thousands of dollars, by type of revenue and as a percentage of
total revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1997 1998
--------------- ---------------- ----------------
$ % $ % $ %
------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Stevedoring........................................ $44,001 60.2% $ 44,481 37.4% $ 44,917 12.1%
Warehousing........................................ 9,984 13.7% 11,887 10.0% 15,176 4.1%
Inland trucking.................................... 2,779 3.8% 3,285 2.8% 4,587 1.2%
Other operating revenues........................... 1,039 1.4% 1,269 1.1% 2,361 0.6%
Rental income...................................... 14,995 20.5% 24,007 20.1% 30,423 8.2%
Ocean revenues..................................... -- -- 31,404 26.4% 261,545 70.6%
Other.............................................. 269 .4% 2,610 2.2% 11,426 3.1%
Revenue from nonconsolidated affiliates............ 9 --% 55 --% 41 0.0%
------- ----- -------- ----- -------- -----
Total revenues..................................... $73,076 100.0% $118,998 100.0% $370,476 100.0%
======= ===== ======== ===== ======== =====
</TABLE>
Holt's major operating expense categories are as follows: (i) terminal;
(ii) general and administrative; (iii) equipment maintenance; (iv)
insurance/safety; and (v) transportation. Holt's terminal expenses consist
primarily of labor charges related to stevedoring and warehousing. General and
administrative expenses are comprised, for the most part, of corporate overhead.
Holt's equipment maintenance expenses are routine expenses which include the
maintenance of Holt's forklifts, cranes, truck, tractors, trailers, etc. The
insurance/safety expense provides for Holt's cost of insurance or claims filed
against it. Finally, Holt's transportation expense is comprised of the costs
associated with Holt's trucking operations, including labor, fuel, maintenance
and other expenses associated with its own fleet and fees paid to owner
operators.
In November 1997, the Company entered the marine transportation business
through the acquisition of NPR, whose predecessor was formed in 1974 by the
Puerto Rico Government in recognition of the vital importance of maritime
transportation to the economic development of Puerto Rico. When NPR's
predecessor commenced operations, it had a virtual monopoly. Over time, however,
the reemergence of competition, bureaucratic management and periodic turnover in
political administrations negatively affected its competitive position and
operating performance. In November 1992, the Puerto Rico Government began
publicly evaluating the merits of liquidating or divesting its interest in the
shipping business. Uncertainty surrounding the Puerto Rico Government's
intentions and the possibility of liquidation provided competitors with the
opportunity to increase their market shares. In March 1995, an investor group,
including certain members of NPR management, purchased NPR's business from the
Puerto Rico Government in the Privatization.
Since the Privatization, NPR's management has implemented various programs
to improve its operating performance. During 1998, NPR transported approximately
32.9% of the fully containerized cargo carried between the United States and
Puerto Rico, as compared to approximately 31.8% of such cargo during 1997.
Following the Privatization, NPR's management reduced operating costs by (i)
decreasing vessel expenses by reducing the number of vessels in operation from
five to four and reducing the number of ports of call in the United States from
five to two, while at the same time increasing the aggregate volume of cargo
carried, (ii) consolidating customer service activities into one service center
located in Tampa, Florida, (iii) trimming other corporate overhead by reducing
headcount from 676 at the time of the Privatization to 387 at December 31, 1998,
(iv) reducing intermodal transportation costs through the commitment of high
cargo volumes to railroads and trucking companies, (v) reducing advertising
costs and (vi) eliminating excess container capacity.
40
<PAGE>
NPR provides service three times per week between San Juan, Puerto Rico and
the United States via the port of Jacksonville, Florida and weekly service
between San Juan and the port of Philadelphia, Pennsylvania. In addition,
through charter arrangements, NPR provides service two times a week between San
Juan and the Dominican Republic and, through a slot charter arrangement, also
services the Caribbean island of Trinidad and the United States Virgin Islands.
NPR's ocean revenues are realized primarily through its northbound and
southbound ocean freight operations. In general, NPR bases its pricing on (i)
direction of the cargo (i.e. northbound or southbound), (ii) type of commodity
transported, (iii) destination of the transported cargo and (iv) market
conditions. In addition, a majority of the cargo transported by NPR in 1998 was
subject to time volume agreements ("TVAs") or fixed rate contracts which provide
NPR's customers with rates which are lower than NPR's "any quantity" tariff
rates, so long as the customer agrees to ship a minimum quantity of cargo over a
specified time period. NPR generates other revenues through third party
stevedoring in San Juan and demurrage (penalties assessed against customers for
holding NPR equipment beyond the contracted period).
NPR's operating expenses can be broadly categorized as follows: (i) vessel,
(ii) cargo handling, (iii) terminal, (iv) transportation and (v) selling,
general and administrative. Vessel expenses are directly attributable to the
operation and/or dry docking of vessels such as fuel expenses, crew wages and
repair costs. Cargo handling expenses are comprised of all of the costs
associated with loading and unloading a vessel, including stevedoring charges,
port assessments, wharfage and dockage. Terminal expenses include expenses
associated with NPR's land-based operations, including facilities and equipment
maintenance and repairs, warehousing, etc. Transportation expenses are all the
expenses associated with the in-land movement of cargo off-site via rail or
truck. Finally, selling, general and administrative expenses are comprised of
NPR's corporate overhead as well as its marketing expenditures.
RESULTS OF OPERATIONS OF THE COMPANY
The following table sets forth, for the periods indicated, the Company's
actual operating results in thousands of dollars and as a percentage of total
revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1997 1998
--------------- ---------------- ----------------
$ % $ % $ %
------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Operating revenues................................. $57,803 79.1% $ 92,326 77.6% $328,586 88.7%
Rental income...................................... 14,995 20.5 24,007 20.2 30,423 8.2
Other revenues..................................... 269 0.4 2,610 2.2 11,426 3.1
Revenues from non-consolidated affiliates.......... 9 -- 55 -- 41 --
------- ----- -------- ----- -------- -----
Total revenues..................................... 73,076 100.0 118,998 100.0 370,476 100.0
------- ----- -------- ----- -------- -----
Operating expenses:
Terminal......................................... 24,125 33.0 30,431 25.6 103,960 28.1
General and administrative....................... 8,865 12.1 26,112 21.9 55,517 15.0
Equipment maintenance............................ 10,720 14.7 15,796 13.3 50,228 13.6
Insurance and safety............................. 4,797 6.6 2,998 2.5 6,493 1.8
Vessel........................................... -- -- 5,815 4.9 45,761 12.4
Transportation................................... 2,917 4.0 9,346 7.9 58,048 15.7
Depreciation and amortization.................... 4,025 5.5 8,652 7.3 16,598 4.5
Losses on investment in joint venture............ -- -- -- -- 9,016 2.4
Other operating expenses......................... 1,868 2.6 1,434 1.2 1,293 0.3
------- ----- -------- ----- -------- -----
Total operating expenses....................... 57,317 78.4 100,584 84.5 346,914 93.6
------- ----- -------- ----- -------- -----
Operating income................................... $15,759 21.6% $ 18,414 15.5% $ 23,562 6.4%
------- ----- -------- ----- -------- -----
Net income......................................... $ 8,299 11.4% $ 10,755 9.0% $ 10,559 2.9%
======= ===== ======== ===== ======== =====
Calculation of EBITDA:
Operating income................................. 15,759 18,414 23,562
Depreciation and amortization.................... 4,025 8,652 16,598
Losses on investment in joint venture............ -- -- 9,016
------- -------- --------
EBITDA......................................... 19,784 27.1% 27,066 22.7% 49,176 13.3%
</TABLE>
41
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues. Revenues increased to $370.5 million, in 1998 from $119.0
million in 1997, an increase of $251.5 million, or 211.3%. This increase was
attributable primarily to the inclusion of $261.5 million of ocean freight
revenue in 1998 compared to ocean freight revenues of $31.4 million in 1997, an
increase of $230.1 million. This increase was due to the acquisition of NPR on
November 20, 1997. Total loads from ocean freight operations in 1998 were
124,549 compared to 121,759 loads for 1997, an increase of 2,790 loads, or 2.3%.
The increase in loads was offset by lower revenue per unit due to rate pressure
in the US-Puerto Rico trade routes. This competitive rate pressure is expected
to continue to impact NPR's revenues for the foreseeable future. Trucking
revenues increased to $4.6 million in 1998 from $3.3 million in 1997 an increase
of $1.3 million, or 39.4%. This increase was due to freight originating on NPR
vessels. Warehousing revenues increased to $15.2 million in 1998 compared to
11.9 million in 1997 an increase of $3.3 million, or 27.7%. This increase was
due to freight originating on NPR vessels. Stevedoring revenue increased to
$44.9 million in 1998 from $44.5 million in 1997 an increase of $0.4 million, or
0.9%. This increase was due to increased
vessel calls.
Rental income increased to $30.4 million for 1998 from $24.0 million in
1997, an increase of $6.4 million, or 26.7%. This $6.4 million increase was due
to increased leasing revenues from the Lessee-Operators at the Gloucester
Facility associated with increased tonnage of cargo handled due to the more
efficient intra-terminal handling system for refrigerated cargo combined with
the continued roll-out of the CTS bar-coding system as well as increased storage
and handling capacity due to additional facility space which was placed in
service during the second quarter of 1997.
The remaining increase of $9.9 million was due primarily to the inclusion
of third party stevedoring revenues at the San Juan terminal due to the
acquisition of NPR, which accounted for $8.8 million. The balance of the
increase in 1998 from 1997 of $1.1 million was due to increased maintenance and
repair revenues.
Terminal Expenses. Terminal expenses increased to $104.0 million for 1998
from $30.4 million for 1997, an increase of $73.6 million, or 242.1%. Terminal
expenses as percentage of revenues were 28.1% for 1998 compared to 25.6% for
1997. This increase was primarily attributable to $66.8 million of expenses
associated with NPR's Jacksonville, San Juan, and Gloucester terminal
operations. The remaining $6.8 million increase was due to the transfer of
stevedoring costs from the Port of Elizabeth to the Packer Avenue facility which
resulted from changing ports of call. Other than increased expenses associated
with the operations of NPR, terminal expenses were unchanged for 1998 and 1997.
General and Administrative Expenses. General and administrative expenses
increased to $55.5 million for 1998 from $26.1 million for 1997, an increase of
$29.4 million, or 112.6%. General and administrative expenses as a percentage of
revenues were 15.0% for 1998 compared to 21.9% for 1997. This increase was
attributable primarily to the inclusion of $26.0 million of general and
administrative expenses related to the operations of NPR. The remaining $3.4
million increase represents increases in professional fees associated with this
purchase.
Equipment Maintenance Expenses. Equipment maintenance expenses increased
to $50.2 million for 1998 from $15.8 million for 1997, an increase of $34.4
million, or 217.7%. Equipment maintenance expenses as a percentage of revenues
were 13.6% for 1998 compared to 13.3% for 1997. This increase was primarily
attributable to $30.6 million of expenses associated with NPR's Jacksonville and
San Juan terminal operations. The remaining $3.8 million increase was due to the
transfer of equipment rental costs from the Port of Elizabeth to the Packer
Avenue facility which resulted from changing ports of call. Other than increased
expenses associated with the acquisition of NPR, equipment maintenance expenses
were unchanged for 1998 and 1997.
Insurance and Safety Expenses. Insurance and safety expenses increased to
$6.5 million for 1998 from $3.0 million for 1997, an increase of $3.5 million,
or 116.7%. Insurance and safety expenses
42
<PAGE>
as a percentage of revenues were 1.8% for 1998 compared to 2.5% for 1997. This
increase was attributable partly to the inclusion of $1.1 million of insurance
and safety expenses related to the operations of NPR. The remaining $2.4 million
increase was due to increased coverage for additional facilities constructed in
late 1997 as well as new equipment which was purchased to replace older
equipment.
Vessel. Vessel expense increased to $45.8 million for 1998 from $5.8
million for 1997, an increase of $40.0 million, or 789.7%. Vessel expenses as a
percentage of revenues were 12.4% for 1998 compared to 4.9% for 1997. This
increase was totally related to NPR.
Transportation Expenses. Transportation expenses increased to $58.0
million for 1998 from $9.3 million for 1997, an increase of $48.7 million, or
523.7%. Transportation expenses as a percentage of revenues were 15.7% for 1998
compared to 7.9% for 1997. This increase was attributable to expenses associated
with NPR's inter-modal operations. In order to remain competitive within the
industry, NPR has absorbed a significant amount of inter-modal expenses which
had historically been passed through and paid for by NPR'S customers. This
practice is expected to continue. Other than increased expenses associated with
the operations of NPR, transportation expenses were unchanged for 1998 and 1997.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses increased to $16.6 million for 1998 from $8.7 million for 1997, an
increase of $7.9 million, or 90.8%. Depreciation and amortization expenses as a
percentage of revenues were 4.5% for 1998 compared to 7.3% for 1997. This
increase was attributable to vessel depreciation of $8.0 million.
Losses on Investment in Joint Venture. Losses on investment in joint
venture totaled $9.0 million for 1998 and was wholly attributable to reserves
established to provide for a 100% provision of advances to fund TNX operations
which have been completely wound down by the end of 1998. The magnitude of this
loss was primarily due to the downturn of the Brazilian economy in the fourth
quarter of 1998, which led to overcapacity of vessel tonnage in the trade lanes
where TNX operates and competitive rate pressure.
Other Operating Expenses. Other operating expenses, which consist of
operating taxes and licenses, traffic and sales expenses and charges from
Non-consolidated Affiliates, decreased to $1.3 million for 1998 from $1.4
million for 1997, a decrease of $0.1 million, or 0.7%. Other operating expenses
as a percentage of revenues were 0.3% for 1998 and 1.2% for 1997.
Net Income. Net income decreased to $10.6 million for 1998 from $10.8
million for 1997, a decrease of $0.2 million, or 1.9%. Net income as a
percentage of revenues was 2.8% for 1998 compared to 9.0% for 1997. The decrease
in net income was attributable to competitive pricing pressures, which have
reduced revenue per load, and has caused Holt to absorb a significant portion of
its transportation costs. Additionally, for 1998, Holt reserved $9.0 million for
advances to fund TNX operations as noted above. Dividend income totaling $5.8
million partially offset the reductions described above.
EBITDA. EBITDA increased to $49.1 million for 1998 from $27.1 million for
1997, an increase of $22.0 million, or 81.2%. EBITDA as a percentage of revenues
was 10.8% for 1998 compared to 22.7% for 1997. The increase in EBITDA was
attributable to the changes in revenues and expenses as discussed above.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues. Revenues increased to $119.0 million in 1997 from $73.1 million
in 1996, an increase of $45.9 million, or 62.8%. Operating revenues increased
$34.5 million which was due primarily to the November 20, 1997 acquisition of
NPR which accounted for $31.4 million of the increase. Rental income increased
to $24.0 million for 1997 from $15.0 in 1996, an increase of $9.0 million, or
60%. This was due to increased leasing revenues from the Lessee-Operators at the
Gloucester Facility associated with increased tonnage of cargo handled and the
continued roll-out of a more efficient intra-terminal handling system. Other
revenue increased $2.3 million which was due to
43
<PAGE>
the acquisition of NPR which accounted for $1.3 million due to demurrage and
miscellaneous sales. The remaining increase of $1.0 million was due to proceeds
from the sale of scrap materials.
Terminal Expenses. Terminal expenses increased to $30.4 million in 1997
from $24.1 million in 1996, an increase of $6.3 million, or 26.1% the increase
was attributable to the inclusion of $6.9 million of NPR terminal expenses.
Terminal expenses as a percentage of revenue were 25.6% in 1997 compared to
33.0% in 1996. This decrease was attributable primarily to reduced labor costs
resulting from the negotiation of favorable work rules with the ILA by the Port
of Philadelphia effective October 1, 1996.
General and Administrative Expenses. General and administrative expenses
increased to $26.1 million in 1997 from $8.9 million in 1996, an increase of
$17.2 million, or 194.5% The increase was attributable to the inclusion of $12.9
million of NPR general and administrative expenses. The remaining $4.3 million
increase was due to (i) a $1.0 million increase in bad debt expense resulting
from the loss of one container customer that filed for bankruptcy and ceased
operations, (ii) increased legal expenses incurred in connection with the
acquisition of NPR and (iii) general increases. General and administrative
expenses as a percentage of revenue were 21.9% in 1997 compared to 12.1% in
1996. The increase in general and administrative expenses as a percentage of
revenue was due to the inclusion of NPR which incurs a higher percentage of
general and administrative expenses to total revenue.
Equipment Maintenance Expenses. Equipment maintenance expenses increased
to $15.8 million in 1997 from $10.7 million in 1996 an increase of $5.1 million,
or 47.3%. The increase was due to (i) $2.7 million in warehouse operating lease
payments incurred in connection with the sub-lease of an additional warehouse
and (ii) $2.2 million in equipment rental expenses due to increased volume of
business at the Packer Avenue Facility due to NPR's change in port of call from
Elizabeth to Philadelphia as well as overall volume increases. Equipment and
maintenance expenses as a percentage of revenue were 13.3% in 1997 and 14.7% in
1996. The decrease in equipment and maintenance expense as a percentage of
revenue was the result of leveraging of the equipment maintenance expenses over
increased revenues.
Insurance and Safety Expenses. Insurance and safety expenses decreased to
$3.0 million in 1997, from $4.8 million in 1996, a decrease of $1.8 million, or
37.5%. Insurance and safety expenses as a percentage of revenue was 2.5% in 1997
compared to 6.6% in 1996. The decrease in insurance and safety expenses was the
result of the decrease in premiums due to lower overall experience rates.
Vessel Expenses. Vessel expenses were $5.8 million in 1997 and were
incurred due to the acquisition of NPR. Holt did not have any vessel expenses
prior to the acquisition of NPR.
Transportation Expense. Transportation expense increased to $9.3 million
in 1997 from $2.9 million in 1996, an increase of $6.4 million, or 220.4%. The
increase was due primarily to the acquisition of NPR which accounted for $6.0
million of the increase. Transportation expense as a percentage of revenue was
7.9% in 1997 compared to 4.0% in 1996. The increase was due to the greater
percentage of transportation expense from NPR's shipping operations, compared to
Holt's stevedoring and warehousing operations.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses increased to $8.7 million in 1997 from $4.0 million in 1996, an
increase of $4.7 million, or 115%. Depreciation and amortization expenses as a
percentage of revenues were 7.3% for the 1997 period compared to 5.5% for the
1996 period. The increase in depreciation and amortization expenses was
primarily due to (i) the amortization of $2.3 million of capitalized costs
associated with the acquisition of NPR, (ii) NPR depreciation of $1.0 million
and (iii) $1.3 million resulting from additions of machinery and equipment
during 1996 and 1997.
Other Operating Expenses. Other operating expenses, which consist of
operating taxes and licenses, traffic and sales expenses and charges from
Non-consolidated Affiliates, decreased to $1.4 million in 1997 from $1.9 million
in 1996, a decrease of $0.5 million, or 23.2%. Other operating
44
<PAGE>
expenses as a percentage of revenues were 1.2% for the 1997 period compared to
2.6% for the 1996 period.
Net Income. Net income increased to $10.8 million for 1997 from $8.3
million for 1996, an increase of $2.5 million, or 30.1%. Net income as a
percentage of revenues was 9.0% for 1997 compared to 11.4% for 1996. The
increase in net income was primarily attributable to the increased revenues at
the Gloucester Facility combined with reduced terminal expenses as a percentage
of revenue due to the negotiation of favorable work rules with the ILA by the
Port of Philadelphia effective October 1, 1996.
EBITDA. EBITDA increased to $27.1 million in 1997 from $19.8 million in
1996. EBITDA as a percentage of revenue was 22.7% in 1997 compared to 27.1% in
1996. The changes in EBITDA were attributable to the changes in revenues and
expenses as discussed above.
RESULTS OF OPERATIONS OF NPR
The following table sets forth, for the periods indicated, NPR's actual
operating results in thousands of dollars and as a percentage of total revenues:
<TABLE>
<CAPTION>
MAR. 3 TO DEC. 31, YEAR ENDED JAN. 6 TO NOV. 20,
1995 JANUARY 5, 1997 1997
------------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Ocean revenues................................. $228,228 97.6% $265,110 98.5% 238,670 97.3%
Other revenues................................. 5,539 2.4 3,987 1.5 6,671 3.7
-------- ----- -------- ----- -------- -----
Total revenues................................. 233,767 100.0 269,097 100.0 245,341 100.0
-------- ----- -------- ----- -------- -----
Operating expenses:
Vessel....................................... 48,012 20.5% 48,941 18.2% 43,915 17.9%
Cargo handling............................... 49,006 21.0 57,662 21.4 50,287 20.5
Terminal..................................... 55,010 23.5 56,145 20.9 52,793 21.5
Transportation............................... 34,512 14.8 49,535 18.4 42,144 17.2
Selling, general and administrative.......... 42,922 18.3 48,644 18.1 40,108 16.4
Depreciation and amortization................ 10,699 4.6 14,524 5.4 10,618 4.3
-------- ----- -------- ----- -------- -----
Total operating expenses................... 240,161 102.7 275,451 102.4 239,865 97.8
-------- ----- -------- ----- -------- -----
Operating income (loss)........................ (6,394) (2.7) (6,354) (2.4) 5,476 2.2
-------- ----- -------- ----- -------- -----
Net income (loss).............................. (12,173) (5.2) (14,932) (5.5) 1,493 0.6
-------- ----- -------- ----- -------- -----
Calculation of EBITDA:
Operating income (loss)...................... $ (6,394) $ (6,354) 5,476
Depreciation and amortization................ 10,699 14,524 10,618
Non-recurring other revenue.................. -- -- (3,000)
-------- -------- --------
EBITDA..................................... 4,305 1.8 8,170 3.0 13,094 6.6
</TABLE>
45
<PAGE>
The following table sets forth, for the periods indicated, NPR's actual
operating results in thousands of dollars and such results expressed per load
(i.e. per loaded container shipped):
<TABLE>
<CAPTION>
MAR. 3 TO DEC. 31, YEAR ENDED JAN. 6 TO NOV. 20,
1995 JANUARY 5, 1997 1997
------------------- ----------------- -------------------
$/LOAD $/LOAD $/LOAD
------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Loads.......................................... 97,641 115,595 107,156
-------- -------- --------
Ocean revenues................................. $228,228 $2,337 $265,110 $2,293 $238,670 $2,227
Other revenues................................. 5,539 57 3,987 35 6,671 62
-------- ------ -------- ------ -------- ------
Total revenues............................. 233,767 2,394 269,097 2,328 245,341 2,289
-------- ------ -------- ------ -------- ------
Operating expenses:
Vessel....................................... 48,012 492 48,941 423 43,915 410
Cargo handling............................... 49,006 502 57,662 499 50,287 469
Terminal..................................... 55,010 563 56,145 486 52,793 493
Transportation............................... 34,512 353 49,535 429 42,144 393
Selling, general and administrative.......... 42,922 440 48,644 421 40,188 374
Depreciation and amortization................ 10,699 110 14,524 126 10,618 99
-------- ------ -------- ------ -------- ------
Total operating expenses................... 240,161 2,460 275,451 2,384 239,865 2,238
-------- ------ -------- ------ -------- ------
Operating income (loss)........................ (6,394) (65) (6,354) (55) 5,476 51
-------- ------ -------- ------ -------- ------
Net income (loss).............................. (12,173) (12.5) (14,932) (129) 1,493 14
-------- ------ -------- ------ -------- ------
Calculation of EBITDA:
Operating income (loss)...................... $ (6,394) $ (6,354) 5,476
Depreciation and amortization................ 10,699 14,524 10,618
Non-recurring other revenue.................. -- -- (3,000)
-------- -------- --------
EBITDA..................................... 4,305 44 8,170 71 13,094 150
</TABLE>
PERIOD FROM JANUARY 6, 1997 TO NOVEMBER 20, 1997 COMPARED TO
YEAR ENDED JANUARY 5, 1997
The Company believes that the comparison of NPR's results of operations in
the period from January 6, 1997 to November 20, 1997 to NPR's results of
operations for the year ended January 5, 1997 is not meaningful due to the
significant difference in the length of time in each such period. However, the
discussion below includes a discussion of each of the operating items on a per
load basis to the extent that the Company believes it is meaningful to the
understanding of such items.
Revenues. Ocean revenue per load (i.e. per container shipped during the
relevant period) decreased to $2,227 per load for the 1997 period, from $2,293
per load for the 1996 period. This decrease per load was attributable primarily
to: (i) a higher proportion of NPR's total loads coming from northbound cargo,
which typically yields less revenue per load than southbound cargo and (ii) and
competitive pressure on pricing, offset in part by an upward adjustment
resulting from a pricing settlement. Ocean revenues generated in other markets,
such as the Dominican Republic, Trinidad and the Virgin Islands, remained
relatively stable for the period ended November 20, 1997 versus the comparable
period in 1996. Other revenue increased to $6.7 million for the 10.6 months
ended November 20, 1997 from $4.0 million for the twelve months ended December
31, 1996, an increase of $2.7 million. This increase was attributable primarily
to increased third party stevedoring services at the San Juan terminal.
46
<PAGE>
Vessel Expenses. As a percentage of revenues, vessel expenses decreased to
17.9% for the 1997 period from 18.2% for the 1996 period. Vessel expenses per
load decreased to $410 per load for the 10.5 months ended 1997, from $423 per
load for the 1996 period. The decrease per load was attributable primarily to
the higher volume of cargo carried in the 1997 period. The decrease in vessel
expenses is primarily attributable to lower operating costs for the payroll,
fuel expenses and dry-docking expenses totaling $6.2 million. Dry-docking
expense decreased from $3.4 million in 1996 to $1.2 million in the 1997 period,
primarily due to the timing of the dry-docking of the vessels and the related
estimated costs that were substantially accrued for in 1996 which resulted in a
reduction of required accrual of $2.2 million for the 1997 period. The U.S.
Coast Guard extended the vessel dry dock requirement in 1996. Vessel maintenance
and repairs increased $1.2 for the 1997 period primarily due to work performed
on the vessels at sea during 1997.
Cargo Handling Expenses. As a percentage of revenues, cargo handling
expenses decreased to 20.5% for the 1997 period from 21.4% for the 1996 period.
On a per load basis, cargo handling expenses decreased to $469 per load for the
1997 period, from $499 per load for the 1996 period. This decrease as a
percentage of revenues was attributable primarily to higher stevedoring
productivity as more cargo was routed through the Port of Jacksonville instead
of the Port of Elizabeth, New Jersey which has lower stevedoring productivity as
well as higher stevedoring costs and port assessments.
Terminal Expenses. As a percentage of revenues, terminal expenses
increased to 21.5% for the 1997 period from 20.9% for the 1996 period. On a per
load basis, terminal expenses increased to $493 per load for the 1997 period
from $486 per load for the 1996 period. This increase was attributable primarily
to: (i) costs related to the implementation of a new tire program, (ii) expenses
related to preventive maintenance on rolling stock and (iii) additional labor
costs resulting from the re-negotiation of its labor contract effective October
1, 1996.
Transportation Expenses. As a percentage of revenues, transportation
expenses decreased to 17.2% for the 1997 period from 18.4% for the 1996 period.
On a per load basis, transportation expenses decreased to $393 per load for the
1997 period, from $429 per load for the 1996 period. This decrease was
attributable primarily to the increased volume and the routing of more cargo to
Jacksonville from more midwestern points in order to save on cargo handling
expenses and assessments in Elizabeth.
Selling, General, and Administrative Expenses. As a percentage of
revenues, selling, general and administrative expenses decreased to 16.4% for
the 1997 period from 18.1% for the 1996 period. On a per load basis, selling,
general and administrative expenses decreased to $374 per load for the 1997
period, from $421 per load for the 1996 period. The decrease in selling, general
and administrative expenses is a result of the reduction of personnel which
created savings of $7.3 million for payroll and payroll fringes for the period
ended November 20, 1997. Additionally, in 1997, NPR achieved communication
expense savings of $1.2 million primarily as a result of competitive pricing by
its suppliers.
Depreciation and Amortization Expenses. As a percentage of revenues,
depreciation and amortization expenses decreased to 4.3% for the 1997 period
from 5.4% for the 1996 period. On a per load basis, depreciation and
amortization expense decreased to $99 per load for the 1997 period from $126 per
load for the 1996 period. This decrease was attributable primarily to reduced
amortization of drydock costs and elimination of certain assets.
Net Income (Loss). As a percentage of revenues net income increased to
0.6% for the 1997 period from a net loss of 5.5% for the 1996 period and was
attributable to the changes in the revenues and expenses discussed above. On a
per load basis, net income increased to $14 per load for the 1997 period from
- -$129 for the 1996 period.
47
<PAGE>
EBITDA. As a percentage of revenues. EBITDA increased to 6.6% for the 1997
period from 3.0% for the 1996 period. On a per load basis, EBITDA increased to
$150 per load for the 1997 period from $71 for the 1996 period.
SEASONALITY
Holt handles a variety of cargoes throughout the year ranging from
refrigerated meat and produce to steel and wood products. Holt believes that
this diversified mix of cargoes has negated the effects of seasonality
associated with specific types of cargoes.
Although NPR historically realized a seasonal impact on its revenues during
December (due to Christmas) and May (due to Mother's Day), this seasonal impact
has diminished significantly over the past two years. The Company believes that
this decrease is attributable partially to greater use of TVAs and fixed rate
contracts in NPR's trade, which reduces the fluctuation in cargo volumes
throughout the year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is cash flow from operations and
borrowings under the Revolving Credit Facility. Financing available under the
Revolving Credit Facility consists of a $50 million revolver (increased from $30
million as of September 1998), under which approximately $6.4 million in letters
of credit and approximately $37 million of borrowings were outstanding at
December 31, 1998. On February 25, 1999 the Revolving Credit Facility was
amended to provide for an additional $17.3 million in the form of a term loan as
an advance against insurance proceeds expected to be collected by the Company
for damages caused by Hurricane Georges. The Company intends to use cash flow
from operations and borrowings under the Revolving Credit Facility to finance
working capital requirements.
The Company's liquidity needs relate primarily to payment of principal and
interest on outstanding indebtedness, including principal and interest payments
on the Notes, the funding of capital expenditures and the funding of
distributions to the Company's sole shareholder to pay income taxes.
As of December 31, 1998, the Company had outstanding $257.8 million of
consolidated indebtedness, consisting of (i) $140.0 million principal amount of
the Notes, and (ii) $117.8 million of senior secured indebtedness. See "Risk
Factors -- Substantial Leverage and Ability to Service Debt,"
"-- Asset Encumbrances" and "Description of Certain Indebtedness."
The Company's mandatory debt service requirements for maturities of the
Revolving Credit Facility and long-term debt for the years ending December 31,
1999, 2000 and 2001 are $51.0 million, $3.1 million and $2.7 million,
respectively. The Company anticipates exercising its option to extend the
maturity date of the Revolving Credit Facility (having an outstanding balance of
$37.0 million at December 31, 1998) to December 31, 2000.
As substantially all of the Company's operating income is generated by its
subsidiaries, the Company is dependent on dividends and other distributions from
its subsidiaries to generate the funds necessary to meet its obligations. The
ability of the subsidiaries to pay dividends to the Company is subject to, among
other things, the terms of the Revolving Credit Facility and Other Indebtedness
and Financings to which they are subject. Certain of the Other Indebtedness and
Financings restrict distributions from the Issuer's subsidiaries to the Issuer
to a percentage of cumulative net income, subject to certain adjustments.
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The Company's aggregate capital expenditures for the years ended December
31, 1996, 1997 and 1998 were $6.9 million, $9.7 million and $19.1 million,
respectively. The Company's capital spending in each period related principally
to the construction of certain improvements and purchase of forklift and other
moving equipment at the Gloucester Facility and the Packer Avenue Facility.
NPR's aggregate capital expenditures were $4.1 million for the period from March
6, 1995 to December 31, 1995, $3.3 million for fiscal 1996 and $0.9 million for
fiscal 1997. NPR's capital expenditures related principally to the acquisition
of rolling stock.
The Revolving Credit Facility, the Indenture and certain of the Other
Indebtedness and Financings contain various covenants which impose certain
restrictions on the Company, including with respect to the incurrence of
additional indebtedness, the payment of dividends and the ability to make
acquisitions. In addition, the Revolving Credit Facility requires the
maintenance of certain financial ratios. See "Risk Factors."
RECENT DEVELOPMENTS
Hurricane Georges. The Company's operations in San Juan, Puerto Rico have
been affected by Hurricane Georges which struck the island during September
1998. Although certain of its buildings and cranes located at Puerto Nuevo
suffered damages, NPR was able to continue to conduct business since two of the
high speed cranes used by the Company were not damaged. Additionally, NPR's
fleet of vessels did not incur any damage. The Company has submitted a claim to
its property insurance carrier for recovery of the replacement cost of the
equipment and buildings which were damaged, business interruption and extra
expense. The net book value of the damaged equipment and buildings are carried
on the Company's books at a de minimis value since these assets have been
fully depreciated.
The Company believes that substantially all of the damages will be covered
by its insurance policy. The Company has received $8 million as an advance
against its insurance claim which has not yet been finalized.
IMPACT OF YEAR 2000 ON THE COMPANY'S SYSTEMS
Many computer systems were not designed to handle dates beyond the year
1999, and, therefore, computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is in the
process of determining whether its computer systems are Year 2000 compliant and
is replacing or upgrading those computer systems that are not.
The Company has two major data centers, NPR in Edison, New Jersey and Holt
in Gloucester City, New Jersey. NPR has an IBM mainframe, two local area
networks and 13 remote site locations. Holt has three IBM AS/400s, one local
area network, 10 remote site locations and three RF site locations.
The Company's systems software is principally supplied by IBM. The
operating systems for the IBM mainframe and the IBM AS/400s are already Year
2000 compliant. Other system software used by the Company is supplied by
Computer Associates, Microsoft, and Novell. All of these software systems are
represented to be Year 2000 compliant by these software vendors. A detailed plan
and impact analysis was conducted by the Company to determine the extent of Year
2000 implications on the Company's mainframe and AS/400 computer systems with
respect to business applications developed and maintained by the Company. The
Company is utilizing existing staff and outside resources to fix and test all
such business applications. Business software supplied by third parties used by
the Company is respresented to be Year 2000 compliant by the vendors of the
software.
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The Company's Year 2000 readiness plan includes the scanning, testing and
modification or upgrade (where necessary) of approximately 20,000 programs and
files used throughout the Company's operations. The Company has purchased
additional computers and conversion tools to be used in connection with the
testing and upgrading of existing systems and has hired additional programmers
to assist with the Year 2000 project. The Company expects to complete all
required upgrades by July 31, 1999. The estimated cost of the Company's Year
2000 readiness project is approximately $1.2 million of which approximately
$750,000 has been incurred through 1998.
In the event the Company does not achieve Year 2000 compliance by January
1, 2000, the resulting misrepresentation of date calculation in the Company's
computer systems could result in interruption in the Company's business, loss of
customers, inability to properly process or account for payments from customers
or payments to vendors and personnel, and claims for damages arising out of the
foregoing, any or all of which could have a material adverse effect on the
Company's financial condition and results of operations. The Company considers
this scenario to be unlikely as its Year 2000 compliance methodology includes
testing of the Company developed software and the vendor supplied software in a
Year 2000 environment and is proceeding on a schedule which would result in
completion of all required upgrades by July 31, 1999.
While the Company has contacted its key business partners and inquired as
to the status of their Year 2000 compliance, the Company has not received
responses indicating an expectation of achieving Year 2000 compliance from all
of them. The Company has no control over the systems and services used by third
parties with which it interfaces, and accordingly, there can be no assurance
that all key business partners will successfully resolve all of their Year 2000
compliance issues. Although the Company cannot predict with accuracy the actual
adverse consequences if key business partners do not achieve Year 2000
compliance, it is possible that such non-compliance could result in an
interruption in the Company's business which could have a material adverse
effect on the Company's financial condition and results of operations.
Contingency plans are being developed to ensure critical operations
continue uninterrupted in the event the Company or key business partners fail to
resolve their respective Year 2000 issues in a timely manner. Such plans will be
developed by the end of the third quarter of 1999 and will be in place prior to
the end of the year. The Company will identify and prioritize the potential
risks and will coordinate this plan with all its departments. The contingency
plan will include the close monitoring of service performance in Year 2000 and,
if needed, the replacement of automated information transference with manual
documents and the development of conversion systems of key interfaces should key
business partners, with which the Company exchanges data, fail to comply on
time.
ENVIRONMENTAL MATTERS
The Company's operations are subject to various federal and state
environmental laws and regulations, including but not limited to, the federal
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
which creates liability on the part of the owner or operator of a facility for
the investigation and remediation of hazardous substances, as well as creating
the authority and funding for unilateral response action by the United States
Environmental Protection Agency ("EPA"). In addition, portions of the Gloucester
Facility are part of a multi-property action pursuant to CERCLA to address
historic contamination via radioactive material. Holt has voluntarily entered
into a consent order with the EPA requiring the performance of certain
investigative measures and the proposal of certain remedial measures in
connection with the Gloucester Facility. The Company has conducted recent
environmental assessments at each of its facilities and believes it is in
material compliance with all environmental laws and does not anticipate material
expenditures for environmental compliance in the foreseeable future. See
"Business -- Holt -- Environmental Matters" and "-- NPR -- Environmental
Matters."
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RECENT ACCOUNTING PRONOUNCEMENTS
Set forth below are recent accounting pronouncements which may have a
future effect on the Company's reporting requirements. These pronouncements
should be read in conjunction with the significant accounting policies which the
Company has adopted that are set forth in the "Notes to Consolidated Financial
Statements" of the Company.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS No.
133). This statement established accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to changes in the fair
value of recognized asset or liability or an unrecognized firm commitment, (b) a
hedge of the exposure to variable cash flows of a forecasted transaction, or (c)
a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign currency denominated forecasted transaction.
SFAS No. 133 amends SFAS No. 52 "Foreign Currency Translation" to permit
special accounting for a hedge of a foreign currency forecasted transaction with
a derivative. It supersedes SFAS No. 80 "Accounting for Futures Contracts, Risk
and Financial Instruments with Concentrations of Credit Risk" and No. 119
"Disclosure and Derivative Financial Instruments and Fair Value of Financial
Instruments." Such statement also amends SFAS No. 107 "Disclosures about Fair
Value of Financial Instruments" to include in SFAS No. 107 the disclosure
provisions about concentrations of credit risk from SFAS No. 105, SFAS No. 133
also nullifies or modifies the consensus reached on a number of issues addressed
by the Emerging Issues Task Force.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. Initial application of this statement should be as of the
beginning of an entity's fiscal quarter following June 15, 1999. On that date,
hedging relationships must be designated anew and documented pursuant to the
provisions of this statement. Earlier application of all of the provisions of
this statement is encouraged, but it is permitted only as of the beginning of
any fiscal quarter that begins after issuance of this Statement. This statement
should not be applied retroactively to financial statements of prior periods.
The Company does not expect the impact of SFAS No. 133 to have a material affect
on its Financial Reporting.
During April 1998, the Accounting Standards Executive Committee of the
AICPA issued Statement of Position 98-5 "Reporting on the Costs of Start-up
Activities (SOP 98-5). SOP 98-5 requires costs of start-up activities and
organization costs to be expensed as incurred and is effective for financial
statements for fiscal years beginning after December 15, 1998. The Company does
not expect the impact of SOP 98-5 to have a material effect on its financial
reporting.
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BUSINESS
THE COMPANY
The Company is a leading provider of integrated cargo transportation and
logistics management services in the United States. The Company's predecessor
was founded in 1926 by Leo A. Holt, Sr., and the Company is wholly owned by his
son, Thomas J. Holt, Sr., the Company's Chairman, President and Chief Executive
Officer. Through Holt, the Company owns and operates marine terminal facilities,
including the largest private integrated marine terminal complex in the United
States, and provides related services. Through NPR, which commenced operations
through its predecessor in 1974 and was acquired by the Company in November
1997, the Company is a leading operator of cargo ships in the U.S.-Puerto Rico
market under the trade name "Navieras." NPR provides containerized cargo
transportation and related services between the United States, Puerto Rico, the
Caribbean and, through a joint venture, South America. As a result of the
Acquisition, the Company expects to realize significant cost savings and
capitalize on new revenue opportunities. The Company's revenues, EBITDA (as
defined herein) and net income for the year ended December 31, 1998 were $370.5
million, $49.2 million and $10.6 million, respectively. At December 31, 1998,
the Company had outstanding $257.8 million of consolidated indebtedness, of
which $117.8 million was secured indebtedness to which the Notes were
effectively subordinated. In addition, at December 31, 1998, the Company had
outstanding guarantees of third-party debt totaling $47.6 million all of which
were secured by assets of the Company and to which the Notes were effectively
subordinated.
Through Holt, the Company offers a variety of cargo services, including
stevedoring (the loading and unloading of ships), warehousing (the storage of
cargo) and inland trucking. Holt also leases port facilities to the
Lessee-Operators. These services are performed at the Holt Facilities, all of
which are located on the Delaware River, a key waterway for commerce on the East
Coast of the United States. The Gloucester Facility in Gloucester City, New
Jersey, is owned by the Company and is leased to the Lessee-Operators. The
Packer Avenue Facility in Philadelphia, Pennsylvania, which is owned by an
agency of the Commonwealth of Pennsylvania, is subleased by the Company for a
term expiring in 2040, including all renewal options. At the Packer Avenue
Facility, Holt provides stevedoring, warehousing and inland transportation of
containerized and other cargoes. The Company provides stevedoring services at
the Wilmington Facility, owned by an agency of the State of Delaware, where the
Company's subsidiary, Wilmington Stevedores, has operated since 1974. In 1998,
the Company and the Lessee-Operators loaded and/or discharged an aggregate of
823 ships and 6.0 million tons of cargo at the Holt Facilities.
Since inception, the Company has invested over $130.0 million in the
Gloucester Facility and the Packer Avenue Facility. The Gloucester Facility
features 4,200 lineal feet of deep water frontage, 18 warehouses with
approximately one million square feet of dry space and approximately one million
square feet of refrigerated space, and two container cranes. The Packer Avenue
Facility features 3,800 lineal feet of deep water frontage, three dry warehouses
with approximately 278,000 square feet of storage space, one refrigerated
warehouse with approximately 168,000 square feet of storage space and five
container cranes. With the most refrigerated warehouse space of any marine
terminal operator in the United States, the Company believes it is currently the
leader in providing refrigerated facilities and related services in the United
States, with a substantial portion of the frozen beef and fruit imported by ship
to the East Coast passing through the Holt Facilities. The Company is the
leading stevedore in the Wilmington Facility, handling in excess of 95% of the
aggregate container volume and approximately 75% of the aggregate tonnage of
cargo handled in the Wilmington Facility during 1998.
Through NPR, the Company is a leading provider of containerized cargo
service between the United States, Puerto Rico and the Caribbean. Containerized
cargo encompasses a variety of goods transported in standard sized containers.
NPR currently operates four ships to provide service three times per week
between San Juan, Puerto Rico and the United States via the port of
Jacksonville, Florida and weekly service between San Juan and the port of
Philadelphia, Pennsylvania. These two ports of entry provide efficient gateways
to major commercial areas throughout the United States and Canada, ranging from
the New York metropolitan area to the West Coast. In addition, through charter
arrangements, NPR provides service two times a week between San Juan and the
Dominican Republic
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and also, through a slot charter arrangement, services the Caribbean island of
Trinidad and the United States Virgin Islands.
NPR's predecessor was formed in 1974 by the Puerto Rico Government and was
sold to an investor group (including certain members of NPR's current
management) in the Privatization in March 1995. Following the Privatization,
NPR's management team significantly improved the operating performance of NPR by
implementing a strategic turnaround plan which consisted of increasing its share
of the cargo transported between the United States and Puerto Rico and reducing
its operating costs. During 1998, NPR transported approximately 32.9% of the
fully containerized cargo carried between the United States and Puerto Rico, as
compared to approximately 31.8% of such cargo during 1997. NPR reduced the
number of vessels in continuous operation from five to four and the number of
ports of call in the United States from five to two, while at the same time
increasing the aggregate volume of cargo carried. In addition, NPR consolidated
customer service activities into one service center located in Tampa, Florida,
and trimmed corporate overhead by reducing the headcount from 676 at the time of
the Privatization to 387 at December 31, 1998. Additional savings were realized
through lower intermodal transportation unit costs due to commitment of higher
cargo volumes to railroads and trucking companies, reduced advertising costs and
elimination of excess container capacity. As a result of these initiatives,
NPR's EBITDA increased from $8.2 million for the year ended January 5, 1997 to
$13.1 million for the period beginning January 6, 1997 and ended November 20,
1997, while for the same periods its revenues decreased from $269.1 million to
$245.3 million and its net income increased from a loss of $14.9 million to net
income of $1.5 million.
The Company believes numerous benefits have resulted and will continue to
result from integration of the operations of Holt and NPR, including cost
savings and new revenue opportunities. Integration commenced immediately upon
consummation of the Acquisition when the Company relocated NPR's northeastern
port of call from Elizabeth, New Jersey to the Packer Avenue Facility, and the
integration is continuing. The Acquisition also provides opportunities for the
Company to cross-market its expanded services to Holt's and NPR's respective
customer bases. The Company believes that these expanded services create new
revenue opportunities both in its existing markets and through expansion into
new markets.
OPERATING STRENGTHS
The Company's objective is to maintain and enhance its position as a
leading provider of integrated cargo transportation and logistics management
services, and to expand its service offerings through controlled internal
growth. The Company intends to achieve its objective by capitalizing on the
following operating strengths:
MARKET LEADERSHIP
Holt and NPR are leaders in their respective businesses and the Company
believes that each has significant opportunities to continue to enhance its
market position. Over its 70-year history, Holt has established itself as a
market leader by pursuing a niche-market strategy that focuses on certain
segments of the cargo handling industry. For example, the Holt Facilities
provide the largest amount of refrigerated warehouse space of any marine
terminal operator in the United States, handling a substantial portion of the
frozen beef and fruit imported by ship to the East Coast. The Holt Facilities
became leaders in the handling of refrigerated cargo as a result of Holt's
investment in extensive refrigerated warehousing facilities and development of
expertise in the optimal methods of handling such cargo. NPR also attained a
leading position by implementing a successful operational turnaround since the
Privatization which has resulted in an increase in its market share. During
1998, NPR ranked first overall, having transported approximately 32.9% of the
fully containerized cargo carried between the United States and Puerto Rico.
Further improvements in NPR's market position are expected both from continued
emphasis on elements of the turnaround plan and entry into new market segments.
In order to facilitate its expansion to the 53-foot "big box" container market,
NPR has completed recently modification of two of its vessels to accommodate
53-foot containers in addition to all other standard-sized containers, and the
Company expects to enter this market in late 1999. This "big box"
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segment, which the Company believes has attractive growth prospects, currently
constitutes approximately 11.8% of the container market between the United
States and Puerto Rico. See "--NPR -- Overview of Operations" and "Risk Factors
- -- Growth Strategies."
LONG-TERM COMPETITIVE ADVANTAGES
The Company possesses certain long-term competitive advantages to help
sustain its leading market positions. Holt's competitive advantages include the
following: (i) control of scarce waterfront property through its ownership of
the Gloucester Facility and its long-term lease of the Packer Avenue Facility;
(ii) availability of extensive warehouse space, especially refrigerated
warehouse space; (iii) efficient operations derived from years of experience and
expertise; and (iv) superior customer service driven primarily by advanced
capabilities in logistics and management information systems, such as the CTS
cargo tracking system offered to customers at the Holt Facilities. NPR's
competitive advantages include (i) the quality of its service, including its
high-speed vessel service and its efficient routing system; (ii) long-term
customer relationships; (iii) control of approximately 60% of the available
waterfront container terminal facilities at Puerto Nuevo, San Juan, the largest
container port in Puerto Rico which allows for the growth of the Company's
third-party stevedoring business; and (iv) the requirement that only vessels
meeting the requirements of the Jones Act be used in the domestic trade (i.e.,
generally, the ships must be United States built, owned and crewed). All of
NPR's ships meet such requirements, and the limited availability of such vessels
in the marketplace creates a competitive advantage for NPR.
HIGH QUALITY, VALUE-ADDED SERVICES
The Company provides high quality, value-added services to its customers.
CTS offers customers at the Holt Facilities a state-of-the-art bar coding system
to provide up-to-the-minute tracking of cargo that can be accessed by customers
remotely via modem. Services and facilities offered at the Holt Facilities are
attractive to customers due to (i) the ability to stevedore, warehouse and
transport cargo at the same facility, which gives customers flexibility and
convenience, (ii) the availability of specialized services, including extensive
refrigerated storage space, and (iii) the efficiency of the operations at the
Holt Facilities which provide reliability and cost efficiency for customers.
Holt's stevedoring operations at the Packer Avenue Facility achieve productivity
levels of up to 30 container lifts per hour and truck turnaround time through
its gates of 30 minutes or less. The Company believes that these productivity
measures are superior to those of other operators in competing ports such as New
York and Baltimore. In addition, in connection with NPR's comprehensive
operational turnaround since the Privatization, NPR has improved the quality and
enhanced the value of its services by, among other things, (i) consolidating its
customer service functions in one location to monitor and maintain consistently
high quality customer service, (ii) enhancing the on-time performance of its
high speed vessel service, and (iii) offering efficient intermodal connections
to trucking and rail carriers.
SIGNIFICANT BENEFITS OF THE ACQUISITION
The Company believes the Acquisition creates significant opportunities to
realize cost savings and capitalize on new revenue opportunities.
o Cost savings. The Company believes the combination of Holt and NPR has
created significant cost saving opportunities, including savings
resulting from the relocation of NPR's northeastern port of call from
Elizabeth, New Jersey to Philadelphia, Pennsylvania and efficiencies to
be realized from improving NPR's stevedoring operations in San Juan. NPR
initiated service on November 20, 1997 to the Packer Avenue Facility. In
addition, the Company believes that it can significantly improve the
efficiency of its stevedoring operations in San Juan, by, among other
things, the move in the third quarter of 1998 of two of Holt's high-speed
cranes to that terminal. These cranes are capable of lifting larger
containers, stacking containers on vessels an additional tier higher and
operating at greater speeds and with less maintenance than the cranes
previously operated by NPR.
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o Revenue opportunities. The combination of Holt and NPR has created
significant opportunities for growth in revenues upon completion of the
integration of the operations of Holt and NPR, with little additional
capital investment. Foremost among these opportunities is the ability to
cross market Holt's and NPR's services to each other's customer base. The
Company now positions itself as a one-stop solution to its customers'
cargo transportation and handling needs. When CTS is integrated into
NPR's operations, the Company will have the ability to offer this feature
to all customers shipping to and from Puerto Rico, which the Company
believes will give NPR a competitive advantage. The CTS technology will
also enhance the Company's stevedoring business in San Juan, where it
currently handles third-party ships in addition to its own. In addition,
the move in the third quarter of 1998 of two of Holt's high-speed cranes
to San Juan will allow the Company to increase its third-party
stevedoring business, an incrementally profitable element of the
Company's strategic growth plan.
The Company intends to expand its services, grow its businesses and
increase its revenues and cash flow primarily through controlled internal growth
that capitalizes on the foregoing operating strengths. In addition, although the
Company is not seeking actively to make acquisitions, the Company may, from time
to time, make opportunistic acquisitions of complementary businesses that the
Company believes will enhance its ability to provide fully integrated and
value-added cargo transportation services to its customers.
HOLT
GENERAL
Holt's predecessor was founded in 1926 by Leo A. Holt, Sr., as a one
man/one truck business, and grew to include warehousing in the 1950s. In 1967,
Holt entered the stevedoring business when it acquired the Gloucester Facility.
From 1967 to 1989, Holt rapidly grew and customized the Gloucester Facility to
include over one million square feet of warehouse space (of which 115,000 square
feet was refrigerated space) and two container cranes. In 1990, to accommodate
planned expansions, Holt began to operate the Packer Avenue Facility, located
directly across the Delaware River from the Gloucester Facility. Holt
consolidated its container operations at this facility in September 1991. The
Packer Avenue Facility is strategically located next to two major interstate
highways and Ameriport, an intermodal facility which services three Class I
railroads including Conrail, CSX and CP Rail. Together, these major interstate
highways and three railroad lines provide an efficient means of land
transportation for the containers and other cargoes loaded and unloaded at the
Packer Avenue Facility. In 1993, Holt began to lease the Gloucester Facility to
Lessee-Operators. From 1994 to 1997, Holt continued to expand and renovate both
the Gloucester Facility and the Packer Avenue Facility. Today, the two
facilities feature an aggregate of 22 warehouses with approximately 2.4 million
square feet of warehouse space, 9 container cranes, approximately 8,000 lineal
feet of river frontage with 18 berths, serviced by a fleet of approximately 150
trucks per day. In 1995, Holt's subsidiary, Murphy Marine, acquired Wilmington
Stevedores, which operates as a contract stevedore at the Wilmington Facility
and provides stevedoring services for a majority of the cargo handled at the
port of Wilmington. During 1998, the Company and the Lessee-Operators loaded
and/or discharged an aggregate of 823 ships and 6.0 million tons of ocean-going
cargo at the Holt Facilities.
OVERVIEW OF OPERATIONS
At the Packer Avenue Facility, Holt offers a variety of cargo services,
including stevedoring (the loading and unloading of ships); warehousing (the
storage of cargo), and inland trucking. At the Gloucester Facility, Holt leases
port facilities to the Lessee-Operators, which provide all stevedoring and
warehousing services. Through these facilities, a customer is able to move
inbound cargo from an arriving ship to its final destination via rail or truck
and outbound cargo from the customer's location to its final destination via
rail, truck or ship. When a ship docks at the Gloucester Facility or the Packer
Avenue Facility, Holt, or in the case of the Gloucester Facility, the
Lessee-Operators, provide services
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to (i) unload cargo from the ship, (ii) move cargo into a warehouse, (iii) store
cargo in refrigerated or dry warehouses, (iv) load cargo onto another ship, or
onto a truck or train for transportation to its final destination, and (v)
transport cargo on an owned or leased truck. At the Wilmington Facility, Holt
provides stevedoring services only.
STEVEDORING
A stevedore contracts with an owner of or an agent for a ship for the
purpose of loading or unloading the ship's cargo. A stevedore employs
longshoremen to load and unload cargoes to or from barges or oceangoing vessels.
In addition to these traditional stevedoring services, Holt and the Lessee-
Operators provide value-added services such as the supervision, equipment and
machinery necessary for conducting cargo handling operations at terminals, and
typically provide most of the portside services the shipping lines require.
These portside services include vessel berthing and line handling, preparing of
cargo stowage plans, documenting cargo and providing other data processing
services, weighing cargoes, providing for security for the cargo, assisting
government agencies such as the United States Customs Service and the Department
of Agriculture, and receiving and delivering the cargo at and from the marine
terminal. Additional services for containerized cargo include parking, storing
and maintaining inventory of containers and chassis, moving containers
throughout the terminal, maintaining and repairing containers and chassis, and
stuffing (loading individual containers) and stripping (unloading individual
containers) cargo.
The principal types of cargo that are handled at the Holt Facilities are as
follows:
o Containerized Cargo. Containerized cargo comprised approximately 49% of
aggregate tonnage handled by Holt and the Lessee-Operators at the Holt
Facilities during 1998. A container is a standardized metal box capable
of carrying up to 32 tons of cargo and is conducive to intermodal
handling (shipment by rail, truck and ship). Containers can hold a wide
variety of cargo from computers to food stuffs. Containers are unloaded
by shore-cranes with a specially designed spreader lifting mechanism and
then moved to a storage or marshaling area by straddle carriers, large
forklifts or top loaders. Alternatively, the container may be placed
directly on a wheeled chassis and then moved by a truck operator to the
storage or marshaling area.
o Breakbulk or Unitized Cargo. Breakbulk cargo, sometimes referred to as
unitized cargo, comprised approximately 39% of aggregate tonnage handled
by Holt and the Lessee-Operators at the Holt Facilities during 1998.
Breakbulk cargo is typically boxed, bagged, or palletized and utilizes
equipment (shore-based cranes, forklifts, etc.) owned or leased by the
stevedore. Breakbulk ships also typically have on-board booms or cranes
(one per hatch) which may be utilized to access the hold. Fruit, steel
and wood constitute the majority of breakbulk cargo handled at the Holt
Facilities.
o Other Cargo. Two other types of cargo handled by Holt are bulk and
roll-on/roll-off cargo. Bulk cargoes typically are not in any containers,
and such cargo can be either dry (such as grain, fertilizer and iron ore)
or wet (such as petroleum products, chemicals and liquid food products).
Roll-on/roll-off cargoes (such as automobiles, trucks and farm equipment)
are driven under their own power on board specialized vessels. These
other cargoes comprised approximately 12% of aggregate tonnage handled by
Holt and the Lessee-Operators at the Holt Facilities during 1998.
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WAREHOUSING
Holt and the Lessee-Operators operate 22 warehouses with approximately 2.4
million square feet of warehouse space, which includes approximately 1.1 million
square feet of refrigerated warehouse space, representing the most refrigerated
warehouse space of any marine terminal operation in the United States. The
warehousing facilities operated by Holt and the Lessee-Operators at the Packer
Avenue Facility and the Gloucester Facility provide customers with additional
services which the Company believes create a substantial competitive advantage.
A shipper directing cargo to one of these facilities, if it so desires, can have
the vessel unloaded, the containers (in the case of containerized cargo)
unstuffed and the cargo stored until it is ready to be delivered to its final
destination. At that point, the cargo can be shipped to its final destination by
Holt or the Lessee-Operators by rail, motor freight line or Holt's own fleet of
trucks.
The utilization of CTS makes the warehousing capabilities at the Packer
Avenue and Gloucester Facilities more efficient and effective. CTS enables Holt,
the Lessee-Operators and the shipper to track specific cargo from the ship to
the warehouse and beyond. This system is especially effective with breakbulk
cargo, such as pallets of fruit, which commonly pass through these facilities.
See "-- Management Information Systems and Technology."
INLAND TRANSPORTATION
Holt's own fleet of 30 tractors and 100 trailers, augmented by
approximately 150 owner-operators, transport truckload freight between the Holt
Facilities and inland points in the United States. Holt maintains a centralized
dispatch and customer service operation located at the Packer Avenue Facility to
schedule pickup and delivery of customer freight. The operations center features
a fully integrated computerized dispatch and customer service network. Customer
service representatives solicit and accept freight, quote freight rates and
serve as the primary contact with customers. Holt intends to utilize the
flexibility of adding and removing owner-operators from its driver work force to
address driver and equipment needs in the future. Owner-operators receive a flat
rate per trip to cover equipment costs, fuel and maintenance.
FACILITY LEASING
Substantially all of the Gloucester Facility is leased to Lessee-Operators
who in turn provide services to their customers. The Lessee-Operators include
container and breakbulk stevedores, warehouse service companies, equipment
rental companies, fruit importers and service companies and a home products
manufacturing company. The Company also provides courtesy offices to the United
States Customs Service and the United States Department of Agriculture. Due to
the size and quality of the Gloucester Facility and the scarce availability of
suitable port facilities in the Philadelphia area, the Company believes that it
has entered into its leases on favorable terms and that any renewals and/or new
contracts could be entered into on substantially similar terms. See "-- Overview
of Port Facilities -- The Gloucester Facility."
OVERVIEW OF PORT FACILITIES
Holt's marine terminal operations are conducted at the Holt Facilities, all
of which are located on the Delaware River, a key waterway for commerce on the
East Coast of the United States. Holt's port operations along the Delaware River
are centrally located within the largest consumption market in the United
States. Same-day delivery can be achieved within a 250 mile radius, which
includes points as far west as Pittsburgh, Pennsylvania, as far north as
Syracuse, New York, and as far south as Norfolk, Virginia. This access is
extremely important to perishable goods importers who look to rush their product
to market in fresh condition. Shippers of non-perishable goods also find the
Holt Facilities attractive because of their accessibility to the United States
interstate highway system and to major railroads. For example, the Packer Avenue
Facility has direct access to three major Class I railroads (Conrail, CSX and CP
Rail), which makes rail shipment cost effective to shippers throughout North
America, including Toronto and Montreal, Canada. The Company believes the Packer
Avenue Facility is the only marine terminal facility in the country that has
three Class I railroads servicing it, which provides Holt with a major
competitive advantage.
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Below is a description of each of the Holt Facilities:
THE GLOUCESTER FACILITY
The Gloucester Facility, which is owned by Holt, consists of approximately
150 acres and features approximately 4,200 lineal feet of deep water frontage,
18 warehouses with approximately one million square feet of dry space,
approximately one million square feet of refrigerated space and two container
cranes. The refrigerated warehouses are located directly adjacent to five deep
water berths and provide for the quick and efficient unloading of refrigerated
cargo directly from vessels to the warehouse. There are also approximately 60
acres of open ground suitable for storing containers, chassis and break-bulk
cargoes which do not need to be stored indoors. The Gloucester Facility has
direct access to rail lines connected to Conrail's South Jersey Line rail yard
and is also in close proximity to major interstate highways, facilitating the
movement of cargoes to and from the Gloucester Facility. Substantially all of
the Gloucester Facility is leased to Lessee-Operators who in turn provide
service to their customers.
The majority of the Lessee-Operators either conduct stevedoring operations
for containerized cargoes and for breakbulk cargo such as steel, wood, and fruit
products or provide long term and temporary warehouse storage at the Gloucester
Facility. Typically, the Lessee-Operators enter into leases, which range in term
from one to five years, for each building or combination of buildings as
necessary to accommodate their business needs. Leases currently in effect
contain expiration dates ranging from 1998 to 2001. Certain of the leases are
terminable by either party at any time upon 90 days prior written notice. In
addition to a fixed lease charge, certain of the Lessee-Operators are required
to pay a variable charge based on the tonnage of cargo or number of containers
moved through the Gloucester Facility by the applicable Lessee-Operators.
Certain of the other Lessee-Operators do not provide stevedoring or
warehousing services. For example, one of the Lessee-Operators at the Gloucester
Facility performs maintenance repair services for forklifts, tractors, chassis,
containers and other types of material handling equipment under a year-to-year
lease. Another Lessee-Operator manufactures wood products for the home building
industry. This manufacturer leases three buildings totaling approximately
200,000 square feet under a lease expiring in 2001. Certain fruit shipping
customers which utilize the Gloucester Facility also rent office space on a
short-term basis from the Company during the fruit import season. The Company
also provides courtesy offices to the United States Department of Agriculture
and United States Customs Service at the Gloucester Facility. These agencies
provide necessary services to the customers at the Gloucester Facility.
THE PACKER AVENUE FACILITY
The Packer Avenue Facility, which is owned by an agency of the Commonwealth
of Pennsylvania, is subleased by Holt pursuant to a sublease expiring in 2040,
including all renewal options. The Packer Avenue Facility occupies approximately
110 acres, featuring approximately 3,800 lineal feet of deep water frontage,
three dry warehouses with approximately 278,000 square feet of storage space,
one refrigerated warehouse with approximately 168,000 square feet of storage
space, an approximately 45,000 square foot maintenance and repair facility and
five container cranes. The Packer Avenue Facility's direct access to three major
Class I railroads (Conrail, CSX and CP Rail) makes rail shipping cost effective
to shippers throughout North America including Toronto and Montreal, Canada. At
the Packer Avenue Facility, Holt provides stevedoring, warehousing and inland
transportation of containerized and other cargoes through its subsidiary Holt
Cargo Systems, Inc. ("Holt Cargo"). Holt Cargo handles weekly shipments of
containerized general commodities as well as unitized steel.
THE WILMINGTON FACILITY
The Wilmington Facility, which is owned by an agency of the State of
Delaware, occupies approximately 80 acres, featuring approximately 2,700 lineal
feet of deep water frontage, four dry warehouses, a bulk orange juice facility,
and two container cranes. The Wilmington Facility is an open terminal which is
available to the Company as well as other stevedoring companies. At the
Wilmington
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Facility, Holt provides the services of stevedoring, maintenance and repair, and
intraport trucking through its subsidiaries Murphy Marine and Wilmington
Stevedores. These subsidiaries handle weekly shipments of containerized bananas
for Dole Fresh Fruit Company and Chiquita Brands International, Inc.
Additionally, Wilmington Stevedores unloads seasonal fruit, bulk cargoes,
unitized steel and wood cargoes as well as Volkswagen automobiles. The Company
believes it is the leading contract stevedore in the Wilmington Facility, as it
handled in excess of 95% of the aggregate container volume and approximately 75%
of the aggregate tonnage of cargo handled in the Wilmington Facility during
1998.
CUSTOMERS
Holt's wide range of services coupled with its willingness to anticipate
customer needs and develop services and facilities to accommodate those needs,
has helped Holt to maintain and expand its customer base and develop strong,
long-term customer relationships. In 1998, Holt's top 15 customers accounted for
$52.4 million, or 54.3%, of total revenues. Holt estimates that it has provided
these top 15 customers with services for between two and 25 years. No customer
accounted for more than 10% of Holt's total revenue for the years ended December
31, 1996, 1997 and 1998, other than Columbus Line, Inc., which accounted for
10.5% of such revenue for the years ended December 31, 1996 and 1997. Holt
obtains new stevedoring business by negotiating liner service contracts with
shippers (importers and exporters of goods) or attracting spot-market vessels.
Holt typically enters into one to five year contracts with its customers,
with cancellation clauses varying from 30 to 180 days. These contracts also
typically contain provisions with respect to the specific services to be
provided, the volume of and pricing for such services and minimum productivity
levels to be achieved by the Company.
MANAGEMENT INFORMATION SYSTEMS AND TECHNOLOGY
Holt and the Lessee-Operators utilize automated information systems,
including CTS, which facilitate the movement of cargo to and from the Holt
Facilities and increase the efficiency of the operations at those facilities,
through contracts with SLS. This capability helps differentiate the Holt
Facilities from their competitors with less advanced technology. CTS is owned by
SLS and made available to the Company. See "Risk Factors -- Related Entity
Transactions" and "Certain Transactions."
CTS utilizes a special bar-coding technology which provides customers with
an innovative tracking system for their cargo. The system is especially
effective when the cargo is unitized or characterized by contents of different
weights, moisture content, or other unique characteristics. The system utilizes
bar-code technology and a radio frequency environment linked directly to a
computer. The entire logistic process for cargo, beginning with ship
discharging, then sorting and segregation, and eventually all movements of the
cargo to transit sheds, warehouses or trucks, is captured in real time and
reported to the various cargo receivers immediately. The Company believes that
none of its competitors can provide this level of detail regarding the location
of specific cargo.
CTS allows Holt and the Lessee-Operators to sort cargo by customer type,
grade and destination. Prior to shipment each pallet of cargo is assigned a bar
code on board the vessel. While the cargo is in transit, CTS receives the
vessel's hold layout and location of specific goods, making it easier to
implement an efficient stevedoring plan. Upon arrival, forklift operators scan
these bar codes to determine where the pallets should be stored in the
warehouse. CTS not only allows Holt and the Lessee-Operators to expedite the
stevedoring process but also to optimize the allocation of warehouse space, thus
reducing labor and storage costs. For the customer, CTS provides a process of
pre-sorting inventory. Thus, when trucks arrive for cargo pick-up, the loading
and delivery processes are streamlined, thereby reducing costs.
In addition, a state-of-the-art container computer system is utilized to
control container cargo and equipment movements throughout the Holt Facilities.
The main components of this system include: computerized gate and yard
operations, usage of radio frequency computer terminals to track containers and
chassis movements, on-line inventory and activity reporting to customers, vessel
planning and stowage linked to gate and yard movements for containers, use of
the latest electronic data interchange technology to exchange shipping manifest
and information regarding container
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movement, booking, and stowage plans with the container lines, and a direct link
to the United States Customs Automated Manifest System to facilitate cargo
releases. Holt intends to introduce the container computer system at NPR's port
in San Juan, where currently there is no similar system in place.
SALES AND MARKETING
Holt's sales and marketing efforts address customer desires and employ a
great deal of personal contact. Holt's sales and marketing personnel convey the
Company's ability and desire to provide cost effective, high quality cargo
handling and transport services. Holt's sales and marketing team is supplemented
by marketing services provided by SLS. See "Certain Transactions." Holt has
always provided significant resources for domestic and foreign travel in order
to bring its services, facilities and family ethics direct to the customer.
Holt focuses on developing long term relationships with customers in
certain product niches including perishable products, wood products, steel
products and containerized cargoes by providing specialized services. For
example, each of the warehouses that the Company uses to store frozen imported
meat has an integrated USDA Meat Inspection Department inspection room and
resident inspector. In addition, the Company actively participates in trade
organizations of its niche customers' industries, including the Produce
Marketing Association of America, the International Hardwood Producers
Association, the Meat Importers Council of America, the International
Refrigerated Warehouse Association and the National Industrial Transportation
League.
COMPETITION
Holt competes in two separate arenas: (i) inter-port competition and (ii)
intra-port competition. Holt believes the United States ports of Boston, New
York (including Northern New Jersey), Baltimore and Norfolk as well as the
Canadian ports of Saint John and Halifax are Holt's main inter-port competitors.
Inter-port competition is based upon the following factors: (i) price; (ii)
destination of the cargo; (iii) access to other modes of transportation such as
rail and trucks; (iv) geographic location; (v) facilities to accommodate
specific types of cargoes; (vi) quality of service; and (vii) quality of labor
relations. In Wilmington, Holt competes against several stevedoring companies.
In the Philadelphia port, the Gloucester and Packer Avenue Facilities compete
against governmental and privately owned facilities. Intra-port competition is
based upon the following factors: (i) adequacy of terminal facilities; (ii)
quality of service; (iii) presence of value-added services; and (iv) price.
The market for ocean-going cargo handling services is very competitive but
Holt believes it maintains several competitive advantages, including the
following: (i) ownership/long term lease of a substantial portion of the
available waterfront property in the Philadelphia port; (ii) long-standing
customer relationships; and (iii) the largest refrigerated warehousing
capabilities of any marine terminal in the United States.
EMPLOYEE AND LABOR RELATIONS
The stevedoring and terminal operator industries are dominated by two large
unions (the International Longshore Worker's Union ("ILWU") on the west coast,
and the ILA in the remaining United States ports). Master labor agreements are
negotiated by the unions not only with the stevedores and marine terminal
operators, but also with steamship lines and steamship agencies. In recent
years, management has negotiated for the introduction of new technology and the
modification of work rules to improve the efficiency of operations.
Holt Cargo has relationships with four unions: (i) the ILA with a contract
expiring September 30, 2001; (ii) the International Association of Machinists
(the "IAM" or the "Machinists") with a contract expiring September 30, 2000;
(iii) the Teamsters with contracts expiring March 31, 2003 and December 31,
2000; and (iv) the Security Officers and Police Guard Union with a contract
expiring January 31, 2000. At the Packer Avenue Facility, Holt Cargo employs the
ILA for its stevedoring operations and the IAM for maintenance and repair
operations. At the Gloucester Facility, the Lessee-Operators employ Teamsters
for unloading the ships and warehousing the cargo. Holt presently
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believes that Holt Cargo and the Lessee-Operators have satisfactory relations
with their unions, notwithstanding two work stoppages by the ILA which occurred
in 1993 and 1996, respectively.
The first work stoppage resulted after Holt Cargo terminated its lease at
the Gloucester Facility and Holt Hauling and Warehousing System, Inc. ("Holt
Hauling") commenced leasing the facility to the Lessee-Operators, which have
contracts with unions other than the ILA. The ILA claimed this to be in
violation of the collective bargaining agreement between the ILA and Holt Cargo
("CBA") and staged an illegal work stoppage. The resulting arbitrations were
resolved in favor of Holt Cargo, as Holt Hauling was found to have no
obligations under the CBA.
Also in 1993, Holt Cargo withdrew from the Philadelphia Marine Trade
Association ("PMTA"), the local multi-employer collective bargaining unit that
has historically negotiated and signed ILA contracts on behalf of Holt Cargo and
other operators in the Port of Philadelphia. In 1993, while Holt Cargo opted out
of the PMTA, it continued to operate under the terms of the existing CBA in
effect at that time and scheduled to expire on September 30, 1994. At the
expiration of the CBA in September of 1994, Holt Cargo negotiated its own
contract directly with the ILA. When Holt Cargo's contract with the ILA expired
in 1996 (concurrently with the PMTA contract), Holt Cargo attempted to again
negotiate its own contract directly with the ILA. This strategy precipitated the
second incident, a 23-day work stoppage by ILA workers at the Packer Avenue
Facility. During the work stoppage, ships were unloaded and cargo was delivered
by management. The work stoppage was resolved when Holt Cargo rejoined the PMTA
and agreed to be bound by the five-year contract concluded by the PMTA that is
in effect until 2001.
In addition, Murphy Marine and Wilmington Stevedores are members of the
PMTA and are covered by the PMTA contract with the ILA.
Holt's employee workforce engages in (i) stevedoring, (ii) trucking, (iii)
warehousing, (iv) mechanical repairs to material handling equipment and (v)
routine maintenance and repair of the Gloucester Facility and the Packer Avenue
Facility. Stevedoring operations are performed by ILA union longshoremen and
non-union supervisory personnel. Longshoremen are hired on an as-needed basis,
and depending upon the number of vessels being loaded or unloaded at any time,
Holt may employ up to approximately 300 longshoremen.
PROPERTIES
GLOUCESTER FACILITY
Holt is headquartered at its Gloucester Facility in Gloucester City, New
Jersey. The Gloucester Facility is comprised of approximately 150 acres of land
and features approximately 4,200 lineal feet of deep water frontage, 18
warehouses with approximately one million square feet of dry space and
approximately one million square feet of refrigerated space, and two container
cranes. The two container cranes facilitate the loading and unloading of vessels
and have the capability of traveling along two thousand feet of crane rail
directly at the wharf. The majority of the warehouses have been constructed
within the last six to eight years. Several of the warehouses are insulated and
have heating capability. Overhead cranes with lifting capability of up to 25
tons are located within several of these dry warehouses.
In order to accommodate customers using the Gloucester Facility, the
facility includes a two-story office building comprising approximately 10,000
square feet and a maintenance and repair shop comprising approximately 41,000
square feet where repairs are made to customers' chassis and containers as well
as the material handling equipment used by the Lessee-Operators. The Gloucester
Facility is located within one mile of a major interstate highway and is
directly across from the Packer Avenue Facility on the Delaware River.
PACKER AVENUE FACILITY
The Packer Avenue Facility, located in Philadelphia, Pennsylvania, is
leased by AHI from the Philadelphia Regional Port Authority (the "PRPA")
pursuant to a lease (the "PRPA Lease") and is subleased by Holt from AHI under a
long term sublease (the "Sublease") which commenced in 1991
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and expires in 2000. The terms of the PRPA Lease and the Sublease are renewable
until 2040 through four 10-year renewal options, the last two of which are
exercisable provided that Holt completes certain required capital improvements.
See "Risk Factors -- Related Entity Transactions" and "Certain Transactions."
The Packer Avenue Facility comprises approximately 110 acres and features
approximately 3,800 lineal feet of deep water frontage, three dry warehouses
with approximately 278,000 square feet of storage space, and one refrigerated
warehouse with approximately 168,000 square feet of storage space. Five cranes
at the Packer Avenue Facility are leased by Holt from AHI, including four cranes
which are leased by AHI from the PRPA under the PRPA Lease. The cranes have the
capability of traveling up to 2,500 feet along the wharf providing direct
shipside loading and unloading. The Packer Avenue Facility also has
approximately 15,000 square feet of office space to service customers using the
facility. The Packer Avenue Facility is located directly adjacent to Ameriport,
an intermodal yard serving three Class I railroads and within one half mile of
major interstate highways.
The rent payable by Holt under the Sublease is equivalent to the rent
payable by AHI under the PRPA Lease plus fifteen percent of that amount and
consists of several components, including base rent, a container pick fee, a
breakbulk cargo fee and certain other fees. Base rent is payable in equal
monthly installments and increases annually provided that the PRPA completes
certain capital improvements at the facility. Holt also pays a fixed monthly
rental for the container crane owned by AHI. A container pick fee ranging from
$1 to $10 per container is to be paid by Holt upon completion by the PRPA of
certain capital improvements at the Packer Avenue Facility with respect to all
containers loaded or unloaded onto or off any vessels at the Packer Avenue
Facility in excess of 89,999 containers in any one year. Holt has not paid any
container pick fees as of this date as the capital improvements have not been
completed and the threshold level of container picks has not been met. Once the
PRPA has completed these capital improvements, Holt has guaranteed that it will
handle 225,000 container picks at the Packer Avenue Facility during each
consecutive 36-month period. In the event Holt does not handle the required
number of picks, then Holt is obligated to pay $10 per container multiplied by
the difference between 225,000 and the number of containers actually handled. A
"breakbulk cargo fee" is also payable by Holt at a rate of $1.50 per ton of
temperature controlled breakbulk cargo handled at the Packer Avenue Facility,
plus $0.20 per ton or $0.70 per ton, depending upon the type of cargo subject to
certain minimum fees. Holt has agreed to be responsible for certain obligations
such as the requirement to (i) carry general liability and other insurance
applicable to similar companies in the industry, (ii) repair and maintain
certain components of the Packer Avenue Facility such as the fire protection
system, water, sewer and electrical utilities, but excluding structural
maintenance and repair to the buildings and the wharf unless damaged by Holt,
(iii) conduct its business in accordance with all federal, state and local
environmental laws, (iv) not place cargo loads in excess of those permitted at
the Packer Avenue Facility, (v) maintain and repair the cranes located at the
Packer Avenue Facility, (vi) provide access to the Packer Avenue Facility for
the PRPA and its agents, contractors and employees, (vii) pay all utility costs,
(viii) pay any taxes, levies or assessments in connection with the Company's
activities at the Facility, and (ix) not transfer its interest in the Sublease
to any other party except as permitted and with notice to the PRPA.
In the event that AHI or the Company fails to pay rent or perform its other
obligations as required under the PRPA Lease or the Sublease, the PRPA and AHI,
respectively, have the right to exercise remedies typically available to a
commercial landlord including the right to terminate the PRPA Lease or the
Sublease and to confess a judgment against AHI or Holt to recover possession of
the Packer Avenue Facility. The PRPA Lease and the Sublease provide that the
PRPA and AHI can only exercise remedies provided that AHI or Holt, respectively,
has been given notice and time to cure the default, except that no notice or
cure period applies after the third monetary default in any twelve-month period.
The Company and AHI are engaged in litigation with the PRPA relating to the PRPA
Lease. See "-- Legal Proceedings."
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WILMINGTON FACILITY
The Wilmington Facility is an open terminal, owned by an agency of the
State of Delaware, which is available to the Company as well as other
stevedoring companies operating at that facility. The Wilmington Facility
occupies approximately 80 acres, featuring approximately 2,700 lineal feet of
deep water frontage, four dry warehouses, a bulk orange juice facility, and two
container cranes.
GOVERNMENT REGULATION
Holt is subject to regulation by various federal and state agencies,
including the Surface Transportation Board, the Federal Maritime Commission, the
United States Coast Guard and various similar federal and state agencies. These
regulatory authorities have broad powers, generally governing activities such as
authority to engage in motor carrier operations, operational safety, tariff
filings of freight rates, and financial reporting. In addition, the Company's
drivers, including owner-operators, also must comply with the safety and fitness
regulations promulgated by the Department of Transportation, including those
relating to drug testing and hours of service.
ENVIRONMENTAL MATTERS
Holt's operations are also subject to various federal, state and local
environmental laws and regulations, promulgated by the Environmental Protection
Agency and similar state regulatory agencies. These regulations govern the
management of hazardous wastes, discharge of pollutants into the air, surface
and underground waters, and the disposal of certain substances. The Company is
not aware of any material water or land fuel spills or hazardous substance
contamination on its properties and believes that its operations are in material
compliance with current environmental laws and regulations.
Portions of the Gloucester Facility, including the Armstrong Building which
houses Holt's corporate offices, are considered to be within a broad area which
was designated by the EPA for investigation and possible remediation under the
federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"). This area, which covers over 65 properties in the Camden/Gloucester
City area, was listed on EPA's National Priorities List ("NPL") on June 17,
1996, thereby invoking eligibility for investigation and remediation utilizing
the federal "Superfund." Superfund activity is necessitated by the discovery, in
1981, that the Camden/Gloucester area contains levels of gamma radiation and
radon/thorium decay products attributable to pre-1940 manufacturing activities
of the former Wellsbach Company. The current Armstrong Building was part of the
former manufacturing facility. Other than the small portion of the building
occupied by office space, the building is primarily empty and unused. Future
plans contemplate demolition of the building. In order to assess the need for
special demolition requirements in light of ongoing EPA activity, in September
1997 Holt commenced a Remedial Investigation/Feasibility Study ("RI/FS"),
addressing the Armstrong Building pursuant to an Administrative Consent Order
with the EPA. The EPA continues to sample, independently, various outside soil
areas, in addition to its ongoing activities in other portions of the NPL site
area. Pending completion of the RI/FS, Holt has performed recent sampling and
preliminary cost estimate analyses which indicate that it could cost up to
approximately $210,000 to address contaminated areas in conjunction with
building demolition.
LEGAL PROCEEDINGS
Holt Cargo, Holt Hauling and AHI (collectively, the "Plaintiffs") commenced
an action in December 1994 in the United States District Court for the Eastern
District of Pennsylvania against the Delaware River Port Authority ("DRPA"), the
Philadelphia Regional Port Authority ("PRPA") and the Port of Philadelphia and
Camden ("PPC") (collectively, the "Defendants"). Certain counts alleging
violations of the Sherman Act and Clayton Act (the "Antitrust Counts") and
breach of the PRPA Lease by the PRPA (the "Breach Counts") filed in the initial
complaint were voluntarily withdrawn by the Plaintiffs after a hearing on the
Defendants' motion to dismiss was conducted by the Court. However the court did
maintain jurisdiction over those counts in the complaint wherein the Plaintiffs
allege that the Defendants along with other non-defendant co-conspirators,
acting under color of state law committed predatory acts under a conspiracy
designed to injure, harass, and appropriate
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the property of the Plaintiffs. The Plaintiffs are seeking to enjoin this
conduct and damages in an unspecified amount for the Defendants' conduct which
constitutes a violation of the Plaintiffs' substantive due process, equal
protection and procedural due process rights under 42 U.S.C. Section 1983.
Specifically, the Plaintiffs allege that in 1994, after the execution of
the PRPA Lease, Pennsylvania and New Jersey agreed to unify their ports in an
effort to eliminate intra-port competition and to enhance their ability to
compete against other ports and adopted legislation to effectuate this
agreement. The Plaintiffs allege that the DRPA produced a "Strategic Business
Plan" in conjunction with the PRPA, South Jersey Port Corporation, and the PPC
which provided for a unified government agency to take over the entire Port
District by waiting for the existing leases of the PRPA to expire, buying out
the existing leases, or renegotiating out of the leases, or a combination which
formed the basis of a scheme to attempt to terminate the PRPA Lease. The PRPA
Lease does not allow for condemnation and therefore prevents the government port
agencies from implementing their Plan to operate all of the government-owned
facilities in the port as part of the unification process. According to the
Plaintiffs, this scheme was contrary to the underlying express principle of the
unifying legislation and related compact, which was designed to encourage
private enterprise. The Plaintiffs further allege that, in an effort to control
the entire Port District, the Defendants conspired to drive Holt Cargo and AHI
out of the Packer Avenue Facility and other holdings, and to remove Holt Cargo,
AHI, and Holt Hauling from their position within the Port District so government
agencies could control the port district.
The Defendants filed a response to the Complaint and the PRPA asserted a
counterclaim alleging that the Plaintiffs breached their obligations under the
PRPA Lease by operating the Packer Avenue Facility in a manner intended to
benefit the Plaintiffs' other facilities, refusing to operate the Packer Avenue
Facility so as to maximize its use, failing to market the Packer Avenue Facility
in a first class manner and soliciting container business for the Gloucester
Facility to the detriment of the Packer Avenue Facility. PRPA seeks compensatory
damages and a ruling enjoining the Plaintiffs from continuing their alleged
detrimental conduct.
On March 23, 1998, the Court issued a Memorandum and Order granting the
Defendants' Motions for Summary Judgment and dismissing PRPA's counterclaim. The
Plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit, which
affirmed the District Court's decision.
As a result of the withdrawal of the Antitrust Counts and the Breach Counts
in the federal action, the Plaintiffs filed a Complaint on May 31, 1996 with the
Federal Maritime Commission against Defendants and Pasha Auto Warehousing Inc.
alleging violations of Section 10 of the Shipping Act of 1984 and Sections 16
and 17 of the Shipping Act of 1916 generally by engaging in unjust and
unreasonable practices, discrimination and unreasonable refusals to deal with
and giving unreasonable preferences to others to the detriment of the Plaintiffs
and breaching the PRPA Lease. PRPA filed a counterclaim with the same
allegations and seeking the same relief as the counterclaim filed by the
Defendant with the District Court.
The Plaintiffs have requested the Federal Maritime Commission ("FMC") to
issue an order commanding the Defendants to cease and desist from the aforesaid
violations, to establish and put in force such practices as the FMC determines
to be reasonable and to pay damages to the Plaintiffs by way of reparation. The
Defendants have filed motions for summary judgment with the FMC which are still
pending. On March 31, 1999, Plaintiffs circulated to the Defendants a proposed
draft of a stipulation to dismiss the case in exchange for PRPA's dismissal of
its counterclaim.
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NPR
GENERAL
NPR, operating under the trade name "Navieras," provides containerized
cargo service between the United States, Puerto Rico and the Caribbean. Based on
the total volume of fully containerized cargo carried between the United States
and Puerto Rico during the year ended December 31, 1998, NPR ranked first
overall, having transported approximately 32.9% of such cargo. At the Puerto
Nuevo San Juan facility, NPR controls approximately 60% of the available
waterfront container terminal facilities which provides significant operating
efficiencies and competitive advantages.
NPR's predecessor was formed in 1974 by the Puerto Rico Government in
recognition of the vital importance of maritime transportation to the economic
development of Puerto Rico. When NPR's predecessor commenced operations, it had
a virtual monopoly. Over time, however, the development of competition combined
with the bureaucratic management style associated with a government controlled
entity had a negative impact on its competitive position and operating
performance. In November 1992, the Puerto Rico Government began to evaluate
publicly the merits of liquidating or divesting its shipping operations.
Uncertainty surrounding the Puerto Rico Government's intentions and the
possibility of liquidation provided competitors with the opportunity to increase
market shares and resulted in significant deterioration in financial
performance. In March 1995, pursuant to the Privatization, an investment group
(including members of NPR's current management) purchased NPR's business. Since
the Privatization, NPR's management has implemented various programs to
significantly improve NPR's performance.
OVERVIEW OF OPERATIONS
NPR operates four ships which carry primarily containerized cargo in
standard size containers, employing 20-foot, 40-foot, 40HC, refrigerated and
45-foot marine containers. Two of NPR's vessels have been modified in order to
accommodate expansion into the 53-foot "big box" segment of the market. For
ocean-going transportation, these containers can be placed both inside the cargo
hold and on the deck of a container ship, and for land transportation are placed
on chassis and pulled by conventional tractors, or on rail cars in single or
double stacks. NPR offers service three times per week between San Juan, Puerto
Rico and the United States via the port of Jacksonville, Florida and weekly
service between San Juan and the port of Philadelphia, Pennsylvania. These two
ports of entry provide efficient gateways to major commercial areas throughout
the United States and Canada. In April 1998, NPR added Miami as a new port of
call in order to increase market penetration in the South Florida market and
reduce intermodal transportation costs. Due to a change in the vessel deployment
schedule resulting from Hurricane Georges, NPR is not currently calling at the
Port of Miami. In connection with the Acquisition, NPR now calls at the Packer
Avenue Facility in Philadelphia instead of its previous port of call of
Elizabeth, New Jersey, in order to capitalize on several areas of expected cost
savings. Through charter arrangements, NPR provides service two times a week
between San Juan and the Dominican Republic and also, through a slot charter
arrangement (i.e. the use of space on another carrier's vessel), services the
Caribbean island of Trinidad and the United States Virgin Islands.
In addition, NPR has developed and enhanced a sophisticated, efficient
intermodal network which permits NPR to offer daily in-land transportation to
and from the ports of Jacksonville, Miami and Philadelphia via high speed rail
and truck connections throughout the United States. Furthermore, as an operator
of ocean-going vessels, which have sailing times that are generally more
predictable than barges, NPR provides its customers with the convenience of
on-time scheduled departures at all ports served.
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NPR owns five vessels, four of which currently are in operation and one of
which can be made available to be rotated into service to minimize service
disruptions when an operating vessel is in need of maintenance or repairs. All
five are Jones Act vessels. The following table sets forth information regarding
the five ships that NPR currently owns:
<TABLE>
<CAPTION>
NUEVO SAN JUAN CAROLINA GUAYAMA HUMACAO MAYAGUEZ
-------------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Date Built..................................... 10/70 3/71 6/69 5/68 12/68
Age............................................ 27 yrs. 26 yrs. 28 yrs. 29 yrs. 29 yrs.
Gross tons..................................... 19,444 19,454 19,283 19,046 19,203
Net tons....................................... 13,939 13,948 13,806 13,544 13,726
Displacement tons.............................. 33,400 33,400 32,565 32,565 32,565
Twenty-foot equivalent units ("TEUs").......... 1,326 1,330 1,292 1,257 1,292
Refrigerated slots ("Reefers") (1)............. 90 90 90 90 90
Length ("LOA")................................. 704.5' 704.5' 700.5' 700.5' 700.5'
Beam........................................... 90' 90' 90' 90' 90'
Draft.......................................... 35.846' 35.846' 35.846' 32.094' 32.094'
Rated Speed.................................... 22 kts. 22 kts. 22 kts. 22 kts. 22 kts.
Shaft H.P...................................... 27,300 27,300 27,300 27,300 27,300
Crew........................................... 28 28 28 28 28
</TABLE>
- ------------------
(1) Included in TEUs indicated above.
In San Juan, Puerto Rico, NPR leases approximately 60% of the available
waterfront container terminal facilities at Puerto Nuevo through long-term
leases with the Puerto Rico Ports Authority which run through 2018-2021. See "--
Properties". The San Juan port is Puerto Rico's primary port serving Puerto
Rico's 3.7 million residents and businesses. In San Juan, the Company performs
its own stevedoring operations on an approximately 110-acre facility, utilizing
four container cranes. Due to its space advantage, NPR is able to offer a fully
wheeled operation which keeps the containers on chassis at all times and allows
for immediate pick-up and delivery. Stevedoring services for NPR's vessels in
Jacksonville are performed by third parties, while in Philadelphia, they are
performed by Holt at the Packer Avenue Facility. Utilizing its vessels, valuable
port space in San Juan and over 20,000 containers and truck chassis, NPR
provides cargo transportation services for over 2,500 customers.
Following the Privatization, NPR's management successfully implemented a
number of initiatives to reduce operating expenses. As a result of these
initiatives, NPR's EBITDA increased from $8.2 million for the year ended January
5, 1997 to $13.1 million for the period beginning January 6, 1997 and ended
November 20, 1997, while for the same periods its revenues decreased from $269.1
million to $245.3 million and its net income increased from a loss of $14.9
million to net income of $1.5 million. These initiatives included the following:
o Increased Routing Efficiency. At the time of the Privatization,
NPR's ships were calling five different ports in the United States:
Elizabeth, New Jersey; Jacksonville, Florida; Baltimore, Maryland;
Charleston, South Carolina; and New Orleans, Louisiana. After the
Privatizations, the current management team reduced the number of
ports of call in the United States from five to two, and was able to
do so with minimal impact on revenues due to effective use of
in-land transportation, a concept commonly referred to as
intermodalism. In addition to the reductions in the ports of call,
NPR has implemented improved vessel deployment. These initiatives
have allowed NPR to reduce the number of operational vessels from
five to four, resulting in reduced vessel expenses combined with
increased capacity utilization while providing the same weekly level
of service to Puerto Rico. The fifth vessel is rotated into service
when one of the other vessels is in need of maintenance or repair,
thereby maintaining continuity of service.
o Closure of port facilities. As a result of the 1995 and 1996
closing of port facilities in Baltimore, Charleston and New Orleans,
NPR eliminated annual rent of approximately $1.3 million. In
addition, the Company closed seven sales and administrative offices
and consolidated customer service operations at one service center
in Tampa, Florida, resulting
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in annual savings of approximately $141,000. These initiatives,
while reducing costs, have resulted in more efficient operations and
improved customer service.
o Reduction in staff. Subsequent to the Privatization, management has
reduced overhead expenses through reductions in office headcount.
The number of employees at NPR was reduced by 289, from 676 to 387,
between the time of the Privatization and December 31, 1998. The
Company believes that this headcount reduction will result in
annualized savings of approximately $14.6 million and will be fully
implemented by the end of 1999.
o Reduced intermodal transportation costs. Due to the substantial
volume of intermodal cargo handled by NPR in the United States, NPR
significantly reduced its per-unit intermodal transportation costs
by entering into high-volume contracts with railroads at favorable
rates. NPR has entered into long-term contracts with the railroads
which fixes its rail rates through the middle of 2000.
o Reduced advertising costs. NPR has curtailed advertising expenses
it perceived as ineffective, resulting in a decrease in advertising
expenses from $458,000 in 1995 to $194,000 in 1997.
OVERVIEW OF PORT FACILITIES
Puerto Nuevo terminal in San Juan, Puerto Rico is the hub for all cargo
handled by NPR. Cargo received from and destined to the United States mainland
and the Caribbean islands passes through this facility en route to its final
destination. At Puerto Nuevo, NPR controls 110 acres, or approximately 60% of
the waterfront container terminal facilities available to these cargo
operations. At the terminal, NPR's facilities include approximately 3,300 feet
of deep water berthing area, office space, gate, maintenance and storage
facilities and four cranes. Three of the cranes are under long-term lease and
one is owned by NPR. San Juan is the only deep water port on the favored north
coast of Puerto Rico.
NPR's terminal in Jacksonville, Florida, known as the Blount Island
Terminal, is leased through 2005 and consists of approximately 42 acres. NPR is
entitled to use approximately 5,500 feet of deep water berthing space and has
preferential berthing and use of three cranes on four days of each week. Fees
for dockage, wharfage and cranes are charged on a per load basis. The facility
also includes facilities for maintenance, storage of cargo, office space and a
computerized gate.
TNX JOINT VENTURE
On August 6, 1997, NPR and Transroll Navegacao S.A. of Brazil ("Transroll")
announced the formation of Transroll Navieras Express, Inc. ("TNX" or the "TNX
joint venture") to provide cargo transportation service between numerous ports
in the United States, San Juan and certain ports in South America. NPR owns
approximately 40% of TNX. At the height of its operations, TNX leased or shared
a total of six self-sustaining container vessels and was a party to slot
chartering and vessel sharing agreements with several international shipping
companies.
A downturn in the Brazilian economy in the last quarter of 1998 resulted in
overcapacity of vessel tonnage introduced into the trade lanes where TNX
operates. Such overcapacity has led to competitive rate pressure, as a result of
which TNX has terminated all of its vessel sharing, slot charter and other
agreements with other shipping companies and completed its last voyage in
November 1998. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
CUSTOMERS
NPR has a diversified customer base consisting of both United States-based
and Puerto Rico-based shippers of a variety of goods. Typical shipments to
Puerto Rico include furniture, consumer goods, refrigerated and other food
products, toys, new and used cars and apparel. Typical shipments from Puerto
Rico include health products, electronics, shoes and scrap aluminum. The Company
intends to continue NPR's efforts both to increase business with existing
customers and add new customers. NPR's top 15 customers accounted for 28.5% of
total revenues in 1998. No customer accounted for more than 10% of NPR's total
revenues in 1998. NPR maintains a diversified customer base of over 2,500
companies, including several Fortune 500 companies.
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NPR has TVAs or fixed rate contracts covering the majority of its business.
TVAs or fixed rate contracts generally specify service standards and provide
customers with reduced rates in exchange for guaranteed minimum quantities
during a specified time period. A TVA or fixed rate contract typically runs for
a term of at least one year and provides for penalties to shippers in the event
that the terms of the TVA or contract are not met. In 1998, a majority of NPR's
revenues were from customers who were party to one or more TVAs or fixed rate
contracts.
SALES AND MARKETING
NPR's sales and marketing function is led by sales professionals who market
NPR to shippers as a customer-oriented provider of value-priced premium and
dependable service. NPR targets major shippers with high value cargo and high
volume, repetitive shipments. The Company believes that price, speed of service
and reliability are important determinants in marketing its services. The
Company believes that NPR has developed a reputation among shippers in the
United States-Puerto Rico market as a reliable provider of high quality and
responsive service. The reliability of NPR's vessels is particularly important
to its customers who depend on their efficient operation and the effective
management of logistical complexities to deliver cargo in a timely and safe
manner. The Company believes that NPR's commitment to high quality customer
service and support is an important factor in maintaining relationships with
major customers which enables it to market the best available rates as well as
obtain timely information regarding its customers' future vessel requirements.
COMPETITION
NPR currently competes with four carriers moving freight between the United
States and Puerto Rico. The current operators in the Puerto Rico trade are
Sea-Land Services, Inc. ("Sea-Land"), Crowley American Transport, Inc.
("Crowley"), Sea Star Line, LLC ("Sea Star") and Trailer Bridge, Inc ("Trailer
Bridge"). Of these operators, NPR and Sea-Land operate high-speed container
vessels while Crowley and Trailer Bridge operate towed, low-speed barges. As of
November 1998, Sea Star began operating one high-speed container vessel and
several flatdeck container barges. It is expected that Sea Star will replace
their remaining barges with a second high speed container vessel in May of 1999.
Competition is based upon the following factors: (i) price; (ii) timeliness of
delivery; (iii) quality of service; and (iv) locations of ports within the
United States. NPR believes it maintains a competitive advantage by operating
vessels which are faster and more reliable than barges. There can be no
assurance that NPR will be able to compete successfully against current and
future service of competition or that the current and future competitive
pressure faced by NPR will not adversely affect its profitability or financial
performance.
NPR management believes other competitors are unlikely to enter the market
as a result of limited port space in Puerto Rico and the requirement that all
cargo traveling between Puerto Rico and the United States be carried exclusively
by Jones Act vessels. Any new market entrant would need significant financial
and other resources to effectively compete. Furthermore, the U.S.-Puerto Rico
market is dominated by TVAs, creating a barrier to entry for any new market
contract. Nevertheless, NPR faces the continuation of price competition from,
and capacity expansion by, competitors already in the Puerto Rico market, some
of which are part of larger transportation organizations which possess greater
financial resources than the Company.
Sea-Land and Crowley are currently participants in a subsidy program
administered by MARAD which subsidizes certain of these carriers' vessels
operating in international routes. In order to continue receiving these
subsidies, Sea-Land and Crowley are subject to limitations on the number of
container slots they may offer in the U.S.-Puerto Rico market. To the extent
these carriers elect to continue receiving these subsidies, the Company believes
that NPR will enjoy a competitive advantage, as NPR is not subject to any
MARAD-imposed limitation on the number of container slots it may offer to
customers.
GOVERNMENT REGULATION
The Company's marine operations are conducted in the United States domestic
and foreign trade. A set of federal laws known as the Jones Act requires that
only United States built, owned and crewed vessels move freight in the domestic
trade between ports in the United States, including the
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noncontiguous areas of Puerto Rico, Alaska, Hawaii and Guam. These marine
operations are subject to regulation by various federal agencies, including the
Surface Transportation Board, the successor agency to the Interstate Commerce
Commission, MARAD and the United States Coast Guard. The marine operations in
the United States foreign trade are, in addition, subject to regulation by the
Federal Maritime Commission. These regulatory authorities have broad powers
governing activities such as operational safety, tariff filings of freight
rates, certain mergers, consolidations and acquisitions, contraband and
financial reporting. Management believes that its operations are in material
compliance with current marine laws and regulations, but there can be no
assurance that current regulatory requirements will not change. See "Risk
Factors -- Potential Loss of Jones Act Protection."
Pursuant to an agreement between NPR and MARAD, two of NPR's vessels are
deemed to be "qualified agreement vessels" within the meaning of Section 607 of
the United States Merchant Marine Act of 1936, as amended (which pertains to
MARAD's Capital Construction Fund Program). As a result, such vessels are
prohibited until March 3, 2000 from engaging in the contiguous domestic trade
(defined as cargo transportation between ports located within the United States,
excluding Alaska, Hawaii and Puerto Rico). The vessels are deemed "qualified
agreement vessels" due to the use of Capital Construction Fund monies by the
prior owner of the vessels in acquiring the vessels. The Company believes that
the agreement will not have an adverse impact on NPR's operations as NPR's
vessels are engaged in the non-contiguous domestic trade and the Company has no
present intention of engaging in the contiguous domestic trade.
EMPLOYEE AND LABOR RELATIONS
Approximately 28.9% of NPR's permanent employees are represented by labor
unions, including five unions related to shipping operations and two unions
related to land operations. At sea, NPR employs: (i) Masters, Mates & Pilots
("MMP") with a contract expiring June 30, 1999; (ii) Marine Engineers Beneficial
Association ("MEBA"), with contracts expiring June 15, 1999; (iii) Seafarers
International Union (SIU) with a contract expiring June 15, 2001; and (iv) two
radio officer unions, the American Radio Association and Radio Officers Union,
both with contracts which expired on December 31, 1998. NPR has commenced
renegotiation of these two labor contracts which have been extended on an
open-ended basis during the renegotiations. On land, NPR employs: (i) the ILA
with a contract expiring September 30, 2001 and (ii) the Office and Professional
Employees International Union ("OPEIU") (the clerical workers' union) with a
contract expiring August 31, 2000. NPR regards its relations with its unions as
satisfactory. The ILA's last strike against NPR was in 1977 and the OPEIU's last
strike against NPR was in 1989.
At December 31, 1998, NPR had 387 employees engaged in sales,
transportation logistics, equipment management, administrative support and
customer service. In addition, NPR employs 72 union shipboard employees.
Longshoremen are hired on an as-needed basis, and depending upon the number of
vessels being loaded or unloaded at any one time, NPR may employ up to 230
longshoremen.
ENVIRONMENTAL MATTERS
NPR's operations are subject to various federal, state and local
environmental laws and regulations, promulgated by the Environmental Protection
Agency and similar state regulatory agencies. These regulations govern the
management of hazardous wastes, discharge of pollutants into the air, surface
and underground waters, and the disposal of certain substances. Management is
not aware of any material water or land fuel spills or hazardous substance
contamination on its properties and believes that its operations are in material
compliance with current environmental laws and regulations.
In connection with NPR's acquisition of its business in the Privatization
in March 1995, NPR agreed to assume responsibility for the administration of
certain asbestos-related tort claims against the Puerto Rico Government and the
payment of the first $2 million of such claims. The Puerto Rico Government has
retained liability for claims above the $2 million level. Currently, the number
of filed asbestosis claims is approximately 1,150. A majority of the claims have
been filed as independent actions in the United States District Court for the
Northern District of Ohio.
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LEGAL PROCEEDINGS
NPR is the defendant in a lawsuit filed in November 1996 in the United
States District Court for the District of Puerto Rico (Ocean Logistics
Management, Inc. v. NPR, Inc., No. 96-2388 DRD). The plaintiff seeks damages
arising out of an agreement between the plaintiff and NPR whereby NPR offered a
discounted freight rate to the plaintiff in exchange for shipment of a
guaranteed volume of containers between the mainland United States and Puerto
Rico. The plaintiff claims that NPR unilaterally terminated the agreement
approximately two and one-half months before its termination date, allegedly
causing damages to the plaintiff. In its first amended complaint, the plaintiff
asserted causes of action claiming breach of contract, breach of a distribution
contract pursuant to Puerto Rico law, tortious interference with contractual
relations, liability for outstanding commissions and trucking allowances and
violations of the Sherman Act. The plaintiff seeks $4 million for each of the
first four claims and $12 million for the fifth claim (presumably because of the
treble damages provisions of the Sherman Act). On February 26, 1999, the Court
ordered plaintiff to show cause why its cause of action claiming liability for
outstanding commissions and trucking claims should not be dismissed in light of
the fact that the Court on the same date dismissed all of plaintiff's other
causes of action. Although the Company believes that any liability of NPR in
connection with the lawsuit will be substantially less than $4 million, there
can be no assurance in that regard or that the resolution of this lawsuit will
not have a material adverse effect on the Company's financial condition or
results of operations.
PROPERTIES
NPR is headquartered in Edison, New Jersey in a one-story leased building
of approximately 65,000 square feet. Currently, 133 administrative employees
work at this facility and approximately 50% of the facility is utilized. The
headquarters' lease expires in February 2001. NPR's San Juan, Puerto Rico
terminal is leased pursuant to multiple agreements with the Puerto Rico Ports
Authority with total acreage of approximately 110 acres, including both
preferential use berthing areas (20 acres for vessels) and exclusive use acreage
(90 acres), with terms expiring from 2018 to 2021, including all renewal
options. A parking lot is leased through 2005.
NPR's approximately 42-acre terminal in Jacksonville, Florida, known as the
Blount Island Terminal, is leased through year 2005. NPR is entitled to use
approximately 5,500 feet of deep water berthing space and has preferential
berthing and use of three cranes on four days of each week.
NPR leases an additional approximately 13,000 square feet of administrative
office space for 31 employees in San Juan, Puerto Rico under a lease which
expires in April 2002, including a renewal option. This office space is
approximately 95% utilized. Six small sales and administrative offices are
leased in Chicago, Miami, Houston, Long Beach, metropolitan Atlanta and
Washington, D.C. under leases with terms expiring from 1998 to 1999. NPR also
leases an approximately 20,000 square feet fully integrated, computerized
customer service center, located in a modern office building in Tampa, Florida,
housing 61 employees, under a lease which expires in February 2003.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth certain information regarding the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas J. Holt......................... 62 Chairman, President and Chief Executive
Officer
Lorraine Robins........................ 69 Executive Vice President and Director
Bernard Gelman......................... 58 Vice President, Chief Financial
Officer, Treasurer and Director
John A. Evans.......................... 52 General Counsel, Vice President,
Corporate Secretary and Director
Thomas J. Holt, Jr..................... 35 Director
Leo A. Holt............................ 34 Director
Michael J. Holt........................ 24 Director
The key employees of NPR are as follows:
Thomas J. Holt, Jr..................... 35 President and Chief Executive Officer
of NPR
Edward W. O'Donnell.................... 49 Executive Vice President and Commercial
Director of NPR
David N. Whene......................... 57 Senior Vice President of Operations of
NPR
Carl R. Fox............................ 46 Senior Vice President of Strategic
Planning and Administration of NPR
</TABLE>
Thomas J. Holt, Sr. has been Chairman, President and Chief Executive
Officer of the Issuer since its capitalization in October 1997. He is the son of
the founder of the Holt business. He has been actively involved with Holt for
over 44 years and has served as an executive officer and director of each of the
Holt Subsidiaries since 1965. He is a member of the Philadelphia District Export
Council, World Trade Association of Philadelphia, Inc., Pacific Maritime
Association and Imported Products Association. Mr. Holt is the father of Thomas
J. Holt, Jr., Leo A. Holt and Michael J. Holt, each a director of the Issuer.
Lorraine Robins has been Executive Vice President and a director of the
Issuer since its capitalization in October 1997. She has worked for Holt for the
last 36 years and has served as Executive Vice President of each of the Holt
Subsidiaries since 1983. She is a member of the World Trade Association of
Philadelphia, Inc., and received the "Woman of the Year" award for outstanding
achievement from the Women's International Trade Association.
Bernard Gelman has been Vice President, Chief Financial Officer, Treasurer
and a director of the Issuer since its capitalization in October 1997. He has
worked for Holt for 30 years and has served as Vice President, Chief Financial
Officer and Treasurer of Holt since 1970. He is a member of both the
Pennsylvania Institute of Certified Public Accountants and The American
Institute of Certified Public Accountants.
John A. Evans has been General Counsel, Corporate Secretary and a director
of the Issuer since its capitalization in October 1997 and Vice President since
January 1998. He has worked for Holt for 26 years and has served as Corporate
Secretary and General Counsel since 1983. He is both an attorney and a certified
public accountant. He is a member of the American Institute of Certified Public
Accountants, New Jersey Bar Association, Pennsylvania Bar Association and the
American Bar Association.
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Thomas J. Holt, Jr. has been a director of the Issuer since its
capitalization in October 1997. On February 1, 1999, he became the President and
Chief Executive Officer of NPR, Inc. Prior thereto, he served as a director,
executive officer and shareholder of AHI and SLS and has been involved in the
stevedoring, marine terminal and warehousing business for over 15 years. He is a
member of the Philadelphia Maritime Society and the World Trade Association of
Philadelphia. He is the son of Thomas J. Holt, Sr., Chairman, President and
Chief Executive Officer of the Issuer and the brother of Leo A. Holt and Michael
J. Holt, each a director of the Issuer.
Leo A. Holt has been a director of the Issuer since its capitalization in
October 1997. He is a director, executive officer and shareholder of AHI and SLS
and has been involved in the stevedoring, marine terminal and warehousing
business for over 14 years. He is a trustee with the Philadelphia Seaman's
Church Institute, a member of both the World Trade Association of Philadelphia
and the Produce Marketing Association. He is the son of Thomas J. Holt, Sr.,
Chairman, President and Chief Executive Officer of the Issuer and the brother of
Thomas J. Holt, Jr., and Michael J. Holt, each a director of the Issuer.
Michael J. Holt has been a director of the Issuer since its capitalization
in October 1997. He is a director, executive officer and shareholder of AHI and
SLS and has been involved with the stevedoring, marine terminal and warehousing
business for over three years. He is the son of Thomas J. Holt, Sr., Chairman,
President and Chief Executive Officer of the Issuer and the brother of Thomas J.
Holt, Jr., and Leo A. Holt, each a director of the Issuer.
Edward W. O'Donnell has been Executive Vice President and Commercial
Director of NPR since the Privatization in March 1995. He has over 25 years
experience in the maritime industry previously serving in executive capacities
with several major shipping companies including Sea-Land, from 1972 to 1977, USL
from 1979 to 1987 and Crowley from 1987 to 1990. He has particular experience in
developing business in the Latin American markets including Brazil, Argentina
and Venezuela. Prior to joining NPR, he was a consultant to Transroll, NPR's
current joint venture partner, where he consulted on business matters affecting
the United States-Brazil and Argentina trade.
David N. Whene has served as Senior Vice President of Operations, Navieras,
since October 1, 1998. Prior to that, he served as Senior Vice President of
Operations for Blue Star Line, N.A., Ltd. from October 1986 to April 1998. Mr.
Whene has worked in various management positions in stevedoring and shipping
companies since 1979.
Carl R. Fox has been Senior Vice President of Business Planning and
Administration of NPR since May 1995. He has 22 years experience in the maritime
industry. In this position at NPR he is involved in directing the strategic
planning initiative focusing on development of short and long-term strategy; and
the management of Information Technology, Human Resources, Administrative
Services, and Reengineering. In addition, he has worked in a number of Financial
and Planning positions at Crowley and USL.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the capitalization of the Issuer in October 1997, the Issuer did
not pay any compensation to its executive officers. In 1996, decisions
concerning compensation of executive officers were made by the Board of
Directors of Holt, consisting, at that time, of Thomas J. Holt, Sr., Lorraine
Robins and Bernard Gelman. See "Certain Transactions."
DIRECTOR COMPENSATION
Directors of the Issuer are not currently compensated for their services as
such. The Issuer reimburses directors for their expenses incurred in connection
with their activities as directors. In the future, the Issuer may elect to
compensate directors for their services as directors.
EXECUTIVE COMPENSATION
The Issuer was capitalized in October 1997 and accordingly, paid no
compensation during the years ended December 31, 1995, 1996 and 1997. Prior to
April of 1998, all of the Issuer's executive officers were compensated by Holt.
The following table sets forth, with respect to services rendered
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during 1996, 1997 and 1998, the total compensation paid by Holt to or for the
account of the Company's Chief Executive Officer and the Company's three other
executive officers (the "Named Executive Officers"). None of the Named Executive
Officers is a party to an employment agreement with the Company. The named
Executive Officers also provide services to, and receive additional compensation
from certain of the Non-consolidated Affiliates. See "Certain Transactions."
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1)
--------------------------- ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
Thomas J. Holt, Sr ........................ 1998 $301,436 $ -- $ 1,259
Chairman of the Board, President 1997 254,782 -- 2,906
and Chief Executive Officer 1996 261,773 -- 2,659
1998 $131,700 $ -- $ 573
Lorraine Robins ........................... 1997 98,530 -- 1,626
Executive Vice President 1996 101,820 -- 1,557
Bernard Gelman ............................ 1998 $185,100 $ -- $ 665
Vice President, Chief Financial 1997 116,252 -- 2,013
Officer and Treasurer 1996 120,200 -- 1,926
1998 $186,766 $ -- $ 639
John A. Evans ............................. 1997 110,450 -- 1,596
General Counsel and Secretary 1996 108,786 -- 1,552
</TABLE>
- ------------------
(1) Amounts indicated for 1998 include employer 401(k) contribution in the
following amounts: Mr. Holt, $1,013; Ms. Robins, $327; Mr. Gelman, $419; and
Mr. Evans, $393. Also includes $246 in group life insurance premiums for
each Named Executive Officer.
401(K) PLAN
The Company maintains a 401(k) Profit-Sharing Plan ("401(k) Plan") for the
benefit of eligible employees of Holt which consists of a 401(k) component and a
profit-sharing component. The 401(k) Plan, which is intended to be qualified
under the Code, is a salary reduction plan and profit-sharing plan covering
employees of Holt who have completed one year of service, and whose employment
is not governed by a collective bargaining agreement.
Under the 401(k) component, participants may elect to defer between 1% and
10% of their compensation up to a maximum of $9,500 per year, as adjusted by the
IRS for changes in the cost of living, and to deposit such amount in the 401(k)
Plan fund. The Company also currently matches contributions of between 75% and
200% (depending on the participant's years of service) of the first 1% of
compensation deferred by a participant. Under the profit-sharing provisions of
the 401(k) Plan, the Company may make contributions in amounts to be determined
by the Company in its sole discretion. Any such Company profit-sharing
contributions will be allocated among all eligible employees, in proportion to
that employee's compensation from the Company. The Company's matching
contributions and profit-sharing contributions allocated to each participant
vest over six years, or earlier upon attainment of the appropriate retirement
age, upon retirement for disability, upon death or upon termination of the
401(k) Plan.
All contributions under the 401(k) Plan are currently invested, subject to
participant-directed elections, in collective funds managed by PaineWebber
Trust. Payment of 401(k) Plan benefits are generally made in a single lump sum
or installments. Distribution of a participant's vested interest in his or her
account generally occurs on the earlier of termination of employment for any
reason (including retirement, death or disability) or by the April 1 following
the calendar year the participant reaches age 70 1/2 if he or she is still
employed.
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NPR 1997 PHANTOM STOCK PLAN
GENERAL
Under the NPR Holding Corporation 1997 Phantom Stock Plan (the "Plan"), NPR
Senior Management (the "Participants"), received grants of "Phantom Stock Units"
in connection with the Acquisition. Each Phantom Stock Unit represents a
conditional contractual right to the payment of compensation in the future,
based on the value of the Phantom Stock Unit at the time payments are made under
the Plan. No Participant contribution or payment is required in connection with
the grant or receipt of payment with respect to Phantom Stock Units. The Phantom
Stock Units granted to NPR Senior Management represent the value of 10% of the
NPR common stock outstanding at the grant date, computed on a fully diluted
basis as if the Phantom Stock Units were outstanding shares of NPR common stock,
subject to adjustment for stock dividends, stock splits and similar dilutive
events.
VESTING OF PHANTOM STOCK UNITS
In general, a participant's Phantom Stock Units will "vest" based on NPR's
achievement of certain financial performance goals. If, for any calendar year
beginning on or after January 1, 1998 and ending December 31, 2002, NPR achieves
the financial performance target listed in the table below, Participants who are
active employees on the last day of that calendar year, or who terminated
employment after June 30 of the calendar year due to disability, death,
resignation with good reason or termination by the Company without cause, will
vest in the corresponding percentage of their Phantom Stock Units, as listed in
the table below. Once an applicable financial performance target has been met
with respect to a year, the applicable percentage of a participant's award is
permanently vested. NPR's meeting (or failure to meet) the financial performance
target with respect to subsequent years does not result in any additional
vesting (or loss of the prior vesting). The financial performance target is
based on NPR's net earnings, before interest, depreciation and amortization as
defined in the Plan (for purposes of this section, "EBITDA").
<TABLE>
<CAPTION>
EBITDA TARGET VESTING PERCENTAGE
------------- ------------------
<S> <C>
$19.8 million................................ 20%
29.0 million................................ 40
29.4 million................................ 60
40.6 million................................ 80
44.1 million................................ 100
</TABLE>
In the event of (i) a public offering of equity securities of the Issuer,
NPR or an affiliate of either (a "Public Offering"), (ii) the liquidation of
NPR, (iii) a merger of NPR, (iv) a change of control of NPR or (v) the sale of
substantially all of the assets of NPR, any of which occurs before January 1,
2003, unvested Phantom Stock Units held by Participants who are active
employees, or who terminated employment with NPR due to disability, death,
resignation with good reason or termination by NPR without cause within six
months of the applicable event, will become fully vested.
PAYMENT OF VALUE OF VESTED PHANTOM STOCK UNITS
As of any date, the value of all Phantom Stock Units in the aggregate is
equal to the sum of (i) five times EBITDA per share of NPR (including, for this
purpose, outstanding shares and Phantom Stock Units) for the immediately
preceding twelve-month period, plus (ii) an amount designed to reflect one-half
of the additional net after-federal-income-tax cost to the Participants of
recognizing income on the payment of the value of the vested Phantom Stock Units
at ordinary income tax rates instead of the income tax rates applicable to the
recognition of long-term capital gains with respect to capital assets that have
been held for more than 18 months.
In general, if a Participant continues in service as an active employee
through December 31, 2002, the value of the vested Phantom Stock Units will be
paid in a cash lump sum within 60 days following the participant's termination
of employment. If a Participant's employment with NPR terminates on or before
December 31, 2002, then depending on the nature of such termination, the value
of the vested Phantom Stock Units will be determined either (i) as of the end of
the year in which the termination
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occurred, (ii) as of the end of the year preceding the termination date or (iii)
as of December 31, 2002, and such value will be paid either (a) in a cash lump
sum within 60 days following the date of the Participant's termination of
employment, or (b) at a later date, up to 60 days following December 31, 2002.
If there is (i) a liquidation of NPR, (ii) a merger of NPR, (iii) a change
of control of NPR or (iv) the sale of substantially all of the assets of NPR
before January 1, 2003, then the value of the vested Phantom Stock Units,
measured as of the date of such event, will be paid to Participants in a cash
lump sum as soon as reasonably practicable thereafter.
Notwithstanding the foregoing, if the payment of the value of the vested
Phantom Stock Units in a cash lump sum as described above would violate any
agreement to which the Issuer or NPR is a party, which evidences or governs
indebtedness for borrowed money (and which agreement was effective as of
November 20, 1997, or which is a refinancing or replacement, in whole or in
part, of such an agreement), NPR will pay the Participant as much of the amount
as it can without violating the debt agreement, and pay the balance, plus
interest at three points over the prime rate (as in effect when the payment
would have been made but for the debt agreement) in periodic installments over
the longer of (i) three years or (ii) a period measured by the duration of time
between the Participant's termination of employment and December 31, 2002.
FEDERAL INCOME TAX CONSEQUENCES
A participant will recognize income for federal income tax purposes when
and to the extent he receives payments pursuant to the Plan. Assuming that the
payment reflects reasonable compensation for services, NPR will be entitled to
deduct the payments as a compensation expense at the time of payment.
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CERTAIN TRANSACTIONS
The Issuer and each of its subsidiaries (the "S Corp. Businesses") are
corporations subject to taxation under Subchapter S of the Code. As a result,
the net taxable income of each S Corp. Business must be included in the taxable
income of its shareholders as the S Corp. Businesses are not subject to tax at
the corporate level with respect to such income. The S Corp. Businesses had
historically made earnings distributions to their shareholders in amounts equal
to or greater than the amount of the shareholders' Federal and State income tax
liabilities arising from the S Corp. Business' status as S Corporations (other
than NPR, Murphy Marine and Wilmington Stevedores, which became S corporations
effective in January 1998). The amount of these distributions were $3.0 million,
$4.5 million and $5.0 million for 1996, 1997 and 1998, respectively. The terms
of the Notes generally will permit the S Corp. Businesses to make distributions
to their shareholders with respect to their tax liabilities attributable to the
S Corp. Businesses, subject to certain requirements described herein. Under
current tax rates, the amount of the distributions are likely to exceed the tax
liability which the S Corp. Businesses would have if they were not S
corporations. See "Description of New Notes."
Holt and the Non-consolidated Affiliates provide services and goods to each
other. Holt provides to the Non-consolidated Affiliates stevedoring services,
rental of warehouse space and building and equipment repair services. In 1996,
1997 and 1998, Holt received a total of $9,000, $55,000 and $41.000,
respectively, for these services. The Non-consolidated Affiliates provide Holt
with rental of warehouse space, building and equipment repairs, management
services and the sale of ice. For 1996, 1997 and 1998 Holt paid the
Non-consolidated Affiliates $1.7 million, $1.2 million and $1.0 million for
these services and goods, respectively.
Holt and the Non-consolidated Affiliates historically have made advances to
each other for working capital purposes and have accrued amounts payable to each
other arising out of the sale of services and goods. The outstanding advances
and payables by the Non-consolidated Affiliates to Holt at December 31, 1996,
1997 and 1998 were $21.1 million, $21.3 and $25.4 million, respectively. None of
these advances bears interest. The outstanding advances and payables by Holt to
the Non-consolidated Affiliates at December 31, 1996, 1997 and 1998 were $10.3
million, $12.2 million and $14.0 million, respectively. See Note 10 of "Notes to
Consolidated Financial Statements" of
the Company.
AHI subleases the Packer Avenue Facility (which includes four container
cranes) and leases an additional crane to the Company. Pursuant to the PRPA
Lease, which expires in 2040 (including all renewal options), the PRPA leases
the Packer Avenue Facility to AHI and has granted to AHI rights to develop
certain undeveloped additional waterfront property. Under the Sublease between
AHI and Holt, Holt pays AHI the rental payable by AHI to the PRPA plus fifteen
percent of that amount. See "Business -- Holt -- Properties." Leo A. Holt and
Michael J. Holt, each a director of the Company and a son of Thomas J. Holt Sr.,
control AHI. Rental expenses and fees paid by Holt to AHI amounted to $2.5
million for the year ended December 31, 1996 and $3.0 million for the years
ended December 31, 1997 and 1998, respectively. See Note 11 of "Notes to
Consolidated Financial Statements" of the Company.
Pursuant to agreements between Holt and SLS, SLS provides Holt with
services relating to accounting, billing, management information processing,
insurance risk analysis and coverage and marketing. All logistics and management
information services provided to the Company's customers, including CTS and the
Container Computer System, and certain of the Company's sales and marketing
activities, are provided by SLS on behalf of the Company. As compensation for
these services, Holt pays SLS an amount equal to five percent of Holt's gross
revenue on a monthly basis. The terms of the consulting agreements expire in
2002. Leo A. Holt and Michael J. Holt, each a director of the Company and a son
of Thomas J. Holt, Sr., control SLS. Fees paid by Holt to SLS for these services
amounted to $3.7 million, $4.5 million and $6.5 million for the years ended
December 31, 1996, 1997 and 1998, respectively. See Note 11 of "Notes to
Consolidated Financial Statements" of the Company.
In February and April 1998, the Company loaned a total of $5 million to
Thomas J. Holt, Sr., the Company's Chairman, President and Chief Executive
Officer. The loan bears interest at a rate of 1% over the prime rate and matures
on December 31, 1999. Interest is payable quarterly.
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In January 1998, the Company sold to AHI for $5 million certain
refrigeration equipment which the Company no longer needed in its operations. Of
the total purchase price, $1.4 million was paid through December 31, 1998.
Holt has entered into an Option to Purchase and Development Agreement with
Delaware Avenue Enterprises, Inc. ("DAE"), a company of which the majority is
owned and operated by Leo A. Holt and Michael J. Holt, directors of the Issuer.
Pursuant to the agreement, Holt paid $8 million to DAE to acquire an option to
purchase 11.5 acres of property located on the Delaware River in Philadelphia
(the "Premises") for a price equal to 120% of any sum expended by DAE to improve
and develop the Premises. The option expires on December 31, 2013. In connection
with the agreement, DAE issued to the Company a $10 million promissory note that
bears interest at 1% over the prime rate and matures on the earlier of December
31, 2013 or the date on which Holt exercises its option and purchases the
Premises. The note is secured by a mortgage and security agreement on the
Premises and a contiguous 28-acre site. See Note 11 of "Notes to the
Consolidated Financial Statements" of the Company.
Holt and certain of the Non-consolidated Affiliates guarantee certain of
each other's indebtedness. See "Description of Certain Indebtedness."
SOLE STOCKHOLDER
Thomas J. Holt, Sr., the Company's Chairman, President and Chief Executive
Officer, owns 100% of the outstanding common stock of the Company. Other than
the common stock, no other class of capital stock of the Company is authorized.
The business address of the sole stockholder is 101 South King Street,
Gloucester City, New Jersey 08030.
DESCRIPTION OF CERTAIN INDEBTEDNESS
In addition to the Notes, the Company is also subject to the following
indebtedness and obligations (collectively, the "Other Indebtedness and
Financings").
OBLIGATIONS OF THE COMPANY
REVOLVING CREDIT FACILITY
In connection with the Acquisition, the Company entered into a revolving
credit facility (the "Revolving Credit Facility") with CoreStates Bank N.A.
(since acquired by First Union National Bank), which was amended on November 18,
1998, to provide for up to $50 million of revolving loans and letters of credit
(increased from $30 million in September 1998) (The "Credit Line") and further
amended on February 25, 1999 to provide for a term loan of $17.3 million (the
"Term Loan") as an advance against insurance proceeds expected to be realized by
the Company and arising out of damages sustained during Hurricane Georges.
Borrowings under the Revolving Credit Facility may be used for general corporate
purposes, including working capital, repair of damages caused by Hurricane
Georges and the issuance of up to $10 million in letters of credit. Amounts
outstanding under the Revolving Credit Facility will bear interest at a variable
rate at the Company's election of (i) the Base Rate (as defined therein) or (ii)
the LIBO Rate (as defined therein) plus 2.50% per annum. The Company will be
required to pay a letter of credit fee of 2% per annum on letters of credit
outstanding and a commitment fee of 0.25% per annum of the unused portion of the
Revolving Credit Facility. As of December 31, 1998, approximately $6.4 million
in letters of credit and approximately $37 million of borrowings were
outstanding under the Revolving Credit Facility. The maturity date of the Credit
Line is November 17, 1999, which can be extended at the option of the Company
for two additional one-year periods. The Term Loan matures on December 31, 1999.
The Credit Line is secured by its five ships (the "Vessels") owned by NPR
pursuant to the terms of First Preferred Ship Mortgages. The Term Loan is
secured by the Company's accounts receivable and right, title and interest in
the property insurance policy insuring all damages incurred by the Company as a
result of Hurricane Georges.
The Revolving Credit Facility contains financial covenants including a
minimum net worth test, a debt to tangible net worth test and an interest
coverage ratio test. In addition, the Revolving Credit Facility contains
covenants that restrict certain mergers, acquisitions and sales of assets, the
incurrence of indebtedness and making of guarantees, the payment of dividends,
the repurchase of stock, the making of loans to shareholders and the granting of
liens. In addition, the Revolving Credit Facility
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contains customary events of default, including any non-payment of principal,
interest or fees when due, non-compliance with covenants, material breach of a
representation or warranty, occurrence of certain bankruptcy and insolvency
events, cross-defaults to other indebtedness, the existence of certain unstayed
and undischarged liens and judgments, and the occurrence of a material adverse
change.
INDUSTRIAL REVENUE BONDS
Holt Hauling financed the development of the Gloucester Facility, in
significant part, through a series of Industrial Revenue Bonds (the "NJEDA
Bonds") issued by the New Jersey Economic Development Authority ("NJEDA")
commencing in 1983, with the most recent refunding bonds issued in 1997. The
NJEDA Bonds outstanding as of December 31, 1998, including their interest rates
and maturity dates, are as follows:
o $10,000,000 Economic Development Bonds (Holt Hauling & Warehousing
System, Inc., 1983 Project), Series G Refunding (non-AMT), bearing
interest at 8.4% and maturing on December 15, 2015;
o $9,000,000 Economic Development Bonds (Holt Hauling & Warehousing
System, Inc., 1983 Project), Series H Refunding (AMT), bearing
interest at 8.6% and maturing on December 15, 2017;
o $5,000,000 Economic Development Revenue Refunding Bonds (Holt
Hauling & Warehousing System, Inc., 1983 Project), 1995 Fixed Rate
Series J, bearing interest at 8.5% and maturing on November 1, 2023;
o $27,250,000 Economic Development Revenue Refunding Bonds (Holt
Hauling & Warehousing System, Inc. -- 1983 Project), 1997 Series K,
maturing on March 1, 2027, of which $18,750,000 bears interest at
7.75% and the remaining $8,500,000 bears interest at 7.90%.
Each of the NJEDA Bonds is secured by mortgages on the Gloucester Facility.
The bond indebtedness thereunder is guaranteed by the other Holt Subsidiaries as
well as the Non-consolidated Affiliates. The respective Loan Agreements and
related documents contain financial covenants including a minimum net worth
test, a debt-to-tangible net worth test and an interest coverage ratio test. In
addition, the applicable documents contain customary events of default,
including any non-payment of principal, interest or fees when due,
non-compliance with covenants, breach of representation or warranty in any
material respect, occurrence of certain bankruptcy and insolvency events,
cross-defaults to other indebtedness, and the existence of certain unstayed and
undischarged liens and judgments.
EQUIPMENT FINANCINGS
Pursuant to a Container Lease Purchase Agreement dated as of June 5, 1996
with Interpool Limited ("Interpool"), NPR leased certain equipment from
Interpool on a rolling basis up to a maximum principal amount of approximately
$4.6 million. As of December 31, 1998, approximately $2.3 million was
outstanding under this agreement.
Holt Cargo, pursuant to a series of sale-leaseback, capital lease and loan
transactions with Advanta Business Services Corp., The Bank of Gloucester,
General Electric Capital Corporation (subsequently assigned to Michigan National
Bank and MBC (as defined herein)), MetLife Capital Corporation, U.S. Fleet
Leasing and Transamerica Business Credit Corporation, has financed its
acquisition of a significant portion of its equipment. The terms of these
financings are consistent with generally prevailing market terms and range from
36 to 60 months in term, with interest rates ranging from 6.6% to 11.6% fixed,
to variable rates of straight prime or LIBOR plus 0.5% to 1.0%. The indebtedness
under each of these facilities is secured by the specific equipment purchased or
financed under such facilities, respectively.
While some of these financing arrangements contain no financial covenants
and other operational restrictions, a number of the agreements do contain
customary covenants, including limitations on (i) the incurring additional
indebtedness, (ii) creating liens, (iii) making restricted payments, including
the payments of dividends, (iv) making investments, (v) engaging in mergers,
consolidations and asset sales, and (vi) engaging in loans, investments and
other transactions with affiliated parties. Certain of the financings include
guarantees by certain of the Non-consolidated Affiliates and the applicable
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guarantees contain similar limitations and restrictions on the guarantors
thereunder. As of December 31, 1998, the aggregate amount outstanding under
these facilities was approximately $13.1 million.
URBAN DEVELOPMENT ACTION GRANTS AND RELATED LOANS
On December 28, 1983, the City of Gloucester City, New Jersey (the "City")
entered into a Grant Agreement with the United States Department of Housing and
Urban Development ("HUD") for an Urban Development Action Grant, the proceeds of
which were to be loaned to Holt Hauling to assist in the financing of certain
land and equipment acquisitions and port development improvements to the
Gloucester Facility. The low cost loan in the aggregate amount of approximately
$3.6 million (the "UDAG I Loan") was made to Holt Hauling pursuant to a Loan
Agreement dated January 3, 1984, between the City and Holt Hauling.
On August 3, 1984, the City entered into a second Grant Agreement with HUD
for an Urban Development Action Grant, the proceeds of which were to be loaned
to Holt Hauling to assist in the financing of certain additional equipment
acquisitions and an extension of the marginal pier at the Gloucester Facility.
The low cost loan in the amount of $2.0 million (the "UDAG II Loan") was made to
Holt Hauling pursuant to a Loan Agreement dated January 3, 1984, between the
City and Holt Hauling.
Pursuant to a Second Amendment to Loan Agreements dated August 1, 1996, the
UDAG I Loan and UDAG II Loans were consolidated and the promissory notes
executed in connection therewith were refinanced by the issuance of an amended
and restated Promissory Note in the restated principal amount of approximately
$5.1 million (the "Restated Note"). The Restated Note bears interest at the rate
of 6% per annum commencing on March 30, 1997, and is payable in 180 equal
monthly payments based on a 25-year amortization, with a balloon payment due on
March 31, 2012. The outstanding balance as of December 31, 1998 under the
Restated Note was approximately $4.9 million.
MULTI-CURRENCY FACILITY
Riverfront is party to a Multi-Currency Secured Revolving Credit Facility,
dated as of April 16, 1997, with Finansbanken ASA and an Amendment No. 1 to the
Multi-Currency Secured Revolving Credit Facility, dated as of April 23, 1997,
which provide Riverfront with access to a credit facility in the maximum
principal amount of NOK 69.0 million. Riverfront's obligations under this Credit
Facility are secured by a pledge of the shares of the stock of ACL owned by
Riverfront. In addition, Holt Hauling and Holt Cargo serve as guarantors of the
obligations of Riverfront. This credit facility requires Riverfront to maintain
a loan to value ratio of 45% (based on the market value of the ACL stock), and
contains a restriction on dividends but otherwise does not contain financial
covenants. As of December 31, 1998, the outstanding balance was $9.0 million.
OTHER TERM LOANS
Holt Hauling entered into a Business Loan Agreement dated March 13, 1997
with Wilmington Savings Fund Society, FSB ("WSFS") pursuant to which WSFS
extended a term loan in the original principal amount of approximately $208,000.
The loan is payable in 35 equal installments of $2,355.66 each, with a final
maturity date of March 13, 2000 and bears interest at a floating rate of prime
plus 0.5% per annum. The WSFS loan is secured by a mortgage on real property and
improvements thereon located at 329 and 701 North King Street, in Gloucester
City, New Jersey. The indebtedness outstanding pursuant to such loan as of
December 31, 1998 was approximately $189,791.
CERTAIN OPERATING LEASES
EQUIPMENT FINANCING -- EMERALD EQUIPMENT LEASING, INC.
On November 20, 1997, NPR sold certain of its assets consisting of
containers, gensets and chassis (the "Emerald Equipment"), to Emerald Equipment
Leasing, Inc. ("Emerald") for a purchase price of $35 million. The Emerald
Equipment was then leased back to NPR and to Holt Cargo (collectively, the
"Lessees"), pursuant to an Equipment Lease Agreement dated as of November 20,
1997 (the "Equipment Lease"). Under the Equipment Lease, the Lessees are
obligated to make monthly payments to Emerald in the amount of approximately
$738,000 per month for a term of 60 months. The Equipment Lease also provides
that the Lessees may terminate the Equipment Lease effective as of the fourth
anniversary of the Equipment Lease commencement date, provided that no
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default of the Lessees exists thereunder and provided that the Lessees make a
lease termination payment to Emerald in the amount of $2.8 million. The
Equipment Lease and payments have been assigned to MBC Leasing Corp. ("MBC"),
which financed Emerald's acquisition of the Emerald Equipment pursuant to a Loan
and Security Agreement dated as of November 20, 1997 (the "MBC Credit
Agreement"), in the maximum principal amount of up to $35.0 million (the
"Equipment Loan"). The Lessees' obligations under the Equipment Lease are
guaranteed by the Issuer and each of its subsidiaries other than the Lessees,
(the "Lease Guarantors") pursuant to a Lease Guaranty Agreement dated as of
November 20, 1997 (the "Lease Guaranty"), which Lease Guaranty is also assigned
to MBC as additional collateral.
Of the $35.0 million available under the MBC Credit Agreement, $24.0
million was advanced on November 20, 1997 and an additional $11 million was
advanced through October 31, 1998. A majority of the outstanding capital stock
of Emerald is owned by certain employees of SLS (who are not executive officers
or directors of SLS).
The Equipment Lease payments were calculated to provide for full
pass-through amortization of the amounts outstanding under the Equipment Loan as
though it had been fully advanced. The initial advance of the Equipment Loan
will bear interest at an annual rate of 9.25%. Subsequent advances will bear
interest at a rate per annum equal to the interest rate for five year Treasury
constant maturities plus 332 basis points. The entire outstanding principal
balance of the Equipment Loan is due and payable on November 20, 2002.
The MBC Credit Agreement contains customary covenants, including
limitations on (i) the incurrence of additional indebtedness, (ii) the creation
of liens, (iii) making restricted payments, including the payments of dividends,
(iv) making investments, (v) engaging in mergers, consolidations and asset
sales, and (vi) engaging in loans, investments and other transactions with
affiliated parties. Similar limitations are imposed on the Lessees and the Lease
Guarantors in the Equipment Lease and the Lease Guaranty. In addition, the Lease
Guarantors, on a consolidated basis, are required to comply with certain
financial covenants including without limitation, (i) a ratio of indebtedness to
tangible net worth, (ii) an interest coverage ratio, and (iii) minimum tangible
net worth, in each case, as specified in the Lease Guaranty.
CCIA OPERATING LEASES
Holt Hauling obtained additional financing for terminal improvements
through the issuance by the Camden County Improvement Authority ("CCIA") of
$24.5 million of its Lease Revenue Bonds (Holt Hauling and Warehousing System,
Inc. Project), 1996 Series A (the "CCIA-HHW Bonds"). Almost one-third of the
CCIA-HHW Bonds ($7.6 million) bear interest at a rate of 9.625% per annum and
mature on January 1, 2011. The remaining $16.9 million of the CCIA-HHW Bonds
bear interest at a rate of 9.875% and mature on January 1, 2021. The CCIA-HHW
Bonds are secured by a mortgage granted by CCIA on its interest in the terminal
improvements and on its leasehold interest in the land on which such
improvements are located. Payment of the CCIA-HHW Bonds is guaranteed by Holt
Hauling and the Non-combined Affiliates. Holt Hauling granted a mortgage on its
fee interest in the Gloucester Facility to secure repayment of the CCIA-HHW
Bonds.
The Company also financed its development of an additional seven acres of
real property located in the City of Camden (the "Kaighn Point Property")
through the issuance by the CCIA of $19.6 million of its Lease Revenue Bonds,
1997 Series A and 1997 Series B (the "CCIA-KPP Bonds" and, together with the
CCIA-DRW Bonds (as defined herein) and CCIA-HHW Bonds, the "CCIA Bonds"). Of the
$17.9 million of Series A Bonds issued, $500,000 mature on June 1, 2007 and bear
interest at a rate of 7.375% per annum and $17.4 million mature on June 1, 2027
and bear interest at 8% per annum. The $1.6 million of Series B Bonds bear
interest at 11.0% per annum and have a maturity date of June 1, 2004. The
CCIA-KPP Bonds are secured by a fee mortgage granted by CCIA and a leasehold
mortgage granted by Holt Hauling on the Kaighn Point Property. Payment of the
CCIA-KPP Bonds is guaranteed by Holt Hauling and the Non-consolidated
Affiliates. Holt Hauling and one of the Non-consolidated Affiliates granted a
mortgage on their respective interest in the Gloucester Facility to secure
repayment of the CCIA-KPP Bonds.
The applicable documentation for each of the CCIA Bonds contain financial
covenants including a minimum net worth test, a debt to tangible net worth test
and an interest coverage ratio test. There are also restrictions on certain
mergers, acquisitions and sales of assets, incurrence of additional
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indebtedness and the making of guarantees, the payment of dividends, the
repurchase of stock, the making of loans to shareholders and the granting of
liens. The documents contain customary events of default consistent with those
contained in the NJEDA Bond documents.
OBLIGATIONS GUARANTEED BY THE COMPANY
DRW BONDS
One of the Lessee-Operators financed its development of a refrigerated
warehouse located at the Gloucester Facility through the issuance by the CCIA of
$18.5 million of its Lease Revenue Bonds (Dockside Refrigerated Warehouses, Inc.
Project), Series 1994 (the "CCIA-DRW Bonds"). The CCIA-DRW Bonds bear interest
at a rate of 8.4% per annum and mature on April 1, 2024. The CCIA-DRW Bonds are
secured by a mortgage granted by CCIA on the warehouse and its leasehold
interests in the real property on which the warehouse is located. In addition,
Holt Hauling and one of the Non-consolidated Affiliates granted a mortgage in
their interest in the Gloucester Facility to secure repayment of the CCIA-DRW
Bonds, which is guaranteed by Holt Hauling and the Non-consolidated Affiliates.
PAID BONDS
The Philadelphia Authority for Industrial Development issued $7.0 million
of its Revenue Bonds (Refrigerated Enterprises, Inc. Project) Series of 1992
(the "PAID Bonds") for the benefit of one of the Non-consolidated Affiliates.
The PAID Bonds are secured by a mortgage on the Non-consolidated Affiliate's
interest in the property financed with the PAID Bonds. Interest accrues at a
rate of 9.05% per annum (8.75% following an "Exemption Event" as defined
therein). The PAID Bonds have a maturity date of December 1, 2019. Repayment of
the PAID Bonds is guaranteed by Holt and the other Non-consolidated Affiliates,
and such guarantees are secured by a mortgage granted by Holt Hauling and one of
the Non-consolidated Affiliates on their respective interests in the Gloucester
Facility. The guarantors are subject to financial covenants including a minimum
net worth test, a debt to tangible net worth test and an interest coverage ratio
test. The Guaranty also contains restrictions on certain mergers, acquisitions
and sales of assets, incurrence of additional indebtedness and the making of
guarantees, the payment of dividends, the repurchase of stock, the making of
loans to shareholders and the granting of liens. The documents contain customary
events of default consistent with those contained in the NJEDA and CCIA Bond
documents.
NJEDA BONDS
The NJEDA issued $6.1 million in Economic Development Refunding Bonds (777
Pattison Avenue Inc. 1988 and 1989 Projects), 1992 Refunding Series, which bear
interest at 8.95% and mature on December 15, 2018 (8.65% following an "Exemption
Event" (as defined therein)). The proceeds from the sale of these Bonds were
loaned to one of the Non-combined Affiliates in order to make certain capital
improvements at the Gloucester Facility. Repayment of the bond indebtedness is
guaranteed by Holt and the other Non-consolidated Affiliates. The Bonds are
secured by a mortgage on the Gloucester Facility.
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DESCRIPTION OF NEW NOTES
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that (i) the New Notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, (ii) holders of the New Notes, except
in limited circumstances, will not be entitled to Liquidated Damages, and (iii)
holders of the New Notes will not be, and upon consummation of the Exchange
Offer, Holders of the Old Notes will no longer be, entitled to certain rights
under the Registration Rights Agreement intended for the holders of unregistered
securities. The Exchange Offer shall be deemed consummated upon the occurrence
of the delivery by the Company to the Registrar under the Indenture of New Notes
in the same aggregate principal amount as the aggregate principal amount of Old
Notes that are validly tendered by holders thereof pursuant to the Exchange
Offer. See "The Exchange Offer -- Termination of Certain Rights" and "--
Procedures for Tendering Old Notes".
Set forth below is a summary of the material provisions of the New Notes.
The New Notes will be issued pursuant to an indenture (the "Indenture") dated as
of January 21, 1998, by and among The Holt Group, Inc. (the "Company"), the
Guarantors and The Bank of New York, as trustee (the "Trustee"). The following
summaries of certain provisions of the Indenture are summaries only, do not
purport to be complete and are qualified in their entirety by reference to all
of the provisions of the Indenture. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to them in the Indenture.
Wherever particular provisions of the Indenture are referred to in this summary,
such provisions are incorporated by reference as a part of the statements made
and such statements are qualified in their entirety by such reference.
GENERAL
The New Notes will be senior unsecured, general obligations of the Company,
limited in aggregate principal amount to $200.0 million, of which $140.0
aggregate principal amount is being issued on the Issue Date. The New Notes will
be, jointly and severally, irrevocably, unconditionally and fully guaranteed on
a senior basis by each of the Company's present and future Subsidiaries except
for any Non-Recourse Subsidiaries (the "Guarantors"). The guarantees will rank
pari passu with all existing and future unsubordinated indebtedness of the
Guarantors and senior in right of payment to all existing and future
subordinated indebtedness of the Guarantors. The obligations of each Guarantor
under its guarantee, however, will be limited in a manner intended to avoid it
being deemed a fraudulent conveyance under applicable law. See "Guarantees;
Certain Bankruptcy Limitations" below. The term "Subsidiaries" as used herein,
however, does not include Unrestricted Subsidiaries. The New Notes will be
issued only in fully registered form, without coupons, in denominations of
$1,000 and integral multiples thereof.
The Indenture provides, in addition to the New Notes being issued on the
Issue Date, for the issuance of up to $60.0 million aggregate principal amount
of additional New Notes having identical terms and conditions to the New Notes
offered hereby (the "Additional New Notes"), subject to compliance with the
covenants contained in the Indenture. Any Additional New Notes will be part of
the same issue as the New Notes offered hereby and will vote on all matters with
the New Notes offered hereby. For purposes of this section, reference to the New
Notes does not include the Additional New Notes.
PRINCIPAL, MATURITY AND INTEREST
The New Notes will mature on January 15, 2006. The New Notes will bear
interest at the rate per annum stated on the cover page hereof from the date of
issuance or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semi-annually on January 15 and July 15 of
each year, commencing July 15, 1998, to the persons in whose names such New
Notes are registered at the close of business on January 1 and July 1
immediately preceding such Interest Payment Date. Interest will be calculated on
the basis of a 360-day year consisting of twelve 30-day months.
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Principal of, premium, if any, and interest and Liquidated Damages, if any,
on the New Notes will be payable, and the New Notes may be presented for
registration of transfer or exchange, at the office or agency of the Company
maintained for such purpose, which office or agency shall be maintained in the
Borough of Manhattan, The City of New York, except as set forth below. At the
option of the Company, payment of interest may be made by check mailed to the
holders of the New Notes ("Holders") at the addresses set forth upon the
registry books of the Company. No service charge will be made for any
registration of transfer or exchange of New Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. Until otherwise designated by the Company, the
Company's office or agency will be the corporate trust office of the Trustee
presently located at the office of the Trustee in the Borough of Manhattan, The
City of New York.
GUARANTEES; CERTAIN BANKRUPTCY LIMITATIONS
The Company is a holding company, conducting all of its business through
Subsidiaries, which have guaranteed or will guarantee the Company's Obligations
with respect to the New Notes, and Unrestricted Subsidiaries. See "Risk
Factors." Holders of the New Notes will be direct creditors of each Guarantor by
virtue of its guarantee.
Nonetheless, in the event of the bankruptcy or financial difficulty of a
Guarantor, such Guarantor's obligations under its guarantee may be subject to
review and avoidance under state and federal fraudulent transfer laws. Among
other things, such obligations may be avoided if a court concludes that such
obligations were incurred for less than reasonably equivalent value or fair
consideration at a time when the Guarantor was insolvent, was rendered
insolvent, or was left with inadequate capital to conduct its business. A court
would likely conclude that a Guarantor did not receive reasonably equivalent
value or fair consideration to the extent that the aggregate amount of its
liability on its guarantee exceeds the economic benefits it receives in the
Offering. The obligations of each Guarantor under its guarantee will be limited
in a manner intended to cause it not to be a fraudulent conveyance under
applicable law, although no assurance can be given that a court would give the
holder the benefit of such provision. See "Risk Factors -- Fraudulent Transfer
Considerations."
If the obligations of a Guarantor under its guarantee were avoided, Holders
of New Notes would have to look to the assets of any remaining Guarantors for
payment. There can be no assurance in that event that such assets would suffice
to pay the outstanding principal and interest on the New Notes.
OPTIONAL REDEMPTION
Except as described in the following paragraph, the Company will not have
the right to redeem any New Notes prior to January 15, 2002. The New Notes will
be redeemable for cash at the option of the Company, in whole or in part, at any
time on or after January 15, 2002, upon not less than 30 days nor more than 60
days notice to each holder of New Notes, at the following redemption prices
(expressed as percentages of the principal amount) if redeemed during the
12-month period commencing January 15 of the years indicated below, in each case
(subject to the right of Holders of record on a Record Date to receive interest
due on an Interest Payment Date that is on or prior to such Redemption Date)
together with accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002.............................................. 104.8750%
2003.............................................. 102.4375%
2004 and thereafter............................... 100.0000%
</TABLE>
Until January 15, 2001 upon a Public Equity Offering of common stock for
cash of the Company, up to 35% of the sum of (i) the original aggregate
principal amount of the New Notes and (ii) the original aggregate principal
amount of any Additional New Notes may be redeemed at the option of the Company
within 90 days of such Public Equity Offering, on not less than 30 days, but not
more than
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60 days, notice to each holder of the New Notes to be redeemed, with cash from
the Net Cash Proceeds of such Public Equity Offering, at a redemption price
equal to 109 3/4% of principal (subject to the right of Holders of record on a
Record Date to receive interest due on an Interest Payment Date that is on or
prior to such Redemption Date), together with accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption; provided, however, that
immediately following such redemption not less than 65% of the sum of (i) the
original aggregate principal amount of the New Notes and (ii) the original
aggregate principal amount of any Additional New Notes remains outstanding. In
the case of a partial redemption, the Trustee shall select the New Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The New Notes may be redeemed in part in
multiples of $1,000 only.
The New Notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first class mail, at least 30
days and not more than 60 days prior to the date fixed for redemption to the
Holder of each Note to be redeemed to such Holder's last address as then shown
upon the registry books of the Registrar. Any notice which relates to a Note to
be redeemed in part only must state the portion of the principal amount equal to
the unredeemed portion thereof and must state that on and after the date of
redemption, upon surrender of such Note, a new Note or New Notes in a principal
amount equal to the unredeemed portion thereof will be issued. On and after the
date of redemption, interest will cease to accrue on the New Notes or portions
thereof called for redemption, unless the Company defaults in the payment
thereof.
CERTAIN COVENANTS
The Indenture contains covenants including the following:
REPURCHASE OF NEW NOTES AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
The Indenture provides that in the event that a Change of Control has
occurred, unless all New Notes have been called for redemption pursuant to the
provisions described under the caption "Optional Redemption," each holder of New
Notes will have the right, at such holder's option, pursuant to an irrevocable
and unconditional offer by the Company (the "Change of Control Offer"), to
require the Company to repurchase all or any part of such holder's New Notes
(provided that the principal amount of such New Notes must be $1,000 or an
integral multiple thereof) on a date (the "Change of Control Purchase Date")
that is no later than 45 Business Days after the occurrence of such Change of
Control, at a cash price equal to 101% of the principal amount thereof (the
"Change of Control Purchase Price"), together with accrued and unpaid interest
and Liquidated Damages, if any, to the Change of Control Purchase Date. The
Change of Control Offer shall be made within 10 Business Days following a Change
of Control and shall remain open for 20 Business Days following its commencement
(the "Change of Control Offer Period"). Upon expiration of the Change of Control
Offer Period, the Company promptly shall purchase all New Notes properly
tendered in response to the Change of Control Offer.
As used herein, a "Change of Control" means (i) prior to the consummation
of an initial Public Equity Offering an Excluded Person shall cease to own
beneficially, directly or indirectly and of record 51% of the Capital Stock of
the Company; or (ii) following the consummation of an initial Public Equity
Offering (A) any merger or consolidation of the Company with or into any person
or any sale, transfer or other conveyance, whether direct or indirect, of all or
substantially all of the assets of the Company, on a consolidated basis, in one
transaction or a series of related transactions, if, immediately after giving
effect to such transaction(s), any "person" or "group" (as such terms are used
for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) (other than an Excluded Person) is or becomes the "beneficial
owner," directly or indirectly, of more than 35% of the total voting power in
the aggregate normally entitled to vote in the election of directors, managers,
or trustees, as applicable, of the transferee(s) or surviving entity or entities
unless an Excluded Person "beneficially owns," directly or indirectly, in the
aggregate a greater percentage of the total voting power in the aggregate
normally entitled to vote in the election of directors, managers, or trustees,
as applicable, of the transferee(s) or surviving entity or entities; or (B) any
"person" or "group" (as such
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terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act,
whether or not applicable) (other than an Excluded Person) is or becomes the
"beneficial owner," directly or indirectly, of more than 35% of the total voting
power in the aggregate of all classes of Capital Stock of the Company then
outstanding normally entitled to vote in elections of directors, unless an
Excluded Person "beneficially owns," directly or indirectly, in the aggregate a
greater percentage of the total voting power of all classes of Capital Stock of
the Company then outstanding normally entitled to vote in the election of
directors; or (iii) during any period of 12 consecutive months after the Issue
Date, individuals who at the beginning of any such 12-month period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
On or before the Change of Control Purchase Date, the Company will (i)
accept for payment New Notes or portions thereof properly tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient
to pay the Change of Control Purchase Price (together with accrued and unpaid
interest and Liquidated Damages, if any) of all New Notes so tendered and (iii)
deliver to the Trustee New Notes so accepted together with an Officers'
Certificate listing the New Notes or portions thereof being purchased by the
Company. The Paying Agent promptly will pay the Holders of New Notes so accepted
an amount equal to the Change of Control Purchase Price (together with accrued
and unpaid interest and Liquidated Damages, if any), and the Trustee promptly
will authenticate and deliver to such Holders a new Note equal in principal
amount to any unpurchased portion of the Note surrendered. Any New Notes not so
accepted will be delivered promptly by the Company to the Holder thereof. The
Company publicly will announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Purchase Date.
The Change of Control purchase feature of the New Notes may make more
difficult or discourage a takeover of the Company, and, thus, the removal of
incumbent management.
The phrase "all or substantially all" of the assets of the Company will
likely be interpreted under applicable state law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or substantially
all" of the assets of the Company has occurred. In addition, no assurances can
be given that the Company will be able to acquire New Notes tendered upon the
occurrence of a Change of Control.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and state
securities laws. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this covenant, compliance by the
Company or any of its subsidiaries with such laws and regulations shall not in
and of itself cause a breach of its obligations under such covenant.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the New Notes that might be delivered by Holders seeking to accept the Change
of Control Offer. The failure of the Company to make or consummate the Change of
Control Offer or pay the Change of Control Purchase Price when due will give the
Trustee and the Holders the rights described under "Event of Default."
Certain Indebtedness of the Company contains and future Indebtedness of the
Company may contain prohibitions of the occurrence of certain events that would
constitute a Change of Control or require such Existing Indebtedness or future
Indebtedness to be repaid or repurchased upon a Change of Control. Moreover, the
exercise by the Holders of their right to require the Company to repurchase the
New Notes could cause a default under such Existing Indebtedness or future
Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to the Holders following the occurrence of a Change of
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Control may be limited by the Company's then existing financial resources. There
can be no assurance that sufficient funds will be available when necessary to
make any required repurchases.
If the Change of Control Purchase Date hereunder is on or after an interest
payment Record Date and on or before the associated Interest Payment Date, any
accrued and unpaid interest (and Liquidated Damages, if any) will be paid to the
person in whose name a Note is registered at the close of business on such
Record Date, and such interest (and Liquidated Damages, if applicable) will not
be payable to Holders who tender the New Notes pursuant to the Change of Control
Offer.
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND ISSUANCE OF
DISQUALIFIED CAPITAL STOCK
The Indenture provides that, except as set forth in this covenant, the
Company and the Guarantors will not, and will not permit any of their
Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, become
directly or indirectly liable with respect to (including as a result of an
Acquisition), or otherwise become responsible for, contingently or otherwise
(individually and collectively, to "incur" or, as appropriate, an "incurrence"),
any Indebtedness or issue any Disqualified Capital Stock (including Acquired
Indebtedness), other than Permitted Indebtedness. Notwithstanding the foregoing,
if (i) no Default or Event of Default shall have occurred and be continuing at
the time of, or would occur after giving effect on a pro forma basis to, such
incurrence of Indebtedness or issuance of Disqualified Capital Stock and (ii) on
the date of such incurrence or issuance (the "Incurrence Date"), the
Consolidated Coverage Ratio of the Company for the Reference Period immediately
preceding the Incurrence Date, after giving effect on a pro forma basis to such
incurrence of such Indebtedness or issuance of Disqualified Capital Stock and,
to the extent set forth in the definition of Consolidated Coverage Ratio, the
use of proceeds thereof, would be at least 2.0 to l (the "Debt Incurrence
Ratio"), then the Company may incur such Indebtedness or issue Disqualified
Capital Stock and the Guarantors may incur such Indebtedness (other than
Disqualified Capital Stock).
In addition, the foregoing limitations will not apply to:
(a) the incurrence by the Company or any Guarantor of Purchase Money
Indebtedness on or after the Issue Date; provided, that (i) the aggregate
principal amount of such Indebtedness incurred on or after the Issue Date
and outstanding at any time pursuant to this paragraph (a) (including any
Indebtedness incurred to refinance, replace or refund such Indebtedness)
shall not exceed $25.0 million, and (ii) in each case, such Indebtedness
shall not constitute more than 100% of the cost (determined in accordance
with GAAP) to the Company or such Guarantor, as applicable, of the property
so purchased, leased or financed;
(b) if no Event of Default shall have occurred and be continuing, the
incurrence by the Company or any Guarantor of Indebtedness in an aggregate
principal amount outstanding at any time (including Indebtedness incurred
to refinance, replace or refund such Indebtedness) of up to $25.0 million;
(c) the incurrence by the Company or any Guarantor of Indebtedness
pursuant to the Credit Agreement up to an aggregate principal amount
outstanding at any time (including any Indebtedness incurred to refinance,
replace or refund such Indebtedness) of $50.0 million, minus the amount of
any such Indebtedness (i) retired with the Net Cash Proceeds from any Asset
Sale applied to reduce permanently the outstanding amounts or the
commitments with respect to such Indebtedness pursuant to clause (1)(b)(ii)
of the first paragraph of the covenant "Limitation on Sale of Assets and
Subsidiary Stock" or (ii) assumed by a transferee in an Asset Sale;
(d) the incurrence by the Company or any Guarantor of Existing
Indebtedness; and
(e) the incurrence by any Non-Recourse Subsidiary of Permitted
Non-Recourse Vessel Indebtedness.
Indebtedness or Disqualified Capital Stock of any Person which is
outstanding at the time such Person becomes a Subsidiary of the Company
(including upon designation of any subsidiary or other person as a Subsidiary)
or is merged with or into or consolidated with the Company or a Subsidiary of
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the Company shall be deemed to have been incurred at the time such Person
becomes such a Subsidiary of the Company or is merged with or into or
consolidated with the Company or a Subsidiary of the Company, as applicable. The
Indenture provides that the Company and the Guarantors will not, and will not
permit any of their Subsidiaries to, directly or indirectly, incur, or suffer to
exist any Indebtedness that is contractually subordinate in right of payment to
any other Indebtedness of the Company or a Guarantor unless, by its terms, such
Indebtedness is subordinate to the same extent in right of payment to the New
Notes or the Guarantee, as applicable.
LIMITATION ON RESTRICTED PAYMENTS
The Indenture provides that the Company and the Guarantors will not, and
will not permit any of their Subsidiaries to, directly or indirectly, make any
Restricted Payment if, after giving effect to such Restricted Payment on a pro
forma basis, (1) a Default or an Event of Default shall have occurred and be
continuing, (2) the Company is not permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio in the covenant
"Limitation on Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock," or (3) the aggregate amount of all Restricted
Payments made by the Company and its Subsidiaries, including after giving effect
to such proposed Restricted Payment, from and after the Issue Date, would exceed
the sum of (a) 50% of the aggregate Consolidated Net Income of the Company for
the period (taken as one accounting period), commencing on the first day of the
first full fiscal quarter commencing after the Issue Date, to and including the
last day of the fiscal quarter ended immediately prior to the date of each such
calculation (or, in the event Consolidated Net Income for such period is a
deficit, then minus 100% of such deficit), plus (b) the aggregate Net Cash
Proceeds received by the Company from the sale of its Qualified Capital Stock
(other than (i) to a Subsidiary of the Company and (ii) to the extent applied in
connection with a Qualified Exchange), after the Issue Date.
The foregoing clauses (2) and (3) of the immediately preceding paragraph,
however, will not prohibit (t) pro rata dividends and other distributions on
Equity Interests of a Subsidiary by such Subsidiary, (u) Restricted Investments,
provided that, after giving pro forma effect to any such Investment, the
aggregate amount of all such Investments made on or after the Issue Date that
are outstanding (after giving effect to any such Investments that are returned
to the Company or the Subsidiary that made such prior Investment, without
restriction, in cash on or prior to the date of any such calculation) at any
time does not exceed $10.0 million plus (i) any cash proceeds received by the
Company or any Guarantor from the Packer Avenue Proceeding and (ii) the Net Cash
Proceeds received by the Company from the sale (other than to any of its
Affiliates, to the extent used to effect a Qualified Exchange, or to make
Restricted Payments other than pursuant to this clause (u)) of its Qualified
Capital Stock after the Issue Date, (v) (i) payments pursuant to the Employee
Stock Plan and (ii) repurchases of Capital Stock from employees of the Company
or its Subsidiaries upon their death or disability or the termination of their
employment, such payments under (i) and (ii) collectively not to exceed $15.0
million in the aggregate on and after the Issue Date and (w) payments required
to be made under put rights pursuant to the TNX Shareholders Agreement not to
exceed $10.0 million in the aggregate, and the provisions of the immediately
preceding paragraph will not prohibit (x) a Qualified Exchange, (y) the payment
of any dividend on Qualified Capital Stock within 60 days after the date of its
declaration if such dividend could have been made on the date of such
declaration in compliance with the foregoing provisions and (z) so long as the
Company is a Subchapter S Corporation or substantially similar pass-through
entity for federal income tax purposes, cash distributions paid by the Company
to its shareholders from time to time in amounts permitted by and otherwise in
accordance with the definition of Permitted Tax Distribution. The full amount of
any Restricted Payment made pursuant to the foregoing clauses (t), (u), (v) and
(y) (but not pursuant to clauses (w), (x) and (z)) of the immediately preceding
sentence, however, will be deducted in the calculation of the aggregate amount
of Restricted Payments available to be made referred to in clause (3) of the
immediately preceding paragraph.
For purposes of this covenant, the amount of any Restricted Payment, if
other than in cash, shall be the fair market value thereof, as determined in the
good faith reasonable judgment of the Board of Directors of the Company.
Additionally, at the time of each Restricted Payment, the Company shall
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deliver an Officers' Certificate to the Trustee describing in reasonable detail
the nature of such Restricted Payment, stating the amount of such Restricted
Payment, stating in reasonable detail the provisions of the Indenture pursuant
to which such Restricted Payment was made and certifying that such Restricted
Payment was made in compliance with the terms of the Indenture.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company and the Guarantors will not, and
will not permit any of their Subsidiaries to, directly or indirectly, create,
assume or suffer to exist any consensual restriction on the ability of any
Subsidiary of the Company to pay dividends or make other distributions to or on
behalf of, or to pay any obligation to or on behalf of, or otherwise to transfer
assets or property to or on behalf of, or make or pay loans or advances to or on
behalf of, the Company or any Subsidiary of the Company, except (a) restrictions
imposed by the New Notes or the Indenture or by other indebtedness of the
Company (which may also be guaranteed by the Guarantors) ranking pari passu with
the New Notes (and the guarantees, as applicable), provided such restrictions
are no more restrictive than those imposed by the Indenture and the New Notes,
(b) restrictions imposed by applicable law, (c) restrictions under the Existing
Indebtedness and Permitted Non-Recourse Vessel Indebtedness, (d) restrictions
under any Acquired Indebtedness not incurred in violation of the Indenture or
any agreement relating to any property, asset, or business acquired by the
Company or any of its Subsidiaries, which restrictions in each case existed at
the time of acquisition, were not put in place in connection with or in
anticipation of such acquisition and are not applicable to any person, other
than the person acquired, or to any property, asset or business, other than the
property, assets and business so acquired, (e) any such restriction or
requirement imposed by Indebtedness incurred under paragraph (c) of the covenant
"Limitation on Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock," provided such restriction or requirement is no more
restrictive than that imposed by the Credit Agreement as of the Issue Date, (f)
restrictions with respect solely to a Subsidiary of the Company imposed pursuant
to a binding agreement which has been entered into for the sale or disposition
of all or substantially all of the Equity Interests or assets of such
Subsidiary, provided further such restrictions apply solely to the Equity
Interests or assets of such Subsidiary which are being sold, (g) restrictions on
transfer contained in Purchase Money Indebtedness incurred pursuant to paragraph
(a) of the covenant "Limitation on Incurrence of Additional Indebtedness and
Issuance of Disqualified Capital Stock," provided such restrictions relate only
to the transfer of the property acquired with the proceeds of such Purchase
Money Indebtedness, and (h) in connection with and pursuant to permitted
Refinancings, replacements of restrictions imposed pursuant to clauses (a), (c)
or (d) of this paragraph that are not more restrictive than those being replaced
and do not apply to any other person or assets other than those that would have
been covered by the restrictions in the Indebtedness so refinanced.
Notwithstanding the foregoing, neither (a) customary provisions restricting
subletting or assignment of any lease entered into in the ordinary course of
business, consistent with industry practice, nor (b) Liens permitted under the
terms of the Indenture on assets securing Senior Debt or Purchase Money
Indebtedness incurred in accordance with the covenant "Limitation on Incurrence
of Additional Indebtedness and Issuance of Disqualified Capital Stock" shall in
and of themselves be considered a restriction on the ability of the applicable
Subsidiary to transfer such agreement or assets, as the case may be.
LIMITATION ON LIENS SECURING INDEBTEDNESS
The Company and the Guarantors will not, and will not permit any of their
Subsidiaries to create, incur, assume or suffer to exist any Lien of any kind,
other than Permitted Liens, upon any of their respective assets now owned or
hereafter acquired on or after the Issue Date of the Indenture or upon any
income or profits therefrom securing any Indebtedness of the Company or any
Guarantor, provided that only with respect to other senior Indebtedness of the
Company (which may also be guaranteed by the Guarantors) ranking on a parity
with the New Notes (and the guarantees, as applicable), the Company provides,
and causes its Subsidiaries to provide, concurrently therewith, that the New
Notes are equally and ratably so secured.
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LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK
The Indenture provides that the Company and the Guarantors will not, and
will not permit any of their Subsidiaries to, in one or a series of related
transactions, convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of its property, business or assets, including by merger or
consolidation (in the case of a Guarantor or a Subsidiary of the Company), and
including any sale or other transfer or issuance of any Equity Interests of any
Subsidiary of the Company, whether by the Company or a Subsidiary or through the
issuance, sale or transfer of Equity Interests by a Subsidiary of the Company,
and including any sale and leaseback transaction (any of the foregoing, an
"Asset Sale"), unless (1)(a) the Net Cash Proceeds therefrom (the "Asset Sale
Offer Amount") are applied, subject to the next paragraph below, (i) within 330
days after the date of such Asset Sale, to the optional redemption of (a)
Indebtedness secured by the items so subject to such Asset Sale or (b) the New
Notes in accordance with the terms of the Indenture and other Indebtedness of
the Company ranking on a parity with the New Notes from time to time outstanding
with similar provisions requiring the Company to make an offer to purchase or to
redeem such Indebtedness with the proceeds of asset sales, pro rata in
proportion to the respective principal amounts (or accreted values in the case
of Indebtedness issued with an original issue discount) of the New Notes and
such other Indebtedness then outstanding or (ii) to the repurchase of (a)
Indebtedness secured by the items so subject to such Asset Sale or (b) the New
Notes and such other Indebtedness ranking on a parity with the New Notes and
having similar provisions requiring the Company to purchase or redeem such
Indebtedness with the proceeds from asset sales pursuant to a cash offer subject
only to conditions, if any, required by law (pro rata in proportion to the
respective principal amounts (or accreted values in the case of Indebtedness
issued with an original issue discount) of the New Notes and such other
Indebtedness then outstanding) (the "Asset Sale Offer") at a purchase price of
100% of principal amount (or accreted value in the case of Indebtedness issued
with an original issue discount) (the "Asset Sale Offer Price") together with
accrued and unpaid interest and Liquidated Damages, if any, to the date of
payment, made within 330 days of such Asset Sale or (b) within 330 days
following such Asset Sale, the Asset Sale Offer Amount is (i) invested in assets
and property (except in connection with the acquisition of a Wholly-owned
Subsidiary, other than notes, bonds, obligation and securities) which in the
good faith reasonable judgment of the Board of Directors of the Company will
immediately constitute or be a part of a Related Business of the Company or such
Subsidiary (if it continues to be a Subsidiary) immediately following such
transaction or (ii) used to retire permanently Indebtedness permitted to be
incurred pursuant to paragraph (c) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Issuance of Disqualified Capital Stock" (including
that in the case of a revolver or similar arrangement that makes credit
available, such commitment is so permanently reduced by such amount), (2) at
least 75% of the consideration for such Asset Sale or series of related Asset
Sales consists of Cash or Cash Equivalents, (3) no Default or Event of Default
shall have occurred and be continuing at the time of, or would occur after
giving effect, on a pro forma basis, to, such Asset Sale, and (4) the Board of
Directors of the Company determines in good faith that the Company or such
Subsidiary, as applicable, receives fair market value for such Asset Sale.
The Indenture provides that an acquisition of New Notes pursuant to an
Asset Sale Offer may be deferred until the accumulated Net Cash Proceeds from
Asset Sales not applied to the uses set forth in clause (1)(a)(i) or clause
(l)(b) above (the "Excess Proceeds") exceeds $10.0 million and that each Asset
Sale Offer shall remain open for 20 Business Days following its commencement
(the "Asset Sale Offer Period"). Upon expiration of the Asset Sale Offer Period,
the Company shall apply the Asset Sale Offer Amount plus an amount equal to
accrued and unpaid interest and Liquidated Damages, if any, to the purchase of
all Indebtedness properly tendered (on a pro rata basis (in $1,000 increments)
if the Asset Sale Offer Amount is insufficient to purchase all Indebtedness so
tendered) at the Asset Sale Offer Price (together with accrued interest and
Liquidated Damages, if any). To the extent that the aggregate amount of New
Notes tendered pursuant to an Asset Sale Offer is less than the Asset Sale Offer
Amount, the Company may use any remaining Net Cash Proceeds for general
corporate purposes as otherwise permitted by the Indenture and following each
Asset Sale Offer the Excess Proceeds amount shall be reset to zero. For purposes
of clause (2) above, total consideration received means the total consideration
received for such Asset Sales minus the amount of Purchase
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Money Indebtedness or Permitted Non-Recourse Vessel Indebtedness secured solely
by and repaid with the proceeds from the assets sold or assumed by a transferee.
Notwithstanding, and without complying with, the provisions of this
covenant:
(i) the Company and its Subsidiaries may, in the ordinary course of
business, (1) convey, sell, transfer, assign or otherwise dispose of
inventory acquired and held for resale in the ordinary course of business
or (2) liquidate Cash Equivalents;
(ii) the Company and its Subsidiaries may convey, sell, transfer,
assign or otherwise dispose of assets pursuant to and in accordance with
the covenant "Limitation on Merger, Sale or Consolidation" and the covenant
"Limitation on Restricted Payments";
(iii) the Company and its Subsidiaries may sell or dispose of damaged,
worn out or other obsolete personal property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Subsidiary, as applicable;
(iv) the Company and the Guarantors may convey, sell, transfer, assign
or otherwise dispose of assets to the Company or any of its Subsidiary
Guarantors; and (v) the Company and each of its Subsidiaries may surrender
or waive contract rights or settle, release or surrender contract, tort or
other claims of any kind or grant Liens not prohibited by the Indenture.
All Net Cash Proceeds from an Event of Loss (other than the proceeds of any
business interruption insurance) shall be invested, or used to repurchase (a)
Indebtedness secured by the items so subject to such Event of Loss or (b) New
Notes and on a pro rata basis with the New Notes other Indebtedness ranking on a
parity with the New Notes, all within the period and as otherwise provided above
in clauses 1(a) or 1(b) of the first paragraph of this covenant.
In addition to the foregoing, the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly make any Asset Sale of any of the
Equity Interests of any Subsidiary of the Company except (i) pursuant to an
Asset Sale of all the Equity Interests of such Subsidiary or (ii) pursuant to an
Asset Sale of common stock with no preferences or special rights or privileges
and with no redemption or prepayment provisions, provided that after such sale,
the Company or its Subsidiaries own a majority of the voting and economic Equity
Interests of such Subsidiary.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the Exchange
Act and the rules and regulations thereunder and all other applicable Federal
and state securities laws. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this covenant, compliance by
the Company or any of its subsidiaries with such laws and regulations shall not
in and of itself cause a breach of its obligations under such covenant.
If the payment date in connection with an Asset Sale Offer hereunder is on
or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest (and Liquidated Damages,
if any) will be paid to the person in whose name a Note is registered at the
close of business on such Record Date, and such interest (and Liquidated
Damages, if applicable) will not be payable to Holders who tender New Notes
pursuant to such Asset Sale Offer.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Indenture provides that neither the Company nor any of its Subsidiaries
will be permitted on or after the Issue Date to enter into or suffer to exist
any contract, agreement, arrangement or transaction with any Affiliate (an
"Affiliate Transaction"), or any series of related Affiliate Transactions (other
than Exempted Affiliate Transactions), (i) unless it is determined that the
terms of such Affiliate Transaction are fair and reasonable to the Company, and
no less favorable to the Company, than could have been obtained in an arm's
length transaction with a non-Affiliate, (ii) if involving consideration to
either party in excess of $1.0 million unless such Affiliate Transaction(s) is
the subject of an Officers' Certificate addressed and delivered to the Trustee
certifying that such
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Affiliate Transaction (or Transactions) has been approved by a majority of the
members of the Board of Directors that are disinterested in such transaction and
(iii) if involving consideration to either party in excess of $10.0 million,
unless, in addition, the Company, prior to the consummation thereof, obtains a
written favorable opinion as to the fairness of such transaction to the Company
from a financial point of view from an independent investment banking firm of
national reputation or, if pertaining to a matter for which such investment
banking firms do not customarily render such opinions, an appraisal or valuation
firm of national reputation; provided, however, that clause (iii) also will be
applicable to any Affiliate Transaction involving consideration to either party
in excess of $5.0 million but equal to or less than $10.0 million unless such
Affiliate Transaction is only with an Affiliate (x) engaged in business
substantially similar and related to the business then conducted by the Company
and its Subsidiaries (as permitted under the Indenture) and (y) such Affiliate
Transaction is entered into in the ordinary course of business for purposes
customary in the Company's industry.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company will not consolidate with or merge
with or into another person or, directly or indirectly, sell, lease, convey or
transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another Person or group of affiliated Persons or adopt a plan of liquidation,
unless (i) either (a) the Company is the continuing entity or (b) the resulting,
surviving or transferee entity or, in the case of a plan of liquidation, the
entity which receives the greatest value from such plan of liquidation is a
corporation organized under the laws of the United States, any state thereof or
the District of Columbia and expressly assumes by supplemental indenture all of
the obligations of the Company in connection with the New Notes and the
Indenture; (ii) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis to such transaction; and
(iii) (unless such transaction is solely the merger of the Company and one of
its previously existing Wholly-owned Subsidiaries which is also a Guarantor and
such transaction is not in connection with any other transaction) immediately
after giving effect to such transaction on a pro forma basis, the consolidated
resulting, surviving or transferee entity or, in the case of a plan of
liquidation, the entity which receives the greatest value from such plan of
liquidation would immediately thereafter be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio set forth in the
covenant "Limitation on Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock."
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company or consummation of a plan of liquidation in
accordance with the foregoing, the successor corporation formed by such
consolidation or into which the Company is merged or to which such transfer is
made or, in the case of a plan of liquidation, the entity which receives the
greatest value from such plan of liquidation shall succeed to (except in the
case of a lease), and be substituted for, and may exercise every right and power
of, the Company under the Indenture with the same effect as if such successor
corporation had been named therein as the Company, and (except in the case of a
lease) the Company shall be released from the obligations under the New Notes
and the Indenture except with respect to any obligations that arise from, or are
related to, such transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, the Company's interest in which constitutes all or
substantially all of the properties and assets of the Company shall be deemed to
be the transfer of all or substantially all of the properties and assets of the
Company.
LIMITATION ON LINES OF BUSINESS
The Indenture provides that neither the Company nor any of its Subsidiaries
shall directly or indirectly engage to any substantial extent in any line or
lines of business activity other than that which, in the reasonable good faith
judgment of the Board of Directors of the Company, is a Related Business.
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FUTURE SUBSIDIARY GUARANTORS
The Indenture provides that all present and future Subsidiaries of the
Company except for Non-Recourse Subsidiaries jointly and severally will guaranty
irrevocably and unconditionally all principal, premium, if any, and interest
(and Liquidated Damages, if any) on the New Notes on a senior basis. The term
Subsidiary does not include Unrestricted Subsidiaries.
RELEASE OF GUARANTORS
The Indenture provides that no Subsidiary Guarantor shall consolidate or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
person) another person unless (i) subject to the provisions of the following
paragraph and certain other provisions of the Indenture, the person formed by or
surviving any such consolidation or merger (if other than such Subsidiary
Guarantor) assumes all the obligations of such Subsidiary Guarantor pursuant to
a supplemental indenture in form reasonably satisfactory to the Trustee,
pursuant to which such person shall unconditionally guarantee, on a senior
basis, all of such Subsidiary Guarantor's obligations under such Subsidiary
Guarantor's guarantee and the Indenture on the terms set forth in the Indenture,
and (ii) immediately before and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default shall have
occurred or be continuing.
Upon the sale or disposition (whether by merger, stock purchase, asset sale
or otherwise) of a Subsidiary Guarantor or all of its assets to an entity which
is not a Subsidiary Guarantor or the designation of a Subsidiary to become an
Unrestricted Subsidiary, which transaction is otherwise in compliance with the
Indenture (including, without limitation, the provisions of the covenant
"Limitations on Sale of Assets and Subsidiary Stock"), such Subsidiary Guarantor
will be deemed released from its obligations under its Guarantee of the New
Notes; provided, however, that any such termination shall occur only to the
extent that all obligations of such Subsidiary Guarantor under all of its
guarantees of, and under all of its pledges of assets or other security
interests which secure, any Indebtedness of the Company or any other Subsidiary
of the Company shall also terminate upon such release, sale or transfer.
LIMITATION ON STATUS AS INVESTMENT COMPANY
The Indenture prohibits the Company and its Subsidiaries from being
required to register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or from otherwise becoming subject
to regulation under the Investment Company Act.
REPORTS
The Indenture provides that whether or not the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall deliver to the Trustee and to each Holder and to prospective purchasers of
New Notes identified to the Company by an Initial Purchaser, within 15 days
after it is or would have been (if it were subject to such reporting
obligations) required to file such with the Commission, annual and quarterly
financial statements substantially equivalent to financial statements that would
have been included in reports filed with the Commission, if the Company were
subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required in
such reports to the Commission, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required and, unless the Commission will not accept such reports,
file with the Commission the annual, quarterly and other reports which it is or
would have been required to file with the Commission.
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EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest (or Liquidated Damages, if any) on the New
Notes as and when the same becomes due and payable and the continuance of any
such failure for 30 days, (ii) the failure by the Company to pay all or any part
of the principal, or premium, if any, on the New Notes when and as the same
becomes due and payable at maturity, redemption, by acceleration or otherwise,
including, without limitation, payment of the Change of Control Purchase Price
or the Asset Sale Offer Price, or otherwise, (iii) the failure by the Company or
any Subsidiary of the Company to observe or perform any other covenant or
agreement contained in the New Notes or the Indenture and, subject to certain
exceptions, the continuance of such failure for a period of 30 days after
written notice is given to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of the New
Notes outstanding, (iv) certain events of bankruptcy, insolvency or
reorganization in respect of the Company or any of its Significant Subsidiaries,
(v) a default in any issue of Indebtedness of the Company or any of its
Subsidiaries with an aggregate principal amount in excess of $10.0 million (a)
resulting from the failure to pay principal or interest when due or (b) as a
result of which the maturity of such Indebtedness has been accelerated prior to
its stated maturity, and (vi) final unsatisfied judgments not covered by
insurance aggregating in excess of $10.0 million, at any one time rendered
against the Company or any of its Subsidiaries and not stayed, bonded or
discharged within 60 days. The Indenture provides that if a Default occurs and
is continuing, the Trustee must, within 90 days after the occurrence of such
default, give to the Holders notice of such default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv), above, relating to the Company or any of its
Significant Subsidiaries), then in every such case, unless the principal of all
of the New Notes shall have already become due and payable, either the Trustee
or the Holders of at least 25% in aggregate principal amount of the New Notes
then outstanding, by notice in writing to the Company (and to the Trustee if
given by Holders) (an "Acceleration Notice"), may declare all principal,
determined as set forth below, and accrued interest (and Liquidated Damages, if
any) thereon to be due and payable immediately. If an Event of Default specified
in clause (iv), above, relating to the Company or any of its Significant
Subsidiaries occurs, all principal and accrued interest (and Liquidated Damages,
if any) thereon will be immediately due and payable on all outstanding New Notes
without any declaration or other act on the part of Trustee or the Holders. The
Holders of a majority in aggregate principal amount of New Notes generally are
authorized to rescind such acceleration if all existing Events of Default, other
than the non-payment of the principal of, premium, if any, and interest (and
Liquidated Damages, if any) on the New Notes which have become due solely by
such acceleration and except a default with respect to any provision requiring a
supermajority approval to amend, which default may only be waived by such a
supermajority, and have been cured or waived.
Prior to the declaration of acceleration of the maturity of the New Notes,
the Holders of a majority in aggregate principal amount of the New Notes at the
time outstanding may waive on behalf of all the Holders any default, except a
default with respect to any provision requiring a supermajority approval to
amend, which default may only be waived by such a supermajority, and except a
default in the payment of principal of or interest (or Liquidated Damages, if
any) on any Note not yet cured or a default with respect to any covenant or
provision which cannot be modified or amended without the consent of the Holder
of each outstanding Note affected. Subject to the provisions of the Indenture
relating to the duties of the Trustee, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request,
order or direction of any of the Holders, unless such Holders have offered to
the Trustee reasonable security or indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the New Notes at the time outstanding will have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may, at its option and at any time
within one year of the Stated Maturity of the New Notes, elect to have its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding New Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented, and the Indenture shall cease to be of further effect as to all
outstanding New Notes and Guarantees, except as to (i) rights of Holders to
receive payments in respect of the principal of, premium, if any, and interest
(and Liquidated Damages, if any) on such New Notes when such payments are due
from the trust funds; (ii) the Company's obligations with respect to such New
Notes concerning issuing temporary New Notes, registration of New Notes,
mutilated, destroyed, lost or stolen New Notes, and the maintenance of an office
or agency for payment and money for security payments held in trust; (iii) the
rights, powers, trust, duties, and immunities of the Trustee, and the Company's
obligations in connection therewith; and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company and the Guarantors released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the New Notes. In
the event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the New Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the New Notes, U.S. legal tender, U.S. Government Obligations
or a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on such New Notes on the stated date
for payment thereof or on the redemption date of such principal or installment
of principal of, premium, if any, or interest on such New Notes, and the holders
of New Notes must have a valid, perfected, exclusive security interest in such
trust; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (A) the Company has received from, or there has been
published by the Internal Revenue Service, a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the holders of such New Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance had
not occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to such Trustee confirming that the holders of such New Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit or
insofar as Events of Default from bankruptcy or insolvency events are concerned,
at any time in the period ending on the 91st day after the date of deposit; (v)
such Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under the Indenture or any other material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound; (vi) the
Company shall have delivered to the Trustee an Officers' Certificate stating
that the deposit was not made by the Company with the intent of preferring the
holders of such New Notes over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company or others; and (vii) the Company shall have delivered to the Trustee
an Officers' Certificate and an opinion of counsel, each stating that the
conditions precedent provided for in, in the case of the Officers' Certificate,
(i) through (vi) and, in the case of the opinion of counsel, clauses (i)
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(with respect to the validity and perfection of the security interest), (ii),
(iii) and (v) of this paragraph have been complied with.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company, the Guarantors
and the Trustee to enter into a supplemental indenture for certain limited
purposes without the consent of the Holders. With the consent of the Holders of
not less than a majority in aggregate principal amount of the New Notes at the
time outstanding, the Company, the Guarantors and the Trustee are permitted to
amend or supplement the Indenture or any supplemental indenture or modify the
rights of the Holders; provided that no such modification may, without the
consent of holders of at least 66 2/3% in aggregate principal amount of New
Notes at the time outstanding, e.g., modify the provisions (including the
defined terms used therein) of the covenant "Repurchase of New Notes at the
Option of the Holder upon a Change of Control" in a manner adverse to the
holders; and provided, that no such modification may, without the consent of
each Holder affected thereby: (i) change the Stated Maturity on any Note, or
reduce the principal amount thereof or the rate (or extend the time for payment)
of interest thereon or any premium payable upon the redemption at the option of
the Company thereof, or change the place of payment where, or the coin or
currency in which, any Note or any premium or the interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof (or, in the case of redemption at the
option of the Company, on or after the Redemption Date), or reduce the Change of
Control Purchase Price or the Asset Sale Offer Price or alter the provisions
(including the defined terms used therein) regarding the right of the Company to
redeem the New Notes as a right, or at the option, of the Company in a manner
adverse to the Holders, or (ii) reduce the percentage in principal amount of the
outstanding New Notes, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture, or
(iii) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the Indenture cannot
be modified or waived without the consent of the Holder of each outstanding Note
affected thereby.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES
The Indenture provides that no direct or indirect stockholder, employee,
officer or director, as such, past, present or future of the Company, the
Guarantors or any successor entity shall have any personal liability in respect
of the obligations of the Company or the Guarantors under the Indenture or the
New Notes solely by reason of his or its status as such stockholder, employee,
officer or director, except that this provision shall not limit the obligation
of any Guarantor pursuant to its guarantee of the New Notes.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness or Disqualified Capital Stock of
any person existing at the time such person becomes a Subsidiary of the Company,
including, without limitation, by designation, or is merged or consolidated into
or with the Company or one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of any person of all
or substantially all the assets of any person by any other person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise, provided that, with respect to ownership interest in the Company
and its Subsidiaries, a Beneficial Owner of 10% or more of the total voting
power normally entitled to vote in the election of directors, managers or
trustees, as applicable, shall for such purposes be deemed to constitute
control.
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"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of the
products (a) of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (ii) the sum of all such principal (or redemption)
payments.
"Beneficial Owner" or "beneficial owner" for purposes of the definition of
Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or
not applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Board of Directors" means, with respect to any person, the board of
directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
"Capitalized Lease Obligation" means, as to any person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Cash Equivalent" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) or (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500.0 million or (iii) commercial paper issued by others rated at
least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least
P-2 or the equivalent thereof by Moody's Investors Service, Inc., and in the
case of each of (i), (ii), and (iii) maturing within one year after the date of
acquisition.
"Consolidated Coverage Ratio" of any person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Fixed Charges of such person
(exclusive of amounts attributable to operations and businesses permanently
discontinued or disposed of, but only to the extent that the obligations giving
rise to such Consolidated Fixed Charges would no longer be obligations
contributing to such person's Consolidated Fixed Charges subsequent to the
Transaction Date) during the Reference Period; provided, that for purposes of
such calculation, (i) Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date shall
be assumed to have occurred on the first day of the Reference Period, (ii)
transactions giving rise to the need to calculate the Consolidated Coverage
Ratio shall be assumed to have occurred on the first day of the Reference
Period, (iii) the incurrence of any Indebtedness or issuance of any Disqualified
Capital Stock during the Reference Period or subsequent to the Reference Period
and on or prior to the Transaction Date (and the application of the proceeds
therefrom to the extent used to refinance or retire other Indebtedness) shall be
assumed to have occurred on the first day of the Reference Period, and (iv) the
Consolidated Fixed Charges of such person attributable to interest on any
Indebtedness or dividends on any Disqualified Capital Stock bearing a floating
interest (or dividend) rate shall be
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computed on a pro forma basis as if the average rate in effect from the
beginning of the Reference Period to the Transaction Date had been the
applicable rate for the entire period, unless such Person or any of its
Subsidiaries is a party to an Interest Swap or Hedging Obligation (which shall
remain in effect for the 12-month period immediately following the Transaction
Date) that has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower) shall be used.
"Consolidated EBITDA" means, with respect to any person, for any period,
the Consolidated Net Income of such person for such period adjusted to add
thereto (to the extent deducted from net revenues in determining Consolidated
Net Income), without duplication, the sum of (i) Consolidated income tax
expense, (ii) Consolidated depreciation and amortization expense, and (iii)
Consolidated Fixed Charges, provided that consolidated depreciation and
amortization expense of a Subsidiary that is a less than wholly owned Subsidiary
shall only be added to the extent of the equity interest of the Company in such
Subsidiary.
"Consolidated Fixed Charges" of any person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of: (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued (including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations) of such person and its
Consolidated Subsidiaries during such period, including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptances and letters of credit financings and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such period, (b)
one-third (1/3) of Consolidated Rental Expense for such period attributable to
operating leases of such person and its Consolidated Subsidiaries, and (c) the
amount of dividends accrued or payable (or guaranteed) by such person or any of
its Consolidated Subsidiaries in respect of Preferred Stock (other than by
Subsidiaries of such person to such person or such person's wholly owned
Subsidiaries). For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined in good faith by the Company to be the rate of interest implicit in
such Capitalized Lease Obligation in accordance with GAAP and (y) interest
expense attributable to any Indebtedness represented by the guaranty by such
person or a Subsidiary of such person of an obligation of another person shall
be deemed to be the interest expense attributable to the Indebtedness
guaranteed.
"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication): (a) all gains (but not losses) which are
either extraordinary (as determined in accordance with GAAP) or are either
unusual or nonrecurring (including any gain from the sale or other disposition
of assets outside the ordinary course of business or from the issuance or sale
of any capital stock), (b) the net income, if positive, of any person, other
than a Consolidated Subsidiary, in which such person or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such person or a
Consolidated Subsidiary of such person during such period, but in any case not
in excess of such person's pro rata share of such person's net income for such
period, (c) the net income or loss of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition, and
(d) the net income, if positive, of any of such person's Consolidated
Subsidiaries to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the terms of
its charter or bylaws or any other agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such Consolidated
Subsidiary.
"Consolidated Rental Expense" of any Person means the aggregate rental
obligations of such Person and its Consolidated Subsidiaries (not including
taxes, insurance, maintenance and similar expenses that the lessee is obligated
to pay under the terms of the relevant leases), determined on a consolidated
basis in conformity with GAAP, payable in respect of such period under leases of
real or
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personal property (net of income from subleases thereof, not including taxes,
insurance, maintenance and similar expenses that the sublessee is obligated to
pay under the terms of such sublease), whether or not such obligations are
reflected as liabilities or commitments on a consolidated balance sheet of such
Person and its Subsidiaries or in the notes thereto, excluding, however, in any
event, that portion of Consolidated Fixed Charges of such Person representing
payments by such Person or any of its Consolidated Subsidiaries in respect of
Capitalized Lease Obligations.
"Consolidated Subsidiary" means, for any person, each Subsidiary of such
person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such person in accordance with GAAP.
"Credit Agreement" means the credit agreement dated as of November 20, 1997
by and among the Company, certain of its subsidiaries and CoreStates Bank, N.A.,
providing for an aggregate $25.0 million revolving credit facility, including
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as such credit agreement and/or related
documents may be amended, restated, supplemented, renewed, replaced or otherwise
modified from time to time, whether or not with the same lender, trustee,
representative lenders or holders, and, subject to the proviso to the next
succeeding sentence, irrespective of any changes in the terms and conditions
thereof. Without limiting the generality of the foregoing, the term "Credit
Agreement" shall include agreements in respect of Interest Swap and Hedging
Obligations with lenders party to the Credit Agreement and shall also include
any amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to any Credit Agreement and all refundings,
refinancings and replacements of any Credit Agreement, including any agreement
(i) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder, so long as borrowers and issuers include one or more of the Company
and its Subsidiaries and their respective successors and assigns, (iii)
increasing the amount of Indebtedness incurred thereunder or available to be
borrowed thereunder, provided that on the date such Indebtedness is incurred it
would be permitted by paragraph (c) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Issuance of Disqualified Capital Stock" or (iv)
otherwise altering the terms and conditions thereof in a manner not prohibited
by the terms of the Indenture.
"Disqualified Capital Stock" means (a) except as set forth in (b), with
respect to any person, Equity Interests of such person that, by its terms or by
the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time or
both would be, required to be redeemed or repurchased (including at the option
of the holder thereof) by such person or any of its Subsidiaries, in whole or in
part, on or prior to the date that is 91 days after the date which is following
the Stated Maturity of the New Notes and (b) with respect to any Subsidiary of
such person (including with respect to any Subsidiary of the Company), any
Equity Interests other than any common equity with no preference, privileges, or
redemption or repayment provisions.
"Employee Stock Plan" means the NPR Holding Corporation 1997 Phantom Stock
Plan under which certain members of the management of NPR, Inc. have received
grants of phantom stock units in connection with the acquisition of NPR Holding
Corporation, NPR-Navieras Receivables, Inc., NPR, Inc. and NPR S.A., Inc.
"Equity Interest" of any Person means any shares, interests, participations
or other equivalents (however designated) in such Person's equity, and shall in
any event include any Capital Stock issued by, or partnership or membership
interests in, such Person.
"Event of Loss" means, with respect to any property or asset, any (i) loss,
destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
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"Excluded Person" means, individually or collectively, Thomas J. Holt, Sr.,
and any of his estates, spouse, heirs, ancestors, lineal descendants, legatees,
and legal representatives and the trustee of any bona fide trust of which one or
more of the foregoing are the sole beneficiaries.
"Exempted Affiliate Transaction" means (a) customary employee compensation
arrangements approved by a majority of independent (as to such transactions)
members of the Board of Directors of the Company, (b) dividends permitted under
the terms of the covenant "Limitation on Restricted Payments" and payable, in
form and amount, on a pro rata basis to all holders of common stock of the
Company, and (c) transactions solely between the Company and any of its wholly
owned Consolidated Subsidiaries or solely among wholly owned Consolidated
Subsidiaries of the Company.
"Existing Indebtedness" means Indebtedness of the Company and the
Guarantors (other than Indebtedness under the Credit Agreement) in existence on
the Issue Date, until such amounts are repaid or refinanced in accordance with
the Indenture.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of any such person, to the
extent such liabilities and obligations would appear as a liability upon the
consolidated balance sheet of such person in accordance with GAAP, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts payable or other obligations to trade creditors
which have remained unpaid for more than 60 days past their original due date)
those incurred in the ordinary course of its business that would constitute
ordinarily a trade payable to trade creditors; (b) all liabilities and
obligations, contingent or otherwise, of such person (i) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (ii) relating to
any Capitalized Lease Obligation, or (iii) evidenced by a letter of credit or a
reimbursement obligation of such person with respect to any letter of credit;
(c) all net obligations of such person under Interest Swap and Hedging
Obligations; (d) all liabilities and obligations of others of the kind described
in the preceding clause (a), (b) or (c) that such person has guaranteed or that
is otherwise its legal liability or which are secured by any assets or property
of such person; (e) any and all deferrals, renewals, extensions, refinancing and
refundings (whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a), (b), (c) or (d), or this clause (e), whether or not between or
among the same parties; and (f) all Disqualified Capital Stock of such Person
(measured at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends). For purposes hereof, the
"maximum fixed repurchase price" of any Disqualified Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the Fair Market Value of such Disqualified Capital Stock, such Fair
Market Value to be determined in good faith by the board of directors of the
issuer (or managing general partner of the issuer) of such Disqualified Capital
Stock.
"Interest Swap and Hedging Obligation" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional
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amount in exchange for periodic payments made by such person calculated by
applying a fixed or floating rate of interest on the same notional amount.
"Investment" by any person in any other person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise) by
such person (whether for cash, property, services, securities or otherwise) of
capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants, of such other
person or any agreement to make any such acquisition; (b) the making by such
person of any deposit with, or advance, loan or other extension of credit to,
such other person (including the purchase of property from another person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such other person) or any commitment to make any such advance,
loan or extension (but excluding accounts receivable, endorsements for
collection or deposits arising in the ordinary course of business); (c) other
than guarantees of Indebtedness of the Company or any Guarantor to the extent
permitted by the covenant "Limitation on Incurrence of Additional Indebtedness
and Issuance of Disqualified Capital Stock," the entering into by such person of
any guarantee of, or other credit support or contingent obligation with respect
to, Indebtedness or other liability of such other person; (d) the making of any
capital contribution by such person to such other person; and (e) the
designation by the Board of Directors of the Company of any person to be an
Unrestricted Subsidiary. The Company shall be deemed to make an Investment in an
amount equal to the fair market value of the net assets of any subsidiary (or,
if neither the Company nor any of its Subsidiaries has theretofore made an
Investment in such subsidiary, in an amount equal to the Investments being
made), at the time that such subsidiary is designated an Unrestricted
Subsidiary, and any property transferred to an Unrestricted Subsidiary from the
Company or a Subsidiary of the Company shall be deemed an Investment valued at
its fair market value at the time of such transfer.
"Issue Date" means the date of first issuance of the New Notes under the
Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by the Company in the case of a sale of Qualified Capital Stock and by
the Company and its Subsidiaries in respect of an Asset Sale plus, in the case
of an issuance of Qualified Capital Stock upon any exercise, exchange or
conversion of securities (including options, warrants, rights and convertible or
exchangeable debt) of the Company that were issued for cash on or after the
Issue Date, the amount of cash originally received by the Company upon the
issuance of such securities (including options, warrants, rights and convertible
or exchangeable debt) less, in each case, the sum of all payments, fees,
commissions and reasonable and customary expenses (including, without
limitation, the fees and expenses of legal counsel and investment banking fees
and expenses) incurred in connection with such Asset Sale or sale of Qualified
Capital Stock, and, in the case of an Asset Sale only, less the amount
(estimated reasonably and in good faith by the Company) of income, franchise,
sales and other applicable taxes required to be paid by the Company or any of
its respective Subsidiaries in connection with such Asset Sale.
"Non-Recourse Subsidiary" means a Subsidiary which is a single purpose
company, partnership or other legal person formed for the purpose of incurring
Permitted Non-Recourse Vessel Indebtedness.
"Obligation" means any principal, premium or interest payment, or monetary
penalty, due by the Company or any Guarantor under the terms of the New Notes or
the Indenture, including any liquidated damages due pursuant to the terms of the
Registration Rights Agreement.
"Packer Avenue Proceeding" shall mean that certain outstanding action
commenced by Holt Cargo, Holt Hauling & Warehousing System, Inc. and Astro
Holding, Inc. (the "Plaintiffs") in the United States District Court for the
Eastern District of Pennsylvania against the Delaware River Port Authority (the
"DRPA"), the Philadelphia Regional Port Authority (the "PRPA") and the Ports of
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Philadelphia and Camden (together with the DRPA and PPC, the "Defendants"). The
Plaintiffs allege that the Defendants, along with other unnamed co-conspirators,
acting under the color of state law, committed predatory acts under a conspiracy
designed to injure, harass and appropriate the property of the Plaintiffs.
Plaintiffs are seeking damages for Defendants' conduct which constitutes a
violation of Plaintiffs' substantive due process, equal protection and
procedural due process rights under 41 U.S.C. Section 1983.
"Permitted Indebtedness" means any of the following:
a. the Company and the Guarantors may incur up to an aggregate
principal amount of Indebtedness evidenced by the New Notes and represented
by the Indenture;
b. the Company and the Guarantors, as applicable, may incur
Refinancing Indebtedness with respect to any Indebtedness or Disqualified
Capital Stock, as applicable, described in clause (a) of this definition or
incurred under the Debt Incurrence Ratio test of the covenant "Limitation
on Incurrence of Additional Indebtedness and Disqualified Capital Stock,"
or which is outstanding on the Issue Date;
c. the Company and the Guarantors may incur Indebtedness solely in
respect of bankers acceptances, letters of credit and performance bonds (to
the extent that such incurrence does not result in the incurrence of any
obligation to repay any obligation relating to borrowed money of others),
all in the ordinary course of business in accordance with customary
industry practices, in amounts and for the purposes customary in the
Company's industry; provided, that the aggregate principal amount
outstanding of such Indebtedness (including any Indebtedness issued to
refinance, refund or replace such Indebtedness) shall at no time exceed
$20.0 million;
d. the Company may incur Indebtedness to any Subsidiary Guarantor, and
any Subsidiary Guarantor may incur Indebtedness to any other Subsidiary
Guarantor or to the Company; provided, that, in the case of Indebtedness of
the Company, such obligations shall be unsecured and subordinated in all
respects to the Company's obligations pursuant to the New Notes and the
date of any event that causes such Subsidiary Guarantor to no longer be a
Subsidiary Guarantor shall be an Incurrence Date; and
e. any Guarantor may guaranty any Indebtedness of the Company or
another Guarantor that was permitted to be incurred pursuant to the
Indenture, substantially concurrently with such incurrence or at the time
such person becomes a Guarantor.
"Permitted Investment" means (a) Investments in any of the New Notes; (b)
Cash Equivalents; and (c) intercompany notes to the extent permitted under
clause (d) of the definition of Permitted Indebtedness.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
securing Indebtedness incurred under the Credit Facility in accordance with
clause (c) of the covenant "Limitation on Incurrence of Additional Indebtedness
and Issuance of Disqualified Capital Stock"; (c) Liens imposed by governmental
authorities for taxes, assessments or other charges not yet subject to penalty
or which are being contested in good faith and by appropriate proceedings, if
adequate reserves with respect thereto are maintained on the books of the
Company in accordance with GAAP; (d) statutory liens of carriers, warehousemen,
mechanics, materialmen, landlords, repairmen, crew's wages, wages of stevedores,
salvage or other like Liens arising by operation of law in the ordinary course
of business (including relating to maritime activities); provided that (i) the
underlying obligations are not overdue for a period of more than 30 days, or
(ii) such Liens are being contested in good faith and by appropriate proceedings
and adequate reserves with respect thereto are maintained on the books of the
Company in accordance with GAAP; (e) Liens securing the performance of bids,
trade contracts (other than borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business; (f) easements, rights-of-
way, zoning, similar restrictions and other similar encumbrances or title
defects which, singly or in the aggregate, do not in any case materially detract
from the value of the property subject thereto (as such property is used by the
Company or any of its Subsidiaries) or interfere with the ordinary conduct of
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the business of the Company or any of its Subsidiaries; (g) Liens arising by
operation of law in connection with judgments, only to the extent, for an amount
and for a period not resulting in an Event of Default with respect thereto; (h)
pledges or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social security
legislation; (i) Liens securing the New Notes; (j) Liens securing Indebtedness
of a Person existing at the time such Person becomes a Subsidiary or is merged
with or into the Company or a Subsidiary or Liens securing Indebtedness incurred
in connection with an Acquisition, provided that such Liens were in existence
prior to the date of such acquisition, merger or consolidation, were not
incurred in anticipation thereof, and do not extend to any other assets; (k)
Liens arising from Purchase Money Indebtedness permitted to be incurred under
paragraph (a) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Issuance of Disqualified Capital Stock," provided such Liens
relate solely to the property which is subject to such Purchase Money
Indebtedness; (l) leases or subleases granted to other persons in the ordinary
course of business not materially interfering with the conduct of the business
of the Company or any of its Subsidiaries or materially detracting from the
value of the relative assets of the Company or any such Subsidiary; (m) Liens
arising from precautionary Uniform Commercial Code financing statement filings
regarding operating leases entered into by the Company or any of its
Subsidiaries in the ordinary course of business; (n) Liens incurred in
connection with Permitted Non-Recourse Vessel Indebtedness; and (o) Liens
securing Refinancing Indebtedness, incurred to refinance any Indebtedness that
was previously so secured in a manner no more adverse to the Holders of the New
Notes than the terms of the Liens securing such refinanced Indebtedness provided
that the Indebtedness secured is not increased and the lien is not extended to
any additional assets or property.
"Permitted Non-Recourse Vessel Indebtedness" means the incurrence by any
Non-Recourse Subsidiary of Indebtedness for so long as (a) the liabilities of
such Non-Recourse Subsidiary in respect thereof are not directly or indirectly
the subject of a guarantee, indemnity or any other form of assurance,
undertaking or support from the Company or any Guarantor which would constitute
Indebtedness of the Company or the Guarantor, (b) in respect of which the person
or persons making such Indebtedness available to such Non-Recourse Subsidiary
have no recourse whatsoever to the Company or any Guarantor for the repayment of
or payment of any sum relating to such Indebtedness and (c) which such
Indebtedness is used for the purpose of refinancing seagoing vessels owned on
the Issue Date or financing newly acquired seagoing vessels, any such vessels to
be used solely by the Company, a Guarantor or such Non-Recourse Subsidiary.
"Permitted Tax Distribution" means with respect to each tax year that the
Company or a Guarantor (a "Taxpayer") qualifies as an S Corporation under the
Internal Revenue Code of 1986 (as amended, or any successor statute), or any
similar provision of state or local law, distributions of Tax Amounts (as
defined below), provided that prior to any distribution of Tax Amounts a
knowledgeable and duly authorized officer of the Taxpayer making such
distribution certifies, and counsel reasonably acceptable to the Trustee opines,
that such Taxpayer qualifies as an S Corporation for Federal income tax purposes
and for the states in respect of which such distributions are being made and
that at the time of such distributions, the most recent audited financial
statements of the Company covering such Taxpayer provide that such Taxpayer was
treated as an S Corporation for Federal income tax purposes for the period of
such financial statements.
"Public Equity Offering" means an underwritten offering of common stock of
equity securities of the Company not constituting Disqualified Capital Stock for
cash pursuant to an effective registration statement under the Securities Act.
"Purchase Money Indebtedness" of any person means any Indebtedness of such
person to any seller or other person incurred to finance the acquisition
(including in the case of a Capitalized Lease Obligation, the lease) of any
after acquired real or personal tangible property which, in the reasonable good
faith judgment of the Board of Directors of the Company, is directly related to
a Related Business of the Company and which is incurred within 120 days of such
acquisition and is secured only by the assets so financed.
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"Qualified Capital Stock" means any Capital Stock of the Company that is
not Disqualified Capital Stock.
"Qualified Exchange" means any legal defeasance, redemption, retirement,
repurchase or other acquisition of Capital Stock or Indebtedness of the Company
issued on or after the Issue Date with the Net Cash Proceeds received by the
Company from the substantially concurrent sale of Qualified Capital Stock or any
exchange of Qualified Capital Stock for any Capital Stock or Indebtedness of the
Company issued on or after the Issue Date.
"Reference Period" with regard to any person means the four full fiscal
quarters (or such lesser period during which such person has been in existence)
ended immediately preceding any date upon which any determination is to be made
pursuant to the terms of the New Notes or the Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, not to exceed (after
deduction of reasonable and customary fees and expenses incurred in connection
with the Refinancing) the lesser of (i) the principal amount or, in the case of
Disqualified Capital Stock, liquidation preference, of the Indebtedness or
Disqualified Capital Stock so Refinanced and (ii) if such Indebtedness being
Refinanced was issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of such Refinancing;
provided, that (A) such Refinancing Indebtedness of any Subsidiary of the
Company shall only be used to Refinance outstanding Indebtedness or Disqualified
Capital Stock of such Subsidiary, (B) such Refinancing Indebtedness shall (x)
not have an Average Life shorter than (i) the Indebtedness or Disqualified
Capital Stock to be so refinanced at the time of such Refinancing or (ii) the
New Notes, but only in the case of Refinancing Indebtedness described by (C)(ii)
below, and (y) in all respects, be no less subordinated or junior, if
applicable, to the rights of Holders of the New Notes than was the Indebtedness
or Disqualified Capital Stock to be refinanced, (C) such Refinancing
Indebtedness shall have a final stated maturity or redemption date, as
applicable, no earlier than (i) the final stated maturity or redemption date, as
applicable, of the Indebtedness or Disqualified Capital Stock to be so
refinanced or (ii) the Stated Maturity, but only if such final stated maturity
or redemption date, as applicable, of the Indebtedness or Disqualified Capital
Stock to be so refinanced falls after the Stated Maturity and (D) such
Refinancing Indebtedness shall be secured (if secured) in a manner no more
adverse to the Holders of the New Notes than the terms of the Liens securing
such refinanced Indebtedness, including, without limitation, the amount of
Indebtedness secured shall not be increased.
"Related Business" means the business conducted (or proposed to be
conducted) by the Company and its Subsidiaries as of the Issue Date and any and
all businesses that in the good faith judgment of the Board of Directors of the
Company are materially related businesses.
"Restricted Investment" means, in one or a series of related transactions,
any Investment, other than investments in Cash Equivalents and other Permitted
Investments; provided, however, that (i) a merger of another person with or into
the Company or a Subsidiary Guarantor in accordance with the terms of the
Indenture shall not be deemed to be a Restricted Investment so long as the
surviving entity is the Company or a Subsidiary Guarantor and (ii) Investments
in any Person, so long as immediately upon such Investment such Person becomes a
Subsidiary Guarantor, shall not be deemed to be a Restricted Investment.
"Restricted Payment" means, with respect to any person, (a) the declaration
or payment of any dividend or other distribution in respect of Equity Interests
of such person or any parent or Subsidiary of such person (including, without
limitation, pursuant to the Employee Stock Plan), (b) any payment on account of
the purchase, redemption or other acquisition or retirement for value of Equity
Interests of such person or any Subsidiary or parent of such person, (c) other
than with the proceeds from the substantially concurrent sale of, or in exchange
for, Refinancing Indebtedness, any purchase, redemption, or other acquisition or
retirement for value of, any payment in respect of any amendment
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of the terms of or any defeasance of, any Subordinated Indebtedness, directly or
indirectly, by such person or a parent or Subsidiary of such person prior to the
scheduled maturity, any scheduled repayment of principal, or scheduled sinking
fund payment, as the case may be, of such Indebtedness and (d) any Restricted
Investment by such person; provided, however, that the term "Restricted Payment"
does not include (i) any dividend, distribution or other payment on or with
respect to Equity Interests of an issuer to the extent payable solely in shares
of Qualified Capital Stock of such issuer; or (ii) any dividend, distribution or
other payment to the Company, or to any of its Subsidiary Guarantors, by the
Company or any of its Subsidiaries.
"Senior Debt" of the Company or any Guarantor means Indebtedness of the
Company or such Guarantor arising under the Credit Agreement and without
duplication, certain Existing Indebtedness or Indebtedness that, by the terms of
the instrument creating or evidencing such Indebtedness, is expressly designated
Senior Debt and made senior in right of payment to the New Notes or the
applicable Guarantee; provided, that in no event shall Senior Debt include (a)
Indebtedness to any Subsidiary of the Company or any officer, director or
employee of the Company or any Subsidiary of the Company, (b) Indebtedness
incurred in violation of the terms of the Indenture, (c) Indebtedness to trade
creditors, (d) Disqualified Capital Stock, (e) Capitalized Lease Obligations,
and (f) any liability for taxes owed or owing by the Company or such Guarantor.
"Significant Subsidiary" shall have the meaning provided under Regulation
S-X of the Securities Act, as in effect on the Issue Date.
"Stated Maturity," when used with respect to any Note, means January 15,
2006.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor that is subordinated in right of payment by its terms or the terms of
any document or instrument or instrument relating thereto to the New Notes or
such Guarantee, as applicable, in any respect or has a stated maturity after the
Stated Maturity.
"Subsidiary," with respect to any person, means (i) a corporation a
majority of whose Equity Interests with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such person, by such person and one or more Subsidiaries of such person or by
one or more Subsidiaries of such person, (ii) any other person (other than a
corporation) in which such person, one or more Subsidiaries of such person, or
such person and one or more Subsidiaries of such person, directly or indirectly,
at the date of determination thereof has at least majority ownership interest,
or (iii) a partnership in which such person or a Subsidiary of such person is,
at the time, a general partner. Notwithstanding the foregoing, an Unrestricted
Subsidiary shall not be a Subsidiary of the Company or of any Subsidiary of the
Company. Unless the context requires otherwise, Subsidiary means each direct and
indirect Subsidiary of the Company.
"Tax Amounts" with respect to any year means (a) an amount equal to the
higher of (i) the product of (A) the taxable income of the relevant Taxpayer for
such year as determined in good faith by its Board of Directors; and (B) the Tax
Percentage (as defined below), and (ii) the product of (A) the alternative
minimum taxable income attributable to such Taxpayer for such year as determined
in good faith by its Board of Directors; and (B) the Tax Percentage, in either
case, reduced by (b) to the extent not previously taken into account, any income
tax benefit attributable to such Taxpayer solely as a result of the
stockholder's investment in such Taxpayer (including without limitation, tax
losses, alternative minimum tax credits, other tax credits and carryforwards and
carrybacks thereof to the extent such benefit is realized in the year for which
the Tax Amount is being determined); provided, however, that in no event shall
such Tax Percentage exceed the greater of (1) the highest aggregate applicable
statutory marginal rate of Federal, state and local income tax (or, when
applicable, alternative minimum tax), to which a corporation doing business in
New York City would be subject in the relevant year of determination (as
certified to the Trustee by a nationally recognized tax accounting firm); and
(2) 50%. Any part of the Tax Amount not distributed in respect of a tax period
for which it is calculated shall be available for distribution in subsequent tax
periods. The term "Tax Percentage" is the highest aggregate applicable statutory
marginal rate of Federal, state and local income tax or, when applicable,
alternative minimum tax, to which an individual shareholder of the Taxpayer
could be subject in the relevant year of determination (calculated in good faith
by the Taxpayer and certified
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to the Trustee by a nationally recognized tax accounting firm). Distributions of
Tax Amounts may be made from time to time with respect to a tax year based on
reasonable estimates, with a reconciliation within 40 days of the earlier of (i)
the Taxpayer's filing of the Internal Revenue Service Form 1120S for the
applicable taxable year; and (ii) the last date such form is required to be
filed (without regard to any extensions). The stockholders of each Taxpayer will
enter into a binding agreement with each Taxpayer to reimburse the applicable
Taxpayer for certain positive differences between the distributed amount and the
Tax Amount, which difference must be paid at the time of such reconciliation.
"TNX Shareholders Agreement" means the Shareholders Agreement, dated as of
November 20, 1997, by and among NPR Holding Corporation, certain members of
NPR's senior management and the other entities and individuals signatory
thereto.
"Unrestricted Subsidiary" means any subsidiary of the Company that does not
own any Capital Stock of, or own or hold any Lien on any property of, the
Company or any other Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company); provided, that (i) such subsidiary shall not
engage, to any substantial extent, in any line or lines of business activity
other than a Related Business, (ii) neither immediately prior thereto nor after
giving pro forma effect to such designation would there exist a Default or Event
of Default and (iii) immediately after giving pro forma effect thereto, the
Company could incur at least $1.00 of Indebtedness pursuant to the Debt
Incurrence Ratio of the covenant "Limitation on Incurrence of Additional
Indebtedness and Issuance of Disqualified Capital Stock." The Board of Directors
of the Company may designate any Unrestricted Subsidiary to be a Subsidiary,
provided that (i) no Default or Event of Default is existing or will occur as a
consequence thereof and (ii) immediately after giving effect to such
designation, on a pro forma basis, the Company could incur at least $1.00 of
Indebtedness pursuant to the Debt Incurrence Ratio of the covenant "Limitation
on Incurrence of Additional Indebtedness and Issuance of Disqualified Capital
Stock." Each such designation shall be evidenced by filing with the Trustee a
certified copy of the resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions. As of the Issue Date, The Riverfront Development
Corporation shall be an Unrestricted Subsidiary.
"U.S. Government Obligations" means direct noncallable obligations of, or
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
"Wholly-owned Subsidiary" means a Subsidiary all the Equity Interests of
which are owned by the Company or one or more Wholly-owned Subsidiaries of the
Company.
BOOK-ENTRY; DELIVERY; FORM AND TRANSFERS
The Old Notes were offered and sold to "qualified institutional buyers" in
reliance on Rule 144A. The Old Notes were issued in registered, global form in
minimum denominations of $1,000 and integral multiples of $1,000 in excess
thereof.
The Old Notes are represented by one or more Notes in registered, global
form without interest coupons (the "Restricted Global Note"), and, except as set
forth below, the New Notes will be represented by one or more Notes in
registered, global form without interest coupons (the "Unrestricted Global
Note," and together with the Restricted Global Note, the "Global Note"). The
Restricted Global Note was, and the Unrestricted Global Note will be, deposited
upon issuance with the Trustee as custodian for The Depository Trust Company
("DTC"), in New York, New York and registered in the name of DTC or its nominee,
in each case for credit to an account of a direct or indirect participant in DTC
as described below.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"Exchange of Book-Entry Notes for Certificated Notes."
The Trustee will act as paying agent and registrar.
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REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Holders of the New Notes are not entitled to any registration rights
with respect to the New Notes. Pursuant to the Registration Rights Agreement,
the Company and the Guarantors agreed to file with the SEC a registration
statement (the "Exchange Offer Registration Statement") on the appropriate form
under the Securities Act with respect to the New Notes. The Registration
Statement of which this Prospectus forms a part constitutes the Exchange Offer
Registration Statement. The Company and the Guarantors further agreed to use
their best efforts to have the Exchange Offer Registration Statement declared
effective within 180 days of the Issue Date, as well as to use their best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously, to keep the Exchange Offer open for a period of not less than 30
business days and cause the Exchange Offer to be consummated no later than the
30th business day after it is declared effective by the Commission.
The Company and the Guarantors agreed that if (i) the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any Holder of Notes
which are Transfer Restricted Securities (as defined below) notifies the Company
prior to the 20th business day following the consummation of the Exchange Offer
that (a) it is prohibited by law or Commission policy from participating in the
Exchange Offer, (b) it may not resell the New Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus, and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by it, or (c) it is a broker-dealer and holds the
Notes acquired directly from the Company and the Guarantors or any of their
respective affiliates, the Company and the Guarantors will file with the
Commission a Shelf Registration Statement to register for public resale the
Transfer Restricted Securities held by any such Holder who provides the Company
and the Guarantors with certain information for inclusion in the Shelf
Registration Statement.
For the purposes of the Registration Rights Agreement, "Transfer Restricted
Securities" means each Old Note until the earliest of the date of which (i) such
Old Note is exchanged in the Exchange Offer and entitled to be resold to the
public by the Holder thereof without complying with the prospectus delivery
requirements of the Securities Act, (ii) such Old Note has been disposed of in
accordance with the Shelf Registration Statement, (iii) such Old Note is
disposed of by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
the Prospectus contained therein) or (iv) such Old Note is distributed to the
public pursuant to Rule 144 under the Securities Act.
The Registration Rights Agreement provides that, in the event that any of
the following occur: (i) the Company and the Guarantors fail to file an Exchange
Offer Registration Statement with the Commission on or prior to April 21, 1998,
(ii) the Exchange Offer Registration Statement is not declared effective by the
Commission on or prior to July 20, 1998, (iii) the Exchange Offer is not
consummated on or before the 30th business day after the Exchange Offer
Registration Statement is declared effective, (iv) if obligated to file the
Shelf Registration Statement, the Company and the Guarantors fail to file the
Shelf Registration Statement with the Commission on or prior to the 30th
business day after such filing obligation arises, (v) if obligated to file a
Shelf Registration Statement, the Shelf Registration Statement is not declared
effective on or prior to the 90th day after the obligation to file a Shelf
Registration Statement arises or (vi) the Exchange Offer Registration Statement
or the Shelf Registration Statement, as the case may be, is declared effective
but thereafter ceases to be effective or useable in connection with resales of
the Transfer Restricted Securities (each, a "Registration Default"), then the
Company and the Guarantors agree to pay to each Holder of Transfer Restricted
Securities affected thereby liquidated damages ("Liquidated Damages") in an
amount equal to $0.05 per week per $1,000 in principal amount of Transfer
Restricted Securities held by such Holder for each week or portion thereof that
the Registration Default continues for the first 90-day period immediately
following the occurrence of such Registration Default. The amount of the
Liquidated Damages shall increase by an additional $0.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages of $0.50 per week, per $1,000 in
principal amount of Transfer Restricted Securities. The Company shall not be
required to pay
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liquidated damages for more than one Registration Default at any given time.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease. All accrued Liquidated Damages shall be paid by the Company
and the Guarantors to Holders entitled thereto in the same manner as interest
payments on the Notes on semi-annual damages payment dates which correspond to
interest payment dates for the Notes.
Holders of Notes to be included in a Shelf Registration Statement will be
required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights Agreement
in order to have their Notes included in the Shelf Registration Statement and
benefit from the provisions regarding Liquidated Damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus constitutes a part.
DEPOSITARY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests and transfer of ownership interests of
each actual purchaser of each security held by or on behalf of DTC are recorded
on the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established
by it, (i) upon deposit of the Global Note, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Note and (ii) ownership of such interests in the Global
Note will be maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Note).
Investors in the Global Note may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations which are Participants in such system. All interests in the Global
Note may be subject to the procedures and requirements of DTC. The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Note to such persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants and certain banks, the ability of a person having
beneficial interests in a Global Note to pledge such interests to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of such interests, may be affected by the lack of a physical certificate
evidencing such interests. For certain other restrictions on the transferability
of the Notes, see "-- Exchange of Book-Entry Notes for Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
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Payments in respect of the principal of and premium, if any, and interest
and Liquidated Damages, if any, on a Global Note registered in the name of DTC
or its nominee will be payable by the Trustee to DTC in its capacity as the
registered Holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee will treat the persons in whose names the Notes,
including the Global Note, are registered as the owners thereof for the purpose
of receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Company, the Trustee nor any agent of the Company or
the Trustee has or will have any responsibility or liability for (i) any aspect
of DTC's records or any Participant's or Indirect Participant's records relating
to or payments made on account of beneficial ownership interests in the Global
Note, or for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participants's records relating to the beneficial
ownership interests in the Global Note or (ii) any other matter relating to the
actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised the Company that its current practice, upon
receipt of any payment in respect of securities such as the Notes (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in the principal amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Interests in the Global Note are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants to
whose account with DTC interests in the Global Note are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the right
to exchange the Global Note for Notes in certificated form, and to distribute
such Notes to its Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof. Neither the Company
nor the Trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their obligations under the rules and
procedures governing the DTC's operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
The Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
an Event of Default or any event which after notice or lapse of time or both
would be an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for the Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures) and will bear a restrictive legend referred, unless
the Company determines otherwise in compliance with applicable law.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
consequences associated with the acquisition, ownership and disposition of the
Notes applicable to holders of Notes who purchase the Notes upon original
issuance. The summary is based upon current laws, regulations, rulings and
judicial decisions, all of which are subject to change. The discussion below
does not address all aspects of U.S. federal income taxation that may be
relevant to particular holders in the context of their specific investment
circumstances or certain types of holders subject to special treatment under
such laws (for example, financial institutions, tax-exempt organizations and
insurance companies). In addition, the discussion does not address any aspect of
state, local or foreign taxation and assumes that purchasers of the Notes will
hold them as "capital assets" (generally, property held for investment) within
the meaning of Section 1221 of the Code.
For purposes of the discussion, a "U.S. holder" is an individual who is a
citizen or resident of the U.S., a corporation, partnership or other entity
created under the laws of the U.S. or any political subdivision thereof, or an
estate that is subject to U.S. federal income taxation without regard to the
source of income or a trust whose administration is subject to the primary
supervision of a United States court and which has one or more U.S. Persons who
have authority to control substantial decisions of the trust and a "Non-U.S.
holder" is any holder who is not a U.S. holder.
Prospective purchasers of the Notes are urged to consult their tax advisors
concerning the U.S. federal income tax consequences of acquiring, owning and
disposing of the Notes as well as the application of state, local and foreign
income and other tax laws.
U.S. HOLDERS
Except as provided below under "-- Exchange Offer," if a Note is redeemed,
sold or otherwise disposed of, a U.S. holder generally will recognize gain or
loss equal to the difference between the amount realized on the sale or other
disposition of such Note (to the extent such amount does not represent accrued
but unpaid interest) and such holder's tax basis in the Note. Such gain or loss
will be capital gain or loss, assuming that the holder has held the Note as a
capital asset, and none of the gain is market discount. Capital gain will be
long-term if the holder has held the Note for more than eighteen months at the
time of disposition.
A "market discount Note" is a Note that is acquired other than at the
original issuance, where the tax basis of the Note to the holder is less than
the stated redemption price of the Note at maturity. The excess of such
redemption price over the tax basis is the "market discount." In general, upon
the disposition of a market discount Note, gain on shall be treated as ordinary
income up to the amount of market discount attributable to the holder of the
Note. Holders who acquire a Note after original issuance at a discount should
consult their tax advisors concerning the recognition of the market discount.
NON-U.S. HOLDERS
PAYMENTS OF INTEREST
No withholding of United States federal income tax will be required with
respect to payments by the Company of interest on a Note to a Non-U.S. Holder of
such Note, provided that (i) the Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote, is not a controlled foreign corporation that is
related to the Company through stock ownership, a foreign tax-exempt
organization or foreign private foundation for United States federal income tax
purposes, and (ii) the requirements of section 871(h) or 881(c) of the Code, as
set forth below, are satisfied. Notwithstanding the above, a Non-U.S. Holder
that is engaged in the conduct of a United States trade or business will be
subject to (i) United States federal income tax on interest that is effectively
connected with such trade or business and (ii) if the Non-U.S. Holder is a
corporation, a United States branch profits tax equal to 30% of its "effectively
connected earnings
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and profits" (as adjusted) for the taxable year, unless it qualifies for an
exemption from such tax or a lower tax rate under an applicable treaty.
GAIN ON SALE OF NOTES
A Non-U.S. Holder generally will not be subject to tax on any capital gains
recognized upon the sale, exchange, redemption or other disposition of a Note
unless (i) such gain is effectively connected with the conduct of a United
States trade or business by the Non-U.S. Holder or (ii) in the case of a
Non-U.S. Holder who is a nonresident alien individual, such holder is present in
the United States for 183 or more days in the taxable year and certain other
requirements are met. In the case of (i) above, the Non-U.S. Holder will be
subject to tax on its net income at graduated rates. In the case of (ii) above,
the Non-U.S. Holder will be subject to tax at a rate of 30% on any such capital
gains to the extent that such capital gains exceed his United States source
capital losses.
FEDERAL ESTATE TAX
A Note held by an individual who at the time of death is not a citizen or
resident of the United States will not be subject to United States federal
estate tax as a result of such individual's death, provided that the individual
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote and that the
interest accrued on such Notes was not effectively connected with a United
States trade or business.
OWNER STATEMENT REQUIREMENT
Sections 871(h) and 881(c) of the Code require that either the beneficial
owner of a Note or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a "Financial Institution") and that holds a Note on behalf of such
owner file a statement with the Company or its agent to the effect that the
beneficial owner is not a U.S. person in order to avoid withholding of United
States federal income tax. Under current regulations, this requirement will be
satisfied if the Company or its agent receives (i) a statement (an "Owner's
Statement") from the beneficial owner of a Note in which such owner certifies,
under penalties of perjury, that such owner is not a U.S. person and provides
such owner's name and address, or (ii) a statement from the Financial
Institution holding the Note on behalf of the beneficial owner in which the
Financial Institution certifies, under penalties of perjury, that it has
received the Owner's Statement together with a copy of the Owner's Statement.
The beneficial owner must inform the Company or its agent (or, in the case of a
statement described in clause (ii) of the immediately preceding sentence, the
Financial Institution) within 30 days of any change in information on the
Owner's Statement.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, a 31% "backup"
withholding tax is applied to certain payments made to, and to the proceeds of
sales before maturity by, certain U.S. persons if such persons (i) fail to
furnish their taxpayer identification numbers which, for an individual, would be
his or her Social Security Number or (ii) in certain circumstances, fail to
certify, under penalties of perjury, that they have both furnished a correct
taxpayer identification number and not been notified by the Internal Revenue
Service that they are subject to backup withholding for failure to report
interest payments. Under current regulations, this backup withholding will not
apply to payments made by the Company or a paying agent on a Note if the Owner's
Statement is received; provided in each case that the Company or the paying
agent, as the case may be, does not have actual knowledge that the payee is a
U.S. person.
Under current regulations, payments of the proceeds of the sale of a Note
to or through a foreign office of a "broker" will not be subject to backup
withholding but will be subject to information reporting if the broker is a U.S.
person, a controlled foreign corporation for United States federal income tax
purposes, or a foreign person 50% or more of whose gross income is from a United
States trade or business for a specified three-year period unless the broker has
in its records documentary
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evidence that the holder of a Note is not a U.S. person and certain conditions
are met or the holder of a Note otherwise establishes an exemption. Payment of
the proceeds of a sale to or through the United States office of a broker is
subject to backup withholding and information reporting unless the holder
certifies its non-United States status under penalties of perjury or otherwise
establishes an exemption.
On October 7, 1997, the Treasury Department released new Treasury
Regulations governing the backup withholding and information reporting
requirements described above. The new regulations would not generally alter the
treatment of Non-U.S. Holders who furnish an Owner's Statement to the payor. The
new regulations may change certain procedures applicable to the foreign office
of a United States broker or foreign brokers with certain types of relationships
to the United States. The new regulations generally are effective for payments
made after December 31, 1998.
THE EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not constitute a significant modification of the terms of the Old Notes and,
therefore, such exchange will not constitute an exchange for United States
federal income tax purposes. Accordingly, such exchange will have no United
States federal income tax consequences to U.S. holders of the Old Notes and the
holding period of the New Notes will include the holding period of the Old Notes
and the basis of the New Notes will be the same as the basis of the Old Notes
immediately before the exchange.
ORIGINAL ISSUE DISCOUNT AND STATED INTEREST
The Old Notes were issued and the New Notes will be issued without original
issue discount. Stated interest on the Old and New Notes will be taxable to a
holder as ordinary interest income at the time it is accrued or paid in
accordance with such holder's method of accounting for tax purposes.
BOND PREMIUM ON THE NEW NOTES
If a holder of a New Note purchased the Old Notes for an amount in excess
of the amount payable at the maturity date (or a call date, if appropriate) of
the Old Notes, the holder may deduct such excess as amortizable bond premium
over the aggregate terms of the Old Notes and the New Notes (taking into account
earlier call dates, as appropriate), under a yield-to-maturity formula. The
deduction is available only if an election is made by the purchaser or is in
effect. This election is revocable only with the consent of the Service. The
election applies to all obligations owned or subsequently acquired by the
holder. The holder's adjusted tax basis in the Old Notes and the New Notes will
be reduced to the extent of the deduction of amortizable bond premium. Except as
may otherwise be provided in future regulations, under the Code the amortizable
bond premium is treated as an offset to interest income on the Old Notes and the
New Notes rather than as a separate deduction item.
MARKET DISCOUNT ON THE NEW NOTES
Tax consequences of a disposition of the New Notes may be affected by the
market discount provisions of the Code. These rules generally provide that if a
holder acquired the Old Notes (other than in an original issue) at a market
discount which equals or exceeds 1/4 of 1% of the stated redemption price of the
Old Notes at maturity multiplied by the number of remaining complete years to
maturity and thereafter recognizes gain upon a disposition (or makes a gift) of
the New Notes, the lesser of (i) such gain (or appreciation, in the case of a
gift) or (ii) the portion of the market discount which accrued while the Old or
New Notes were held by such holder will be treated as ordinary income at the
time of the disposition (or gift). For these purposes, market discount means the
excess (if any) of the stated redemption price at maturity over the basis of
such Old or New Notes immediately after their acquisition by the holder. A
holder of the New Notes may elect to include any market discount (whether
accrued under the Old Notes or the New Notes) in income currently rather than
upon disposition of the New Notes. This election once made applies to all market
discount obligations acquired on or after the first taxable year to which the
election applies, and may not be revoked without the consent of the Service.
111
<PAGE>
A holder of any New Note who acquired the Old Note at a market discount
generally will be required to defer the deduction of a portion of the interest
on any indebtedness incurred or maintained to purchase or carry such Old or New
Note until the market discount is recognized upon a subsequent disposition of
such New Note. Such a deferral is not required, however, if the holder elects to
include accrued market discount in income currently.
REDEMPTION OR SALE OF THE NEW NOTES
Generally, any redemption or sale of the New Notes by a holder should
result in taxable gain or loss equal to the difference between the amount of
cash and the fair market value of property received (except to the extent that
such cash or property received is attributable to accrued, but previously
untaxed, interest) and the holder's tax basis in the New Notes. The tax basis of
a holder of the New Notes should generally be equal to the price paid for the
Old Notes exchanged therefor, plus any accrued market discount on the New Notes
(and the Old Notes exchanged therefor) included in the holder's income prior to
sale or redemption of the New Notes, or reduced by any amortizable bond premium
applied against the holder's income prior to sale or redemption of the New
Notes. Such gain or loss generally would be long-term capital gain or loss if
the holding period exceeded one year, except to the extent it constitutes
accrued market discount.
EACH HOLDER OF THE OLD NOTES SHOULD CONSULT HIS OR HER TAX ADVISOR WITH
RESPECT TO THE TAX CONSEQUENCES TO HIM OR HER OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE NEW NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that holds Old Notes that were acquired for its own
account as a result of market making or other trading activities (other than Old
Notes acquired directly from the Company), may exchange Old Notes for New Notes
in the Exchange Offer. However, any such broker-dealer may be deemed to be an
"underwriter" within the meaning of such term under the Securities Act and must,
therefore, acknowledge that it will deliver a prospectus in connection with any
resale of New Notes received in the Exchange Offer. This prospectus delivery
requirement may be satisfied by the delivery by such broker-dealer of this
Prospectus, as it may be amended or supplemented from time to time. The Company
has agreed that, for a period of 180 days after the effective date of this
Prospectus, it will make this Prospectus, as amended or supplemented, available
to any broker-dealer who receives New Notes in the Exchange Offer for use in
connection with any such sale. The Company will not receive any proceeds from
any sales of New Notes by broker-dealers. New Notes received by broker-dealers
for their own accounts pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
of New Notes by broker-dealers may be made directly to a purchaser or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such New Notes. Any broker-dealer that resells New Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such New Notes may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Company has agreed to pay all expenses incident to the Exchange Offer other
than commissions or concessions of any brokers or dealers and will indemnify
Holders (including any broker-dealer) against certain liabilities, including
liabilities under the Securities Act.
By acceptance of the Exchange Offer, each broker-dealer that receives New
Notes pursuant to the Exchange Offer hereby agrees to notify the Company prior
to using the Prospectus in connection with the sale or transfer of New Notes,
and acknowledges and agrees that, upon receipt of notice from the Company of the
happening of any event which makes any statement in the Prospectus untrue in any
112
<PAGE>
material respect or which requires the making of any changes in the Prospectus
in order to make the statements herein not misleading (which notice the Company
agrees to deliver promptly to such broker-dealer), such broker-dealer will
suspend use of the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented prospectus to such broker-dealer.
LEGAL MATTERS
The validity of the New Notes offered hereby is being passed upon for the
Company by Pepper Hamilton LLP.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1998 and for each of the three years in the period ended December
31, 1998 included herein have been audited by BDO Seidman LLP, independent
certified public accountants, as set forth in their report appearing herein, and
have been included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The consolidated financial statements of NPR Holding Corporation and
Subsidiaries as of January 5, 1997 and November 20, 1997 and for the periods
ended December 31, 1995, January 5, 1997 and November 20, 1997 included herein
have also been audited by BDO Seidman LLP, independent certified public
accountants, as set forth in their report appearing herein, and have been
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
CHANGE OF ACCOUNTANTS
On October 21, 1997, the Issuer engaged BDO Seidman LLP ("BDO") as NPR's
independent public accountants. BDO's engagement was approved by the Issuer's
Board of Directors. BDO also serves as independent public accountants to the
Company. Pursuant to such engagement, BDO audited NPR's financial statements for
the period March 3, 1995 through December 31, 1995, the year ended January 5,
1997 and the period January 6, 1997 to November 20, 1997, which financial
statements are included herein. See "Consolidated Financial Statements of NPR
Holding Corporation and Subsidiaries." Prior to such engagement, the Company had
not consulted with BDO on issues relating to NPR's accounting principles or the
type of audit opinion to be issued with respect to NPR's financial statements.
Deloitte & Touche LLP ("Deloitte") were the prior auditors of NPR, and
Deloitte audited the financial statements of NPR for the period from March 3,
1995 through December 31, 1995 and the year ended January 5, 1997. The report of
Deloitte on such financial statements, which is not included herein, did not
contain an adverse opinion nor a disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope, or accounting principles. In connection
with the audit by Deloitte for the period from March 3, 1995 through December
31, 1995 and the year ended January 5, 1997, there was no disagreement between
NPR and Deloitte on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which, if not resolved to
the satisfaction of Deloitte, would have caused them to make reference to the
matter in their report. Deloitte has not been associated with any financial
statements of NPR subsequent to the year ended January 5, 1997. Deloitte's
appointment as NPR's independent public accountants was not renewed following
the completion of Deloitte's engagement to audit NPR's financial statements
described above.
113
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE HOLT GROUP, INC. AND SUBSIDIARIES
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1997 and
1998...................................................... F-3
Consolidated Statements of Income for the years ended
December 31, 1996, 1997 and 1998.......................... F-5
Consolidated Statements of Comprehensive Income (Loss) for
the Years Ended December 31, 1996, 1997 and 1998.......... F-6
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 1996, 1997 and 1998.............. F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998.......................... F-8
Notes to the Consolidated Financial Statements.............. F-9
NPR HOLDING CORPORATION AND SUBSIDIARIES
Report of Independent Accountants........................... F-25
Consolidated Balance Sheets as of January 5, 1997 and
November 20, 1997......................................... F-26
Consolidated Statements of Operations for the period from
March 3, 1995 to December 31, 1995, the fifty-three weeks
ended January 5, 1997 and the period from January 6, 1997
to November 20, 1997...................................... F-27
Consolidated Statements of Stockholders' Equity (Deficiency)
for the period from March 3, 1995 to December 31, 1995,
the fifty-three weeks ended January 5, 1997, and the
period from January 6, 1997 to November 20, 1997.......... F-28
Consolidated Statements of Cash Flows for the period from
March 3, 1995 to December 31, 1995, the fifty-three weeks
ended January 5, 1997 and the period from January 6, 1997
to November 20, 1997...................................... F-29
Notes to the Consolidated Financial Statements.............. F-30
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholder and Directors
The Holt Group, Inc.
Gloucester City, New Jersey
We have audited the accompanying consolidated balance sheets of The Holt
Group, Inc. and subsidiaries ("Holt") as of December 31, 1997 and 1998, and the
related consolidated statements of income, comprehensive income (loss),
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1998. These consolidated financial statements are the
responsibility of Holt's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Holt as of
December 31, 1997 and 1998 and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31, 1998
in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
April 13, 1999
F-2
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets
Current assets:
Cash...................................................... $ 8,005 $ 4,821
Marketable securities..................................... 40,156 26,143
Receivables
Trade.................................................. 32,610 57,077
Tenants................................................ 37,076 40,296
Other.................................................. 17,390 13,669
Fuel and supplies......................................... 2,201 2,338
Prepaid expenses.......................................... 2,960 3,428
Other current assets...................................... 189 3,540
-------- --------
Total current assets................................... 140,587 151,312
-------- --------
Property, plant and equipment, net of accumulated
depreciation and amortization............................. 194,427 195,265
-------- --------
Other assets
Receivables, other........................................ 11,288 29,032
Investments............................................... 2,925 2,925
Unamortized financing costs............................... 4,192 3,616
Capitalized overhaul costs, net of amortization........... -- 19,333
Other..................................................... 7,697 9,344
Receivables from non-consolidated affiliates.............. 21,262 25,403
-------- --------
Total other assets..................................... 47,364 89,653
-------- --------
$382,378 $436,230
======== ========
</TABLE>
See accompanying summary of significant accounting policies and
notes to consolidated financial statements.
F-3
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Revolving credit facility................................. $ 8,500 $ 37,000
Note payable, bank........................................ 9,166 9,036
Current maturities of long-term debt
Notes payable, banks................................... 1,012 1,179
Other.................................................. 3,089 3,211
Accounts payable.......................................... 42,544 55,676
Payroll taxes payable..................................... 4,235 4,433
Accrued expenses.......................................... 17,964 30,040
Payments in excess of billings............................ 3,355 3,353
-------- --------
Total current liabilities.............................. 89,865 144,528
-------- --------
Long-term debt, net of current maturities
Notes payable, banks...................................... 1,864 1,164
Notes payable, other...................................... 189,802 205,624
-------- --------
Total long-term debt, net of current maturities........ 191,666 206,788
-------- --------
Payables to non-consolidated affiliates..................... 12,190 13,979
-------- --------
Other long term liabilities................................. 15,928 11,108
-------- --------
Commitments and contingencies
Stockholder's equity:
Common stock, par value $.01, authorized 1,000 shares,
issued and outstanding 100 shares...................... -- --
Additional paid-in capital................................ 631 1,131
Retained earnings......................................... 55,147 60,685
Accumulated other comprehensive income (loss)............. 16,951 (1,989)
-------- --------
Total stockholder's equity.................................. 72,729 59,827
-------- --------
$382,378 $436,230
======== ========
</TABLE>
See accompanying summary of significant accounting policies and
notes to consolidated financial statements.
F-4
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Operating............................................ $57,803 $ 92,326 $328,586
Rental income........................................ 14,995 24,007 30,423
Other................................................ 269 2,610 11,426
Revenue from non-consolidated affiliates............. 9 55 41
------- -------- --------
Total revenues................................. 73,076 118,998 370,476
------- -------- --------
Operating expenses
Terminal............................................. 24,125 30,431 103,960
General and administrative........................... 8,865 26,112 55,517
Equipment maintenance................................ 10,720 15,796 50,228
Insurance and safety................................. 4,797 2,998 6,493
Vessel............................................... -- 5,815 45,761
Transportation....................................... 2,917 9,346 58,048
Depreciation and amortization........................ 4,025 8,652 16,598
Operating taxes and licenses......................... 165 227 552
Losses on investment in joint venture................ -- -- 9,016
Charges from non-consolidated affiliates............. 1,703 1,207 741
------- -------- --------
Total operating expenses....................... 57,317 100,584 346,914
------- -------- --------
Income from operations................................. 15,759 18,414 23,562
Interest expense, net.................................. 8,154 9,211 18,780
Other income
Gain on sale of property and equipment............... 694 7 72
Dividends received................................... -- 1,595 5,799
Realized foreign exchange loss....................... -- (50) (94)
------- -------- --------
Total other income............................. 694 1,552 5,777
------- -------- --------
Net income............................................. $ 8,299 $ 10,755 $ 10,559
======= ======== ========
</TABLE>
See accompanying summary of significant accounting policies and
notes to consolidated financial statements.
F-5
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1997 1998
------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net income.............................................. $ 8,299 $10,755 $ 10,559
Other comprehensive income (loss):
Foreign exchange translation adjustments.............. -- 316 275
Changes in market value on marketable securities...... -- 16,635 (19,215)
------- ------- --------
Total other comprehensive income (loss)............ -- 16,951 (18,940)
------- ------- --------
Total other comprehensive income (loss)................. $ 8,299 $27,706 $ (8,381)
======= ======= ========
</TABLE>
See accompanying summary of significant accounting policies and
notes to consolidated financial statements.
F-6
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON ADDITIONAL OTHER TOTAL
STOCK PAID-IN RETAINED COMPREHENSIVE STOCKHOLDER'S
AMOUNT CAPITAL EARNINGS INCOME EQUITY
------ ---------- -------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996........... $ -- $ 631 $43,542 $ -- $44,173
Net income......................... -- -- 8,299 -- 8,299
Dividends paid..................... -- -- (2,968) -- (2,968)
---- ------- ------- ------- -------
Balance, December 31, 1996......... -- 631 48,873 -- 49,504
Net income......................... -- -- 10,755 -- 10,755
Comprehensive income
Foreign exchange adjustments..... -- -- -- 316 316
Change in market value on
marketable securities.......... -- -- -- 16,635 16,635
Dividends paid..................... -- -- (4,481) -- (4,481)
---- ------- ------- ------- -------
Balance, December 31, 1997......... -- 631 55,147 16,951 72,729
Net income......................... -- -- 10,559 -- 10,559
Gain on sale of equipment to
company owned by relatives of
Holt's stockholder............... -- 500 -- -- 500
Comprehensive income (loss)
Foreign exchange translation
adjustments.................... -- -- -- 275 275
Change in market value on
marketable securities.......... -- -- -- (19,215) (19,215)
Dividends paid..................... -- -- (5,021) -- (5,021)
---- ------- ------- ------- -------
Balance, December 31, 1998......... $ -- $ 1,131 $60,685 $(1,989) $59,827
==== ======= ======= ======= =======
</TABLE>
See accompanying summary of significant accounting policies and
notes to consolidated financial statements.
F-7
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities
Net income................................................ $ 8,299 $ 10,755 $ 10,559
Adjustments to reconcile net income to net cash provided
by (used in) operating activities
Depreciation and amortization........................... 4,025 8,652 16,598
(Gain) on sale of property and equipment................ (694) (7) (72)
Provision for doubtful accounts......................... -- -- (415)
Changes in assets and liabilities
(Increase) decrease in assets
Trade receivables....................................... 3,858 20,705 (24,052)
Tenants receivables..................................... (5,173) (22,809) (3,220)
Fuel and Supplies....................................... -- (68) (137)
Prepaid expenses........................................ 367 (2,779) (468)
Other current assets.................................... 4,932 5,461 (3,351)
Other assets............................................ 285 1,939 (516)
Increase (decrease) in liabilities
Accounts payable........................................ 816 374 13,132
Payroll taxes payable................................... (98) 765 198
Accrued expenses........................................ 588 2,034 12,076
Payments in excess of billings.......................... -- (426) (2)
Other non-current liabilities........................... -- (63) (4,820)
------- --------- ---------
Net cash (used in) provided by operating activities......... 17,205 24,533 15,510
------- --------- ---------
Cash flows from investing activities
Payment for NPR acquisition net of cash acquired.......... -- (67,105) --
Proceeds from sale of property and equipment.............. 675 7 4,580
Purchases of marketable securities........................ -- (23,521) (4,927)
Purchases and construction of property, plant and
equipment............................................... (6,936) (9,674) (19,058)
Capitalized overhaul costs................................ -- -- (20,831)
Decrease (increase) in other receivables.................. (1,397) 10,911 (14,023)
Decrease (increase) in receivables from non-consolidated
affiliates.............................................. (7,751) (149) (4,141)
Decrease (increase) in payables to non-consolidated
affiliates.............................................. (956) 1,917 1,790
Increase in goodwill...................................... -- -- (1,222)
------- --------- ---------
Net cash (used in) investing activities..................... (16,365) (87,614) (57,832)
------- --------- ---------
Cash flows from financing activities
Redemption of preferred stock............................. -- (740) --
Financing cost incurred................................... (495) (3,994) (721)
Net payments on term notes................................ -- (33,940) (28,500)
Proceeds of long-term debt................................ 10,986 166,387 144,585
Payments on long-term debt................................ (8,941) (55,314) (71,705)
Contribution of Capital................................... -- -- 500
Dividends paid............................................ (2,969) (4,481) (5,021)
------- --------- ---------
Net cash (used in) provided by financing activities......... (1,419) 67,918 39,138
------- --------- ---------
Net increase (decrease) in cash............................. (579) 4,837 (3,184)
Cash, at beginning of year.................................. 1,821 3,168 8,005
------- --------- ---------
Cash, at end of year........................................ $ 1,242 $ 8,005 $ 4,821
======= ========= =========
Supplemental disclosure of cash flow information
Cash paid during the year for interest, net of amounts
capitalized............................................. $ 8,247 $ 8,128 $ 16,374
======= ========= =========
Non-cash investing and financing activities
Change in market value of marketable securities........... -- $ 16,635 $ (19,215)
Unrealized foreign exchange gain.......................... -- 316 275
Gain on sale of property and equipment to company owned by
relatives of Holt's stockholder......................... -- -- 500
Acquisition of NPR Holding Corporation
Fair market value of assets acquired...................... $ -- $ 179,709 --
Liabilities assumed....................................... -- 110,679 --
------- --------- ---------
Cash paid................................................. $ -- $ 69,030 $ --
======= ========= =========
</TABLE>
See accompanying summary of significant accounting policies and
notes to consolidated financial statements.
F-8
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
The Holt Group, Inc. and its subsidiaries (collectively referred to as
"Holt") are engaged in stevedoring, trucking, warehousing and distribution
services; rental of real estate and equipment in the Delaware Valley area, and
operate and charter vessels.
BASIS OF PRESENTATION
During October 1997, Holt Hauling and Warehousing System, Inc., Holt Cargo
Systems, Inc., The Riverfront Development Corporation, Murphy Marine Services,
Inc. and subsidiary (Wilmington Stevedores, Inc.), collectively, the Holt
Subsidiaries, reorganized their operations. In order to effectuate the
reorganization, on October 31, 1997, the Holt Subsidiaries sole stockholder
contributed 100% of the common stock of the Holt Subsidiaries to The Holt Group,
Inc., which is 100% owned by the same stockholder. Holt's wholly-owned
subsidiaries are included in the accompanying consolidated financial statements.
This reorganization has been reflected retroactively for all periods presented.
PRINCIPLES OF COMBINATION AND BASIS OF PRESENTATION
The consolidated financial statements include Holt's wholly owned
subsidiaries, Holt Hauling and Warehousing Systems, Inc. (HHW), Holt Cargo
Systems, Inc. (HCS), Murphy Marine Services, Inc. (MMS), NPR Holding Corporation
(NPR), The Riverfront Development Corporation (RFD), San Juan International
Terminals, Inc. (SAN) and SJIT, Inc. (SJIT).
All significant intercompany transactions and balances have been
eliminated.
CASH AND CASH EQUIVALENTS
Holt considers highly liquid investments with a maturity of three months or
less at the time of purchase to be cash equivalents.
MARKETABLE SECURITIES
Holt classifies its marketable equity securities as available-for-sale.
Available-for-sale securities are carried at fair market value, with unrealized
gains and losses reported as a component of stockholder's equity.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION AND AMORTIZATION
Property, plant and equipment are stated at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the assets
ranging from five to fifty years. Costs of construction in progress are
segregated from other property accounts until construction is completed, at
which time depreciation charges commence. Maintenance and repair costs are
charged to operations as incurred, and major renewals and betterments are
capitalized. Leasehold improvements are amortized over the life of the related
assets.
OVERHAUL COSTS
Costs incurred while a vessel is in drydock to satisfy the requirements of
various periodic regulatory inspections are capitalized and amortized over the
expected benefit period of approximately two to three years.
F-9
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
VALUATION OF LONG-LIVED ASSETS
When events and circumstances warrant, the carrying value of long-lived
assets to be held and used is evaluated. The carrying value of a long-lived
asset is considered impaired when the anticipated undiscounted cash flow from
such asset is less than its carrying value. In that event, a loss is recognized
based on the amount by which the carrying value exceeds the fair market value of
the long-lived asset. Holt believes that no material impairment existed at
December 31, 1998.
INTEREST ON CONSTRUCTION
Interest attributable to construction is capitalized into the cost of each
project on a pro rata basis. Interest capitalized in 1996, 1997 and 1998 was
$394, $650 and $1,106 respectively.
REVENUE RECOGNITION
Stevedoring, trucking and distribution services revenue is recognized when
services are provided to customers. Rental revenue is recognized over the term
of each lease. Ocean revenue is recognized based on relative transit time
(amount of days at sea) in each reporting period and related vessel operating
expenses are recognized as incurred.
AMORTIZATION OF FINANCING COSTS
Financing costs are amortized using the straight-line method over the terms
of the respective bond issues.
INCOME TAXES
Separate federal and state income tax returns are filed by the corporations
comprising Holt, some of which are subchapter S corporations. As provided by the
Internal Revenue Code, income of subchapter S corporations is reportable by the
stockholders on their individual tax returns. Accordingly, no provision for
federal or state income taxes has been reflected in the accompanying financial
statements for the subchapter S corporations, which earned substantially all of
the consolidated income for each year.
Deferred income taxes which would apply only to non-subchapter S
corporations are insignificant.
Effective January 1, 1998, all of Holt's wholly owned subsidiaries file a
consolidated federal returns and, for certain state income taxes, subchapter S
corporation tax returns as provided by the Internal Revenue Code.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-10
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
RECLASSIFICATIONS
Certain amounts in the December 31, 1997 financial statements have been
reclassified to conform to the December 31, 1998 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS No.
133). This statement established accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to changes in the fair
value of recognized asset or liability or an unrecognized firm commitment, (b) a
hedge of the exposure to variable cash flows of a forecasted transaction, or (c)
a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign currency denominated forecasted transaction.
SFAS No. 133 amends SFAS No. 52 "Foreign Currency Translation" to permit
special accounting for a hedge of a foreign currency forecasted transaction with
a derivative. It supersedes SFAS No. 80 "Accounting for Futures Contracts, Risk
and Financial Instruments with Concentrations of Credit Risk" and No. 119
"Disclosure and Derivative Financial Instruments and Fair Value of Financial
Instruments." Such statement also amends SFAS No. 107 "Disclosures about Fair
Value of Financial Instruments" to include in SFAS No. 107 the disclosure
provisions about concentrations of credit risk from SFAS No. 105. SFAS No. 133
also nullifies or modifies the consensus reached on a number of issues addressed
by the Emerging Issues Task Force.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. Initial application of this statement should be as of the
beginning of an entity's fiscal quarter following June 15, 1999. On that date,
hedging relationships must be designated anew and documented pursuant to the
provisions of this statement. Earlier application of all of the provisions of
this statement is encouraged, but it is permitted only as of the beginning of
any fiscal quarter that begins after issuance of this Statement. This statement
should not be applied retroactively to financial statements of prior periods.
Holt does not expect the impact of SFAS No. 133 to have a material effect on its
Financial Reporting.
2. ACQUISITION OF NPR HOLDING CORPORATION
On November 20, 1997, Holt acquired 100% of the outstanding common stock of
NPR Holding Corporation ("NPR") in exchange for $44.0 million cash and $25.0
million in notes to the selling stockholders. The operating plans for the
combined business had a material impact on Holt and its operations and financial
condition and required the integration and the implementation of operating,
finance and management systems and controls between Holt and NPR. This
transaction was accounted for as a purchase and Holt's consolidated statements
of income includes NPR's operations for the 45 days ended December 31, 1997 and
for the year ended December 31, 1998.
As part of the transaction, Holt repaid $39.7 million of existing debt
obligations of NPR. Also, Holt entered into five-year employment agreements with
certain members of NPR management and granted these employees "Phantom Stock
Units" representing the right to receive the value of up to 10% of the common
stock of NPR outstanding on November 20, 1997 (computed on a fully diluted
F-11
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
2. ACQUISITION OF NPR HOLDING CORPORATION -- (CONTINUED)
basis as if the Phantom Stock Units were outstanding shares of NPR common
stock), based on the achievement of specified performance goals, none of which
were earned as of December 31, 1998.
In connection with this acquisition, Holt also entered into a
sale/leaseback agreement with a related party whereby certain equipment with a
net book value of $35 million was sold for $24 million cash and a $11 million
note receivable. The note receivable which was outstanding at December 31, 1997
was paid in full during November 1998. No gain or loss was recognized as the
sales price was equal to the net carrying value of the equipment. The agreement
provides for monthly rental payments of $738 for 60 months which are included in
related party leases (see Note 8). Holt has the option to terminate the lease at
the end of 48 months by returning the equipment and paying a termination fee of
$2.8 million.
Holt relocated NPR's U.S. northeastern port of call from Elizabeth, New
Jersey to Philadelphia, Pennsylvania, a move designed to consolidate operations.
Holt does not believe that the relocation will trigger a multiemployer plan
withdrawal liability, which is estimated to be $17.1 million, plus interest
(which, if triggered, would be payable over an eight-year period). However,
there can be no assurance that the liability, or a portion thereof, will not
become payable in the future.
3. MARKETABLE SECURITIES AVAILABLE FOR SALE
In April 1997, Holt purchased 1,096 shares (subsequently converted into
2,192 shares as a result of a 2-for-1 stock split) of common stock, representing
16.9% of the outstanding shares of Altantic Container Line AB (ACL), a publicly
traded foreign corporation, at a cost of $23.5 million for cash and a $8.5
million note payable to a foreign bank. The note is due in December 1999 and
bears interest at the London Inter-Bank Offered Rate (LIBOR) plus 2.25%.
During June 1998, Holt purchased options to buy approximately 1.5 million
shares (11.1%) of ACL stock at a cost of $5.2 million. These options were
scheduled to expire in March of 1999. Prior to the expiration dates of these
options, Holt entered into new option agreements for the 1.5 million shares and
paid approximately $9.3 million for the new options, which are now scheduled to
expire on December 1, 1999.
Marketable securities available-for-sale and other cost investments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1998 1997
------------------------------ ------------------------------
UNREALIZED UNREALIZED
HOLDING HOLDING
GAINS GAINS
COST (LOSSES) TOTAL COST (LOSSES) TOTAL
------- ---------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Stock, ACL...................... $23,509 $ 2,069 $25,578 $23,509 $16,635 $40,144
Options, ACL.................... 5,201 (4,649) 552 -- -- --
Other........................... 13 -- 13 12 -- 12
------- ------- ------- ------- ------- -------
$28,723 $(2,580) $26,143 $23,521 $16,635 $40,156
======= ======= ======= ======= ======= =======
</TABLE>
Dividends declared for the years ended December 31, 1997 and 1998 were
$1,595 and $5,799 and are included other income in the accompanying Statements
of Income.
F-12
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
3. MARKETABLE SECURITIES AVAILABLE FOR SALE -- (CONTINUED)
It is Holt's intent to dividend to Holt's sole stockholder the ACL shares
and options it owns subject to all indebtedness related to the shares and
options and also subject to receiving all necessary governmental and third party
consents for ultimate distribution. As of March 31, 1999, such indebtedness
amounted to $24.4 million, of which $9.0 million was payable to a bank and $15.4
million was payable to other subsidiaries of Holt. In conjunction with the
distribution, Holt's sole shareholder shall assume such indebtedness and agree
to pay the portion payable to Holt ($15.4 million) prior to December 31, 1999.
In the event the divident is not declared, Holt intends to otherwise liquidate
the ACL stock and options.
4. INVESTMENTS
Technology Company
The investment is in a shipping company which intends to use patented
technology in the design and construction of ocean going vessels. The investment
is stated at its cost of $2,925 and is included in "Investment" in the
accompanying balance sheet.
TNX Joint Venture
Holt owns a 40% interest in a joint venture which provides cargo and
transportation services between numerous ports in the United States, San Juan
and certain ports in South America, which is accounted for under the equity
method.
The joint venture required a capital contribution of $500, which
approximated Holt's share of operating losses as of and for the period ended
November 20, 1997, the date of Holt's acquisition of NPR (see Note 1).
As a result of operating losses incurred during 1998, Holt wound down the
operations of the TNX joint venture (TNX). Holt terminated all of its vessel
sharing, slot charter and other agreements with other shipping companies and
completed its last voyage during November 1998.
During 1998, Holt advanced $9 million to TNX for working capital. As a
result of the losses from TNX operations and the winding down of operations,
Holt fully reserved these advances at December 31, 1998. Holt does not
anticipate making any further advances to the joint venture in 1999.
5. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------
1997 1998
--------------------------- ---------------------------
ESTIMATED ACCUMULATED ACCUMULATED
USEFUL DEPRECIATION AND DEPRECIATION AND
LIFE COST AMORTIZATION COST AMORTIZATION
-------------- -------- ---------------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Land................. -- $ 15,905 $ -- $ 15,905 $ --
Buildings............ 15 to 50 years 29,692 9,206 30,236 9,985
Improvements......... 5 to 50 years 10,046 4,394 12,750 4,780
Equipment............ 5 to 20 years 43,695 23,109 56,233 33,347
Vessels.............. 11 to 14 years 94,104 805 97,300 8,114
Piers................ 40 to 50 years 34,851 10,054 34,851 10,913
Construction in
progress........... -- 13,702 -- 15,129 --
-------------- -------- ------- -------- -------
$241,995 $47,568 $262,404 $67,139
======== ======= ======== =======
</TABLE>
Construction in progress at December 31, 1997 and 1998 consists of $4.8
million of undeveloped land, ongoing construction of certain buildings and
various crane improvements.
The were no material commitments with respect to construction in progress
at December 31, 1997 and 1998.
F-13
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
6. THE REVOLVING CREDIT FACILITY AND LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
-------- --------
<S> <C> <C>
Revolving Credit Facility.............................. $ 8,500 $ 37,000
Notes payable, banks................................... 12,402 $ 11,979
Senior unsecured notes................................. -- 140,000
Subordinated unsecured sellers notes................... 25,000 --
Senior unsecured increasing rate notes................. 100,000 --
Bonds payable
1997 Fixed Rate Series K............................. 27,250 27,250
1992 Fixed Rate Series G............................. 10,000 10,000
1992 Fixed Rate Series H............................. 9,000 9,000
1992 Fixed Rate Series J............................. 5,000 5,000
Construction mortgage payable.......................... 4,989 4,896
Equipment financing.................................... 11,652 12,689
-------- --------
213,433 257,814
Less current maturities
Revolving Credit Facility............................ 8,500 37,000
Notes payable, banks................................. 10,178 10,815
Equipment and construction notes payable............. 3,089 3,211
-------- --------
$191,666 $206,788
======== ========
</TABLE>
As of December 31, 1998, maturities of the Revolving Credit Facility and
long-term debt over the next five years are due as follows:
YEAR ENDING DECEMBER 31,
------------------------
1999....................................... $51,026
2000....................................... 3,112
2001....................................... 2,710
2002....................................... 2,763
2003....................................... 1,812
Substantially all property, plant and equipment are pledged as collateral
for long-term debt.
The bond indentures and loan agreements provide for certain covenants
regarding working capital, net worth, dividend distributions and other financial
matters. At December 31, 1997 and 1998, Holt was in compliance with the terms of
the loan covenants.
F-14
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
6. THE REVOLVING CREDIT FACILITY AND LONG-TERM DEBT -- (CONTINUED)
NOTES PAYABLE, BANKS
At December 31, 1997 and 1998, notes payable, banks, consist of the
following term notes:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
------- -------
<S> <C> <C>
Revolving credit facility due in October 1999 with
interest payable monthly at 8.5%, secured by the
vessels............................................... $ 8,500 $37,000
Term loan due December 1999 with interest payable
monthly at LIBOR (7.425% at December 31, 1998) plus
2.25%, secured by investments in marketable
securities............................................ 9,166 9,036
Payable in monthly installments of $19 plus interest at
1.25% over prime. The final payment of $1,186 is due
in December 1999...................................... 1,653 1,419
Payable in monthly installments of $28 plus interest at
prime................................................. 528 750
Payable in monthly installments of $33 plus interest at
1% over prime......................................... 195 --
Payable in monthly installments of $16 plus interest at
prime................................................. 500 750
Payable in monthly installments of $.5 including
interest at 11%....................................... -- 24
------- -------
$20,542 $48,979
======= =======
</TABLE>
The prime rate noted in certain loan agreements at December 31, 1997 and
1998 was 8.5% and 7.75% respectively.
SENIOR NOTES
Senior Notes of $140,000 are due in January 2006. The notes bear interest
at 9.75% with interest payable semiannually.
SUBORDINATED UNSECURED SELLERS NOTES
The Subordinated Unsecured Sellers Notes of $25,000 plus accrued interest
were due December 1998. The notes bear interest at 12.5%. The Subordinated
Unsecured Sellers Notes were refinanced in connection with the issuance of the
Senior Notes and, accordingly, have been classified as long-term debt in the
accompanying balance sheet at December 31, 1997.
SENIOR UNSECURED INCREASING RATE NOTES
The Senior Unsecured Increasing Rate Notes of $100,000 plus accrued
interest were due December 1998. The Senior Unsecured Increasing Rate Notes bear
interest at prime plus 2%. The Senior Unsecured Increasing Rate Notes were
refinanced in connection with the issuance of the Senior Notes and, accordingly,
have been classified as long-term debt in the accompanying balance sheet at
December 31, 1997.
BONDS PAYABLE
1997 Fixed Rate Series K
The bonds mature March 1, 2027 and bear interest at an effective rate of
7.8%, payable semi-annually. These bonds redeemed and replaced the 1986 fixed
rate series D and E bonds.
F-15
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
6. THE REVOLVING CREDIT FACILITY AND LONG-TERM DEBT -- (CONTINUED)
1992 Fixed Rate Series G
The bonds mature at various dates through December 15, 2015, and bear
interest at 8.4%, payable semi-annually. The bond indenture requires annual
principal payments into a sinking fund beginning December 15, 2006 through 2015.
1992 Fixed Rate Series H
The bonds mature at various dates through December 15, 2017, and bear
interest at 8.6%, payable semi-annually. The bond indenture requires annual
principal payments into a sinking fund beginning December 15, 2008 through 2017.
1992 Fixed Rate Series J
The bonds mature at various dates through November 1, 2023, and bear
interest at 8.5%, payable semi-annually. The bond indenture requires annual
principal payments into a sinking fund beginning November 1, 2004 through 2023.
CONSTRUCTION MORTGAGE PAYABLE
The mortgage is payable in monthly installments of $33 including interest
at 6% beginning April 1997; final payment of $2,952 including interest, is due
in March, 2012.
EQUIPMENT FINANCING
The equipment obligations are payable in monthly installments aggregating
$217 plus interest. Interest rates at December 31, 1997 and December 31, 1998
ranged from 7.55% to 11.55%.
OTHER LONG TERM LIABILITIES
At December 31, 1997, and 1998, other long-term liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
------- -------
<S> <C> <C>
Deferred rental payments................................ $ 267 $ 622
Reserves for insurance deductible....................... 1,015 507
Reserve for asbestos claims............................. 1,877 1,046
Reserve for post retirement benefits, net of current
portions of $-0- and $637 for 1997 and 1998,
respectively.......................................... 9,228 8,419
Reserve for post employment benefits.................... 714 514
Accrued closing costs -- non-current maturities......... 2,517 --
Other deferred payments................................. 310 --
------- -------
$15,928 $11,108
======= =======
</TABLE>
7. EMPLOYEE BENEFIT PLANS
In connection with the acquisition described in Note 2, Holt assumed and
continued all the NPR employee benefit plans.
F-16
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
7. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
Pension and Postretirement Benefits Plans
Substantially all nonunion employees of NPR are covered under a
noncontributory defined benefit retirement plan. In addition, Holt has an
unfunded plan to provide postretirement health care and life insurance benefits
to certain NPR employees who retire with a minimum of 10 years of service. These
benefits are accrued over the period the employee provides services to Holt.
Holt amended the plan effective January 31, 1998 freezing the accrued
benefit as of that date. This amendment eliminated for all employees the accrual
of benefits for future service.
The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair value of assets for the period ended December 31,
1997 and for the year ended December 31, 1998, and a statement of the funded
status as of December 31, 1997 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1997 1998
------------------- -------------------
PENSION OTHER PENSION OTHER
BENEFITS BENEFITS BENEFITS BENEFITS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Reconciliation of benefit obligation
Benefit obligation at beginning of year/period..... $45,215 $7,623 $45,293 $7,624
Service cost....................................... 118 12 129 125
Interest cost...................................... 294 46 3,186 545
Participant contributions.......................... -- 4 -- 45
Acturial (gain) loss............................... (79) (14) 3,074 581
Benefits paid...................................... (255) (47) (3,143) (854)
------- ------ ------- ------
Benefit obligation at December 31.................. $45,293 $7,624 $48,539 $8,066
======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1997 1998
------------------- -------------------
PENSION OTHER PENSION OTHER
BENEFITS BENEFITS BENEFITS BENEFITS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Reconciliation of fair value of plan assets
Fair value of plan assets at beginning of
year/period...................................... $47,846 $ -- $48,246 $ --
Actual return on plan assets....................... 655 -- 4,291 --
Employer contributions............................. -- 43 1,028 809
Participant contributions.......................... -- 4 -- 45
Benefit payments................................... (255) (47) (3,144) (854)
------- ------ ------- ------
Fair value of plan assets at December 31........... $48,246 $ -- $50,421 $ --
======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1997 1998
------------------- -------------------
PENSION OTHER PENSION OTHER
BENEFITS BENEFITS BENEFITS BENEFITS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Funded status
Funded status at December 31..................... $ 2,953 $(7,624) $ 1,882 $(8,066)
Unrecognized (gain) loss......................... -- (1,604) 2,592 (990)
------- ------- ------- -------
Prepaid (accrued) benefit cost................... $ 2,953 $(9,228) $ 4,474 $(9,056)
======= ======= ======= =======
</TABLE>
F-17
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
7. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
The following table provides the components of net periodic benefit cost
for the plans:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1997 1998
------------------- -------------------
PENSION OTHER PENSION OTHER
BENEFITS BENEFITS BENEFITS BENEFITS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Service cost....................................... $ 118 $ 12 $ 129 $ 125
Interest cost...................................... 294 45 3,186 545
Expected return on plan assets..................... (268) -- (3,809) --
Amortization of net (gain)......................... (13) (5) -- (33)
------- ------ ------- ------
Net periodic benefit cost.......................... $ 131 $ 52 $ (494) $ 637
======= ====== ======= ======
</TABLE>
Gains and losses in excess of 10% of the greater of the benefit obligation
and the market-related value of assets are amortized over the average remaining
service period of active participants.
The assumptions used in the measurement of Holt's benefit obligations are
shown in the following table:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1997 1998
---------------------- ----------------------
PENSION OTHER PENSION OTHER
BENEFITS BENEFITS BENEFITS BENEFITS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Discount rate..................................... 7.25% 7.25% 6.75% 6.75%
Expected return on plan assets.................... 8.00% n/a 8.00% n/a
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A 1% change in the assumed health
care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1% 1%
INCREASE DECREASE
-------- --------
<S> <C> <C>
Effect on total of service and interest cost components of
net periodic postretirement health care benefit cost...... $ 12 $ (13)
Effect on the health care component of the accumulated
postretirement benefit obligation......................... $146 $(165)
</TABLE>
It is the policy of NPR to fund pension costs in accordance with
actuarially computed funding requirements and the various bargaining agreements.
Certain Holt employees are covered under union-sponsored collectively
bargained defined benefit plans. Expenses for these plans were $3,365 in 1996,
$5,722 in 1997 and $7,727 in 1998 as determined in accordance with negotiated
labor contracts.
NPR also provides a defined contribution 401(k) plan for its management
employees. The plan is 100% contributory by the employees.
F-18
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
8. COMMITMENTS AND CONTINGENCIES AND OTHER MATTERS
COMMITMENTS
Contributions to certain labor-related benefit plans are subject to various
assessments under certain collective bargaining agreements. Certain of these
assessments are subject to audit and final determination, and in the opinion of
Holt, the accompanying financial statements include adequate recognition of the
estimated liability for these assessments.
At December 31, 1997 and 1998, Holt was contingently liable for outstanding
standby letters of credit in the amount of $6,290 and $6,340, respectively.
HURRICANE GEORGES
Holt's operations in San Juan, Puerto Rico have been affected by Hurricane
Georges which struck the island during September 1998. Although certain of its
buildings and cranes located at Puerto Nuevo suffered damages, NPR was able to
continue to conduct business since two of Holt's high speed cranes were not
damaged. Additionally, NPR's fleet of vessels did not incur any damage.
The Net Book value of property damaged as a result of the hurricane was
insignificant. Claims for business interruption and certain property damage are
ongoing and are not reflected in the accompanying financial statements. Holt
believes that substantially all of the damages will be covered by insurance.
Holt has received $8 million as an advance against its insurance claim which has
not yet been finalized.
CONTINGENCIES
Holt is the defendant in a lawsuit filed in November 1996 in United States
District Court. Plaintiff seeks damages arising out of an agreement between
plaintiff and Holt whereby Holt offered a discounted freight rate in exchange
for shipment of a guaranteed volume of containers between the mainland United
States and Puerto Rico. Plaintiff claims that Holt unilaterally terminated the
agreement approximately two and one-half months before its termination date,
allegedly causing damages. Plaintiff seeks $28.0 million for such damages. On
February 26, 1999 the Court ordered Plaintiff to show cause why its cause of
action claiming liability for outstanding commissions and trucking claims should
not be dismissed in light of the fact that the Court on the same date dismissed
all of Plaintiff's other causes of action.
Holt is a party to various other legal proceedings, claims and assessments
arising in the course of its business activities. Based upon information
presently available, and in light of legal and other defenses and insurance
coverage and other potential sources of payment available to Holt, management
does not expect these legal proceedings, claims and assessments, individually or
in the aggregate, to have a material impact on Holt's consolidated financial
position or results of operations.
GUARANTEES
A governmental authority owns a building located on Holt's Gloucester
Marine Terminal. The building has been leased out by the owner to a relative of
the stockholder of Holt. Holt has guaranteed the tenant's lease payments
aggregating $18,500 through April 2024. The guarantee is secured by a mortgage
lien on the Gloucester Marine Terminal which is subordinate to the senior
mortgage debt and on a parity with the remaining mortgage debt.
A governmental authority has issued $7.0 million of its Revenue Bonds for
the benefit of one of the non-consolidated affiliates, all of which is
outstanding at December 31, 1998. The bonds are
F-19
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
8. COMMITMENTS AND CONTINGENCIES AND OTHER MATTERS -- (CONTINUED)
secured by a mortgage on the non-consolidated affiliate's interest on the
property financed by the bonds. The bonds bear an interest rate of 9.05% and
mature on December 1, 2019. Repayment of bond indebtedness is guaranteed by Holt
and the non-consolidated affiliates. The guarantee is secured by a mortgage
granted by Holt and one of the non-consolidated affiliates on their respective
interests in the Gloucester Facility. The guarantee provides for certain
financial covenants, with which Holt was in compliance for all years presented.
A governmental authority has issued $6.1 million of its Refunding Bonds for
the benefit of one of the non-consolidated affiliates all of which is
outstanding at December 31, 1998. The bonds bear an interest rate of 8.95% and
mature on December 15, 2018. Repayment of bond indebtedness is guaranteed by
Holt and the non-consolidated affiliates. The bonds and the guarantee are
secured by a mortgage granted by Holt and the non-consolidated affiliate on
their respective interests in the Gloucester Facility.
LEASE COMMITMENTS
As of December 31, 1998, Holt leases property and equipment under
noncancelable operating leases requiring minimum annual rentals as follows:
<TABLE>
<CAPTION>
RELATED
PARTY OTHER
YEAR ENDING DECEMBER 31, LEASES LEASES TOTAL
- ------------------------ ------- -------- --------
<S> <C> <C> <C>
1999................................... $10,282 $ 18,908 $ 29,190
2000................................... 10,302 17,766 28,068
2001................................... 8,857 15,584 24,441
2002................................... 8,120 14,038 22,158
2003................................... -- 10,635 10,635
Thereafter............................. -- 104,979 104,979
------- -------- --------
$37,561 $181,910 $219,471
======= ======== ========
</TABLE>
Rental payments under the Related Party Lease (referenced above) consist of
several components, including base rent, a container pick fee, a break bulk
cargo fee and certain other fees.
Holt has a 25-year noncancelable lease and a 30-year noncancelable lease
for certain buildings located on the Gloucester Marine Terminal and a marine
terminal facility located in Camden, New Jersey (collectively the "Facilities")
all of which are owned by the same governmental authority referred to in the
first paragraph under "Guarantees" above. Minimum annual rentals are reflected
in the above schedule. Holt has the right to purchase the Facilities throughout
the term of the lease. The purchase price is the greater of the fair market
value of the Facilities or the amount required to optionally redeem or defease
the bonds under the landlord's indenture.
Rent expense under noncancelable lease obligations charged to operations
was $4,748 in 1996, $8,364 in 1997 and $26,816 in 1998.
9. LEASES
Holt is the lessor of substantially all of the Gloucester Marine Terminal
utilizing operating leases for periods generally greater than one year.
F-20
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
9. LEASES -- (CONTINUED)
Minimum rentals receivable under noncancelable lease arrangements as of
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
RELATED
YEAR ENDING DECEMBER 31, PARTY OTHER TOTAL
- ------------------------ ------- -------- --------
<S> <C> <C> <C>
1999.................................... $ 483 $ 11,877 $ 12,360
2000.................................... 121 11,824 11,945
2001.................................... -- 11,136 11,136
2002.................................... -- 6,240 6,240
2003.................................... -- 5,460 5,460
Thereafter.............................. -- 85,295 85,295
------ -------- --------
$ 604 $131,832 $132,436
====== ======== ========
</TABLE>
Net book value of property being leased was approximately $49.0 million and
$50.9 million at December 31, 1997 and 1998, respectively.
10. NON-CONSOLIDATED AFFILIATE TRANSACTIONS
Holt transacts business with companies under the control of Holt's
principal stockholder. These transactions include providing advances to and from
those companies. These advances do not bear interest.
Holt also provided services and goods to these companies which include
stevedoring services, rental of warehouse space and building and equipment
repairs. At December 31, 1997 and 1998, $21,262 and $25,403 was due to Holt in
connection with net advances made and services performed on behalf of certain
non-consolidated affiliates. At December 31, 1997 and 1998, $12,190 and $13,979
was due to certain non-consolidated affiliates in connection with net advances
and services received. Revenue for these services totaled $9, $55 and $41 in
1996, 1997 and 1998. These companies provided services to Holt which included
rental of warehouse space, building and equipment repairs, management services
and sale of ice. Payments for these services totaled $1,703, $1,207 and $741 in
1996, 1997 and 1998.
The cost of the goods and services provided by and charged to
non-consolidated affiliates are at prices which management believes are
comparable to those provided to non-related customers.
11. OTHER RELATED PARTY TRANSACTIONS
LEASES
In 1996, 1997, and 1998, Holt leased property and equipment from a company
owned by family members of Holt's stockholder who are also directors of Holt
under a non-cancelable lease which expires December 30, 2000 and which is
renewable through 2040 pursuant to four 10-year renewal options. Rental payments
under this lease totaled $2,481 in 1996, $2,981 in 1997 and $2,972 in 1998 and
are included in the minimum annual rentals disclosed in Note 8 above.
Pursuant to the sale/leaseback agreement (see Note 2), Holt made rental
payments totaling -0-, $738 and $8,857 for the years ended December 31, 1996,
1997 and 1998, respectively. Contingent minimum annual rentals are disclosed in
Note 8 above.
Holt leases property to a company owned by a relative of Holt's principal
stockholder. At December 31, 1997 and 1998, "Tenant Receivables" includes
$18,046 and $29,074 respectively, due from this company.
F-21
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
11. OTHER RELATED PARTY TRANSACTIONS -- (CONTINUED)
CORPORATE SERVICES
Holt has an agreement to purchase general and administrative support
services from another company owned by these same family members. The cost of
the services provided to Holt are negotiated on an arms length basis which are
comparable to those provided to non-related customers during the normal course
of business. Payments for these services totaled $3,748 in 1996, $4,492 in 1997
and $6,509 in 1998.
In the normal course of business, Holt performs services for this company.
At December 31, 1997 and 1998, Receivables Tenants includes $1,238 and $513
respectively.
Also at December 31, 1997 and 1998, "Other Noncurrent Receivables" included
$3,500 and $12,023, respectively, due from the company that provides support
services to Holt and other companies owned by the same family members.
SALE OF EQUIPMENT
On January 5, 1998, Holt sold certain equipment to a company owned by
relatives of Holt's stockholder who are also directors of Holt for $5 million of
which $3.6 million is included in "Other Noncurrent Receivables" in the
accompanying balance sheet. The sale resulted in a gain of $500 which is
included as a component of stockholder's equity.
AGREEMENTS
During 1998, Holt has entered into an Option to Purchase and Development
Agreement with Delaware Avenue Enterprises, Inc. (DEL), a company owned and
operated by relatives of Holt's stockholder who are also directors of Holt.
Pursuant to the agreement, Holt paid $8 million to DEL to acquire an option to
purchase 11.5 acres of property located on the Delaware River in Philadelphia
(the "Premises") for a price equal to 120% of any sum expended by DEL to improve
and develop the Premises for use by Holt in its future operations. The option
expires on December 31, 2013. The cost of the option is included in "Noncurrent
Receivables Other" in the accompanying balance sheet.
In connection with the agreement, DEL issued to the Company a $10 million
promissory note that bears interest at 1% over the prime rate and matures on the
earlier of December 31, 2013 or the date on which Holt exercises its option and
purchases the Premises. The note is secured by a mortgage and security agreement
on the Premises and a contiguous 28-acre site. The note is included in
"Noncurrent Receivables Other" in the accompanying balance sheet.
NOTE RECEIVABLE
In 1998, Holt's principal stockholder executed three notes totaling $5
million in favor of Holt. The notes bear interest at prime plus 1% (8.75% at
December 31, 1998) and are due on or before December 31, 1999 and are included
in "Other Current Receivables" in the accompanying Balance Sheet.
12. CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers comprising Holt's customer base. Holt does
not require collateral from its customers. During 1996 and 1997, sales to one
customer accounted for 10.5% of revenues and less than 10% of revenues for 1998.
F-22
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 31, 1998, the estimated fair values of Holt's financial
instruments and significant assumptions made in determining fair values are as
follows:
--Cash, accounts receivable, accounts payable, payroll taxes payable and
accrued expenses: The amounts reported in the balance sheet approximate
fair value due to the short-term maturities of these instruments.
--Receivables, other and long-term debt: The amounts reported in the
balance sheet are at market rates of interest and approximate fair value.
--Receivable from/payables to non-consolidated affiliates: Due to
uncertain repayment terms, it is not practicable to estimate fair market
value.
14. NON-GUARANTOR SUBSIDIARY
Holt's wholly owned subsidiary, RFD, is not a guarantor on the Senior Notes
(See Note 6). The guarantor subsidiaries are wholly owned and provide full,
complete, unconditional, joint and several guarantees on the Senior Notes.
Additionally, Holt's parent, HGI has no operations or assets other than its
investment in subsidiaries. Accordingly, Holt has not presented separate
financial statements and other disclosures concerning the subsidiary guarantors
as management has determined that such information is not material to investors.
Summarized financial information is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------------------------------
SUBSIDIARY
HGI GUARANTORS RFD ELIMINATIONS CONSOLIDATED
-------- ---------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets........... $ 5,794 $119,388 $26,130 $ -- $151,312
Non-current assets....... 257,325 297,419 2,925 (272,751) 284,918
Current liabilities...... 44,533 89,741 9,069 -- 143,343
Non-current
liabilities............ 140,000 174,258 15,257 (96,456) 233,059
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------------------------------------
SUBSIDIARY
HGI GUARANTORS RFD ELIMINATIONS CONSOLIDATED
-------- ---------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue.................. $ 28,730 $394,943 $ -- $(54,197) $370,476
Operating income......... 25,073 27,422 (204) (28,729) 23,562
Net income............... 11,036 23,941 4,811 (29,229) 10,559
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------------------------
SUBSIDIARY
HGI GUARANTORS RFD ELIMINATIONS CONSOLIDATED
-------- ---------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets........... $ 500 $ 99,943 $40,144 $ -- $140,587
Non-current assets....... 208,048 240,497 3,925 (210,679) 241,791
Current liabilities...... 11,134 69,497 9,234 -- 89,865
Non-current
liabilities............ 125,000 144,188 14,817 (64,221) 219,784
</TABLE>
F-23
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
14. NON-GUARANTOR SUBSIDIARY -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------------
SUBSIDIARY
HGI GUARANTORS RFD ELIMINATIONS CONSOLIDATED
-------- ---------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue.................. $ -- $132,746 $ -- $(13,748) $118,998
Operating income
(loss)................. (2,344) 20,790 (149) 117 18,414
Net income (loss)........ (3,883) 13,513 1,008 117 10,755
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------------------------
SUBSIDIARY
HGI GUARANTORS RFD ELIMINATIONS CONSOLIDATED
-------- ---------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets........... $ -- $ 46,282 $ -- $ -- $ 46,282
Non-current assets....... 49,222 134,586 3,405 (61,016) 126,197
Current liabilities...... -- 48,913 487 -- 49,400
Non-current
liabilities............ -- 84,749 620 (11,794) 73,575
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------
SUBSIDIARY
HGI GUARANTORS RFD ELIMINATIONS CONSOLIDATED
-------- ---------- ------- ------------ ------------
Revenue.................. $ 8,299 $ 79,198 $ 5 $(14,426) $ 73,076
Operating income......... 8,299 21,886 -- (14,426) 15,759
<S> <C> <C> <C> <C> <C>
Net income............... 8,299 8,299 -- (8,299) 8,299
</TABLE>
RFD's current assets consist primarily of marketable securities. RFD's
liabilities consist of bank debt and advances from two of the subsidiary
guarantors. RFD's net income is a result of dividends received.
15. SUBSEQUENT EVENT
On February 25, 1999, the Revolving Credit Facility was amended to provide for
an additional $17,250 in the form of a term loan. The term loan is due the
earlier to occur of the finalization of the insurance claim regarding Hurricane
Georges or December 31, 1999.
F-24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholders and Directors
NPR Holding Corporation and Subsidiaries
Edison, New Jersey
We have audited the accompanying consolidated balance sheets of NPR Holding
Corporation and Subsidiaries (NPR) as of January 5, 1997 and November 20, 1997,
and the related consolidated statements of operations, stockholders' equity
(deficiency), and cash flows for the periods ended December 31, 1995, January 5,
1997 and November 20, 1997. These consolidated financial statements are the
responsibility of NPR's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NPR as of
January 5, 1997 and November 20, 1997, and the consolidated results of its
operations and its consolidated cash flows for the periods ended December 31,
1995, January 5, 1997 and November 20, 1997, in conformity with generally
accepted accounting principles.
BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
April 24, 1998
F-25
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 5, NOVEMBER 20,
1997 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 1,850 $ 1,926
Trade and other receivables, net of allowance of $23,838
at January 5, 1997 and $26,454 at November 20, 1997.... 40,342 34,459
Fuel and operating supplies, net of reserves of $638 at
January 5, 1997 and $-0- at November 20, 1997.......... 2,427 2,533
Prepaid expenses and other current assets................. 1,854 2,176
-------- --------
Total current assets........................................ 46,473 41,094
-------- --------
Vessels, property and equipment, net........................ 94,249 83,446
Capitalized overhaul costs and other noncurrent assets,
net of accumulated amortization of $2,604 at January 5,
1997 and $3,464 at November 20, 1997...................... 2,716 3,546
Goodwill, net of accumulated amortization of $372 at January
5, 1997 and $551 at November 20, 1997..................... 2,697 2,517
-------- --------
$146,135 $130,603
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Note payable.............................................. $ 17,104 $ 5,649
Current maturities of long-term debt...................... 8,074 8,719
Accounts payable and accrued liabilities.................. 48,575 57,587
Payments in excess of billings............................ 7,300 6,587
-------- --------
Total current liabilities.............................. 81,053 78,542
-------- --------
Other accrued liabilities................................... 42,843 35,623
Long-term debt, net of current maturities................... 33,539 26,245
Redeemable preferred stock.................................. 689 739
Commitments and Contingencies
Stockholders' equity (deficiency)
Common stock
Class A-1; par value $.001; authorized 16,000 shares;
issued and outstanding 15,177 shares at January 5,
1997 and November 20, 1997........................... -- --
Class A-2; par value $.001; authorized 16,000 shares;
no shares issued or outstanding..................... -- --
Class B; par value $.001; authorized, issued and
outstanding 450 shares............................... -- --
Class C; par value $.001; authorized 2,057 shares,
issued and outstanding 2,023 shares at January 5,
1997 and 2,057 at November 20, 1997.................. -- --
Additional paid-in capital............................. 15,116 15,116
Accumulated deficit.................................... (27,105) (25,662)
-------- --------
Total stockholders' equity (deficiency)..................... (11,989) (10,546)
-------- --------
$146,135 $130,603
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
MARCH 3, 1995 JANUARY 1, 1996 JANUARY 6, 1997
TO TO TO
DECEMBER 31, 1995 JANUARY 5, 1997 NOVEMBER 20, 1997
----------------- --------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Ocean revenue........................... $228,228 $265,110 $238,670
Other revenue........................... 5,539 3,987 6,671
-------- -------- --------
Total revenues.................... 233,767 269,097 245,341
-------- -------- --------
Expenses
Vessel (including vessel fuel of $12,154
at December 31, 1995, $14,365 at
January 5, 1997 and $12,484 at
November 20, 1997.................... 48,012 48,941 43,915
Cargo handling.......................... 49,006 57,662 50,287
Terminal................................ 55,010 56,145 52,793
Transportation.......................... 34,512 49,535 42,144
Selling, general and administrative..... 42,922 48,644 40,108
Depreciation and amortization........... 10,699 14,524 10,618
-------- -------- --------
Total operating expenses.......... 240,161 275,451 239,865
-------- -------- --------
Income (loss) from operations............. (6,394) (6,354) 5,476
-------- -------- --------
Other (income) expense
Interest expense........................ 5,812 7,171 5,973
Investment loss......................... -- -- 500
Miscellaneous expense (income), net..... (33) 1,407 (2,490)
-------- -------- --------
Other expenses, net............... 5,779 8,578 3,983
-------- -------- --------
Net income (loss)......................... $(12,173) $(14,932) $ 1,493
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS, SHARES IN WHOLE UNITS)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON STOCK PAID-IN ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Issuance of shares, March 1995....... 17,781 $ -- $15,213 $ -- $15,213
Shares acquired and cancelled........ (438) -- (150) -- (150)
Net loss for the period ended
December 31, 1995.................. -- -- -- (12,173) (12,173)
- --------------------------------------------------------------------------------------------------
Stockholders' equity,
December 31, 1995.................. 17,343 -- 15,063 (12,173) 2,890
Issuance of shares................... 307 -- 53 -- 53
Net loss for the period ended
January 5, 1996.................... -- -- -- (14,932) (14,932)
- --------------------------------------------------------------------------------------------------
Stockholders'
(deficiency),
January 5, 1997.................... 17,650 -- 15,116 (27,105) (11,989)
Issuance of shares................... 34 -- -- -- --
Preferred stock dividends accrued.... -- -- -- (50) (50)
Net income for period ended
November 20, 1997.................. -- -- -- 1,493 1,493
- --------------------------------------------------------------------------------------------------
Stockholders' (deficiency),
November 20, 1997.................. 17,684 -- 15,116 (25,662) (10,546)
====== ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
MARCH 3, 1995 JANUARY 1, 1996 JANUARY 6, 1997
TO TO TO
DECEMBER 31, 1995 JANUARY 5, 1997 NOVEMBER 20, 1997
----------------- --------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net income (loss)................................... $(12,173) $(14,932) $ 1,493
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization..................... 10,699 14,524 10,618
Amortization of debt issuance costs............... 1,166 1,385 1,349
Allowance for bad debts........................... 572 2,536 2,616
(Gain) loss on sale of property and equipment..... (21) 582 (2,502)
Share of TNX operating loss....................... -- -- 500
Changes in assets and liabilities:
(Increase) decrease in assets
Trade and other receivable...................... (4,878) (5,317) 3,267
Fuel and operating supplies..................... (13) 293 (106)
Prepaid expenses and other current assets....... (1,627) 1,206 (321)
Increase (decrease) in liabilities
Accounts payable and accrued expenses........... 1,697 (7,189) 9,719
Payments in excess of billings.................. 2,253 2,200 (714)
Other noncurrent assets and liabilities......... 8,754 (3,024) (10,257)
-------- -------- -------
Net cash provided by (used in) operating
activities........................................ 6,429 (7,736) 15,662
-------- -------- -------
Cash flows from investing activities:
Cash paid to purchase assets of PRMSA............... (52,780) --
Refund from PRMSA for adjustment of purchase
price............................................. 5,654 --
Cash paid to settle Mills litigation................ (250) -- --
Acquisition costs paid.............................. (6,479) -- --
Purchase of property and equipment and capitalized
overhaul costs.................................... (4,063) (3,342) (854)
Proceeds from sale of property and equipment........ 220 756 4,580
Investment in TNX................................... -- -- (500)
-------- -------- -------
Net cash provided by (used in) investing
activities........................................ (63,352) 3,068 3,226
-------- -------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock.............. 15,213 53 --
Proceeds from bank loans............................ 45,000 -- --
Repayments of bank loans............................ (4,056) (9,723) (7,357)
Purchase of treasury stock.......................... (150) -- --
Net borrowings (payments) under line of credit
agreement......................................... 2,939 14,165 (11,455)
-------- -------- -------
Net cash provided by (used in) financing
activities........................................ 58,946 4,495 (18,812)
-------- -------- -------
Net increase (decrease) in cash and cash
equivalents....................................... 2,023 (173) 76
Cash and cash equivalents, at beginning of period... -- 2,023 1,850
-------- -------- -------
Cash and cash equivalents, at end of period......... $ 2,023 $ 1,850 1,926
======== ======== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for interest............ $ 4,212 $ 4,909 3,617
======== ======== =======
Noncash investing and financing transactions
Preferred stock dividends accrued................... -- -- 50
Details of Acquisition in 1995:
Fair value of assets acquired..................... 155,856 --
Liabilities assumed............................... 108,731 --
-------- -------- -------
Cash paid......................................... $ 47,125 $ --
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-29
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND OPERATIONS
FORMATION OF COMPANY
NPR Holding Corporation ("NPR") was incorporated December 12, 1994. NPR was
established to purchase the net assets of the Puerto Rico Maritime Shipping
Authority ("PRMSA"). On March 3, 1995, NPR acquired all of the stock of the
Puerto Rico Marine Management Inc. ("PRMMI") and assumed certain liabilities of
PRMSA, for a cash payment of $52,780 and the issuance of a $5,000 Promissory
Note. The transaction was financed with the proceeds of NPR's sale of common
stock and the proceeds of a $45,000 collateralized bank loan (Note 6). All
assets and liabilities have been recorded at fair values as of March 3, 1995. On
February 27, 1995, NPR created two wholly owned subsidiaries, NPR-Navieras
Receivables, Inc. and NPR, Inc. to effectuate the purchase of the PRMSA assets.
NPR, Inc. serves as the operating company. NPR and its subsidiaries, operating
under the trade name Navieras, operate a fleet of five Lancer class container
ships and more than 20,000 containers and chassis.
NPR and PRMSA subsequently adjusted the purchase price as provided for in
the agreement dated March 3, 1995. In summary, PRMSA paid NPR $5,654 in cash for
the working capital shortfall pursuant to the purchase agreement, and NPR agreed
to assume $2,000 of PRMSA's liability for asbestos claims and issue an
additional promissory note to PRMSA in the amount of $1,000. This adjustment has
been included in the initial accounting for the purchase.
RESTRUCTURING OF NPR'S OPERATION
Immediately after the purchase, NPR implemented its restructuring and
revitalization plan. The plan installed a new management team to meet NPR's
current and future operating demands, established a new vessel deployment
schedule to accelerate the frequency of its transportation services, closed
unprofitable port facilities, and refurbished NPR's port cranes.
Associated with the acquisition, management committed to a restructuring
plan which involved closing down certain leased facilities. The facilities
consisted of the New Orleans, Baltimore and Charleston operating terminals and
certain sales offices at other locations. Also included was involuntary
severance for management and other employees covered by collective bargaining
agreements at these and other facilities. As of the acquisition date, $7,066 in
restructuring costs, consisting of approximately $5,607 in remaining lease
payments and other facility costs and $1,459 in severance costs, were recognized
as liabilities in the purchase transaction and included in the acquisition cost
allocation. For periods ended December 31, 1995, January 5, 1997, and November
20, 1997, lease payments and other facility costs paid totaled $395, $1,214, and
$127, respectively. Severance cost paid totaled $406, $933, and $0,
respectively, for the same periods.
As of January 5, 1997, the planned closings were completed. The New Orleans
lease commitment, which originally extended through January 2003 was terminated
effective September 25, 1996. The lease termination agreement stipulated that
NPR pay a lease termination fee of $4,804, payable over the remaining life of
the original lease. The closing costs including the lease termination fee, were
included in the restructuring costs referred to above.
SALE OF COMPANY
On November 20, 1997, NPR's outstanding common stock was acquired by The
Holt Group, Inc. (see Note 15). These financial statements present the results
of operations and financial position prior to the acquisition by Holt.
F-30
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING PERIOD
NPR's fiscal year is a 52 or 53 week period ending the Sunday following
December 31, except if December 31, is a Sunday. Since NPR started its
operations on March 3, 1995, after the acquisition of the PRMSA assets, NPR's
first fiscal period which ended December 31, 1995, was a 43 week period (see
Note 1). All costs incurred by NPR during the period between the date of
formation and the acquisition date have been included as either acquisition or
financing costs. Fiscal year 1996 which ended January 5, 1997, consisted of 53
weeks. Fiscal year 1997, which ended November 20, 1997 (see Note 15), consisted
of 45 weeks.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
NPR Holding Corporation and its wholly owned subsidiaries, NPR-Navieras
Receivables, Inc. and NPR, Inc. after eliminating intercompany accounts and
transactions.
OCEAN REVENUE AND VESSEL OPERATING EXPENSES
Ocean revenue is recognized based on relative transit time in each
reporting period and related vessel operating expenses are recognized as
incurred.
FUEL AND OPERATING SUPPLIES
Bunker fuel and garage inventories are valued at the lower of first-in,
first-out cost or market.
CASH AND CASH EQUIVALENTS
NPR considers highly liquid investments with a maturity of three months or
less at the time of purchase to be cash equivalents.
VESSELS, PROPERTY AND EQUIPMENT
Vessels, property and equipment are stated at cost. Depreciation and
amortization is provided on the straight-line basis over estimated useful lives
as follows:
<TABLE>
<S> <C>
Vessels 12 years
Vessel betterments Over the remaining lives of the vessels
Containers and trailers 12 years (new) and 11 years (used)
Chassis 12 years (new) and 11 years (used)
Terminal property and equipment 3 - 10 years
Leasehold rights and improvements Over the term of the lease
</TABLE>
Expenditures for renewals and betterments which improve or extend the life
of the assets are capitalized. Cost and accumulated depreciation of assets sold,
retired or otherwise disposed of are removed from the accounts and any resulting
gain or loss is included in operations.
F-31
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
LONG-LIVED ASSETS
NPR adopted the provisions of Statement of Financial Accounting Standards
("SFAS") No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" (SFAS 121) during the period ended December
31, 1995. SFAS 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used for long-lived assets and certain identifiable
intangibles to be disposed of. The adoption of this standard did not have a
material impact on NPR's results of operations.
When events and circumstances warrant, the carrying value of long-lived
assets to be held and used are evaluated. The carrying value of a long-lived
asset is considered impaired when the anticipated undiscounted cash flows from
such asset is less than its carrying value. In that event, a loss is recognized
based on the amount by which the carrying value exceeds the fair market value of
the long-lived asset. NPR believes that no material impairment existed at
November 20, 1997.
MAINTENANCE, REPAIR AND OVERHAUL COSTS
Maintenance and repair costs incurred while the asset is in service are
charged to operations in the current period.
Costs incurred while a vessel is in drydock (e.g., overhaul) to satisfy the
requirements of various periodic regulatory inspections are capitalized and
amortized over the expected benefit period.
Maintenance and repairs to the vessel fleet while in periodic drydock which
do not materially prolong the useful life of an asset are estimated and accrued
over the period of time between drydockings, and such accruals are charged to
operations currently.
The costs to be incurred to restore certain leased equipment to the
condition mandated by the lease agreements are estimated and accrued over the
average in-service life.
EQUIPMENT OFF-HIRE LEASE TERMINATION LIABILITY
NPR operates various equipment under operating leases. NPR is liable for
any damages incurred on the equipment upon lease termination that do not have
damage protection rates included in the lease payments. The liability is based
upon NPR's estimate of expected lease termination charges and the liability is
adjusted by periodic charges to operating expenses as necessary.
CLAIMS NOT COVERED BY INSURANCE
Accrual for claims not covered by NPR's insurance, principally cargo
claims, injuries, property and vessel damages, include an estimate based on
individual claims outstanding and an estimated amount for losses incurred but
not reported on the basis of past experience.
GOODWILL
The excess of the cost of the net assets acquired over their fair value at
the date of acquisition is being amortized on the straight-line method over 15
years. Amortization expense charged to operations for the period March 3, 1995
to December 31, 1995, the period January 1, 1996 to January 5, 1997 and January
6, 1997 to November 20, 1997 was $167, $205 and $179, respectively.
F-32
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the period reported. Actual results
could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates are based on pertinent information available to
management as of November 20, 1997. The estimated fair value, which approximates
cost of cash equivalents, trade and other receivables, accounts payable and
accrued expenses are reflected in the consolidated balance sheets. The estimated
fair value of long-term debt approximates face amount since substantially all
borrowings are at variable rates. There are no significant instruments with
off-balance sheet risk such as hedging contracts or derivatives.
INCOME TAXES
NPR files its U.S. federal income tax return on a consolidated basis.
Income tax expense is determined pursuant to Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Under this method, deferred
tax assets and deferred tax liabilities are determined based upon differences
between the financial and tax basis of assets and liabilities, using enacted tax
rates in effect for the year in which the differences are expected to reverse.
3. LOAN AND SECURITY AGREEMENT
The Loan and Security Agreement ("Agreement") as amended January 28, 1997
and referred to in Notes 5 and 6 requires that NPR maintain certain financial
ratios, amounts, and other covenants as defined in that Agreement. NPR, from
time to time, did not meet covenants regarding the delivery of audited annual
financial statements, the delivery or application of the proceeds of NPR's sale
of individual items of collateral, the cash flow coverage ratio and tangible net
worth as of or for certain periods, as specified in that Agreement. On October
20, 1997, the Lenders collectively agreed to amend the Agreement and to waive
any default or event of default for NPR's failure to comply with the covenants
referred to above during periods prior to such amendment. In addition, covenants
regarding tangible net worth were amended for certain future periods up to and
including January 4, 1998.
NPR was in compliance with all terms of the Agreement, as amended. On
November 20, 1997, in conjunction with the sale of NPR (see Note 15), all
amounts outstanding under this agreement were paid in full.
F-33
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
4. VESSELS, PROPERTY AND EQUIPMENT
Vessels, property and equipment at January 5, 1997 and November 20, 1997
consist of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 5, NOVEMBER 20,
1997 1997
---------- ------------
<S> <C> <C>
Vessels and vessel betterments.............................. $ 54,324 $ 54,324
Containers, chassis and trailers............................ 54,296 52,558
Terminal property and equipment............................. 6,315 6,118
Leasehold rights and improvements........................... 572 598
Construction-in-progress.................................... 319 97
-------- --------
115,826 113,695
Less accumulated depreciation and amortization.............. 21,577 30,247
-------- --------
Vessels, property and equipment, net........................ $ 94,249 $ 83,446
-------- --------
-------- --------
</TABLE>
Substantially all of the assets of NPR are pledged as collateral for the
Tranche 2 and Tranche 3 loans (see Note 6).
On December 4, 1996, NPR sold the S.S. Ponce. The proceeds were distributed
in accordance with the Ponce Disposition Agreement with PRMSA, whereas, NPR
received approximately $800 as reimbursement of the vessel's lay-up costs. NPR
recorded a loss on the sale of the S.S. Ponce during 1996 of approximately $800.
On April 28, 1997, the Kennedy Building located in San Juan, Puerto Rico was
sold, resulting in a gain of $2,807, which is included in other income on the
accompanying statement of operations.
5. NOTE PAYABLE
On March 3, 1995, NPR as borrower, entered into a Loan and Security
Agreement with LaSalle National Bank as Agent and as Trustee, and with LaSalle
National Bank and Transamerican Business Credit Corporation as Lenders.
Subsequently, on September 20, 1995, this Agreement was modified to include BOT
Financial Corp. as an additional Lender. This Agreement provides for a
three-year term with two additional one-year options at NPR's discretion to
extend, and pledges all accounts receivable as collateral. The Loan and Security
Agreement provides for a line of credit up to 85% of the face amount of eligible
accounts receivable, less the face amount of all issued and outstanding Letters
of Credit, or $20 million, whichever is less. The interest rate on this segment
of the Loan and Security Agreement known as the Tranche 1 Loan, is established
at 1% per annum in excess of the prime rate. During the period January 6, 1997
through November 20, 1997, the Tranche 1 borrowings ranged from a low of $2,818
to a high of $17,104. During the period January 1, 1996 through January 5, 1997,
the Tranche 1 borrowings ranged from a low of $2,067 to a high of $17,109. The
unused line of credit as of November 20, 1997 was $13,778. At November 20, 1997
and January 5, 1997, the effective interest rate was 9.5%, and the
collateralized accounts receivable were $33,636 and $36,030, respectively.
Upon the sale of NPR, Inc. on November 20, 1997, the Tranche 1 Loan was
paid in full. On January 28, 1997, LaSalle National Bank, as sole lender, in
accordance with the March 3, 1995 Credit Agreement and with the consent of the
other Lenders, provided an additional $3 million LaSalle Loan. This Tranche 4
Loan was guaranteed by a Participation Agreement where Berkshire Fund III
Investment Co. provided a $1 million Standby Letter of Credit and Pyramid
Ventures, Inc. contributed $2 million. LaSalle National Bank issued a single $3
million advance to NPR, as a nonrevolving loan. Tranche 4 remained fully
extended, with an 8.5% effective interest rate, until it was paid in full upon
the sale of NPR, Inc. on November 20, 1997.
F-34
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
6. LONG-TERM DEBT
The Loan and Security Agreement with LaSalle National Bank (see Note 5)
provides for a maximum $30 Million Tranche 2 Loan and a maximum $15 Million
Tranche 3 Loan. NPR also has a $5 Million and a $1 Million borrowing from Puerto
Rico Maritime Shipping Authority known as the Seller's Notes (see Note 1).
In July 1996, NPR entered into a seven-year lease/purchase agreement with
Interpool, Inc. The principal amount of $3,238 represented the lease/purchase of
594 units of 45-feet high cube steel containers. The total lease obligation of
$4,555 includes $1,317 in total interest payments over the term. Monthly payment
on this lease varies and is calculated on a $3.00 (Three dollar) per diem, per
unit basis. Ownership effectively reverts to NPR at the expiration of the lease
in September 2003.
Following is a summary of long-term debt at January 5, 1997 and November
20, 1997:
<TABLE>
<CAPTION>
JANUARY 5, NOVEMBER 20,
1997 1997
---------- ------------
<S> <C> <C>
Tranche 2
Payable in various monthly amounts through March 2000,
plus interest at 1.25% above the prime rate, commenced
April 1, 1995, secured by equipment, furniture and
other assets........................................... $22,833 $18,118
Tranche 3
Payable in various monthly amounts through March 1999,
plus interest at 2.25% above the prime rate, secured by
the vessels............................................ 8,885 6,579
PRMSA Notes
10% unsecured Seller's Notes due March 5, 2005,
interest calculated semi-annually (NPR has the option
either to pay the interest semi-annually or to include
the semi-annual interest as additional principal. For
the period January 6, 1997 to November 20, 1997 and the
period January 1, 1996 to January 5, 1997, NPR added to
principal $707 and $552, respectively)................. $ 6,806 $ 7,513
Interpool
Payable monthly on a per diem basis, commenced July
1996 with a seven year term, expiring September 2003... 3,089 2,754
------- -------
41,613 34,964
Less current maturities ............................... 8,074 8,719
------- -------
Long-term debt, net of current maturities ............. $33,539 $26,245
------- -------
------- -------
</TABLE>
The Tranche 2, Tranche 3 and the PRMSA Notes were paid in full upon the
sale of NPR (see Note 15).
F-35
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
JANUARY 5, NOVEMBER 20,
1997 1997
---------- ------------
<S> <C> <C>
CURRENT
Accounts payable......................................... $32,709 $40,724
Accrued liabilities...................................... 8,762 10,219
Other liabilities........................................ 2,064 1,587
Accrued dry docking costs................................ 5,040 5,057
------- -------
$48,575 $57,587
------- -------
------- -------
LONG-TERM
Reserve for insurance deductible......................... $ 904 $ 840
Accrued closing cost -- noncurrent maturities............ 3,140 3,112
Reserve for equipment off-hire termination............... 6,180 5,903
Reserve for asbestos claims.............................. 1,933 1,883
Reserve for employee benefit plans (see Note 8).......... 24,712 23,555
Other.................................................... 5,974 330
------- -------
$42,843 $35,623
------- -------
------- -------
</TABLE>
8. EMPLOYEE BENEFIT PLANS
In connection with the acquisition described (in Note 1), NPR assumed and
continued all the employee benefit plans as defined by PRMSA.
PENSION PLAN
Substantially all nonunion employees of NPR are covered under a
noncontributory defined benefit retirement plan. The net pension cost for this
plan included the following components:
<TABLE>
<CAPTION>
JANUARY 5, NOVEMBER 20,
1997 1997
---------- ------------
<S> <C> <C>
Service cost-benefits earned during the period........... $ 1,550 $ 1,301
Interest cost on projected benefit obligation............ 3,457 3,232
Actual return on plan assets............................. (2,879) (3,088)
------- -------
Net periodic pension cost................................ $ 2,128 $ 1,445
------- -------
------- -------
</TABLE>
F-36
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
8. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
A reconciliation of the funded status of the Plan as of January 5, 1997 and
November 20, 1997 is as follows:
<TABLE>
<CAPTION>
JANUARY 5, NOVEMBER 20,
1997 1997
---------- ------------
<S> <C> <C>
Actuarial present value of benefit obligations
Vested benefits........................................ $ 40,316 $ 40,208
Nonvested benefits..................................... 2,283 4,892
-------- --------
Accumulated benefit obligation.............................. 42,599 45,100
Effect on projected future compensation..................... 6,846 6,761
-------- --------
Projected benefit obligation................................ 49,445 51,861
Plan assets at fair value (primarily common stocks and U.S.
obligations).............................................. 40,377 47,846
-------- --------
Projected benefit obligation in excess of plan assets....... (9,068) (4,015)
Unrecognized net (gain)..................................... (5,889) (9,762)
-------- --------
(Accrued) pension cost...................................... $(14,957) $(13,777)
-------- --------
-------- --------
</TABLE>
The discount rate used in determining the projected benefit obligation was
7.5% at January 5, 1997 and 7.25% at November 20, 1997. The expected long-term
rate of return on plan assets was 8% at January 5, 1997 and November 20, 1997.
The assumed rate of salary increase was 4.5% at January 5, 1997 and 5% November
20, 1997.
In connection with the sale of NPR (Note 15), NPR's pension plan was frozen
as of January 15, 1998.
NPR also provides a defined contribution 401(k) Plan for its management
employees. The plan is 100% contributory by the employees.
The remaining employees of NPR are covered by multiemployer retirement
plans. The employer is required to pay contributions to the multiemployer plans
as required by the applicable collective bargaining agreements. Under the
provisions of the Employee Retirement Income Security Act (ERISA), NPR, as well
as the other employers participating in such multiemployer plans may be
contingently liable for its proportional share of the plan's unfunded vested
benefits in the event of plan termination or NPR's withdrawal from such plans
(see Note 13). NPR contributed and charged to expense $2,679, $2,670, and
$2,475, respectively for the periods ended December 31, 1995, January 5, 1997
and November 20, 1997.
It is the policy of NPR to fund pension costs in accordance with
actuarially computed funding requirements and the various bargaining agreements.
POSTRETIREMENT BENEFITS OTHER THAN PENSION
NPR has an unfunded plan to provide postretirement health care and life
insurance benefits to certain employees who retire with a minimum of 10 years of
service. These benefits are accrued over the period the employee provides
services to NPR.
F-37
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
8. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
Postretirement benefit expense was $672, $769 and $582 for the periods
ended December 31, 1995, January 5, 1997 and November 20, 1997, respectively, as
follows:
<TABLE>
<CAPTION>
MARCH 3, JANUARY 1, JANUARY 6,
1995 TO 1996 TO 1997 TO
DECEMBER 31, JANUARY 5, NOVEMBER 20,
1995 1997 1997
------------ ---------- ------------
<S> <C> <C> <C>
Service cost.................................... $144 $192 $132
Interest cost................................... 528 577 503
Amortization of gain............................ -- -- (53)
---- ---- ----
Postretirement benefit cost..................... $672 $769 $582
---- ---- ----
---- ---- ----
</TABLE>
In general, retiree health benefits are paid as covered expenses are
incurred. The following table sets forth the unfunded status of the Plan at
January 5, 1997 and November 20, 1997:
<TABLE>
<CAPTION>
JANUARY 5, NOVEMBER 20,
1997 1997
---------- ------------
<S> <C> <C>
Accumulated postretirement benefit
Retirees................................................... $5,329 $5,100
Fully eligible active employees............................ 1,541 1,337
Other active employees..................................... 1,527 1,186
------ ------
Total APBO................................................. 8,397 7,623
Add unrecognized net gain.................................. 717 1,559
------ ------
Accrued postretirement benefit liability................... $9,114 $9,182
------ ------
------ ------
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5% at January 5, 1997 and 7.25% at November 20, 1997.
The assumed rate of increase in administrative charges are 6% at January 5, 1997
and 4% at November 20, 1997. The rate of increase in the per capita cost of
covered health care benefits is assumed to be 10.2%, decreasing gradually to
5.25% by calendar year 2005.
9. MILLS SETTLEMENT AGREEMENT AND ISSUANCE OF REDEEMABLE PREFERRED STOCK
On June 1, 1995, NPR entered into an agreement with Mills Capital Advisor,
Inc. ("Mills") and Russel T. Stern, Jr. ("RTS") to settle: (a) certain claims
made by Mills in an action filed in the Circuit Court of Cook County, Illinois,
Chancery Division, captioned Mills Capital Advisors, Inc. V. BT Investment
Partners, Inc., Case No. 95 CH 1725 (the "Litigation"), and (b) all obligations
of the Mills and BT Investment Partners, Inc. ("BTIP") agreement dated March 23,
1995 (the "Settlement Agreement").
NPR authorized 689 shares of preferred stock with a liquidation value of
$.1 per share, no voting rights, a 3% cumulative dividend provision based on the
stock's liquidation value, and a redemption schedule stipulating that the
redeemed preferred shares stock are canceled and not reissued. The first
redemption date was set at June 1, 2002 at which time NPR would be required to
redeem issued and outstanding shares of preferred stock having an aggregate
liquidation value of $258, at a price per share equal to the liquidation value.
The second redemption date was set at June 1, 2003 at which time, NPR would be
required to redeem issued and outstanding shares of preferred stock having an
aggregate liquidation value of $258, at a price per share equal to the
liquidation value plus cumulative
F-38
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
9. MILLS SETTLEMENT AGREEMENT AND ISSUANCE OF REDEEMABLE PREFERRED
STOCK -- (CONTINUED)
and unpaid dividends. The final redemption date was set at June 1, 2004 at which
time all outstanding shares of preferred stock would be required to be redeemed
at liquidation value plus cumulative and unpaid dividends.
On November 20, 1997, in conjunction with the sale of NPR (see Note 15),
the Settlement Agreement was satisfied through redemption of all outstanding
preferred stock in consideration of a payment by NPR of $740, including accrued
dividends of approximately $50.
10. COMMON STOCK
All shares of NPR's Common Stock are identical in all respects and entitle
the holders to the same rights and privileges, subject to the same
qualifications, limitations and restrictions except for the voting rights,
dividends and distributions as specified below.
Holders of Class A-1 Common, Class B Common and Class C Common are entitled
to one vote per share on all matters to be voted on by the stockholders of NPR.
Holders of Class A-2 Common have the same voting rights except that they shall
have no voting rights when all Common Stock holders vote as one class on matters
involving: 1) merger or consolidations, 2) sales of substantially all of NPR's
assets, and 3) any amendment of NPR's Certificate of Incorporation.
Dividends or distributions of earnings shall be paid ratably to all of the
holders of the Common Stocks.
At January 5, 1997 and November 20, 1997, there were 2,023 and 2,057 shares
of Class C Common Stock outstanding, respectively, held by NPR's management.
Pursuant to the stockholders' agreement establishing certain limitation
features, contingent upon NPR achieving targeted earning levels, or in defined
circumstances upon the sale of stock or results of operations, said stock would
become vested and be entitled to participate fully in the proceeds of such
exchanges and earnings distributions.
Dividends or distributions in connection with the distributions from
sources other than earnings shall be paid ratably to each holder in the class
and in the order set forth below until the sum of all nonearnings distributions
are paid:
Class A (A-1 and A-2) Common up to the first $1,000 per share
Class B Common for the next $1,010 per share
Class C Common for the next $10 per share
Any remaining distributions shall be distributed to all of the holders of
Common Stock ratably.
The Class A-1 Common holders can convert any or all of their shares of
Class A-1 into the same number of shares of Class A-2 Common, and vice versa. On
November 20, 1997, all of the outstanding shares of all classes of common stock
were purchased by The Holt Group, Inc. (See Note 15).
11. INCOME TAXES
No provision for income taxes was provided in any period presented due to
the significant losses that NPR incurred.
F-39
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
11. INCOME TAXES -- (CONTINUED)
The significant components of the Net Deferred Tax Asset (Liability)
consist of the following at January 5, 1997 and November 20, 1997:
<TABLE>
<CAPTION>
JANUARY 5, NOVEMBER 20,
1997 1997
---------- ------------
<S> <C> <C>
Depreciation and amortization.............................. $(13,005) $(10,295)
Net operating loss......................................... 21,450 42,915
Foreign tax credit......................................... 714 1,059
Pension and retiree benefits............................... 11,508 9,431
Inventories................................................ 111 --
Compensation and benefits.................................. 300 505
Receivables................................................ 10,914 10,544
Equipment off-hire......................................... 2,830 2,355
Contract dry dock.......................................... 4,508 3,571
Intangibles................................................ 2,557 822
Other...................................................... 1,329 1,140
Deferred tax asset valuation reserve....................... (43,216) (62,047)
-------- --------
Total...................................................... $ -- $ --
-------- --------
-------- --------
</TABLE>
As it is more likely than not that none of the future tax benefits of any
of the components of the deferred tax asset will be realized, a valuation
reserve of $27,213 and $62,047 at January 5, 1997 and November 20, 1997,
respectively has been established.
For income tax reporting, NPR has net operating loss carryforwards
aggregating approximately $9 million available to reduce future U.S. income
taxes and $101 million available to reduce Puerto Rico income taxes. Subsequent
to the acquisition of NPR by The Holt Group, Inc. (See Note 15) the Company
adopted S corporation status, whereby the shareholders' record income and loss
on their personal tax returns and the net operating losses and the deferred tax
asset will be unavailable to reduce future taxable income of NPR.
12. OPERATING LEASES
Future minimum rental payments required under noncancelable operating
leases that have initial or remaining terms in excess of one year, and the
remaining future lease payments and consideration for the early termination of
the leases associated with the facility closings at November 20, 1997 are as
follows:
December 1997-1998......................... $ 8,388
1999....................................... 6,531
2000....................................... 5,814
2001....................................... 4,693
2002....................................... 4,574
Thereafter................................. 8,557
-------
$38,557
-------
-------
Rental expense for the periods ended December 31, 1995, January 5, 1997 and
November 20, 1997 was $4,524, $5,603 and $5,830, respectively.
F-40
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
13. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
COMMITMENTS
Contributions to certain labor-related benefit plans are subject to various
assessments under certain collective bargaining agreements. Certain of these
assessments are subject to audit and final determination, and in the opinion of
NPR, the accompanying financial statements include adequate recognition of the
estimated liability for these assessments.
CONTINGENCIES
NPR is the defendant in a lawsuit filed in November 1996 in United States
District Court. Plaintiff seeks damages arising out of an agreement between
plaintiff and NPR whereby NPR offered a discounted freight rate in exchange for
shipment of a guaranteed volume of containers between the mainland United States
and Puerto Rico. Plaintiff claims that NPR unilaterally terminated the agreement
approximately two and one-half months before its termination date, allegedly
causing damages. Plaintiff seeks $28.0 million for such damages. NPR has filed a
motion to dismiss the complaint, which remains pending. NPR intends to
vigorously defend against the lawsuit. There can be no assurance that the
resolution of this lawsuit will not have a material adverse effect on NPR's
financial condition or results of operations.
NPR is a party to various other legal proceedings, claims and assessments
arising in the course of its business activities. Based upon information
presently available, and in light of legal and other defenses and insurance
coverage and other potential sources of payment available to NPR, management
does not expect these legal proceedings, claims and assessments, individually or
in the aggregate, to have a material adverse impact on NPR's consolidated
financial position or results of operations.
As of November 20, 1997, NPR has outstanding letters of credit in the
amount of $1,400, expiring on various dates through October 19, 1998, of which
$110 was fully collateralized.
14. START OF NEW SERVICE, TNX (TRANSROLL NAVIERAS EXPRESS, INC.)
NPR announced a new venture with Transroll Navegacao, S.A. of Brazil (TNX)
whereby a weekly express service in the South American trade lanes will
commence. NPR has a 49.99% share of TNX. TNX's inaugural sailing commenced in
October 1997, calling at the South American ports of Fortaleza-Vitoria, Buenos
Aires, Rio Grande, Imbituba/Sao Francisco de Sul, Santos and Rio de Janeiro. In
connection with this service, NPR has agreed to guarantee to TNX up to $1,500
total reimbursement related to the time chartering of three vessels -- MV
Norpol, MV Antares and MV Aldebaran.
The joint venture requires a $500 capital contribution and advances up to
$2.0 million which will be funded from the proceeds of Holt's proposed offering
of Senior Notes due 2006.
For the period ended November 20, 1997, TNX incurred a net loss of $975.
NPR's share of the loss amounted to approximately $500.
F-41
<PAGE>
NPR HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
15. SALE OF NPR
On November 20, 1997, NPR's outstanding common stock was acquired by The
Holt Group, Inc. in exchange for $44.0 million cash and $25.0 million in notes
to the selling shareholders. The operating plans for the combined business will
have a material impact on NPR and its operations and financial condition and
will require the integration of administrative finance, sales and marketing
functions and the implementation of operating, finance and management systems
and controls between Holt and NPR.
As part of the sale transaction, Holt contributed $39.7 million to NPR
which was used to repay existing debt obligations of NPR. Also, NPR entered into
five-year employment agreements with certain members of NPR management and
granted these employees "Phantom Stock Units" representing the right to receive
the value of up to 10% of the common stock of NPR outstanding on November 20,
1997 based on the achievement of specified performance goals. NPR then
distributed to its shareholders 10% of the outstanding capital stock of TNX (see
above) and caused $670 in cash bonuses to be distributed to certain management
employees of NPR's in 1997.
In connection with the sale, NPR also entered into a $35 million equipment
sale/leaseback agreement with a related party. The agreement provides for
monthly rental payments of $738 for 60 months. NPR has the option to terminate
the lease at the end of 48 months by returning the equipment and payment of a
termination fee of $2.8 million.
The combined company has relocated its U.S. northeastern port of call from
Elizabeth, New Jersey to Philadelphia, Pennsylvania, a move designed to
consolidate operations. Holt does not believe that the relocation will trigger a
multiemployer plan withdrawal liability, which is estimated to be $17.1 million,
plus interest (which, if triggered, would be payable over an eight-year period).
However, there can be no assurance that the liability, or a portion thereof,
will not become payable in the future.
These financial statements are not representative of the postmerger
business of NPR.
F-42
<PAGE>
================================================================================
ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THE PROSPECTUS, THE LETTER OF
TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE
AGENT AS FOLLOWS.
BY REGISTERED OR CERTIFIED MAIL:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
New York, New York 10286
Attn: Jackie Warren
BY HAND/OVERNIGHT EXPRESS:
The Bank of New York
101 Barclay Street, 7E
New York, New York 10286
Attn: Reorganization Section
FACSIMILE TRANSMISSION:
(212) 815-6339
TO CONFIRM RECEIPT:
(212) 815-5924
(ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSIMILE SHOULD BE SENT PROMPTLY BY
HAND, OVERNIGHT COURIER OR REGISTERED OR CERTIFIED MAIL)
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
================================================================================
================================================================================
OFFER TO EXCHANGE ALL
OUTSTANDING
9 3/4% SENIOR NOTES DUE 2006
($140,000,000 PRINCIPAL AMOUNT)
FOR 9 3/4% SENIOR NOTES DUE 2006
[LOGO]
THE HOLT GROUP, INC.
-----------------------
PROSPECTUS
-----------------------
, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Holt Group, Inc. (the "Company"), Holt Cargo Systems, Inc. ("Holt
Cargo"), Murphy Marine Services, Inc. ("Murphy Marine"), Wilmington Stevedores,
Inc. ("Wilmington Stevedores"), San Juan International Terminals, Inc. ("San
Juan"), SJIT, Inc. ("SJIT"), NPR, Inc. ("NPR"), NPR-Navieras Receivables, Inc.
("Navieras"), NPR Holding Corporation ("NPR Holding") and NPR S.A., Inc. ("NPR
S.A.") (collectively, the "Delaware Registrants") are Delaware corporations.
Reference is made to Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL"), which enables a corporation in its original certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of the director's fiduciary duty, except (i) for any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions), or (iv) for any transaction from which
the director derived an improper personal benefit. The certificates of
incorporation of the Company, Murphy Marine, San Juan, SJIT and NPR S.A. contain
provisions eliminating or limiting their directors' personal liability to the
corporation or its stockholders to the extent permitted by Section 102(b)(7) of
the DGCL.
Reference also is made to Section 145 of the DGCL which provides that a
corporation may indemnify any person, including officers and directors, who was
or is, or is threatened to be made, a party to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was an officer,
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise, if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, with respect to any criminal proceeding, had no reasonable cause to believe
that his conduct was unlawful. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding. A Delaware corporation may indemnify its officers, directors,
employees and agents in an action by or in the right of the corporation under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer, director, employee or agent is adjudged to be
liable to the corporation. Where an officer, director, employee or agent is
successful on the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify him against the expenses which such
officer, director, employee or agent actually and reasonably incurred in
connection therewith. The certificates of incorporation of Holt Cargo, NPR,
Navieras and NPR Holding and the by-laws of the Company, Murphy Marine,
Wilmington Stevedores and NPR S.A. contain indemnification provisions permitted
by Section 145 of the DGCL.
Holt Hauling and Warehousing System, Inc. ("Holt Hauling") is a
Pennsylvania corporation. Sections 513 and 518 of the Pennsylvania Corporations
and Unincorporated Associations statute (the "Associations Code") and Sections
1741-1750 of the Pennsylvania Business Corporation Law of 1988 (the "BCL")
provide for indemnification of the directors and officers of Holt Hauling. Under
Sections 1741-1750 of the BCL, directors and officers of Holt Hauling may be
indemnified by the Holt Hauling against all expenses actually and reasonably
incurred in connection with actions (including, under certain circumstances,
derivative actions) brought against such director or officer by reason of his or
her status as a representative of Holt Hauling or by reason of the fact that
such director or officer serves or served as a representative of another entity
at the request of Holt Hauling, so long as the director or officer acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of Holt Hauling; and, provided further that with respect to
any criminal proceedings, such officer or director had no reasonable cause to
believe that his or her conduct was
II-1
<PAGE>
unlawful. Section 1745 of the BCL permit Holt Hauling to pay expenses incurred
in connection with any such action, suit or proceeding in advance of the final
disposition of such action, suit or proceeding upon Holt Hauling's receipt of an
undertaking by or on behalf of the representative to repay the amount so
advanced if said person is ultimately determined not to be entitled to
indemnification under the BCL. Section 1713 expressly does not permit the
limitation of directors' responsibility or liability arising from any criminal
statute or liability for the payment of taxes pursuant to federal, state or
local law. Under the BCL, the personal liability of the officers and directors
of Holt Hauling shall not be limited if the responsibility or liability arises
under or any criminal statute or the liability concerns for the payment of tax
pursuant to federal, state or local law.
Section 1743 of the BCL mandates indemnification by Holt Hauling of its
officers, directors and representatives when such individuals are ultimately
successful on the merits or otherwise in defense of any third-party action or
proceedings, of any or derivative or corporate actions.
Subject to certain limitations and exceptions, the Company and its
subsidiaries have insurance coverage for losses by any person who is or
hereafter may be a director or officer of the Company arising from claims
against that person for any wrongful act in his capacity as a director or
officer of the Company or any of its subsidiaries.
The foregoing discussion is qualified in its entirety by reference to the
DGCL, the Associations Code, the BCL and the by-laws of the Delaware Registrants
and Holt Hauling.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of Exhibits filed as part of this
Registration Statement.
<TABLE>
<S> <C>
*3.1 Certificate of Incorporation of the Company.
*3.2 By-laws of the Company.
*3.3 Certificate of Incorporation of Holt Cargo Systems, Inc.
*3.4 By-laws of Holt Cargo Systems, Inc.
*3.5 Articles of Incorporation of Holt Hauling and Warehousing
Systems, Inc.
*3.6 By-laws of Holt Hauling and Warehousing Systems, Inc.
*3.7 Certificate of Incorporation of Murphy Marine Services, Inc.
*3.8 By-laws of Murphy Marine Services, Inc.
*3.9 Certificate of Incorporation of Wilmington Stevedores, Inc.
*3.10 By-laws of Wilmington Stevedores, Inc.
*3.11 Certificate of Formation of NPR, Inc.
*3.12 By-laws of NPR, Inc.
*3.13 Certificate of Incorporation of NPR-Navieras Receivables,
Inc.
*3.14 By-laws of NPR-Navieras Receivables, Inc.
*3.15 Certificate of Incorporation of NPR Holding Corporation.
*3.16 By-laws of NPR Holding Corporation.
*3.17 Certificate of Incorporation of NPR S.A., Inc.
*3.18 By-laws of NPR S.A., Inc.
*3.19 Certificate of Incorporation of San Juan International
Terminals, Inc.
*3.20 By-laws of San Juan International Terminals, Inc.
*3.21 Certificate of Incorporation of SJIT, Inc.
*3.22 By-laws of SJIT, Inc.
*4 Indenture, dated January 21, 1998, among the Company, the
Guarantors and The Bank of New York.
5 Opinion of Pepper Hamilton LLP.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
*10.1 Purchase Agreement, dated January 14, 1998, among the
Company, the Guarantors and Donaldson, Lufkin & Jenrette.
*10.2 Exchange Registration Rights Agreement, dated January 21,
1998, among the Company, its subsidiaries and Donaldson,
Lufkin & Jenrette Securities Corporation.
*10.3 Stock Purchase Agreement, dated September 25, 1997, among
the Company and the selling shareholders of NPR Holding
Corporation signatory thereto.
*10.4 Securities Purchase Agreement, dated November 20, 1997,
between the Company and HS Funding, Inc.
*10.5 Securities Purchase Agreement, dated November 18, 1997,
among the Company and the persons listed and the signature
pages attached thereto.
*10.6 Shareholders Agreement, dated November 20, 1997, among the
Shareholders signatory thereto.
*10.7 Agreement, dated August 6, 1997, between Transroll Navagacao
S.A. and NPR Holding Corporation.
*10.8 First Amendment to Joint Venture Agreement dated November
20, 1997.
*10.9 NPR 1997 Phantom Stock Plan.
*10.10 Settlement Agreement, dated April __, 1997, among The New
York Shipping Association -- International Longshoreman's
Association Pension Trust Fund, Puerto Rico Maritime
Shipping Authority, Government Development Bank for Puerto
Rico and NPR, Inc.
*10.11 Payment Agreement, dated April __, 1997, among Government
Development Bank for Puerto Rico, Puerto Rico Maritime
Shipping Authority, NPR, Inc., and NPR Holding Corporation.
*10.12 United States Pension Services, Inc. 401(k) Plan and Trust.
*10.13 Loan Agreement, dated January 3, 1984, between the City of
Gloucester City, New Jersey and Holt Hauling and Warehousing
System, Inc.
*10.14 First Amendment to Loan Agreement, dated January 3, 1984,
dated March 31, 1991, between the City of Gloucester City,
New Jersey and Holt Hauling and Warehousing System, Inc.
*10.15 Loan Agreement, dated August 3, 1984, between the City of
Gloucester City, New Jersey and Holt Hauling and Warehousing
System, Inc.
*10.16 First Amendment to Loan Agreement, dated August 3, 1984,
dated March 31, 1991, between Holt Hauling and Warehousing
System, Inc. and the City of Gloucester City, New Jersey.
*10.17 Second Amendment to Loan Agreements, dated January 3, 1984,
and August 3, 1984, dated August 1, 1996.
*10.18 Multi Currency Secured Revolving Credit Facility dated April
16, 1997, between The Riverfront Development Corporation and
Finansbanken ASA.
*10.19 Amendment No. 1 to Multi Currency Secured Revolving Credit
Facility dated April 16, 1997, dated April 23, 1997, between
The Riverfront Development Corporation and Finansbanken ASA.
*10.20 Equipment Lease Agreement, dated November 18, 1997, between
Emerald Equipment Leasing, Inc., NPR, Inc. and Holt Cargo
Systems, Inc.
*10.21 Lease Guaranty Agreement, dated November 20, 1997, by the
Company, Holt Hauling and Warehousing System, Inc.,
Wilmington Stevedores, Inc., Murphy Marine Services, Inc.,
The Riverfront Development Corporation, NPR-Navieras
Receivables, Inc., and NPR S.A., Ind., for the benefit of
Emerald Equipment Leasing, Inc. with respect to various
duties and obligations of NPR, Inc. and Holt Cargo Systems,
Inc.
*10.22 Amended and Restated Lease and Operating Agreement, dated
December 30, 1990, between Philadelphia Regional Port
Authority and Holt Cargo Systems, Inc. for Packer Avenue
Marine Terminal.
*10.23 Sublease, dated June 14, 1991, between Astro Holdings, Inc.
and Holt Cargo Systems, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
*10.24 Assignment of Lease, dated June 14, 1991, between Holt Cargo
Systems, Inc. and Astro Holdings, Inc.
*10.25 Loan and Security Agreement, dated August 8, 1989, between
Holt Cargo Systems, Inc. and Bank Leumi Le-Israel B.M.
*10.26 Modification of Loan and Security Agreement, dated November
13, 1992, between Holt Cargo Systems, Inc. and Bank Leumi
Le-Israel B.M. and Second Modification of Loan and Security
Agreement, dated December 31, 1992.
*10.27 Third Modification of Loan and Security Agreement, dated
July 1, 1995, between Holt Cargo Systems, Inc. and PNC Bank,
National Association (successor in interest to Bank Leumi
Le-Israel B.M.).
*10.28 Loan Agreement, dated July 20, 1995, among Holt Cargo
Systems, Inc., Holt Hauling and Warehousing Systems, Inc.,
Broadway Equipment Leasing Corp., Refrigerated Distribution
Center, Inc., Triple Seven Ice, Inc., Holt Cargo Systems of
California, Inc., The Riverfront Development Corporation,
777 Pattison Avenue, Inc., Holt Warehousing Company, Marine
Information Technology, Inc., B.H. Sobelman & Co., Inc., T.
and L. Leasing Corp., CRT, Inc., Refrigerated Enterprises,
Inc., Oregon Avenue Enterprises, Incorporated, Pattison
Avenue Warehousing Corp., Murphy Marine Services, Inc.,
Rockside International Fish Co., Inc., Wilmington
Stevedores, Inc. and Meridian Bank.
*10.29 Container Lease Purchase Agreement, dated June 5, 1996,
between NPR, Inc. and Interpool Limited, and Membership and
Equipment Lease Agreement dated April 1, 1996 between
Interpool Limited and NPR, Inc.
*10.30 Credit Agreement, dated November 20, 1997, between the
Company and CoreStates Bank, N.A.
*10.31 Business Loan Agreement, dated March 13, 1997, between Holt
Hauling and Warehousing System, Inc. and Wilmington Savings
Fund Society, FSB.
*10.32 Series G Loan Agreement, dated January 2, 1992, between Holt
Hauling and Warehousing System, Inc. and the New Jersey
Economic Development Authority.
*10.33 Series H Loan Agreement, dated January 2, 1992, between Holt
Hauling and Warehousing System, Inc. and the New Jersey
Economic Development Authority.
*10.34 Series G Mortgage and Security Agreement, dated as of
January 2, 1992, between Holt Hauling and Warehousing
System, Inc. and Mellon Bank, N.A.
*10.35 Series H Mortgage and Security Agreement, dated January 2,
1992, between Holt Hauling and Warehousing System, Inc. and
Mellon Bank, N.A.
*10.36 Series J Loan Agreement, dated June 1, 1995, between Holt
Hauling and Warehousing System, Inc. and the New Jersey
Economic Development Authority.
*10.37 Series J Mortgage and Security Agreement, dated June 1,
1995, between Holt Hauling and Warehousing System, Inc. and
The Bank of New York (NJ).
*10.38 Lease Agreement, dated January 15, 1996, between Holt
Hauling and Warehousing System, Inc. and Camden County
Improvement Authority.
*10.39 Mortgage and Security Agreement, dated January 15, 1996,
between Holt Hauling and Warehousing System, Inc., 777
Pattison Ave., Inc. and The Bank of New York (NJ).
*10.40 Mortgage and Security Agreement, dated May 15, 1992, between
Holt Hauling and Warehousing System, Inc., 777 Pattison
Ave., Inc. and Fidelity Bank, National Association.
*10.41 Memorandum of Installment Sale Agreement, dated May 15,
1992, among Philadelphia Authority for Industrial
Development, Refrigerated Enterprises, Inc., Holt Hauling
and Warehousing System, Inc., B.H. Sobelman & Co., Inc.,
Refrigerated Distribution Center, Inc., Oregon Avenue
Enterprises, Incorporated, Holt Cargo System, Inc., The
Riverfront Development Corp., CRT, Inc., Triple Seven Ice,
Inc. and 777 Pattison Ave., Inc.
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
*10.42 Installment Sale Agreement, dated May 15, 1992, among
Philadelphia Authority for Industrial Development,
Refrigerated Enterprises, Inc., Holt Hauling and Warehousing
System, Inc., B.H. Sobelman & Co., Inc., Refrigerated
Distribution Center, Inc., Oregon Avenue Enterprises,
Incorporated, Holt Cargo Systems, Inc., The Riverfront
Development Corp., CRT, Inc., Triple Seven Ice, Inc.,
Pattison Avenue Warehousing Corp., and 777 Pattison Ave., Inc.
*10.43 Series K Loan Agreement, dated February 1, 1997, between New
Jersey Economic Development Authority and Holt Hauling and
Warehousing System, Inc.
*10.44 Series K Mortgage and Security Agreement, dated February 1,
1997, among Holt Hauling and Warehousing, 777 Pattison Ave.,
Inc. and New Jersey Economic Development Authority.
10.45 Mortgage and Security Agreement, dated March 15, 1994, among
Holt Hauling and Warehousing System, Inc., 777 Pattison
Ave., Inc. and The Bank of New York N.A.
*10.46 Contract of Sale, dated April __, 1994, between Holt Hauling
and Warehousing System, Inc. and Camden County Improvement
Authority.
*10.47 First Leasehold Mortgage and Security Agreement, dated June
1, 1997, between Holt Hauling and Warehousing System, Inc.
*10.48 Loan Agreement, dated March 2, 1992, among 777 Pattison
Ave., Inc., Holt Hauling and Warehousing System, Inc., B.H.
Sobelman & Co., Inc., Refrigerated Distribution Center,
Inc., Oregon Avenue Enterprises, Incorporated, Holt Cargo
Systems, Inc., CRT, Inc., The Riverfront Development Corp.,
Triple Seven Ice, Inc., Pattison Avenue Warehousing Corp.
and Refrigerated Enterprises, Inc.
*10.49 Security Agreement, dated January 24, 1997, by Holt Cargo
System, Inc. in favor of Transamerica Business Credit
Corporation.
*10.50 Client Services Agreement, dated July 10, 1995, between SLS
Services, Inc. and Wilmington Stevedores, Inc.
*10.51 Client Services Agreement, dated April 1, 1994, between SLS
Services, Inc. and Holt Cargo Systems, Inc.
*10.52 Client Services Agreement, dated April 1, 1994, between SLS
Services, Inc. and Holt Hauling & Warehousing System, Inc.
*10.53 Client Services Agreement, dated July 1, 1994, between SLS
Services, Inc. and Murphy Marine Services, Inc.
*10.54 Client Services Agreement, dated April 1, 1994, between SLS
Services, Inc. and The Riverfront Development Corporation.
*10.55 Amendment No. 1 to Client Services Agreement, dated January
__, 1998, by and among SLS Services, Inc., Holt Cargo
Systems, Inc., Holt Hauling & Warehousing System, Inc.,
Murphy Marine Services, Inc., The Riverfront Development
Corporation and Wilmington Stevedores, Inc.
*10.56 Option to Purchase and Development Agreement, dated March
27, 1998, between Delaware Avenue Enterprises, Inc. and Holt
Hauling and Warehousing System, Inc.
*10.57 Promissory Notes dated February 25, 1998, April 2, 1998 and
April 29, 1998 by Thomas J. Holt, Sr. in favor of The Holt
Group, Inc.
10.58 Amended and Restated Credit Agreement among the Holt Group,
Inc., Holt Cargo Systems, Inc., Holt Hauling and Warehousing
System, Inc., Murphy Marine Services, Inc., NPR Holding
Corporation, NPR, Inc., NPR-Navieras Receivables, Inc., NPR,
S.A., Inc., San Juan International Terminals, Inc.,
S.J.I.T., Inc., and Wilmington Stevedores, Inc., and First
Union National Bank, Summit Bank, Wilmington Trust of
Pennsylvania and MBC Leasing Corp. with First Union National
Bank as Agent dated February 25, 1999.
*21 Subsidiaries of Registrant.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Pepper Hamilton LLP (included in Exhibit 5).
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
*25 Form T-1.
*27.1 Financial Data Schedule for The Holt Group, Inc.
(1993-1997).
*27.2 Financial Data Schedule for The Holt Group, Inc. (June 30,
1997 and 1998).
*27.3 Financial Data Schedule for NPR Holding Corporation
(1995-1997).
27.4 Financial Data Schedule for The Holt Group, Inc. (December
31, 1998).
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Exchange Agent Agreement, dated __________, 1998,
between The Bank of New York and the Company.
</TABLE>
- ------------------
* Previously filed.
(b) Financial Statement Schedules.
All schedules have been omitted because they are not applicable, not
required, or the required information is included in the Financial Statements or
the notes thereto.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Delaware Registrants and Holt Hauling pursuant to the foregoing provisions, or
otherwise, the Delaware Registrants and Holt Hauling have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by a Delaware Registrant or Holt Hauling, of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, a Delaware Registrant or Holt Hauling will, unless in the opinion of
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrants hereby undertake: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and (iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; (2) that, for
the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
THE HOLT GROUP, INC., has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized in Gloucester City,
New Jersey on the 21st day of April, 1999.
THE HOLT GROUP, INC.
By: /s/ THOMAS J. HOLT, SR.
-------------------------------------
Thomas J. Holt, Sr.
President, Chairman of the Board and
Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS J. HOLT, SR. President, Chairman of the Board and April 21, 1999
- ------------------------ Director (The Principal Executive Officer)
Thomas J. Holt, Sr.
/s/ BERNARD GELMAN Vice President, Chief Financial Officer and April 21, 1999
- ------------------------ Director (The Principal Financial Officer
Bernard Gelman and Principal Accounting Officer)
/s/ JOHN A. EVANS Director April 21, 1999
- ------------------------
John A. Evans
/s/ LEO A. HOLT Director April 21, 1999
- ------------------------
Leo A. Holt
/s/ THOMAS J. HOLT, JR. Director April 21, 1999
- ------------------------
Thomas J. Holt, Jr.
/s/ MICHAEL J. HOLT Director April 21, 1999
- ------------------------
Michael J. Holt
/s/ LORRAINE ROBINS Director April 21, 1999
- ------------------------
Lorraine Robins
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
HOLT CARGO SYSTEMS, INC., has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in Gloucester
City, New Jersey on the 21st day of April, 1999.
HOLT CARGO SYSTEMS, INC.
By: /s/ THOMAS J. HOLT, SR.
-------------------------------------
Thomas J. Holt, Sr.
President, Chairman of the Board and
Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS J. HOLT, SR. President, Chairman of the Board and April 21, 1999
- ------------------------ Director (The Principal Executive Officer)
Thomas J. Holt, Sr.
/s/ BERNARD GELMAN Vice President, Chief Financial Officer and April 21, 1999
- ------------------------ Director (The Principal Financial Officer
Bernard Gelman and Principal Accounting Officer)
/s/ LORRAINE ROBINS Director April 21, 1999
- ------------------------
Lorraine Robins
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
HOLT HAULING AND WAREHOUSING SYSTEM, INC., has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Gloucester City, New Jersey on the 21st day of April, 1999.
HOLT HAULING AND WAREHOUSING
SYSTEM, INC.
By: /s/ THOMAS J. HOLT, SR.
-------------------------------------
Thomas J. Holt, Sr.
President, Chairman of the Board and
Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS J. HOLT, SR. President, Chairman of the Board and April 21, 1999
- ------------------------ Director (The Principal Executive Officer)
Thomas J. Holt, Sr.
/s/ BERNARD GELMAN Vice President, Chief Financial Officer and April 21, 1999
- ------------------------ Director (The Principal Financial Officer
Bernard Gelman and Principal Accounting Officer)
/s/ LORRAINE ROBINS Director April 21, 1999
- ------------------------
Lorraine Robins
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
MURPHY MARINE SERVICES, INC., has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in Gloucester
City, New Jersey on the 21st day of April, 1999.
MURPHY MARINE SERVICES, INC.
By: /s/ MARK MURPHY
------------------------------------
Mark Murphy
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MARK MURPHY President (The Principal Executive Officer) April 21, 1999
- ------------------------
Mark Murphy
/s/ BERNARD GELMAN Vice President - Finance and Director (The April 21, 1999
- ------------------------ Principal Financial Officer and Principal
Bernard Gelman Accounting Officer)
/s/ THOMAS J. HOLT, SR. Director April 21, 1999
- ------------------------
Thomas J. Holt, Sr.
/s/ LORRAINE ROBINS Director April 21, 1999
- ------------------------
Lorraine Robins
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
WILMINGTON STEVEDORES, INC., has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in Gloucester
City, New Jersey on the 21st day of April, 1999.
WILMINGTON STEVEDORES, INC.
By: /s/ MARK MURPHY
------------------------------------
Mark Murphy
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MARK MURPHY President (The Principal Executive Officer) April 21, 1999
- ------------------------
Mark Murphy
/s/ BERNARD GELMAN Vice President - Finance and Director (The April 21, 1999
- ------------------------ Principal Financial Officer and Principal
Bernard Gelman Accounting Officer)
/s/ THOMAS J. HOLT, SR. Director April 21, 1999
- ------------------------
Thomas J. Holt, Sr.
/s/ LORRAINE ROBINS Director April 21, 1999
- ------------------------
Lorraine Robins
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
SAN JUAN INTERNATIONAL TERMINALS, INC., has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Gloucester City, New Jersey on the 21st day of April, 1999.
SAN JUAN INTERNATIONAL TERMINALS, INC.
By: /s/ THOMAS J. HOLT, SR.
------------------------------------
Thomas J. Holt, Sr.
President, Chairman of the Board,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS J. HOLT, SR. President, Chairman of the Board and April 21, 1999
- -------------------------- Director (The Principal Executive Officer)
Thomas J. Holt, Sr.
/s/ BERNARD GELMAN Vice President - Finance and Director (The April 21, 1999
- -------------------------- Principal Financial Officer and Principal
Bernard Gelman Accounting Officer)
/s/ LORRAINE ROBINS Executive Vice President and Director April 21, 1999
- --------------------------
Lorraine Robins
/s/ JOHN A. EVANS Director April 21, 1999
- --------------------------
John A. Evans
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
SJIT, INC., has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in Gloucester City, New
Jersey on the 21st day of April, 1999.
SJIT, INC.
By: /s/ THOMAS J. HOLT, SR.
-----------------------------------
Thomas J. Holt, Sr.
President, Chairman of the Board,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS J. HOLT, SR. President, Chairman of the Board and April 21, 1999
- ------------------------ Director (The Principal Executive Officer)
Thomas J. Holt, Sr.
/s/ BERNARD GELMAN Vice President - Finance and Director (The April 21, 1999
- ------------------------ Principal Financial Officer and Principal
Bernard Gelman Accounting Officer)
/s/ LORRAINE ROBINS Executive Vice President and Director April 21, 1999
- ------------------------
Lorraine Robins
/s/ JOHN A. EVANS Director April 21, 1999
- ------------------------
John A. Evans
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
NPR HOLDING CORPORATION, has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in Edison,
New Jersey on the 21st day of April, 1999.
NPR HOLDING CORPORATION
By: /s/ THOMAS J. HOLT, JR.
-------------------------------------
Thomas J. Holt, Jr.
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS J. HOLT, JR. President, Chief Executive Officer April 21, 1999
- ------------------------------- and Director (The Principal
Thomas J. Holt, Jr. Executive Officer)
/s/ BERNARD GELMAN Vice President and Director April 21, 1999
- ------------------------------- (The Principal Financial Officer
Bernard Gelman and Principal Accounting Officer)
/s/ THOMAS J. HOLT, SR. Director April 21, 1999
- -------------------------------
Thomas J. Holt, Sr.
/s/ LORRAINE ROBINS Director April 21, 1999
- -------------------------------
Lorraine Robins
/s/ LEO A. HOLT Director April 21, 1999
- -------------------------------
Leo A. Holt
/s/ MICHAEL J. HOLT Director April 21, 1999
- -------------------------------
Michael J. Holt
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
NPR-NAVIERAS RECEIVABLES, INC., has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized in Edison,
New Jersey on the 21st day of April, 1999.
NPR-NAVIERAS RECEIVABLES, INC.
By: /s/ THOMAS J. HOLT, JR.
-------------------------------------
Thomas J. Holt, Jr.
President, Chairman of the Board and
Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS J. HOLT, JR. President, Chief Executive Officer and April 21, 1999
- --------------------------- Director (The Principal Executive
Thomas J. Holt, Jr. Officer)
/s/ BERNARD GELMAN Vice President and Director April 21, 1999
- --------------------------- (The Principal Financial Officer and
Bernard Gelman Principal Accounting Officer)
/s/ THOMAS J. HOLT, SR. Director April 21, 1999
- ---------------------------
Thomas J. Holt, Sr.
/s/ LORRAINE ROBINS Director April 21, 1999
- ---------------------------
Lorraine Robins
/s/ LEO A. HOLT Director April 21, 1999
- ---------------------------
Leo A. Holt
/s/ MICHAEL J. HOLT Director April 21, 1999
- ---------------------------
Michael J. Holt
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
NPR, INC., has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in Edison, New Jersey on
the 21st day of April, 1999.
NPR, INC.
By: /s/ THOMAS J. HOLT, JR.
-------------------------------------
Thomas J. Holt, Jr.
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS J. HOLT, JR. President, Chief Executive Officer and April 21, 1999
- --------------------------- Director (The Principal Executive
Thomas J. Holt, Jr. Officer)
/s/ BERNARD GELMAN Vice President and Director April 21, 1999
- --------------------------- (The Principal Financial Officer and
Bernard Gelman Principal Accounting Officer)
/s/ THOMAS J. HOLT, SR. Director April 21, 1999
- ---------------------------
Thomas J. Holt, Sr.
/s/ LORRAINE ROBINS Director April 21, 1999
- ---------------------------
Lorraine Robins
/s/ LEO A. HOLT Director April 21, 1999
- ---------------------------
Leo A. Holt
/s/ MICHAEL J. HOLT Director April 21, 1999
- ---------------------------
Michael J. Holt
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
NPR S.A., INC., has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in Edison, New Jersey on
the 21st day of April, 1999.
NPR S.A., INC.
By: /s/ THOMAS J. HOLT, JR.
-------------------------------------
Thomas J. Holt, Jr.
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ THOMAS J. HOLT, JR. President, Chief Executive Officer and April 21, 1999
- --------------------------- Director (The Principal Executive
Thomas J. Holt, Jr. Officer)
/s/ BERNARD GELMAN Vice President and Director April 21, 1999
- --------------------------- (The Principal Financial Officer and
Bernard Gelman Principal Accounting Officer)
/s/ THOMAS J. HOLT, SR. Director April 21, 1999
- ---------------------------
Thomas J. Holt, Sr.
/s/ LORRAINE ROBINS Director April 21, 1999
- ---------------------------
Lorraine Robins
/s/ LEO A. HOLT Director April 21, 1999
- ---------------------------
Leo A. Holt
/s/ MICHAEL J. HOLT Director April 21, 1999
- ---------------------------
Michael J. Holt
</TABLE>
II-17
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
5 Opinion of Pepper Hamilton LLP.
10.58 Amended and Restated Credit Agreement among the Holt Group,
Inc., Holt Cargo Systems, Inc., Holt Hauling and Warehousing
System, Inc., Murphy Marine Services, Inc., NPR Holding
Corporation, NPR, Inc., NPR-Navieras Receivables, Inc., NPR,
S.A., Inc., San Juan International Terminals, Inc.,
S.J.I.T., Inc., and Wilmington Stevedores, Inc., and First
Union National Bank, Summit Bank, Wilmington Trust of
Pennsylvania and MBC Leasing Corp. with First Union National
Bank as Agent dated February 25, 1999.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Pepper Hamilton LLP (included in Exhibit 5).
</TABLE>
II-18
Pepper Hamilton LLP
- ------Attorneys at Law
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
215.981.4000
Fax 215.981.4750
April 26, 1999
The Holt Group, Inc. and Guarantors
101 South King Street
Gloucester City, New Jersey 08030
Re: Registration Statement on Form S-4
----------------------------------
Gentlemen:
You have requested our opinion, as special counsel for The Holt Group, Inc.
(the "Company") and for Holt Cargo Systems, Inc., Holt Hauling and Warehousing
System, Inc., Murphy Marine Systems, Inc., Wilmington Stevedores, Inc., San Juan
International Terminals, Inc., SJIT, Inc., NPR, Inc., NPR-Navieras Receivables,
Inc., NPR Holding Corporation and NPR S.A., Inc. (collectively, the "Guarantors"
)in connection with a registration statement on Form S-4 (the "Registration
Statement") initially filed by the Company under the Securities Act of 1933, as
amended (the "Act") with the Securities and Exchange Commission on May 13, 1998.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Registration Statement.
The Registration Statement relates to an offer to exchange (the "Exchange
Offer") the Company's 9 3/4% Senior Notes due 2006 (the "New Notes") for an
equal principal amount of the Company's outstanding 9 3/4% Senior Notes due 2006
(the "Old Notes").
The Notes were issued, and the New Notes will be issued, under an Indenture
dated as of January 21, 1998 (the "Indenture") among the Company, the Guarantors
and The Bank of New York, as Trustee (the "Trustee").
In connection with this opinion, we have examined the Registration
Statement, the Indenture (included as Exhibit 4 to the Registration Statement),
the form of the New Notes (set forth as Exhibit A to the Indenture) and such
other documents, records and other matters as we have deemed necessary or
appropriate in order to give the opinions set forth herein.
We have, with your approval, assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the
<PAGE>
The Holt Group, Inc. and Guarantors
April 26, 1999
Page 2
conformity to original documents of documents submitted to us as certified,
facsimile, conformed, electronic, or photostatic copies and the authenticity of
the originals of such copies. As to all questions of fact material to this
opinion that have not been independently established, we have relied upon
certificates or comparable documents, and oral and written statements and
representations, of officers and representatives of the Company. We have not
independently verified such information and assumptions.
Based upon and subject to the foregoing, assuming that the Indenture has
been duly authorized, executed and delivered by, and represents the valid and
binding obligation of, the Trustee, and when the Registration Statement,
including any amendment thereto, shall have become effective under the
Securities Act and the Indenture shall have been duly qualified under the Trust
Indenture Act of 1939, as amended, it is our opinion that:
1. Each of the Company and the Guarantors is duly incorporated and is
validly existing and in good standing under the laws of their respective
jurisdictions of its incorporation with the corporate power and authority to
execute, deliver, and perform their respective obligations under the New Notes
and the Indenture; and each of the Indenture and the New Notes has been duly
authorized by the Company and the Guarantors;
2. The Indenture constitutes the legal, valid and binding obligation of the
Company and the Guarantors, enforceable against the Company and the Guarantors
in accordance with its terms;
3. The New Notes, when duly executed and delivered by or on behalf of the
Company and the Guarantors in the form contemplated by the Indenture upon the
terms set forth in the Exchange Offer and authenticated by the Trustee or an
authenticating agent appointed by the Trustee in accordance with the terms of
the Indenture, will constitute the legal, valid and binding obligations of the
Company and the Guarantors, enforceable against the Company and the Guarantors
in accordance with their terms;
subject, in the case of the opinions set forth in paragraphs numbered 2 and 3
hereof, to (i) bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance and other laws of general applicability relating to or affecting
creditors' rights from time to time in effect; (ii) application of general
principles of equity (regardless of whether considered in proceedings in equity
or at law) and the discretion of the court before which any proceeding therefor
may be brought; (iii) standards of commercial reasonableness and the implied
covenant of good faith; and (iv) public policy.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our Firm under the caption "Legal
Opinions" in the Registration Statement. In doing so, we do not admit that we
are in the category of persons whose consent it required under Section 7 of the
Act, or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
PEPPER HAMILTON LLP
- --------------------------------------------------------------------------------
Amended and Restated
CREDIT AGREEMENT
Among
THE HOLT GROUP, INC.
HOLT CARGO SYSTEMS, INC.
HOLT HAULING AND WAREHOUSING SYSTEM, INC.
MURPHY MARINE SERVICES, INC.
NPR HOLDING CORPORATION
NPR, INC.
NPR-NAVIERAS RECEIVABLES, INC.
NPR, S.A.
SAN JUAN INTERNATIONAL TERMINALS, INC.
S.J.I.T., INC.
WILMINGTON STEVEDORES, INC.
and
Certain Banking Institutions Named Herein
with
FIRST UNION NATIONAL BANK
As Agent
dated
February 25, 1999
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
1. Certain Definitions.......................................................2
1.1. Definitions........................................................2
1.2. Accounting Terms..................................................11
2. The Credit...............................................................11
2.1. Credit Facilities.............................................11
(a) Revolving Loans...............................................11
(b) Term Loans....................................................12
(c) Letters of Credit.............................................12
2.2. The Notes.........................................................13
(a) Revolving Notes...............................................13
(b) Term Notes....................................................14
2.3. Funding Procedures................................................14
(a) Requests for Advance..........................................14
(b) Irrevocability................................................14
(c) Availability of Funds.........................................15
(d) Funding Assumptions...........................................15
(e) Funding of Net Amount.........................................15
2.4. Interest..........................................................15
(a) Base Rate.....................................................15
(b) LIBO Rate.....................................................15
(c) Renewals and Conversions of Loans.............................16
(d) Automatic Reinstatement.......................................16
2.5. Commitment Fee. .................................................16
2.6. Reduction or Termination of Commitment............................17
(a) Loan Commitment Reduction or Termination......................17
(b) Automatic Loan Commitment Termination.........................17
2.7. Prepayments.......................................................17
(a) Base Rate Loans...............................................18
(b) LIBO Rate Loans. .............................................18
(c) Sale or Loss of Vessel........................................18
(d) Proceeds of Insurance Claims..................................18
(e) Proceeds of Debt or Equity Issuance...........................18
2.8. Payments..........................................................18
(a) Base Rate Loans...............................................18
(b) LIBO Rate Loans...............................................18
(c) Form of Payments, Application of Payments,
Payment Administration, Etc................................18
(d) Net Payments..................................................19
(e) Prepayment of LIBO Rate Loans.................................19
(f) Demand Deposit Account........................................20
2.9. Changes in Circumstances; Yield Protection........................20
2.10. Illegality........................................................21
3. Representations and Warranties...........................................21
3.1. Organization, Standing............................................21
-i-
<PAGE>
3.2. Corporate Authority, Validity, Etc................................21
3.3. Litigation........................................................22
3.4. ERISA.............................................................22
3.5. Financial Statements and Projections..............................23
3.6. Not in Default, Judgments, Etc....................................23
3.7. Taxes.............................................................23
3.8. Permits, Licenses, Etc............................................24
3.9. No Materially Adverse Contracts, Etc..............................24
3.10. Compliance with Laws, Etc.........................................24
(a) Compliance Generally........................................24
(b) Hazardous Wastes, Substances and Petroleum Products.........24
3.11. Solvency..........................................................24
3.12. Subsidiaries, Etc.................................................25
3.13. Title to Properties, Leases.......................................25
3.14. Public Utility Holding Company; Investment Company................25
3.15. Margin Stock......................................................25
3.16. Use of Proceeds...................................................25
3.17 Year 2000 Problem.................................................25
3.18. Disclosure Generally..............................................25
4. Conditions Precedent.....................................................26
4.1. All Loans.........................................................26
(a) Documents.....................................................26
(b) Covenants; Representations....................................26
(c) Defaults......................................................26
(d) Material Adverse Change.......................................27
4.2. Conditions to First Loan..........................................27
(a) Articles, Bylaws..............................................27
(b) Evidence of Authorization.....................................27
(c) Legal Opinions................................................27
(d) Incumbency....................................................27
(e) Notes.........................................................27
(f) Collateral Documents..........................................27
(g) Other Documents...............................................27
(h) Consents......................................................28
(i) Fees, Expenses................................................28
(j) Financial Projections.........................................28
5. Affirmative Covenants....................................................28
5.1. Financial Statements and Reports..................................28
(a) Annual Statements.............................................28
(b) Quarterly Statements..........................................29
(c) Compliance Certificate........................................29
(d) ERISA.........................................................29
(e) Material Changes..............................................29
(f) Summary Annual Budget.........................................29
(g) Other Information.............................................29
5.2. Corporate Existence...............................................29
5.3. ERISA.............................................................29
-ii-
<PAGE>
5.4. Compliance with Regulations.......................................30
5.5. Conduct of Business; Permits and Approvals,
Compliance with Laws...........................................30
5.6. Maintenance of Insurance..........................................30
5.7. Payment of Debt; Payment of Taxes, Etc............................30
5.8. Notice of Events..................................................30
5.9. Inspection Rights.................................................31
5.10. Generally Accepted Accounting Principles..........................31
5.11. Compliance with Material Contracts................................31
5.12. Use of Proceeds...................................................32
5.13. Further Assurances................................................32
5.14. Restrictive Covenants in Other Agreements.........................32
5.15. Year 2000 Program.................................................32
5.16. Subsidiaries......................................................32
6. Negative Covenants.......................................................33
6.1. Consolidation and Merger..........................................33
6.2. Liens.............................................................33
6.3. Guarantees........................................................33
6.4. Margin Stock......................................................33
6.5. Acquisitions and Investments......................................33
6.6. Transfer of Assets; Nature of Business............................34
6.7. Restricted Payments...............................................34
6.8. Accounting Change.................................................34
6.9. Transactions with Affiliates......................................34
6.10. Indebtedness......................................................35
7. Financial Covenants......................................................35
7.1. Minimum Adjusted Net Worth........................................35
7.2. Maximum Adjusted Funded Debt to Adjusted EBITDA...................35
7.3. Minimum Fixed Charge Coverage Ratio...............................36
7.4. Minimum Interest Coverage.........................................36
7.5. Minimum Annualized Adjusted EBITDA................................36
7.6. Term Loan Borrowing Base..........................................37
8. Default..................................................................37
8.1. Events of Default.................................................37
(a) Payments......................................................37
(b) Covenants.....................................................37
(c) Representations, Warranties...................................37
(d) Bankruptcy....................................................37
(e) Certain Other Defaults........................................37
(f) Judgments.....................................................38
(g) Attachments...................................................38
(h) ERISA.........................................................38
(i) Security Interests............................................38
(j) Material Adverse Change.......................................38
(k) Change in Control.............................................38
9. Collateral...............................................................39
-iii-
<PAGE>
9.1. Collateral........................................................39
9.2. Release of Collateral.............................................39
10. Agent...................................................................40
10.1. Appointment and Authorization....................................40
10.2. Duties and Obligations...........................................40
10.3. First Union as a Bank............................................41
10.4. Independent Credit Decisions.....................................41
10.5. Indemnification..................................................41
10.6. Successor Agent..................................................42
10.7. Allocations Made By First Union..................................42
11. Miscellaneous...........................................................42
11.1. Waiver...........................................................42
11.2. Amendments.......................................................42
11.3. Governing Law....................................................43
11.4. Participations and Assignments...................................43
11.5. Captions.........................................................43
11.6. Notices..........................................................43
11.7. Sharing of Collections, Proceeds and Set-Offs;
Application of Payments.......................................43
11.8. Expenses; Indemnification........................................45
11.9. Survival of Warranties and Certain Agreements....................45
11.10. Severability.....................................................45
11.11. Banks' Obligations Several; Independent
Nature of Banks' Rights.......................................45
11.12. No Fiduciary Relationship........................................46
11.13. CONSENT TO JURISDICTION AND SERVICE OF PROCESS...................46
11.14. ARBITRATION, WAIVER OF JURY TRIAL................................46
11.15. Counterparts; Effectiveness......................................47
11.16. Use of Defined Terms.............................................47
11.17. Offsets..........................................................47
11.18. Entire Agreement.................................................47
11.20. Consolidated Basis...............................................47
- -----------------------------------------------------------------------
EXHIBIT A-1 REVOLVING LOAN COMMITMENTS AND PERCENTAGES
EXHIBIT A-2 TERM LOAN COMMITMENTS AND PERCENTAGES
EXHIBIT B-1 REVOLVING NOTE
EXHIBIT B-1 TERM NOTE
EXHIBIT C FIRST PREFERRED SHIP MORTGAGE
EXHIBIT D PLEDGE AGREEMENT
EXHIBIT E ACCOUNTS AND GENERAL INTANGIBLES SECURITY AGREEMENT
EXHIBIT F ASSIGNMENT OF INSURANCE PROCEEDS
SCHEDULE 1 DISCLOSURE SCHEDULE
SCHEDULE 2 COLLATERAL SCHEDULE
SCHEDULE 3 APPLICABLE MARGINS, COMMITMENT FEE
-iv-
<PAGE>
Credit Agreement
This Credit Agreement, dated February 25, 1999, is entered into by and
among THE HOLT GROUP, INC., a Delaware corporation ("Holt Group"), HOLT CARGO
SYSTEMS, INC., a Delaware corporation ("Cargo"), HOLT HAULING AND WAREHOUSING
SYSTEM, INC., a Pennsylvania corporation ("Hauling"), MURPHY MARINE SERVICES,
INC., a Delaware corporation ("Murphy"), NPR HOLDING CORPORATION, a Delaware
corporation ("NPR Holding"), NPR, INC., a Delaware corporation ("NPR, Inc."),
NPR-NAVIERAS RECEIVABLES, INC., a Delaware corporation ("NPR- Navieras"), NPR
S.A., Inc., a Delaware corporation ("NPR S.A."), SAN JUAN INTERNATIONAL
TERMINALS, INC., a Delaware corporation ("San Juan"), S.J.I.T., INC., a Delaware
corporation ("SJIT"), and WILMINGTON STEVEDORES, INC., a Delaware corporation
("Wilmington"), (together, sometimes referred to herein as the "Holt Companies"
and individually, as a "Holt Company"), the lending institutions signatories
hereto and named in Exhibit A attached hereto and such other institutions that
hereafter become a "Bank" pursuant to ss.10.4 hereof (collectively, the "Banks"
and individually, a "Bank") and First Union National Bank, a national banking
association, as agent for the Banks under this Agreement ("First Union", which
shall mean its capacity as agent unless specifically stated otherwise). This
Agreement amends and restates in its entirety the Credit Agreement, dated
November 17, 1998, among the Holt Companies and the Banks with First Union as
agent.
Preliminary Statement
WHEREAS, Holt Group is the owner of all of the issued and outstanding
shares of capital stock of Cargo, Hauling, Murphy, NPR Holding, San Juan, SJIT
and Wilmington.
WHEREAS, Holt Group is the owner of all of the issued and outstanding
shares of capital stock of The Riverfront Development Corporation, a New Jersey
corporation ("Riverfront").
WHEREAS, NPR Holding is the owner of all of the issued and outstanding
shares of capital stock of NPR-Navieras and NPR S.A.
WHEREAS, NPR-Navieras is the owner of all of the issued and outstanding
shares of capital stock of NPR, Inc.
WHEREAS, the Holt Companies have been adversely affected by Hurricane
Georges in September 1998, have suffered substantial losses, have made claims
under American International Insurance Company of Puerto Rico Policy No.
026-16761 for payment of certain losses incurred, and require funds to make
repairs and conduct their business pending the resolution and final payment of
said claims under said insurance policy.
WHEREAS, the Holt Companies, jointly and severally, have requested, and the
Banks have agreed, that an amended and restated credit facility as herein
described be established for their joint benefit, under the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and promises hereinafter
set forth and intending to be legally bound hereby, the parties hereto agree as
follows:
-1-
Credit Agreement February 25, 1999
<PAGE>
1. Certain Definitions
1.1 Definitions.
"1995 Credit Agreement" shall mean that certain Loan Agreement, dated July
20, 1995, among Cargo, Hauling, Murphy, Riverfront, Wilmington and various
affiliates, and First Union National Bank, successor by merger to CoreStates
Bank, N.A. (CoreStates Bank, N.A. itself being successor by merger to Meridian
Bank).
"1997 Credit Agreement" shall mean that certain Credit Agreement, dated
November 20, 1997, among the Holt Companies, Riverfront and First Union National
Bank, successor by merger to CoreStates Bank, N.A.
"Additional Amount" shall have the meaning set forth in ss.2.8(e).
"Adjusted EBIT" shall mean Adjusted Net Income plus interest expense and
taxes for the period in question.
"Adjusted EBITDA" shall mean Adjusted EBIT plus expenses for depreciation
and amortization for the period in question.
"Adjusted Funded Debt" shall mean (i) Indebtedness for Money Borrowed of
The Holt Group, Inc. and its consolidated subsidiaries excluding Indebtedness
for Money Borrowed by Riverfront, and (ii) all liabilities of The Holt Group,
Inc. and its consolidated subsidiaries in connection with letter of credit
reimbursement agreements excluding liabilities of Riverfront in connection with
letter of credit reimbursement agreements.
"Adjusted Net Income" shall mean Net Income as defined in accordance with
GAAP with the following adjustments: (i) deduction of the Net Income, if any, of
Riverfront, (ii) addition for Fiscal Year 1998 of the charges incurred in
connection with the Transroll Navieras Express, Inc. ("TNX") joint venture,
(iii) deduction of any net income from Extraordinary Items and (iv) addition of
any net losses from Extraordinary Items.
"Adjusted Net Worth" shall mean Net Worth minus (i) earned surplus/retained
earnings attributable to Riverfront, and (ii) unrealized gains in marketable
securities attributable to investments of Riverfront.
"Affiliate" shall mean any Person: (1) which directly or indirectly
controls, or is controlled by, or is under common control with any Holt Company;
(2) which directly or indirectly beneficially owns or holds ten percent (10%) or
more of any class of voting stock of any Holt Company; or (3) ten percent (10%)
or more of whose voting stock is directly or indirectly owned or held by any
Holt Company. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract, or
otherwise. For purposes hereof, Atlantic Container Line Aktiebolag, a Swedish
corporation, FastShip, Inc., a Delaware corporation, and Emerald Equipment
Leasing, Inc. shall not be deemed affiliates.
"Affiliate Transaction" shall have the meaning set forth in ss.6.9.
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Credit Agreement February 25, 1999
<PAGE>
"Agreement" shall mean this Credit Agreement, as amended, supplemented,
modified, replaced, substituted for or restated from time to time and all
exhibits and schedules attached hereto.
"Assignment of Insurance Claims" shall mean the Assignment of Insurance
Claims in the form and substance attached hereto as Exhibit F.
"Base Rate" shall mean, for any day, the higher of the Federal Funds Rate
plus 1/2 of 1% or the prime commercial lending rate of First Union National
Bank, as announced from time to time at its head office, calculated on the basis
of the actual number of days elapsed in a year of 360 days.
"Base Rate Margin" shall have the meaning set forth in Schedule 3 attached
to this Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday, or other
day on which commercial banks in Philadelphia are authorized or required to
close under the laws of the Common-wealth of Pennsylvania.
"Capital Lease" shall mean all lease obligations of any Person for any
property (whether real, personal or mixed) which have been or should be
capitalized on the books of the lessee in accordance with Generally Accepted
Accounting Principles.
"Capitalized Lease Obligations" with respect to any Person, shall mean the
aggregate amount which, in accordance with GAAP, is required to be reported as a
liability on the balance sheet of such Person at such time in respect of such
Person's interest as lessee under a Capital Lease.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and all rules and regulations with respect thereto in effect from time
to time.
"Collateral" shall have the meaning set forth in ss.9.1.
"Compliance Certificate" shall mean a certificate with respect to the
compliance by the Holt Companies with the provisions of this Agreement and the
other Loan Documents, including calculations with respect to compliance with the
financial covenants set forth in Article 7 hereof. The Compliance Certificate
shall be in the form and substance requested by First Union, as such may be
modified from time to time, and shall be signed by the chief financial officer,
treasurer or controller of The Holt Group, Inc.
"CPLTD" shall mean the amounts payable within the next twelve months in
respect of Long Term Debt but shall exclude any amounts payable under this
Agreement. Long Term Debt for purposes of this definition shall mean
Indebtedness for Money Borrowed which was payable over a period of more than
twelve months at the time the Indebtedness for Money Borrowed was incurred.
"Debt" shall mean, as of any date of determination with respect to the Holt
Companies, without duplication, (i) all items which in accordance with Generally
Accepted Accounting Principles would be included in determining total
liabilities as shown on the liability side of a consolidated balance sheet of
the Holt Companies as of the date on which Debt is to be determined, (ii) all
indebtedness of others with respect to which any Holt Company has become liable
by way of a guarantee or endorsement (other than for collection or deposit in
the ordinary course of business), (iii) all liabilities of any Holt Company in
connection with letter of credit reimbursement obligations, and
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Credit Agreement February 25, 1999
<PAGE>
(iv) lease obligations that, in conformity with GAAP, have been capitalized
on the Holt Companies' consolidated balance sheet.
"Default Rate" on any Loan shall mean the higher of 2% per annum above the
Base Rate or 2% per annum above the rate of interest otherwise in effect for
such Loan (whether a Revolving Loan or a Term Loan).
"Dollars" shall mean the lawful currency of the United States of America.
"Environmental Control Statutes" shall mean each and every applicable
federal, state, county or municipal environmental statute, ordinance, rule,
regulation, order, directive or requirement, together with all successor
statutes, ordinances, rules, regulations, orders, directives or requirements, of
any Governmental Authority, including without limitation laws in any way related
to Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
"ERISA Affiliate" shall mean any corporation which is a member of the same
controlled group of corporations as any Holt Company within the meaning of
ss.414(b) of the Code, or any trade or business which is under common control
with any Holt Company within the meaning of ss.414(c) of the Code.
"Event of Default" shall have the meaning set forth in ss.8.1.
"Exempt Affiliate Transaction" shall mean (a) customary employee compensation
arrangements approved by a majority of independent (as to such transactions)
members of the board of directors of a Holt Company, (b) dividends
expressly permitted under the terms of ss.6.7 hereof and payable, in form and
amount, on a pro rata basis to all holders of common stock of The Holt Group,
Inc., and (c) transactions solely between or among the Holt Companies.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that if the day for which such rate is to be determined is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day.
"First Preferred Ship Mortgage" shall mean the First Preferred Ship Mortgage in
the form and substance attached hereto as Exhibit C.
"Fiscal Quarter" shall mean a fiscal quarter of the Holt Companies, which shall
be any quarterly period ending on March 31, June 30, September 30 or December 31
of any year.
"Fiscal Year" shall mean a fiscal year of the Holt Companies, which shall end
on the last day of December.
"Fixed Charges" shall mean interest expense plus CPLTD plus Unfunded
Capital Expenditures.
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Credit Agreement February 25, 1999
<PAGE>
"Generally Accepted Accounting Principles" or "GAAP" shall mean generally
accepted accounting principles as in effect from time to time in the United
States, consistently applied.
"Governmental Authority" shall mean the federal, state, county or municipal
government, or any department, agency, bureau or other similar type body
obtaining authority therefrom or created pursuant to any laws, including without
limitation Environmental Control Statutes.
"Hazardous Substances" shall mean without limitation, any regulated substance,
toxic substance, hazardous substance, hazardous waste, pollution, pollutant or
contaminant, as defined or referred to in the Resource Conservation and Recovery
Act, as amended, 15 U.S.C., ss.2601 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act, 33 U.S.C. ss.1251 et seq.; the federal
underground storage tank law, Subtitle I of the Resource Conservation and
Recovery Act, as amended, P.L. 98-616, 42 U.S.C. ss.6901 et seq.; together with
any amendments thereto, regulations promulgated thereunder and all substitutions
thereof, as well as words of similar purport or meaning referred to in any other
federal, state, county or municipal environmental statute, ordinance, rule or
regulation.
"Indebtedness for Borrowed Money" shall mean all indebtedness, liabilities, and
obligations, now existing or hereafter arising, for money borrowed by any Holt
Company or any Subsidiary, whether or not evidenced by any note, indenture, or
agreement (including, without limitation, the Note and any indebtedness for
money borrowed from an Affiliate). Indebtedness for Borrowed Money shall not
include amounts payable between any Holt Company and any Affiliate where the
obligation arose in connection with the delivery of goods or services in the
ordinary course of business.
"Insurance Claims" shall mean claims made by NPR, Inc. under American
International Insurance Company of Puerto Rico Policy No. 026-16761 in
connection with covered losses for property damage, business interruption and
other losses as a result of direct physical loss or damage to property described
in the policy, subject to certain exclusions, which claims (i) relate to damage
incurred principally as a result of Hurricane Georges in September 1998, (ii)
have not been disallowed, (iii) have not been paid and (iv) if any advances are
made by the insurer, are net of any and all such advances.
"Interest Period" shall mean with respect to any LIBO Rate Loan, each period
commencing on the date any such Loan is made, or, with respect to a Loan being
renewed, the last day of the next preceding Interest Period with respect to a
Loan, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day of the calendar month) in the
first, second, third or sixth calendar month thereafter as selected under the
procedures specified in ss. in the case of Revolving Loans or the first calendar
month thereafter in the case of Term Loans, if the Banks are then offering LIBO
Rate Loans for such period; provided that each LIBO Rate Loan Interest Period
which would otherwise end on a day which is not a Business Day (or, for purposes
of Loans to be repaid on a London Business Day, such day is not a London
Business Day) shall end on the next succeeding Business Day (or London Business
Day, as appropriate) unless such next succeeding Business Day (or London
Business Day, as appropriate) falls in the next succeeding calendar month, in
which case the Interest Period shall end on the next preceding Business Day (or
London Business Day, as appropriate).
"Investment" in any Person shall mean without duplication (a) the acquisition
(whether for cash, property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of such Person; (b) any deposit with, or advance, loan
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Credit Agreement February 25, 1999
<PAGE>
or other extension of credit to, such Person (other than any such deposit,
advance, loan or extension of credit having a term not exceeding 180 days in the
case of unaffiliated Persons and 365 days in the case of Affiliates representing
the purchase price of inventory or supplies purchased in the ordinary course of
business) or guarantee or assumption of, or other contingent obligation with
respect to, Indebtedness for Borrowed Money or other liability of such Person;
and (c) (without duplication of the amounts included in (a) and (b)) any amount
that may, pursuant to the terms of such investment, be required to be paid,
deposited, advanced, lent or extended to or guaranteed or assumed on behalf of
such Person.
"Letter of Credit" shall have the meaning set forth in ss.2.1(b).
"LIBO Rate" shall mean, for the applicable Interest Period, (i) the rate,
rounded upwards to the next one-sixteenth of one percent, determined by First
Union three London Business Days prior to the date of the corresponding LIBO
Rate Loan, at which First Union National Bank, individually, is offered deposits
in dollars at approximately 11:00 A.M., London time by leading banks in the
interbank eurodollar or eurocurrency market for delivery on the date of such
Loan in an amount and for a period comparable to the amount and Interest Period
of such Loan and in like funds, divided by (ii) a number equal to one (1.0)
minus the LIBO Rate Reserve Percentage. The LIBO Rate shall be adjusted
automatically with respect to any LIBO Rate Loan outstanding on the effective
date of any change in the LIBO Rate Reserve Percentage, as of such effective
date. LIBO Rate shall be calculated on the basis of the actual number of days
elapsed in a year of 360 days.
"LIBO Rate Loans" shall mean Loans accruing interest based on the LIBO Rate.
"LIBO Rate Margin" shall have the meaning set forth in Schedule 3 attached to
this Agreement.
"LIBO Rate Reserve Percentage" shall mean, for any LIBO Rate Loan for any
Interest Period therefor, the daily average of the stated maximum rate
(expressed as a decimal) at which reserves (including any marginal,
supplemental, or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by the Bank against "Eurocurrency
liabilities" (as such term is used in Regulation D) but without benefit of
credit proration, exemptions, or offsets that might otherwise be available to
the Bank from time to time under Regulation D. Without limiting the effect of
the foregoing, the LIBO Rate Reserve Percentage shall reflect any other reserves
required to be maintained by the Bank against (1) any category of liabilities
which includes deposits by reference to which the rate for LIBO Rate Loans is to
be determined; or (2) any category of extension of credit or other assets which
include LIBO Rate Loans.
"Lien" shall mean any lien, mortgage, security interest, chattel mortgage,
pledge or other encumbrance (statutory or otherwise) of any kind securing
satisfaction of an obligation of any Holt Company or any Subsidiary of any Holt
Company, including any agreement to give any of the foregoing, any conditional
sales or other title retention agreement, and the filing of or the agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction or similar evidence of any encumbrance, whether within or outside
the United States.
"Loan" or "Loans" shall mean the meanings set forth in ss.2.1.
"Loan Documents" shall mean this Agreement, the Notes, any Security Agreement
and all other documents directly related or incidental to said documents, the
Loans or the Collateral.
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Credit Agreement February 25, 1999
<PAGE>
"London Business Day" shall mean any Business Day on which banks in London,
England are open for business.
"Material Adverse Change" shall mean any event or condition which (a) is
reasonably likely to result in a material adverse change in the financial
condition, assets, operations or prospects of the Holt Companies taken as a
group, or (b) gives reasonable grounds to conclude that any Holt Company will
not be able to perform or observe (in the normal course) its obligations under
the Loan Documents to which it is a party, including but not limited to the
Notes.
"Material Adverse Effect" shall mean any event or condition which (a) is
reasonably likely to have a material adverse effect on the financial condition,
assets, operations or prospects of the Holt Companies taken as a group, (b)
gives reasonable grounds to conclude that any Holt Company will not be able to
perform its obligations under the Loan Documents to which it is a party,
including but not limited to the Notes, or (c) is reasonably likely to affect
legality, validity or enforceability of this Agreement or the Notes or the
rights and remedies of the holder(s) of the Loans.
"Multiemployer Plan" shall mean a multiemployer plan as defined in ERISA
ss.4001(a)(3), which covers employees of any Holt Company or any ERISA
Affiliate.
"Net Worth" shall mean Net Worth as defined in accordance with GAAP.
"Note" and "Notes" shall have the meanings set forth in ss.2.2.
"Obligations" shall mean all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every kind,
matured or unmatured, direct or contingent, owing, arising, due, or payable to
the Banks or First Union, by or from any Holt Company arising out of this
Agreement or any other Loan Document, including, without limitation, all
obligations to repay principal of and interest on the Loans, and to pay
interest, fees, costs, charges, expenses, professional fees, and all sums
chargeable to any Holt Company or for which any Holt Company is liable as
indemnitor under the Loan Documents, whether or not evidenced by any note or
other instrument.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any successor
thereto.
"Pension Plan" shall mean, at any time, any Plan (including a Multiemployer
Plan), the funding requirements of which (under ERISA ss.302 or Code ss.412)
are, or at any time within the six years immediately preceding the time in
question, were in whole or in part, the responsibility of any Holt Company or
any ERISA Affiliate.
"Permitted Liens" shall mean (a) any Liens for current taxes, assessments and
other governmental charges not yet due and payable or being contested in good
faith by any Holt Company by appropriate proceedings and for which adequate
reserves have been established by the Holt Company as reflected in the Holt
Companies' consolidated financial statements; (b) any mechanic's, materialman's,
carrier's, warehousemen's or similar Liens for sums not yet due or being
contested in good faith by any Holt Company by appropriate proceedings and for
which adequate reserves have been established by the Holt Company as reflected
in the Holt Companies' consolidated financial statements; (c) easements,
rights-of-way, restrictions and other similar encumbrances on the real property
or fixtures of any Holt Company incurred in the ordinary course of business
which individually or in the aggregate are not substantial in amount and which
do not in any case materially detract from the value or marketability of the
property subject thereto or interfere with the ordinary
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Credit Agreement February 25, 1999
<PAGE>
conduct of the business of any Holt Company; (d) Liens (other than Liens
imposed on any property of any Holt Company pursuant to ERISA or ss.412 of the
Code) incurred or deposits made in the ordinary course of business, including
Liens in connection with workers' compensation, unemployment insurance and other
types of social security and Liens to secure performance of tenders, statutory
obligations, surety and appeal bonds (in the case of appeal bonds such Liens
shall not secure any reimbursement or indemnity obligation in an amount greater
than $250,000), bids, leases that are not Capital Leases, performance bonds (in
the case of performance bonds such Liens shall not secure any reimbursement or
indemnity obligation in an amount greater than $1,000,000 in the aggregate),
sales contracts and other similar obligations, in each case, not incurred in
connection with the obtaining of credit or the payment of a deferred purchase
price, and which do not, in the aggregate, result in a Material Adverse Effect;
(e) Liens, if any, existing on the date hereof and listed in Schedule 1 hereto;
(f) Liens related to any capital lease obligations and/or purchase money
security interests limited to assets so leased, purchased, or financed, the
aggregate unpaid balance of which shall not at any time exceed the sum of (1)
$10,000,000 and (2) the unpaid balance of such items in existence at the date
hereof and set forth in Schedule 1 hereto; (g) Liens in the leasehold interests
of the Holt Companies and any of them in any equipment leased from Emerald
Equipment Leasing, Inc. and in the leases themselves; and (h) liens in favor of
First Union, as Agent, in the Collateral contemplated by this Agreement and the
other Loan Documents.
"Person" shall mean any individual, corporation, partnership, joint venture,
association, company, business trust or entity, or other entity of whatever
nature.
"Plan" shall mean an employee benefit plan as defined in ss.3(3) of ERISA,
other than a Multiemployer Plan, whether formal or informal and whether legally
binding or not.
"Pledge Agreement" shall have mean the Pledge Agreement in the form and
substance attached hereto as Exhibit D.
"Potential Default" shall mean an event, condition or circumstance that with
the giving of notice or lapse of time or both would become an Event of Default.
"Prohibited Transaction" shall mean a transaction that is prohibited under Code
ss.4975 or ERISA ss.406 and not exempt under Code ss.4975 or ERISA ss.408.
"Regulation" shall mean any statute, law, ordinance, regulation, order or rule
of any United States or foreign, federal, state, local or other government or
governmental body, including, without limitation, those covering or related to
banking, financial transactions, securities, public utilities, environmental
control, energy, safety, health, transportation, bribery, record keeping,
zoning, antidiscrimination, antitrust, wages and hours, employee benefits, and
price and wage control matters.
"Regulation D" shall mean Regulation D of the Board of Governors of the Federal
Reserve System, as it may be amended from time to time.
"Regulatory Change" shall mean any change after the date of this Agreement in
any Regulation (including Regulation D) or the adoption or making after such
date of any interpretations, directives or requests of or under any Regulation
(whether or not having the force of law) by any court or
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Credit Agreement February 25, 1999
<PAGE>
governmental or monetary authority charged with the interpretation or
administration thereof applying to a class of banks including any one of the
Banks but excluding any foreign office of any Bank.
"Release" shall mean without limitation, the presence, leaking, leaching,
pouring, emptying, discharging, spilling, using, generating, manufacturing,
refining, transporting, treating, or storing of Hazardous Substances at, into,
onto, from or about the property or the threat thereof, regardless of whether
the result of an intentional or unintentional action or omission, and which is
in violation of any applicable law, including Environmental Control Statutes.
"Reportable Event" shall mean, with respect to a Pension Plan: (a) any of the
events set forth in ERISA Sections 4043(b) (other than a reportable event as to
which the provision of 30 days' notice to the PBGC is waived under applicable
regulations) or 4063(a) or the regulations thereunder, (b) an event requiring
any Holt Company or any ERISA Affiliate to provide security to a Pension Plan
under Code ss.401(a)(29) and (c) any failure by any Holt Company or any ERISA
Affiliate to make payments required by Code ss.412(m).
"Request for Advance" shall have the meaning set forth in ss.2.3.
"Required Banks" at any time shall mean Banks whose Revolving Loan Commitments
and Term Loan Commitments equal or exceed 66 2/3% of the Aggregate Revolving
Loan Commitment and Aggregate Term Loan Commitment taken together, if no Loans
are outstanding or, if Loans are outstanding, Banks whose outstanding Loans
equal or exceed 66 2/3% of the Loans (Revolving Loans and Term Loans).
"Revolving Credit Termination Date" shall have the meaning set forth in ss.2.2.
"Revolving Loan" or "Revolving Loans" shall mean the meanings set forth in
ss.2.1.
"Revolving Loan Commitment" shall have the meaning set forth in ss.2.1.
"Revolving Loan Commitment Fee" shall have the meaning set forth in ss.2.5.
"Revolving Note" and "Revolving Notes" shall have the meanings set forth in
ss.2.2.
"Security Agreement" shall mean the Accounts and General Intangibles Security
Agreement in the form and substance attached hereto as Exhibit E.
"Solvent" shall mean, with respect to any Person, that the aggregate present
fair saleable value of such Person's assets is in excess of the total amount of
its probable liabilities on its existing debts as they become absolute and
matured, such Person has not incurred debts beyond its foreseeable ability to
pay such debts as they mature, and such Person has capital adequate to conduct
the business it is presently engaged in or is about to engage in.
"Subsidiary" shall mean a corporation or other entity the shares of stock or
other equity interests of which having ordinary voting power (other than stock
or other equity interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or
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Credit Agreement February 25, 1999
<PAGE>
other managers of such corporation are at the time owned, or the management of
which is otherwise controlled, directly or indirectly through one or more
intermediaries or both, by any Holt Company. Emerald Equipment Leasing, Inc.
shall not be deemed a subsidiary.
"Taxes" shall have the meaning set forth in ss.2.8.(d).
"Term Credit Termination Date" shall have the meaning set forth in ss.2.2.
"Term Loan" or "Term Loans" shall mean the meanings set forth in ss.2.1.
"Term Loan Borrowing Base" shall mean 50% of the unpaid Insurance Claims.
"Term Loan Commitment" shall have the meaning set forth in ss.2.1.
"Term Loan Commitment Fee" shall have the meaning set forth in ss.2.5.
"Term Note" and "Term Notes" shall have the meanings set forth in ss.2.2.
"Termination Event" shall mean, with respect to a Pension Plan: (a) a
Reportable Event, (b) the termination of a Pension Plan, or the filing of a
notice of intent to terminate a Pension Plan, or the treatment of a Pension Plan
amendment as a termination under ERISA ss.4041(c), (c) the institution of
proceedings to terminate a Pension Plan under ERISA ss.4042 or (d) the
appointment of a trustee to administer any Pension Plan under ERISA ss.4042.
"Unfunded Capital Expenditures" shall mean capital expenditures other than
capital expenditures financed as contemplated in ss.6.10(iii).
"Unfunded Pension Liabilities" shall mean, with respect to any Pension Plan at
any time, the amount, if any, determined by taking the accumulated benefit
obligation, as disclosed in accordance with Statement of Accounting Standards
No. 87, and deducting the fair market value of Pension Plan assets.
"Unrecognized Retiree Welfare Liability" shall mean, with respect to any Plan
that provides post-retirement benefits other than pension benefits, the amount
of the accumulated post-retirement benefit obligation, as determined in
accordance with Statement of Financial Accounting Standards No. 106, as of the
most recent valuation date. Prior to the date such statement is applicable to
any Holt Company, such amount of the obligation shall be based on an estimate
made in good faith.
"Vessel" shall mean the assets listed and described in Schedule 2 attached
herein which are subject to First Preferred Ship Mortgages in favor of First
Union National Bank, as Agent, to secure repayment of Loans and Letters of
Credit made and outstanding hereunder.
"Year 2000 Problem" shall mean the risk that the Holt Companies' computer
applications or systems or other technologies, or those of the key vendors,
suppliers or customers of either of them, may be unable to accurately process,
calculate, compare, and sequence date or time data from, into, or between the
20th and 21st centuries, or the years 1999 and 2000, or with regard to leap year
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Credit Agreement February 25, 1999
<PAGE>
calculations, or otherwise function properly and unimpaired with respect to all
calendar dates falling on or after January 1, 2000.
1.2. Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with Generally Accepted Accounting
Principles consistent with those applied in the preparation of the financial
statements referred to in ss.3.5, and all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
2. The Credit
2.1. Credit Facilities.
(a) Revolving Loans. Subject to the terms and conditions herein set
forth, each Bank agrees, severally and not jointly, to make revolving loans
(herein called individually a "Revolving Loan" and collectively, the
"Revolving Loans", and together with the Term Loans, a "Loan" and
collectively, the "Loans") to the Holt Companies during the period beginning
on the date hereof and ending on the Revolving Credit Termination Date in
amounts not to exceed at any time outstanding (together with each Bank's
share of all Letters of Credit outstanding) the commitment amount set forth
opposite the name of such Bank on Exhibit A-1 hereto (each such amount, as
the same may be reduced pursuant to ss.2.6 or ss.2.10 being hereinafter
called such Bank's "Revolving Loan Commitment"). The Banks' collective
commitment to make Revolving Loans shall be the "Aggregate Revolving Loan
Commitment"). The maturity date of each Revolving Note, as provided in ss.2.2
below, shall be the Revolving Credit Termination Date. All Revolving Loans
shall be made by the Banks simultaneously and pro rata in accordance with
their respective Revolving Loan Commitments. All Revolving Loans shall be
made to the Holt Companies at the primary office of First Union in
Philadelphia located at Broad and Chestnut Streets, Philadelphia,
Pennsylvania 19101.
Notwithstanding the foregoing, the Holt Companies shall not be entitled
to any Revolving Loan if, after giving effect to such Revolving Loan, the
aggregate unpaid amount of all Revolving Loans, when added to the aggregate
amount of Letters of Credit outstanding as provided below, would exceed the
Aggregate Revolving Loan Commitment. Within the limit of the Aggregate
Revolving Loan Commitment, the Holt Companies may borrow, prepay and
reborrow. Each Revolving Loan shall be in the minimum principal amount of
$1,000,000.
(b) Term Loans. Subject to the terms and conditions herein set forth,
each Bank agrees, severally and not jointly, to make term loans (herein
called individually a "Term Loan" and collectively, the "Term Loans", and
together with the Revolving Loans, a "Loan" and collectively, the "Loans") to
the Holt Companies during the period beginning on the date hereof and ending
on the Term Credit Termination Date in amounts not to exceed at any time
outstanding the commitment amount set forth opposite the name of such Bank on
Exhibit A-2 hereto (each such amount, as the same may be reduced pursuant to
ss.2.6 or ss.2.10 being hereinafter called such Bank's "Term Loan
Commitment"). The Banks' collective commitment to make Term Loans shall be
the "Aggregate Term Loan Commitment"). The maturity date of each Term Note,
as provided in ss.2.2 below, shall be the Term Credit Termination Date. All
Term Loans shall be made by the Banks simultaneously and pro rata in
accordance with their respective Term Loan Commitments. All Term Loans shall
be made to the Holt Companies at the primary office of First Union in
Philadelphia located at Broad and Chestnut Streets, Philadelphia,
Pennsylvania 19101.
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Credit Agreement February 25, 1999
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Notwithstanding the foregoing, the Holt Companies shall not be entitled
to any Term Loan if, after giving effect to such Term Loan, the aggregate
unpaid amount of all Term Loans would exceed the Aggregate Term Loan
Commitment. Prepayments and repayments of Term Loans shall automatically
reduce the Aggregate Term Loan Commitment and proportionally, the Term Loan
Commitment of each Bank. Amounts prepaid or paid may not be reborrowed. Each
Term Loan shall be in the minimum principal amount of $1,000,000.
(c) Letters of Credit. First Union, under the terms and subject to the
conditions of this Agreement, on behalf of itself and each other Bank in the
same proportions as each Bank's Revolving Loan Commitment bears to the
Aggregate Revolving Loan Commitment, shall provide letters of credit at the
request and for the account of the Holt Companies, from time to time prior to
the Revolving Credit Termination Date, as requested by the Holt Companies,
provided that:
(i) the aggregate amount of Letters of Credit outstanding at any one
time shall not exceed ten million dollars ($10,000,000), at any time hereafter,
or such lesser amount, if any, as will, when added to the amount of all
Revolving Loans then outstanding, aggregate the then existing Revolving
Aggregate Loan Commitment;
(ii) no Letter of Credit shall be issued after the Revolving Credit
Termination Date and no Letter of Credit shall be for a term longer than one
year; and
(iii) Letters of Credit shall be issued primarily to support
insurance premium requirements of any one or more of the Holt Companies.
As used in this Agreement, "Letter of Credit" shall mean only those
letters of credit issued pursuant to a completed application on the form of
letter of credit application required by First Union at the time of the
request for each Letter of Credit. If and to the extent that any provision of
any letter of credit application required by First Union shall be
inconsistent with or otherwise be in conflict with this Agreement, this
Agreement shall govern.
Letters of Credit issued and currently outstanding in the aggregate
amount of $6,325,000 pursuant to the 1995 Credit Agreement and the 1997
Credit Agreement shall be deemed to be Letters of Credit for purposes of this
Agreement for so long as they shall continue in effect and shall be included
in the calculation of Letters of Credit outstanding hereunder.
The Holt Companies shall request a Letter of Credit by delivering a
completed letter of credit application to First Union not less than one
Business Day prior to the date specified by the Holt Companies as the date
the Letter of Credit is to be issued.
Letters of Credit shall not bear interest until drawn upon. Letters of
Credit for commercial purposes shall each be subject to a fee payable to
First Union National Bank, for its own account, said fee to be based on its
issuance charges as in effect from time to time. Letters of Credit which are
standby in nature shall each be subject to an annual charge, payable
quarterly in arrears from the date of issuance, equal to (a) 200 basis points
(2.00%) times the aggregate amount of all standby Letters of Credit
outstanding which shall be shared among the Banks pro rata in the same
proportions that each Bank's Loan Commitment bears to the Aggregate Loan
Commitment, and (b) 12.5 basis points (1/8 of 1%) times the face amount of
each standby Letter of Credit outstanding which shall be payable to the
issuing Bank.
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Credit Agreement February 25, 1999
<PAGE>
Within the foregoing limit, the Holt Companies may request issuance of
Letters of Credit, reimburse First Union upon a drawing thereunder and
request new issuances. If any obligation of the Holt Companies to pay money
in connection with any Letter of Credit is not met when requested by First
Union, as permitted by the applicable letter of credit application and the
reimbursement agreement contained therein, the amount due shall be funded
automatically by a Revolving Loan which Revolving Loan shall be made without
regard to any minimum borrowing requirement, condition precedent herein, or
Event of Default hereunder which would otherwise entitle any Bank or the
Banks not to provide such Revolving Loan, and each Bank shall make its
proportionate share of such Revolving Loan. Any obligation of the Holt
Companies to pay money in connection with any Letter of Credit shall be
secured as if made as a Revolving Loan hereunder. In the event the Holt
Companies shall terminate the Aggregate Revolving Loan Commitment as provided
in ss.2.6 and shall pay the outstanding principal amount of all Revolving
Loans in full and with interest or the Revolving Credit Termination Date
shall occur at a time when one or more Letters of Credit remain outstanding,
then the Holt Companies shall furnish to First Union, within three Business
Days such amount of cash, to be held as cash collateral and invested in
certificates of deposit of First Union National Bank, as will pay the maximum
amount which may be drawn by beneficiaries of Letters of Credit outstanding
at the date of such termination or Revolving Credit Termination Date, as
applicable.
2.2. The Notes.
(a) Revolving Notes. The Revolving Loans made by each Bank shall be
evidenced by a single promissory note of the Holt Companies under which they
shall be jointly and severally liable (each such promissory note as it may be
amended, extended, modified, restated, replaced, substituted for or renewed,
being referred to herein as a "Revolving Note" and all Revolving Notes
together as the "Revolving Notes", and together with the Term Notes as a
"Note" and together with all Term Notes as the "Notes") in principal face
amount equal to such Bank's Revolving Loan Commitment payable to the order of
such Bank and otherwise in the form attached hereto as Exhibit B-1. Each
Revolving Note shall be dated its date of issuance, shall bear interest at
the rate per annum and be payable as to principal and interest in accordance
with the terms hereof. Each Revolving Note shall mature on the earliest to
occur of (i) the date the maturity of the Notes are accelerated as provided
in ss.8.1 hereof, or (ii) November 17, 2001 (this date to be deemed the
"Revolving Credit Termination Date"). Upon maturity, the Revolving Loans
evidenced by each Bank's Revolving Note shall be due and payable. Each Bank
shall maintain records of all Revolving Loans by it and evidenced by its
Revolving Note and of all payments thereon, which records shall be conclusive
absent manifest error.
(b) Term Notes. The Term Loans made by each Bank shall be evidenced by a
single promissory note of the Holt Companies under which they shall be
jointly and severally liable (each such promissory note as it may be amended,
extended, modified, restated, replaced, substituted for or renewed, being
referred to herein as a "Term Note" and all Term Notes together as the "Term
Notes", and together with the Revolving Notes as a "Note" and together with
all Term Notes as the "Notes") in principal face amount equal to such Bank's
Term Loan Commitment payable to the order of such Bank and otherwise in the
form attached hereto as Exhibit B-2. Each Term Note shall be dated its date
of issuance, shall bear interest at the rate per annum and be payable as to
principal and interest in accordance with the terms hereof. Each Term Note
shall mature on the earliest to occur of (i) the date the maturity of the
Notes are accelerated as provided in ss.8.1 hereof, or (ii) December 31, 1999
(this date to be deemed the "Term Credit Termination Date"). Upon maturity,
the Term Loans evidenced by each Bank's Term Note shall be due and payable.
Each Bank shall maintain
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Credit Agreement February 25, 1999
<PAGE>
records of all Term Loans by it and evidenced by its Term Note and of
all payments thereon, which records shall be conclusive absent manifest
error.
2.3. Funding Procedures.
(a) Requests for Advance. Each request for a Loan or the conversion or
renewal of an interest rate with respect to a Loan shall be made not later
than 11:00 a.m. on a Business Day by delivery to First Union of a written
request signed by the Holt Companies or, in the alternative, a telephone
request followed promptly by written confirmation of the request (a "Request
for Advance"), specifying the date and amount of the Loan to be made,
converted or renewed, specifying whether the Loan is to be a Revolving Loan
or Term Loan, selecting the interest rate option applicable thereto, and in
the case of a LIBO Rate Loan, specifying the Interest Period applicable to
such Loan if it is a Revolving Loan. The form of request to be used in
connection with the making, conversion or renewal of Loans shall be that form
provided to the Holt Companies by First Union. Each request shall be received
not less than one Business Day prior to the date of the proposed borrowing,
conversion or renewal in the case of Base Rate Loans and three London
Business Days prior to the date of the proposed borrowing, conversion or
renewal in the case of LIBO Rate Loans. No request shall be effective until
actually received in writing by First Union, as Agent. Any request may be
made by submission of such request by facsimile transmission with the signed
original being promptly transmitted to First Union. First Union shall be
entitled to rely on a facsimile of the signed original as fully as it had
received the signed original.
(b) Irrevocability. Upon receipt of a request for a Loan and if the
conditions precedent provided herein shall be satisfied at the time such
request, First Union promptly shall notify each Bank of such request and of
such Bank's ratable share of such Loan. Upon receipt of a request for a Loan
by First Union, the request shall not be revocable by the Holt Companies.
(c) Availability of Funds. Not later than 1:00 p.m. EST on the date of
each Loan, each Bank shall make available (except as provided in clause (d)
below) its ratable share of such Loan, in immediately available funds, to
First Union at the address set forth opposite its name on the signature page
hereof or at such account in London as First Union shall specify to the Holt
Companies and the Banks. Unless First Union knows that any applicable
condition specified herein has not been satisfied, it will make funds so
received from the Banks immediately available to the Holt Companies on the
date of each Loan by a credit to the account designated by the Holt Companies
at First Union's address set forth opposite its name on the signature page
hereof or at such other destination and in such other form as the Holt
Companies may request, in writing.
(d) Funding Assumptions. Unless First Union shall have been notified by
any Bank at least one Business Day prior to the date of the making,
conversion or renewal of any LIBO Rate Loan, or by 11:00 a.m. EST on the date
a Base Rate Loan is requested, that such Bank does not intend to make
available to First Union, such Bank's portion of the total amount of the Loan
to be made, converted or renewed on such date, First Union may assume that
such Bank has made such amount available to First Union on the date of the
Loan and First Union may, in reliance upon such assumption, make available to
the Holt Companies a corresponding amount. If and to the extent such Bank
shall not have so made such funds available to First Union, such Bank agrees
to repay First Union forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made
available to the Holt Companies until the date such amount is repaid to First
Union, at the Federal Funds Rate plus 50 basis points for three Business
Days, and thereafter at the Base Rate. If such Bank shall repay to First
Union such corresponding amount,
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Credit Agreement February 25, 1999
<PAGE>
such amounts so repaid shall constitute such Bank's Revolving or Term
Loan, as applicable, for purposes of this Agreement. If such Bank does not
repay such corresponding amount forthwith upon First Union's demand therefor,
First Union shall promptly notify the Holt Companies, and the Holt Companies
shall immediately pay such corresponding amount to First Union, without any
prepayment penalty or premium, but with interest on the amount repaid, for
each day from the date such amount is made available to the Holt Companies
until the date such amount is repaid to First Union, at the rate of interest
applicable at the time to such Loan. Nothing herein shall be deemed to
relieve any Bank of its obligation to fulfill its Revolving or Term Loan
Commitment, as applicable, hereunder or to prejudice any rights which the
Holt Companies may have against any Bank as a result of any default by such
Bank hereunder.
(e) Funding of Net Amount. If the Banks make a Loan on a day on which
all or any part of an outstanding Loan from the Banks is to be repaid, each
Bank shall apply the proceeds of its new Loan to make such repayment and only
an amount equal to the difference (if any) between the amount being borrowed
and the amount being repaid shall be made available by such Bank to the Holt
Companies as provided in clause (c).
2.4. Interest. The following interest rates may be applicable to Loan or
Loans, as requested by the Holt Companies from time to time.
(a) Base Rate. Each Base Rate Loan shall bear interest on the principal
amount thereof from the date made until such Loan is paid in full or
converted, at a rate per annum equal to the Base Rate plus the Base Rate
Margin applicable to that type of Loan, i.e. Revolving Loan or Term Loan.
(b) LIBO Rate. Each LIBO Rate Loan shall bear interest on the principal
amount thereof from the date made until such Loan is paid in full, renewed,
or converted, at a rate per annum equal to the LIBO Rate plus the LIBO Rate
Margin applicable to that type of Loan, i.e. Revolving Loan or Term Loan.
After receipt of a request for a LIBO Rate Loan, First Union shall proceed to
determine the LIBO Rate to be applicable thereto. First Union shall give
prompt notice by telephone or facsimile to the Holt Companies of the LIBO
Rate thus determined in respect of each LIBO Rate Loan or any change therein.
Not more than five LIBO Rate Loans in the case of Revolving Loans nor three
LIBO Rate Loans in the case of Term Loans shall be in existence at any one
time in any combination of LIBO Rates applicable to said Loans.
(c) Renewals and Conversions of Loans. On the last day of each Interest
Period, the LIBO Rate Loan then maturing shall automatically be renewed for a
new Interest Period of like duration, unless the Holt Companies shall have
given First Union notice of a permitted conversion or renewal for an Interest
Period of different duration as provided in ss. hereof, or an Event of
Default, or Potential Default exists or would thereby occur. If no Event of
Default or Potential Default exists or would thereby occur, the Holt
Companies shall have the right to convert Base Rate Loans into LIBO Rate
Loans, to convert LIBO Rate Loans into Base Rate Loans, and to renew LIBO
Rate Loans for Interest Periods of different duration, from time to time,
provided that it shall give First Union notice of each permitted conversion
or renewal as provided in ss. hereof, and LIBO Rate Loans may be converted or
renewed for different Interest Periods only as of the last day of the
applicable Interest Period for such Loans. First Union shall use its best
efforts to notify the Holt Companies of the effectiveness of such conversion
or renewal (automatic or not automatic), and the new interest rate to which
the converted or renewed Loan is subject, as soon as practicable after the
conversion or renewal; provided, however, that any failure to give such
notice shall not affect the Holt Companies' obligations or the Banks' rights
and remedies hereunder in any way whatsoever. In the event a LIBO Rate Loan
is not automatically renewed as provided herein and the Holt Companies shall
not have
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Credit Agreement February 25, 1999
<PAGE>
selected an alternative Interest Period for any LIBO Rate Loan
maturing as provided herein, such Loan shall be automatically converted into
a Base Rate Loan on the last day of the Interest Period for such Loan.
(d) Automatic Reinstatement. The liability of the Holt Companies under
this ss.2.4 shall continue to be effective or be automatically reinstated, as
the case may be, if at any time payment, in whole or in part, of any of the
payments to the Banks is rescinded or must otherwise be restored or returned
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization
of the Holt Companies, or upon or as a result of the appointment of a
custodian, receiver, trustee or other officer with similar powers with
respect to any of the Holt Companies or any substantial part of their
property, all as though such payment had not been made.
2.5. Commitment Fee.
(i) Revolving Loans. The Holt Companies agree to pay for the account of
each Bank as compensation for its Revolving Loan Commitment, a fee
("Revolving Loan Commitment Fee") computed at the rate per annum set forth in
Schedule 3 attached to this Agreement on the average daily amount of the
unused portion of its Revolving Loan Commitment accrued from and after
November 17, 1998. The unused portion of its Revolving Loan Commitment shall
mean its Revolving Loan Commitment less the aggregate principal amount of its
outstanding Revolving Loans and its proportionate share of Letters of Credit
issued hereunder. The Revolving Loan Commitment Fee shall be calculated and
be payable quarterly in arrears and on the Revolving Credit Termination Date.
The Revolving Loan Commitment Fee shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
(ii) Term Loans. The Holt Companies agree to pay for the account of each
Bank as compensation for its Term Loan Commitment, a fee ("Term Loan
Commitment Fee") computed at the rate per annum set forth in Schedule 3
attached to this Agreement on the average daily amount of the unused portion
of its Term Loan Commitment accrued from and after the date hereof. The
unused portion of its Term Loan Commitment shall mean its Term Loan
Commitment less the aggregate principal amount of its outstanding Term Loans
issued hereunder. The Term Loan Commitment Fee shall be calculated and be
payable quarterly in arrears and on the Term Credit Termination Date. The
Term Loan Commitment Fee shall be calculated on the basis of a 360-day year
for the actual number of days elapsed.
2.6. Reduction or Termination of Commitment.
(a) Loan Commitment Reduction or Termination.
(i) Revolving Loans. The Holt Companies may at any time and from
time to time, on not less than three (3) Business Days' written notice,
(i) permanently reduce the Aggregate Revolving Loan Commitment, provided that
any such reduction shall be in the amount of $5,000,000 or a multiple thereof
and that no such reduction shall cause the aggregate principal amount of
Revolving Loans outstanding to exceed the Aggregate Revolving Loan Commitment
as reduced, or (ii) terminate the Aggregate Revolving Loan Commitment. In the
event any Vessel constituting part of the Collateral is sold or otherwise
disposed of or is a total loss or constructive total loss for any reason, the
proceeds of the sale or other disposition or the insurance proceeds, as
applicable, shall be used promptly upon receipt thereof to prepay the
Revolving Loans in like amount and the Aggregate Revolving Loan Commitment
shall be permanently reduced in like amount except to the extent proceeds of
insurance may be used otherwise as provided in the applicable First Preferred
Ship Mortgage.
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Credit Agreement February 25, 1999
<PAGE>
(ii) Term Loans. The Holt Companies may at any time and from time to
time, on not less than three (3) Business Days' written notice, (i)
permanently reduce the Aggregate Term Loan Commitment, provided that any such
reduction shall be in the amount of $2,500,000 or a multiple thereof and that
no such reduction shall cause the aggregate principal amount of Term Loans
outstanding to exceed the Aggregate Term Loan Commitment as reduced, or (ii)
terminate the Aggregate Term Loan Commitment. In the event any monies are
received in respect of the Insurance Claims, all such proceeds shall be used
promptly upon receipt thereof to prepay the Term Loans in like amount in
accordance with ss.2.7(d) hereof, and the Aggregate Term Loan Commitment
shall be permanently reduced such prepayment.
(b) Automatic Loan Commitment Termination.
(i) Revolving Loans. In the event the Aggregate Revolving Loan
Commitment is terminated, the Revolving Credit Termination Date shall
accelerate to such date of termination and the Holt Companies shall,
simultaneously with such termination, repay the Revolving Loans, whether Base
Rate Loans or LIBO Rate Loans, in accordance with ss.2.8.
(ii) Term Loans. In the event the Aggregate Term Loan Commitment is
terminated, the Term Credit Termination Date shall accelerate to such date of
termination and the Holt Companies shall, simultaneously with such
termination, repay the Term Loans, whether Base Rate Loans and LIBO Rate
Loans, in accordance with ss.2.8.
2.7. Prepayments.
(a) Base Rate Loans. On one Business Day's notice to the Bank, the Holt
Companies may, at their option, prepay any Base Rate Loan in whole at any
time or in part from time to time.
(b) LIBO Rate Loans. On one Business Day's notice to First Union and the
Banks, the Holt Companies may, at their option prepay any LIBO Rate Loan
provided that if they shall prepay a LIBO Rate Loan prior to the last day of
the applicable Interest Period, or shall fail to borrow any LIBO Rate Loan on
the date such Loan is to be made, they shall pay to each Bank, in addition to
the principal and interest then to be paid in the case of a prepayment, on
such date of prepayment, the Additional Amount (as defined in ss.2.8(e)
below) incurred or sustained by such Bank as a result of such prepayment or
failure to borrow.
(c) Sale or Loss of Vessel. In the event any Vessel constituting part of
the Collateral is sold or otherwise disposed of or is a total loss or
constructive total loss for any reason, the proceeds of the sale or other
disposition or the insurance proceeds, as applicable, shall be used promptly
upon receipt thereof to prepay the Revolving Loans in like amount except to
the extent proceeds of insurance may be used otherwise as provided in the
applicable First Preferred Ship Mortgage. The prepayments may be applied to
Revolving Loans which are Base Rate Loans or LIBO Rate Loans as the Holt
Companies may elect. If no election is made, the prepayments shall be applied
to Revolving Loans which are Base Rate Loans to the extent practicable.
(d) Proceeds of Insurance Claims. In the event any monies are paid in
respect of the Insurance Claims, such monies shall be used promptly upon
receipt thereof to prepay the Term Loans in like amount and all amounts in
excess of the amount necessary to pay aggregate amount of the Term Loans then
outstanding in full shall be promptly remitted to the Holt Companies. The
prepayments may be applied to Term Loans which are Base Rate Loans or LIBO
Rate Loans as the Holt Companies may elect. If no election
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Credit Agreement February 25, 1999
<PAGE>
is made, the prepayments shall be applied to Term Loans which are Base
Rate Loans to the extent practicable.
(e) Proceeds of Debt or Equity Issuance. In the event the Holt Companies
or any of them shall issue additional capital stock in exchange for cash
(payable in lump sum or installments) or incur Indebtedness for Money
Borrowed (other than indebtedness incurred in connection with the purchase of
equipment which is secured by said equipment) to or from any Person other
than another Holt Company, the net proceeds of any such issuance or
incurrence shall be applied to prepayment of the Loans promptly following the
receipt of the proceeds thereof by the applicable Holt Company. Prepayment
shall be made first to Term Loans until such Loans are repaid in full and
second to Revolving Loans.
2.8. Payments.
(a) Base Rate Loans. Accrued interest on all Base Rate Loans shall be
due and payable on the first Business Day of each calendar month and upon the
Revolving Credit Termination Date or the Term Credit Termination Date, as
applicable.
(b) LIBO Rate Loans. Accrued interest on LIBO Loans with Interest
Periods of one, two or three months shall be due and payable on the last day
of such Interest Period. Accrued interest on LIBO Rate Loans with an Interest
Period of six months shall be due and payable on the last day of the third
month of such Interest Period and on the last day of such Interest Period.
(c) Form of Payments, Application of Payments, Payment Administration,
Etc. Provided that no Event of Default or Potential Default then exists and
except as provided in ss.2.7(e), all payments and prepayments shall be
applied to the Loans in such order and to such extent as shall be specified
by the Holt Companies, by written notice to First Union at the time of such
payment or prepayment. Except as otherwise provided herein, all payments of
principal, interest, fees, or other amounts payable by the Holt Companies
hereunder shall be remitted to First Union on behalf of the Banks at the
address set forth opposite its name on the signature page hereof or at such
office or account as First Union shall specify to the Holt Companies, in
immediately available funds not later than 2:00 p.m. on the day when due.
Whenever any payment is stated as due on a day which is not a Business Day,
the maturity of such payment shall, except as otherwise provided in the
definition of "Interest Period," be extended to the next succeeding Business
Day and interest shall continue to accrue during such extension. The Holt
Companies authorize First Union to deduct from any account of any Holt
Company maintained at First Union or over which First Union has control any
amount payable under this Agreement, the Notes or any other Loan Document.
First Union's failure to deliver any bill, statement or invoice with respect
to principal amounts due shall not affect the Holt Companies' obligation to
pay such principal when due and payable.
(d) Net Payments. All payments made to the Banks by the Holt Companies
hereunder, under the Notes or under any other Loan Document will be made
without set off, counterclaim or other defense. All such payments will be
made free and clear of, and without deduction or withholding for, any present
or future taxes, levies, imposts, duties, fees, assessments or other charges
of whatever nature now or hereafter imposed by any jurisdiction or any
political subdivision or taxing authority thereof or therein (but excluding,
except as provided below, any tax imposed on or measured by the net income of
a Bank (including all interest, penalties or similar liabilities related
thereto) and any tax imposed on or measured by the gross income of a Bank
pursuant to the laws of the United States of America or any political
subdivision thereof, or taxing authority of the United States of America or
any political subdivision thereof, in which the principal
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Credit Agreement February 25, 1999
<PAGE>
office or applicable lending office of a Bank is located), and all
interest, penalties or similar liabilities with respect thereto
(collectively, all such non-excluded amounts being "Taxes"). If any Taxes are
so levied or imposed, the Holt Companies agree to pay the full amount of such
Taxes, and such additional amounts as may be necessary so that every payment
of all amounts due hereunder, under any Note or under any other Loan
Document, after withholding or deduction for or on account of any Taxes, will
not be less than the amount provided for herein or in such Note. The Holt
Companies will furnish to each Bank upon request certified copies of tax
receipts evidencing such payment by them. The Holt Companies will indemnify
and hold harmless each Bank, and reimburse each Bank upon its written
request, for the amount of any Taxes so levied or imposed and paid or
withheld by each Bank.
(e) Prepayment of LIBO Rate Loans. If any principal of a LIBO Rate Loan
shall be repaid (whether upon prepayment, reduction of the Loan Commitment
after acceleration or for any other reason) or converted to a Base Rate Loan
prior to the last day of the Interest Period applicable to such LIBO Rate
Loan or if the Holt Companies fail for any reason to borrow a LIBO Rate Loan
after giving irrevocable notice pursuant to ss.2.5, the Holt Companies shall pay
to First Union on behalf of the Banks, in addition to the principal and
interest then to be paid, such additional amounts as may be necessary to
compensate each Bank for all direct and indirect costs and losses (including
losses resulting from redeployment of prepaid or unborrowed funds at rates
lower than the cost of such funds to each Bank, and including lost profits
incurred or sustained by each Bank) as a result of such repayment or failure
to borrow (the "Additional Amount"). The Additional Amount (which each Bank
shall take reasonable measures to minimize) shall be specified in a written
notice or certificate delivered to the Holt Companies by First Union, as
Agent. Such notice or certificate shall contain a calculation in reasonable
detail of the Additional Amount to be compensated and shall be conclusive as
to the facts and the amounts stated therein, absent manifest error.
(f) Demand Deposit Account. At least one of the Holt Companies shall
maintain at least one demand deposit account with First Union National Bank
for purposes of this Agreement. The Holt Companies authorize First Union (but
First Union shall not be obligated) to deposit into said account all amounts
to be advanced to the Holt Companies hereunder. Further, the Holt Companies
authorize First Union (but First Union shall not be obligated) to deduct from
said account, or any other account maintained by any Holt Company at First
Union, any amount payable hereunder on or after the date upon which it is due
and payable. Such authorization shall include but not be limited to amounts
payable with respect to principal, interest, fees and expenses.
2.9. Changes in Circumstances; Yield Protection.
(a) If any Regulatory Change or compliance by any Bank with any request
made after the date of this Agreement by the Board of Governors of the Federal
Reserve System or by any Federal Reserve Bank or other central bank or fiscal,
monetary or similar authority (in each case whether or not having the force of
law) shall:
(i) impose, modify or make applicable any reserve, special deposit,
Federal Deposit Insurance Corporation premium or similar requirement or
imposition against assets held by, or deposits in or for the account of,
or loans made by, or any other acquisition of funds for loans or
advances by, any Bank; or
(ii) impose on any Bank any other condition regarding either of its
Notes.
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Credit Agreement February 25, 1999
<PAGE>
and the result of any of the foregoing events is to increase the cost to
any Bank of making or maintaining any Loan or to reduce the amount of
principal, interest or fees to be received by any Bank hereunder in respect
of any Loan, such Bank will immediately so notify and the Holt Companies. If
such Bank determines in good faith that the effects of the change resulting
in such increased cost or reduced amount cannot reasonably be avoided or the
cost thereof mitigated, then upon notice by such Bank to the Holt Companies,
the Holt Companies shall pay to such Bank on each interest payment date of
the Loan, such additional amount as shall be necessary to compensate such
Bank for such increased cost or reduced amount.
(b) If any Bank shall determine that any Regulation regarding capital
adequacy or the adoption of any Regulation regarding capital adequacy, which
Regulation is applicable to banks (or their holding companies) generally and not
a specific Bank (or its holding company) specifically, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank (or its holding company) with
any such request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
the effect of reducing the rate of return on such Bank's capital as a
consequence of its obligations hereunder to a level below that which such Bank
could have achieved but for such adoption, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, the Holt Companies shall promptly pay
to such Bank, upon the demand of such Bank, such additional amount or amounts as
will compensate such Bank for such reduction.
(c) If any Bank shall determine that by reason of abnormal circumstances
affecting the interbank eurodollar or applicable eurocurrency market, adequate
and reasonable means do not exist for ascertaining the LIBO Rate to be
applicable to the requested LIBO Rate Loan or that eurodollar or eurocurrency
funds in amounts sufficient to fund all the LIBO Rate Loans are not obtainable
on reasonable terms, such Bank shall give notice of such inability or
determination by telephone and thereupon the obligations of the Banks to make,
convert other Loans to, or renew such LIBO Rate Loan shall be excused, subject,
however, to the right of the Holt Companies at any time thereafter to submit
another request.
(d) Determination by any Bank for purposes of this Section 2.9 of the
effect of any Regulatory Change or other change or circumstance referred to
above on its costs of making or maintaining Loans or on amounts receivable by it
in respect of the Loans and of the additional amounts required to compensate the
Bank in respect of any additional costs, shall be made in good faith and shall
be evidenced by a certificate, signed by an officer of such Bank and delivered
to the Holt Companies, as to the fact and amount of the increased cost incurred
by or the reduced amount accruing to such Bank owing to such event or events.
Such certificate shall be prepared in reasonable detail and shall be conclusive
as to the facts and amounts stated therein, absent manifest error.
(e) Each Bank will notify the Holt Companies and of any event occurring
after the date of this Agreement that will entitle such Bank to compensation
pursuant to this Section as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation. Said notice shall be in
writing, shall specify the applicable Section or Sections of this Agreement to
which it relates and shall set forth the amount or amounts then payable pursuant
to this Section. The Holt Companies shall pay such Bank the amount shown as due
on such notice within 30 days after its receipt of the same.
2.10. Illegality. Notwithstanding any other provision in this Agreement,
if the adoption of any applicable Regulation, or any change therein, or any
change in the interpretation or administration thereof
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<PAGE>
by any governmental authority, central bank, or comparable agency charged with
the interpretation or administration thereof, or compliance by any Bank
with any request or directive (whether or not having the force of law) of any
such authority, central bank, or comparable agency shall make it unlawful or
impossible for such Bank to (1) maintain its Revolving Loan Commitment or
Term Loan Commitment, then upon notice to the Holt Companies by such Bank,
the Revolving Loan Commitment or Term Loan Commitment of such Bank shall
terminate; or (2) maintain or fund its LIBO Rate Loans, then upon notice to
the Holt Companies of such event, the Holt Companies' outstanding LIBO Rate
Loans shall be converted into Base Rate Loans.
3. Representations and Warranties
Each of the Holt Companies represents and warrants to the Banks that:
3.1. Organization, Standing. It (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, (ii) has the corporate power and authority necessary to
own its assets, carry on its business and enter into and perform its
obligations hereunder and under each Loan Document, and (iii) is qualified to
do business and is in good standing in each jurisdiction where the nature of
its business or the ownership of its properties requires such qualification,
except where the failure to be so qualified would not have a Material Adverse
Effect.
3.2. Corporate Authority, Validity, Etc. The making and performance of
the Loan Documents to which it is a party are within its power and authority
and have been duly authorized by all necessary corporate action. Except as
has been obtained, the making and performance of the Loan Documents do not
and under present law will not require any consent or approval of any of its
shareholders or any other person, do not and under present law will not
violate any law, rule, regulation order, writ, judgment, injunction, decree,
determination or award, do not violate any provision of its charter or
by-laws, do not and will not result in any breach of any material agreement,
lease or instrument to which it is a party, by which it is bound or to which
any of its assets are or may be subject, and do not and will not give rise to
any Lien upon any of its assets, except for the liens provided for herein.
The number of shares and classes of the capital stock of each of the Holt
Companies and the ownership thereof are accurately set forth on Schedule 1
attached hereto; all such shares are validly issued, fully paid and
non-assessable, and the issuance and sale thereof are in compliance with all
applicable federal and state securities and other applicable laws. Further,
none of the Holt Companies is in default under any such agreement, lease or
instrument except to the extent such default reasonably could not have a
Material Adverse Effect. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Holt
Companies of any Loan Document or for the validity or enforceability thereof.
Each Loan Document, when executed and delivered, will be the legal, valid and
binding obligation of each of the Holt Companies enforceable against it in
accordance with its terms.
3.3. Litigation. Except as disclosed on Schedule 1, there are no actions,
suits or proceedings pending or threatened against or affecting any of the
Holt Companies or any of their assets before any court, government agency, or
other tribunal which if adversely determined reasonably could have a Material
Adverse Effect upon the ability of the Holt Companies or any of them to
perform under the Loan Documents. If there is any disclosure on Schedule 1,
the status (including the tribunal, the nature of the claim and the amount in
controversy) of each such litigation matter as of the date of this Agreement
is set forth in Schedule 1.
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Credit Agreement February 25, 1999
<PAGE>
3.4. ERISA. (a) the Holt Companies and each ERISA Affiliate are in
compliance in all material respects with all applicable provisions of ERISA
and the regulations promulgated thereunder; and, except as disclosed on
Schedule 1, since April 29, 1980, none of the Holt Companies or any ERISA
Affiliate has withdrawn from participation in any "multiemployer plan" (as
defined in section 4001 of ERISA) to which it makes contributions such that
any withdrawal liability has been or may be assessed and remains unpaid, and
none of the Holt Companies or any ERISA Affiliate has received any notice and
is not aware that any multiemployer plan to which it contributes is insolvent
or in reorganization status within the meaning of ERISA. With respect to
multiemployer plans to which the Holt Companies or any ERISA Affiliate makes
contributions but does not participate in the administration of such plans,
none of the Holt Companies or any ERISA Affiliate has received any
information from any such multiemployer plan which would indicate that any of
the foregoing representation would be incorrect as applied to such
multiemployer plan; (b) neither the Holt Companies nor any ERISA Affiliate
sponsors or maintains any Plan under which there is an accumulated funding
deficiency within the meaning of ss.412 of the Code, whether or not waived;
(c) the aggregate liability for accrued benefits and other ancillary benefits
under each Plan that is or will be sponsored or maintained by the Holt
Companies or any ERISA Affiliate (determined on the basis of the actuarial
assumptions prescribed for valuing benefits under terminating single-employer
defined benefit plans under Title IV of ERISA) does not exceed the aggregate
fair market value of the assets under each such defined benefit pension Plan;
(d) the aggregate liability of the Holt Companies and each ERISA Affiliate
arising out of or relating to a failure of any Plan to comply with the
provisions of ERISA or the Code, will not have a Material Adverse Effect; (e)
there does not exist any unfunded liability (determined on the basis of
actuarial assumptions utilized by the actuary for the plan in preparing the
most recent Annual Report) of the Holt Companies or any ERISA Affiliate under
any plan, program or arrangement providing post-retirement life or health
benefits; and (f) none of the Plans which are "employee pension benefit
plans" (as defined by ERISA) or the trusts created thereunder have been
terminated since September 2, 1974; nor has any such Plan incurred any
material liability to the Pension Benefit Guaranty Corporation established
pursuant to ERISA, other than for required insurance premiums which have been
paid when due, or incurred any material "accumulated funding deficiency," (as
defined by ERISA) whether or not waived; nor has there been any "reportable
event" (as defined by ERISA), or other event or condition, which represents a
material risk of termination of any such Plan by the Pension Benefit Guaranty
Corporation.
3.5. Financial Statements and Projections.
(a) Financial Statements. The consolidated and consolidating financial
statements (which consolidating balance sheets may be unaudited and prepared by
management) of The Holt Group, Inc. and its subsidiaries for the Fiscal Years
ending December 31, 1996 and December 31, 1997 and for the interim nine-month
period ending September 30, 1998, consisting in each case of a balance sheet, a
statement of operations, a statement of shareholders' equity, a statement of
cash flows and accompanying footnotes (except in the case of interim financial
statements), furnished to the Banks in connection herewith, present fairly, in
all material respects, the financial position, results of operations and
operating statistics of the Holt Group, Inc. and its subsidiaries as of the
dates and for the periods referred to, in conformity with Generally Accepted
Accounting Principles. Except as set forth on Schedule 1 hereto, there are no
material liabilities, fixed or contingent, which are not reflected in such
financial statements, other than liabilities which are not required to be
reflected in such balance sheets. There has been no Material Adverse Change
since September 30, 1998.
(b) Projections. The summary form consolidated balance sheet and
consolidated income statement of The Holt Group, Inc. and its subsidiaries,
furnished to the Banks in connection herewith, show historical
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<PAGE>
information on a quarterly basis for the calendar quarters ending March
31, 1998 through September 30, 1998, and projections on a quarterly basis for
the calendar quarters ending December 31, 1998 through December 31, 1999. The
historical information is taken from the financial statements referred to in
clause (a) above for the interim nine-month period ending September 30, 1998.
The projections are based upon good faith estimates and assumptions believed
to be reasonable, it being recognized by First Union and the Banks that such
projections as to future events are not to be viewed as facts and that actual
results during the periods covered by such projections may differ materially
from the projected results.
3.6. Not in Default, Judgments, Etc. No Event of Default or Potential
Default under any Loan Document has occurred and is continuing. Each of the
Holt Companies has satisfied all judgments and is not in default with respect
to any judgment, writ, injunction, decree, rule, or regulation of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board, bureau, agency, or instrumentality, domestic or foreign
which could reasonably be expected to have a Material Adverse Effect.
3.7. Taxes. Each of the Holt Companies has filed all federal, state,
local and foreign tax returns and reports which it is required by law to file
and as to which its failure to file would have a Material Adverse Effect, and
has paid all taxes, including wage taxes, assessments, withholdings and other
governmental charges which are presently due and payable, other than those
being contested in good faith by appropriate proceedings, if any, and/or
disclosed on Schedule 1. The tax charges, accruals and reserves on the books
of the Holt Companies are adequate to pay all such taxes that have accrued
but are not presently due and payable.
3.8. Permits, Licenses, Etc. Each of the Holt Companies possesses all
permits, licenses, franchises, trademarks, trade names, copyrights and
patents necessary to the conduct of its business as presently conducted or as
presently proposed to be conducted, except where the failure to possess the
same would not have a Material Adverse Effect.
3.9. No Materially Adverse Contracts, Etc. None of the Holt Companies is
subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the judgment of its
directors or officers has or is reasonably expected in the future to have a
Material Adverse Effect upon it or any Subsidiary. Neither the Holt Companies
nor any Subsidiary is a party to any contract or agreement which in the
judgment of its directors or officers has or is reasonably expected to have
any Material Adverse Effect except as otherwise reflected in adequate
reserves.
3.10. Compliance with Laws, Etc.
(a) Compliance Generally. Each of the Holt Companies is in compliance in
all material respects with all Regulations applicable to its business (including
obtaining all authorizations, consents, approvals, orders, licenses, exemptions
from, and making all filings or registrations or qualifications with, any court
or governmental department, public body or authority, commission, board, bureau,
agency, or instrumentality), the noncompliance with which reasonably could have
a Material Adverse Effect.
(b) Hazardous Wastes, Substances and Petroleum Products. Except as
disclosed on Schedule 1, (i) each of the Holt Companies has received all permits
and filed all notifications necessary to carry on its business; and is in
compliance in all respects with all Environmental Control Statutes; (ii) none of
the Holt Companies has not given any written or oral notice, nor has it failed
to give required notice, to
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<PAGE>
the Environmental Protection Agency ("EPA") or any state or local agency
with regard to any actual or imminently threatened Release of Hazardous
Substances on properties owned, leased or operated by it or used in
connection with the conduct of its business and operations; (iii) none of the
Holt Companies has received notice that it is potentially responsible for
costs of clean-up or remediation of any actual or imminently threatened
Release of Hazardous Substances pursuant to any Environmental Control
Statute; (iv) no real property owned or leased by any of the Holt Companies
is in violation of any Environmental Laws and no Hazardous Substances are
present on said real property in violation of applicable law; and (v) none of
the Holt Companies has been identified in any litigation, administrative
proceedings or investigation as a potentially responsible party for any
liability under any Environmental Laws, where such liability could have a
Material Adverse Effect.
3.11. Solvency. Each of the Holt Companies is, and after giving effect
to the transactions contemplated hereby, will be, Solvent. In determining
solvency, each Holt Company shall be entitled to treat as an asset (in the
form of receivables from the other Holt Companies) the contribution
obligations of the other Holt Companies to the determining Holt Company in
the event the determining Holt Company were to pay the entirety of Loans
outstanding under this Agreement, provided, however each contribution
obligation shall be net of a reserve for any doubt in the ability of the
applicable contribution obligor to pay its contribution obligation.
3.12. Subsidiaries, Etc. None of the Holt Companies has any
Subsidiaries, except as set forth in Schedule 1 hereto. Set forth in Schedule
1 hereto is a complete and correct list, as of the date of this Agreement, of
all Investments held by the Holt Companies in any joint venture or other
Person.
3.13. Title to Properties, Leases. Each of the Holt Companies has good
and marketable title to all assets and properties reflected as being owned by
it in its financial statements as well as to all assets and properties
acquired since said date (except property disposed of since said date in the
ordinary course of business). Except for the Liens set forth in Schedule 1
hereto and any other Permitted Liens, there are no Liens on any of such
assets or properties. Each of the Holt Companies has the right to, and does,
enjoy peaceful and undisturbed possession under all material leases under
which it is leasing property as a lessee. All such leases are valid,
subsisting and in full force and effect, and none of such leases is in
default, except where such default, either individually or in the aggregate,
could not have a Material Adverse Effect.
3.14. Public Utility Holding Company; Investment Company. None of the
Holt Companies is a "public utility company" or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended; or
a "public utility" within the meaning of the Federal Power Act, as amended.
Further, none of the Holt Companies is an "investment company" or an
"affiliated person" of an "investment company" or a company "controlled" by
an "investment company" as such terms are defined in the Investment Company
Act of 1940, as amended.
3.15. Margin Stock. None of the Holt Companies is or will be engaged
principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying or trading in any
margin stocks or margin securities (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System as amended from time to
time). None of the Holt Companies will use or permit any proceeds of the
Loans to be used, either directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stocks or
margin securities.
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<PAGE>
3.16. Use of Proceeds. The Holt Companies will use the proceeds of each
Revolving Loan only for working capital financing, capital renovations to
existing Vessels and other general corporate purposes. The proceeds of each
Term Loan will be used only for repairs and improvements to the properties,
real and personal, which were damaged principally as a consequence of
Hurricane Georges which occurred in September 1998 and which are or are
expected to be included in the Insurance Claims, as well as incremental
working capital financing and other general corporate purposes arising
therefrom.
3.17. Year 2000 Problem. The Holt Companies are taking all action
reasonably necessary to assess the risk that the computer applications they
use in their business may be unable to properly perform date sensitive
functions on or after January 1, 2000. Further, they are in the process of
taking all remedial action reasonably necessary to avoid such risk and expect
to timely complete such action. To their knowledge, no third party with which
any of them has any material contractual relationship has identified any
similar risk in its own computer applications which it is not addressing and
which, if not properly addressed, would be likely to have a Material Adverse
Effect.
3.18. Disclosure Generally. The representations and statements made by
each of the Holt Companies or on its behalf in connection with this credit
facility and the Loans, including representations and statements in each of
the Loan Documents, do not and will not contain any untrue statement of a
material fact or omit to state a material fact or any fact necessary to make
the representations made not materially misleading. No written information,
exhibit, report, brochure or financial statement furnished by any of the Holt
Companies to the Banks in connection with this credit facility, the Loans, or
any Loan Document contains or will contain any material misstatement of fact
or omit to state a material fact or any fact necessary to make the statements
contained therein not misleading.
4. Conditions Precedent
4.1. All Loans. The obligation of each Bank to make any Loan (including
but not limited to the first Loan hereunder after the date of this amended
and restated Credit Agreement) and the obligation of First Union to issue any
Letter of Credit are conditioned upon the following:
(a) Documents.
(i) Request for Advance. The Holt Companies shall have delivered and
First Union shall have received a request for a Revolving Loan or Term Loan
in such form as First Union may request from time to time.
(ii) Insurance Claims. The Holt Companies shall have delivered and
First Union shall have received certification by an executive officer of
The Holt Group, with supporting schedules and detailed information
satisfactory to First Union, that the aggregate amount of any Term Loans
outstanding immediately following the making of the requested Term Loans will
not be more than fifty percent (50%) of the aggregate amount of the then
unpaid Insurance Claims.
(iii) Permitted Indebtedness. The Holt Companies shall have delivered
and First Union shall have received certification by an executive officer of
The Holt Group, with supporting schedules and information satisfactory to
First Union, the Revolving Loans or Term Loans requested will upon the making
of such Loans by the Banks not cause The Holt Group to be breach of its
agreements with respect to
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Credit Agreement February 25, 1999
<PAGE>
"permitted indebtedness" or "permitted liens" relating to the 9 3/4%
Notes issued by The Holt Group under an Indenture dated January 21, 1998, as
such Indenture may be amended, modified or replaced from time to time.
(iv) Other Documents. The Holt Companies shall have delivered and
First Union shall have received such other certificates, opinions, documents,
assurances, etc. as it may reasonably require or reasonably deem advisable
in connection with the making of the requested Loans.
(b) Covenants; Representations. The Holt Companies shall be in
compliance with all covenants, agreements and conditions in each Loan
Document and each representation and warranty contained in each Loan Document
shall be true with the same effect as if such representation or warranty had
been made on the date such Revolving Loan, Term Loan or Letter of Credit, as
applicable, is made or issued.
(c) Defaults. Immediately prior to and after giving effect to such
transaction, no Event of Default or Potential Default shall exist.
(d) Material Adverse Change. Since September 30, 1998, there shall not
have been any Material Adverse Change with respect to the Holt Companies or
any Subsidiary.
4.2. Conditions to First Loan. In addition to the conditions to all
Loans as provided in ss., the obligation of each Bank to make its first Loan
under this amended and restated Credit Agreement is conditioned upon the
following:
(a) Articles, Bylaws. Each Bank shall have received copies of the
Articles of Incorporation and Bylaws of each Holt Company certified by its
Secretary or Assistant Secretary; together with a Certificate of Good
Standing from any jurisdiction where the nature of its business or the
ownership of its properties requires such qualification except where the
failure to be so qualified would not have a Material Adverse Effect.
(b) Evidence of Authorization. Each Bank shall have received copies
certified by the Secretary or Assistant Secretary of each Holt Company of all
corporate or other action taken by such Holt Company to authorize its
execution and delivery and performance of the Loan Documents and to authorize
the Loans, together with such other related papers as First Union shall
reasonably require.
(c) Legal Opinions. Each Bank shall have received a favorable written
opinion in form and substance satisfactory to the Bank from Pepper Hamilton
LLP, John A. Evans, Esq. and such other counsel as it shall deem necessary,
as counsel for the Holt Companies, which shall be addressed to the Banks and
be dated the date of the first Loan under this amended and restated Credit
Agreement.
(d) Incumbency. First Union, on behalf of the Banks, shall have received
a certificate signed by the secretary or assistant secretary of each Holt
Company, together with the true signature of the officer or officers
authorized to execute and deliver the Loan Documents and certificates
thereunder, upon which the Banks shall be entitled to rely conclusively until
it shall have received a further certificate of the secretary or assistant
secretary of such Holt Company amending the prior certificate and submitting
the signature of the officer or officers named in the new certificate as
being authorized to execute and deliver Loan Documents and certificates
thereunder.
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Credit Agreement February 25, 1999
<PAGE>
(e) Notes. Each Bank shall have received its Revolving Note and Term
Note duly executed, completed and issued in accordance herewith.
(f) Collateral Documents. First Union, on behalf of the Banks, shall
have received (i) a First Preferred Ship Mortgage duly executed, completed and
issued in accordance herewith pertaining to each seagoing vessel included in the
Collateral each in form and substance acceptable to it, (ii) a Pledge Agreement
duly executed, completed and delivered pledging all of the issued and
outstanding shares of capital stock of NPR, Holding, NPR, Inc., NPR-Navieras and
NPR S.A. together with the stock certificates being so pledged, (iii) a Security
Agreement duly executed, completed and delivered pledging all of the Accounts
and related General Intangible of each Holt Company and (iv) an Assignment of
Insurance Claims duly executed, completed and delivered assigning to the Banks
all rights of each Holt Company to receive payments under the described
insurance policy.
(g) Other Documents. First Union, on behalf of the Banks, shall have
received all certificates, instruments, and other documents then required to be
delivered pursuant to any Loan Documents, in each instance in form and substance
reasonably satisfactory to it, together with each other Loan Document required
hereunder.
(h) Consents. The Holt Companies shall have provided to each Bank
evidence satisfactory to it that all governmental, shareholder and third party
consents and approvals necessary in connection with the transactions
contemplated hereby have been obtained and remain in effect.
(i) Fees, Expenses. The Holt Companies shall simultaneously pay or shall
have paid all fees and expenses due hereunder or under any other Loan Document.
(j) Financial Projections. The Holt Companies shall have provided to
each Bank financial projections referred to in ss.3.5(b).
5. Affirmative Covenants
The Holt Companies covenant and agree, individually and collectively,
that from and after the date hereof and so long as the Aggregate Revolving Loan
Commitment or Aggregate Term Loan Commitment is in effect or any Obligation
remains unpaid or outstanding, they and each of them will and their subsidiaries
will:
5.1. Financial Statements and Reports. Furnish to the Banks the following
financial information:
(a) Annual Statements. No later than one hundred and twenty (120) days
after the end of each Fiscal Year or such earlier date as the Holt Group, Inc.
and its subsidiaries shall file their annual financial statements with the
Securities and Exchange Commission, the consolidated and consolidating balance
sheet (which consolidating balance sheets may be unaudited and prepared by
management) of the Holt Group, Inc. and its subsidiaries as of the end of such
year and the prior year in comparative form, and related statements of
operations, shareholders' equity, and cash flows for the Fiscal Year and the
prior Fiscal Year in comparative form. The financial statements shall be in
reasonable detail with appropriate notes and be prepared in accordance with
Generally Accepted Accounting Principles. The consolidated annual financial
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<PAGE>
statements shall be certified (without any qualification or exception) by BDO
Seidman LLP or such other independent certified public accountants of nationally
recognized standing reasonably acceptable to First Union. Such financial
statements shall be accompanied by a report of such independent certified public
accountants stating that, in the opinion of such accountants, such financial
statements present fairly, in all material respects, the financial position, and
the results of operations and the cash flows of the Holt Group, Inc. and its
subsidiaries for the period then ended in conformity with Generally Accepted
Accounting Principles, except for inconsistencies resulting from changes in
accounting principles and methods agreed to by such accountants and specified in
such report, and that, in the case of such financial statements, the examination
by such accountants of such financial statements has been made in accordance
with generally accepted auditing standards and accordingly included examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements and assessing the accounting principles used and
significant estimates made, as well as evaluating the overall financial
statement presentation. In addition to the annual financial statements, the Holt
Companies shall, promptly upon receipt thereof, furnish to the Banks copies of
each other report submitted to its board of directors by its independent
accountants in connection with any annual, interim or special audit made by them
of the financial records of the Holt Group, Inc. and its subsidiaries.
(b) Quarterly Statements. No later than sixty (60) days after the end of
each Fiscal Quarter of each Fiscal Year or such earlier date as the Holt Group,
Inc. and its subsidiaries shall file their quarterly financial statements with
the Securities and Exchange Commission, the consolidated and consolidating
balance sheet (which consolidating balance sheets may be unaudited and prepared
by management) and related consolidated and consolidating statements of
operations, shareholders' equity and cash flows of the Holt Group, Inc. and its
subsidiaries for such quarterly period and for the period from the beginning of
such fiscal year to the end of such Fiscal Quarter and a corresponding financial
statement for the same periods in the preceding Fiscal Year certified by the
chief financial officer of the Holt Group, Inc. and its subsidiaries as having
been prepared in accordance with Generally Accepted Accounting Principles
(subject to changes resulting from audits and year-end adjustments).
(c) Compliance Certificate. Simultaneously with the delivery of the
financial statements referred to in clauses (a) and (b) of this Section, a
Compliance Certificate signed by the chief financial officer of the Holt Group,
Inc. and its subsidiaries.
(d) ERISA. All reports and forms filed with respect to all Plans, except
as filed in the normal course of business and that would not result in an
adverse action to be taken under ERISA, and details of related information of a
Reportable Event, promptly following each filing.
(e) Material Changes. Notification to First Union, and each other Bank,
of any litigation, administrative proceeding, investigation, business
development, or change in financial condition which could reasonably have a
Material Adverse Effect, promptly following its discovery.
(f) Summary Annual Budget. Within one hundred twenty (120) calendar days
after the end of each Fiscal Year, a budget for the then current Fiscal Year
setting forth in reasonably detail at least by Fiscal Quarters projected profit
or loss, resulting balance sheets, cash flows and anticipated Loans under this
credit facility.
(g) Other Information. Promptly, upon request by First Union or each
other Bank, from time to time (which may be on a monthly or other basis), the
Holt Companies shall provide such other information and reports regarding
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Credit Agreement February 25, 1999
<PAGE>
its operations, business affairs, prospects and financial condition as the Banks
may reasonably request.
5.2. Corporate Existence. Preserve their, and cause their Subsidiaries to
preserve their, corporate existence and all material franchises, licenses,
patents, copyrights, trademarks and trade names consistent with good business
practice; and maintain, keep, and preserve all of their properties (tangible and
intangible) necessary or useful in the conduct of their businesses in good
working order and condition, ordinary wear and tear excepted.
5.3. ERISA. Comply in all material respects with the provisions of ERISA to
the extent applicable to any Plan maintained for the employees of the Holt
Companies or any ERISA Affiliate; do or cause to be done all such acts and
things that are required to maintain the qualified status of each Plan and tax
exempt status of each trust forming part of such Plan; not incur any material
accumulated funding deficiency (within the meaning of ERISA and the regulations
promulgated thereunder), or any material liability to the PBGC (as established
by ERISA); not permit any event to occur as described in ss.4042 of ERISA or
which may result in the imposition of a lien on their properties or assets;
notify the Banks in writing promptly after it has come to the attention of
senior management of the Holt Companies of the assertion or threat of any
"reportable event" or other event described in ss.4042 of ERISA (relating to the
soundness of a Plan) or the PBGC's ability to assert a material liability
against it or impose a lien on their, or any ERISA Affiliates' properties or
assets; and refrain from engaging in any Prohibited Transactions or actions
causing possible liability under ss.5.02 of ERISA.
5.4. Compliance with Regulations. Comply, and cause their Subsidiaries to
comply, in all material respects with all Regulations applicable to their
businesses, the noncompliance with which reasonably could have a Material
Adverse Effect.
5.5. Conduct of Business; Permits and Approvals, Compliance with Laws.
Continue to engage, and cause their Subsidiaries to continue to engage, in an
efficient and economical manner in businesses substantially the same as
conducted by them on the date of this Agreement; maintain, and cause their
Subsidiaries to maintain, in full force and effect, its and their franchises,
and all licenses, patents, trademarks, trade names, contracts, permits,
approvals and other rights necessary to the profitable conduct of their
businesses.
5.6. Maintenance of Insurance. Keep and maintain, and cause their
Subsidiaries to keep and maintain, all of its and their property and assets
covered by insurance with reputable and financially sound insurance companies
against such hazards and in such amounts as is customary in the industry, under
policies requiring the insurer to furnish thirty (30) days' prior notice to the
Bank and opportunity to cure any non- payment of premiums prior to termination
of coverage; and furnish the Bank with certificates of such insurance and cause
the Bank to be named as an additional insured and the loss payee thereof with
respect to the Collateral, as its interest may appear.
5.7. Payment of Debt; Payment of Taxes, Etc. Where the amount involved
exceeds $1,000,000 or where the non-payment or non-discharge would otherwise
have a Material Adverse Effect on the Holt Companies or any of their
Subsidiaries, or any of their assets: promptly pay and discharge, and cause
their Subsidiaries to promptly pay and discharge, (a) all of their Debt in
accordance with the terms thereof; (b) all taxes, assessments, and governmental
charges or levies imposed upon them or upon their income and profits, upon any
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Credit Agreement February 25, 1999
<PAGE>
of their property, real, personal or mixed, or upon any part thereof, before the
same shall become in default; (c) all lawful claims for labor, materials and
supplies or otherwise, which, if unpaid, might become a lien or charge upon such
property or any part thereof; provided, however, that so long as the Holt
Companies first notifies First Union of their intention to do so, the Holt
Companies or their Subsidiaries shall not be required to pay and discharge any
such Debt, tax, assessment, charge, levy or claim so long as the failure to so
pay or discharge does not constitute or result in an Event of Default or a
Potential Default hereunder and so long as no foreclosure or other similar
proceedings shall have been commenced against any property or any part thereof
and so long as the validity thereof shall be contested in good faith by
appropriate proceedings diligently pursued and they shall have set aside on
their consolidated books adequate reserves with respect thereto.
5.8. Notice of Events. Promptly upon discovery of any of the following
events, the Holt Companies shall provide telephone notice to the Banks
(confirmed within three (3) calendar days by written notice), describing the
event and all action the Holt Companies proposes to take with respect thereto:
(a) an Event of Default or Potential Default under this Agreement or any
other Loan Document;
(b) any default or event of default under a contract or contracts and
the default or event of default involves payments by the Holt Companies in an
aggregate amount equal to or in excess of $1,000,000;
(c) a default or event of default under or as defined in any evidence of
or agreements for Indebtedness for Borrowed Money under which any Holt Company's
or its Subsidiaries' liability is equal to or in excess of $1,000,000,
singularly or in the aggregate, whether or not an event of default thereunder
has been declared by any party to such agreement or any event which, upon the
lapse of time or the giving of notice or both, would become an event of default
under any such agreement or instrument or would permit any party to any such
instrument or agreement to terminate or suspend any commitment to lend to the
Holt Companies or their Subsidiaries or to declare or to cause any such
indebtedness to be accelerated or payable before it would otherwise be due;
(d) the institution of, any material adverse determination in, or the
entry of any default judgment or order or stipulated judgment or order in, any
suit, action, arbitration, administrative proceeding, criminal prosecution or
governmental investigation against the Holt Companies or their Subsidiaries in
which the amount in controversy is in excess of $1,000,000, singularly or in the
aggregate; or
(e) any change in the ability of the Holt Companies, or the ability of
any third party contemplated in ss.3.17 and ss.5.15, to timely address a Year
2000 Problem which could have a Material Adverse Effect as well as any change in
either the process toward resolution or the purported completed resolution of
any such Year 2000 Problem; or
(f) any change in any Regulation, including, without limitation, changes
in tax laws and regulations, which would have a Material Adverse Effect on the
Holt Companies or any of their Subsidiaries.
5.9. Inspection Rights. During regular business hours and then as often as
reasonably requested of the Holt Companies, permit First Union, or any
authorized officer, employee, agent, or representative of First Union to examine
and make abstracts from the records and books of account of the Holt Companies
and their Subsidiaries, wherever located, and to visit the properties of the
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Credit Agreement February 25, 1999
<PAGE>
Holt Companies and their Subsidiaries; and to discuss the affairs, finances, and
accounts of the Holt Companies and their Subsidiaries with The Holt Group,
Inc.'s chief executive officer, any executive vice president, its chief
financial officer, treasurer, controller or (with prior written notice to any of
the listed officers) independent accountants.
5.10. Generally Accepted Accounting Principles. Maintain books and records
at all times in accordance with Generally Accepted Accounting Principles.
5.11. Compliance with Material Contracts. The Holt Companies and their
Subsidiaries will comply in all material respects with all obligations, terms,
conditions and covenants, as applicable, in all Debt of the Holt Companies or
their Subsidiaries and all instruments and agreements related thereto, and all
other instruments and agreements to which any of them is a party or by which any
of them is bound or any of their properties is affected and in respect of which
the failure to comply reasonably could have a Material Adverse Effect.
5.12. Use of Proceeds. The Holt Companies will use the proceeds of each
Revolving Loan only for working capital financing, capital repairs, retrofitting
and/or maintenance, to existing Vessels and other general corporate purposes.
The proceeds of each Term Loan will be used only for repairs and improvements to
the properties, real and personal, which were damaged principally as a
consequence of Hurricane Georges which occurred in September 1998 and which are
or are expected to be included in the Insurance Claims, as well as incremental
working capital financing and other general corporate purposes arising
therefrom.
5.13. Further Assurances. Do such further acts and things and execute and
deliver to the Banks such additional assignments, agreements, powers and
instruments, as any Bank may reasonably require or reasonably deem advisable to
carry into affect the purposes of this Agreement or to better assure and confirm
unto each Bank its rights, powers and remedies hereunder.
5.14. Restrictive Covenants in Other Agreements. In the event that any Holt
Company shall enter into or otherwise become subject to or suffer to exist any
agreement pertaining to Debt which contains financial covenants or restrictions
that are more restrictive on it than the covenants and restrictions contained in
this Agreement, each and every such financial covenant and restriction shall be
deemed incorporated herein by reference as fully as if set forth herein. Said
financial covenant or restriction shall continue in effect for so long as the
agreement containing said financial covenant or restriction shall remain in
effect, provided however, said agreement may be amended to change any said
financial covenant or restriction so long as the purpose of said amendment is
not to eliminate or avoid an event of default or to a potential default
thereunder. If and to the extent that any such financial covenant or restriction
shall be inconsistent with or otherwise be in conflict with any covenant or
restriction set forth herein (other than by reason of its being more
restrictive), the covenant or restriction contained in this Agreement shall
govern.
5.15. Year 2000 Program. The Holt Companies will use their best efforts to
continue to assess the risk that the computer applications they use in their
business may be unable to properly perform date sensitive functions on or after
January 1, 2000 and will promptly take all remedial action reasonably necessary
to avoid such risk. Further, it will continue to monitor Year 2000 Problems
pertaining to third parties with whom it has material contractual relationships
which problems, if not properly addressed, could have a Material Adverse Effect.
5.16. Subsidiaries. In the event that any Holt Company shall create or
acquire any Subsidiary after the date hereof, such Subsidiary shall become a
party to this Agreement and be subject to all terms and conditions hereof.
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Credit Agreement February 25, 1999
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6. Negative Covenants
The Holt Companies covenant and agree, individually and collectively, that
from and after the date hereof and so long as the Aggregate Revolving Loan
Commitment or Aggregate Term Loan Commitment is in effect or any Obligation
remains unpaid or outstanding, they and each of them will not and will not
permit their Subsidiaries to:
6.1. Consolidation and Merger. (a) Dissolve, (b) adopt or enter
into any plan or agreement of liquidation, or (c) merge or consolidate with or
into any corporation or acquire all or substantially all of the assets of any
Person, unless the surviving entity is a Holt Company.
6.2. Liens. Create, assume or permit to exist any Lien on any of their
properties or assets, whether now owned or hereafter acquired, or upon any
income or profits therefrom, except Permitted Liens.
6.3. Guarantees. Except as set forth in Schedule 1 hereto, guarantee or
otherwise in any way become or be responsible for indebtedness or obligations
(including working capital maintenance, take-or- pay contracts) of any other
Person, contingently or otherwise, in any amounts that would exceed in the
aggregate the sum of (a) $5,000,000 and (b) the amount of all guarantees in
existence at the date hereof and set forth in Schedule 1 hereto (including
replacements or refinancings of the underlying obligations). In the event any
obligation which was the subject of a guarantee as contemplated by clause (b)
shall be terminated, the amount of said guarantee shall cease to be included in
clause (b).
6.4. Margin Stock. Use or permit any proceeds of the Loans to be used,
either directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock within the meaning of Regulation U
of The Board of Governors of the Federal Reserve System, as amended from time to
time.
6.5. Acquisitions and Investments. Except as permitted in ss.ss. 6.1 and
6.10, purchase or otherwise acquire (including without limitation by way of
share exchange) any part or amount of the capital stock or assets of, or make
any Investments in any other Person; or enter into any new business activities
or ventures not directly related to their present businesses; or create any
Subsidiary, except (a) they may acquire and hold stock, obligations or
securities received in settlement of debts (created in the ordinary course of
business) owing to them, and (b) they may make and own (i) Investments in
certificates of deposit or time deposits having maturities in each case not
exceeding one year from the date of issuance thereof and issued by a Bank, or
any FDIC-insured commercial bank incorporated in the United States or any state
thereof having a combined capital and surplus of not less than $150,000,000,
(ii) Investments in marketable direct obligations issued or unconditionally
guaranteed by the United States of America, any agency thereof, or backed by the
full faith and credit of the United States of America, in each case maturing
within one year from the date of issuance or acquisition thereof, (iii)
Investments in commercial paper issued by a corporation incorporated in the
United States or any State thereof maturing no more than one year from the date
of issuance thereof and, at the time of acquisition, having a rating of A-1 (or
better) by Standard & Poor's Corporation or P-1 (or better) by Moody's Investors
Service, Inc., and (iv) Investments in money market mutual funds all of the
assets of which are invested in cash or investments described in the immediately
preceding clauses (i), (ii) and (iii).
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<PAGE>
6.6. Transfer of Assets; Nature of Business. Sell, transfer, assign or
otherwise dispose of any of their assets unless such sale or disposition shall
be in the ordinary course of their businesses for value received; or discontinue
or liquidate in any material respect any substantial part of their operations or
business.
6.7. Restricted Payments.
(a) Make or pay any redemptions, repurchases, dividends or
distributions of any kind with respect to the capital stock of The Holt Group,
Inc., or make or pay any advances to any holder of the capital stock of The Holt
Group, Inc. except that as long as no Event of Default or Potential Default
shall be in existence, The Holt Group, Inc. may (i) pay dividends or make
distributions in any Fiscal Year ending after December 31, 1997, up to but not
exceeding, in the aggregate, an amount which is fifty percent (50%) of net
income for the immediately preceding Fiscal Year in the case of each Fiscal Year
ending after December 31, 1997 and (ii) make advances during any Fiscal Year in
anticipation of dividends or distributions for such Fiscal Year up to but not
exceeding in the aggregate, an amount which is fifty percent (50%) of net income
for such Fiscal Year measured on a quarterly basis, provided that all such
advances shall be repaid in full on or before April 1 on the next succeeding
Fiscal Year.
(b) Other than as provided in Section 6.7(a) above, make any repayment
or advance any monies to any Subsidiary or Affiliate or any officer or director
of any Subsidiary or Affiliate in respect of intercompany obligations, except
that as long as no Event of Default or Potential Default shall be in existence
repayments or advances may be made to any Subsidiary or Affiliate in the
ordinary course of the business of the applicable Holt Company other than
Riverfront or any Subsidiary or Affiliate created or acquired after November 17,
1998.
6.8. Accounting Change. Make or permit any change in financial accounting
policies or financial reporting practices, except as required by Generally
Accepted Accounting Principles or regulations of the Securities and Exchange
Commission, if applicable.
6.9. Transactions with Affiliates. Enter into or suffer to exist any
contract, agreement, arrangement or transaction with any Affiliate (an
"Affiliate Transaction"), or any series of related Affiliate Transactions (other
than Exempted Affiliate Transactions), (i) unless it is determined that the
terms of such Affiliate Transaction are fair and reasonable to the applicable
Holt Company, and no less favorable to such company, than could have been
obtained in an arm's length transaction with a non-Affiliate, (ii) if involving
consideration to either party in excess of $1,000,000 unless such Affiliate
Transaction(s) is the subject of an officers' certificate addressed and
delivered to each Bank certifying that such Affiliate Transaction (or
Transactions) has been approved by a majority of the members of the board of
directors that are disinterested in such transaction and (iii) if involving
consideration to either party in excess of $10,000,000, unless, in addition, the
applicable Holt Company, prior to the consummation thereof, obtains a written
favorable opinion as to the fairness of such transaction to such company from a
financial point of view from an independent investment banking firm of national
reputation or, if pertaining to a matter for which such investment banking firms
do not customarily render such opinions, an appraisal or valuation firm of
national reputation; provided, however, that clause (iii) of this ss.6.9 also
shall be applicable to any Affiliate Transaction involving consideration to
either party in excess of $5,000,000 but equal to or less than $10,000,000
unless such Affiliate Transaction is only with an Affiliate (x) engaged in
business substantially similar and related to the business then conducted by the
Holt Companies (as permitted under this Agreement) and (y) such Affiliate
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<PAGE>
Transaction is entered into in the ordinary course of business for purposes
customary in the Holt Companies' industry.
6.10. Indebtedness. Create, enter into or allow to exist any Indebtedness
for Borrowed Money of the Holt Companies or any of their Subsidiaries except (i)
the Loans hereunder and the Letters of Credit issued pursuant hereto, (ii)
indebtedness in existence at the date hereof and listed in Schedule 1 hereto,
and refinancing and substitutions thereof, (iii) Capitalized Lease Obligations
and/or purchase money security interests limited to assets leased, purchased, or
financed, the aggregate unpaid balance of which shall not at any time exceed the
sum of (a) $10,000,000 and (b) the unpaid amount of all such items in existence
at the date hereof and set forth in Schedule 1 hereto, (iv) performance bonds
which shall not exceed $1,000,000 in the aggregate outstanding at any time, (v)
indebtedness by and among the Holt Companies and (vi) operating leases entered
into after the date hereof, provided that, the aggregate payments under
operating leases which have terms of more than one year shall not at any time
exceed $1,250,000.
7. Financial Covenants
The Holt Companies covenant and agree, individually and collectively, that
from and after the date hereof and so long as the Aggregate Revolving Loan
Commitment or the Aggregate Term Loan Commitment is in effect or any Obligation
remains unpaid or outstanding. Riverfront shall be excluded from the following.
7.1. Minimum Adjusted Net Worth. Adjusted Net Worth will not at any time be
less than the sum of (i) $51,000,000 plus (ii) fifty percent (50%) of Adjusted
Net Income for each Fiscal Quarter ending after June 30, 1998 without deduction
for any net losses. In the event the sum of the amounts determined in accordance
with clause (ii) above on a Fiscal Quarter basis shall exceed fifty percent
(50%) of Adjusted Net Income for the Fiscal Year of which said Fiscal Quarters
are a part, minimum Adjusted Net Worth shall be reduced by the amount of such
excess effective on the date the financial statements required pursuant to ss.
shall have been received by the Banks. At all times prior to any such date(s),
minimum Adjusted Net Worth shall include the amounts determined in accordance
with clause (ii) without reduction.
7.2. Maximum Adjusted Funded Debt to Adjusted EBITDA. The ratio of Adjusted
Funded Debt to Adjusted EBITDA shall not exceed the following:
Date Ratio
Through December 31, 1998 5.75:1
January 1-March 31, 1999 5.25:1
April 1-June 30, 1999 5.00:1
July 1-September 30, 1999 4.75:1
October 1-December 31, 1999 4.50:1
January 1-March 31, 2000 4.00:1
April 1-June 30, 2000 3.75:1
July 1-September 30, 2000 3.50:1
October 1, 2000 and thereafter 3.25:1
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Credit Agreement February 25, 1999
<PAGE>
This ratio shall be calculated as the end of each Fiscal Quarter and shall be
for the four (4) most recently ended consecutive Fiscal Quarters. Adjusted
EBITDA for Fiscal Year 1998 shall be calculated by multiplying the sum of
Adjusted EBITDA for the Fiscal Quarters ended March 31, 1998 and June 30, 1998
times two, and as soon as information for the Fiscal Quarter ended September 30,
1998 is released by multiplying the sum of Adjusted EBITDA for the Fiscal
Quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 times 1.33.
7.3. Minimum Fixed Charge Coverage Ratio. The ratio of Adjusted EBITDA to
Fixed Charges will not at any time be less than the following:
Date Ratio
Through June 29, 1999 1.10:1
June 30, 1999 and thereafter 1.25:1
This ratio shall be calculated as the end of each Fiscal Quarter and shall be
for the four (4) most recently ended consecutive Fiscal Quarters. Adjusted
EBITDA for Fiscal Year 1998 shall be calculated by multiplying the sum of
Adjusted EBITDA for the Fiscal Quarters ended March 31, 1998 and June 30, 1998
times two, and as soon as information for the Fiscal Quarter ended September 30,
1998 is released by multiplying the sum of Adjusted EBITDA for the Fiscal
Quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 times 1.33.
7.4. Minimum Interest Coverage. The ratio of Adjusted EBIT to Interest
Expense will not be less than the following:
Date Ratio
Through September 30, 1999 1.50:1
December 31, 1999 and thereafter 2.00:1
This ratio shall be calculated as the end of each Fiscal Quarter and shall be
for the four (4) most recently ended consecutive Fiscal Quarters. For Fiscal
Year 1998, this ratio shall be calculated by multiplying the sum of Adjusted
EBIT and Interest Expense, respectively, for the Fiscal Quarters ended March 31,
1998 and June 30, 1998 times two, and as soon as information for the Fiscal
Quarter ended September 30, 1998 is released by multiplying the sum of Adjusted
EBIT for the Fiscal Quarters ended March 31, 1998, June 30, 1998 and September
30, 1998 times 1.33.
7.5. Minimum Annualized Adjusted EBITDA. Annualized Adjusted EBITDA will
not be less than the following:
Date Adjusted EBITDA
Through September 30, 1999 $45,000,000
December 31, 1999 and thereafter $55,000,000
This amount shall be calculated as the end of each Fiscal Quarter and shall be
for the four (4) most recently ended consecutive Fiscal Quarters. Annualized
Adjusted EBITDA for Fiscal Year 1998 shall be calculated by multiplying the sum
of Adjusted EBITDA for the Fiscal Quarters ended March 31, 1998 and June 30,
1998 times two, and as soon as information for the Fiscal Quarter ended
September 30, 1998 is released by multiplying the sum of Adjusted EBITDA for the
Fiscal Quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 times
1.33.
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Credit Agreement February 25, 1999
<PAGE>
7.6. Term Loan Borrowing Base. The aggregate principal amount of Term Loans
outstanding shall not at any time exceed the Term Loan Borrowing Base or the
Aggregate Term Loan Commitment, which ever is less, provided, however, that this
covenant shall not be deemed breached if, at the time such aggregate amount
exceeds said level, within three Business Days after any Holt Company first has
knowledge of such excess, a prepayment of Term Loans shall be made in an amount
sufficient to assure continued compliance with this covenant in the future.
8. Default
8.1. Events of Default. The Holt Companies shall be in default if any one
or more of the following events (each an "Event of Default") occurs:
(a) Payments. The Holt Companies fail to pay any principal of or
interest on any Note when due and payable (whether at maturity, by
acceleration or otherwise) or fail to pay when it is due and payable the
administrative fee payable to First Union, or any amount payable under
any Loan Document, and such failure shall continue for a period of five
days or more.
(b) Covenants. The Holt Companies fail to observe or perform (1) any
term, condition or covenant set forth in ss.ss.5.2 (with respect to
corporate existence only), 5.6 and 5.15; and all sections of Articles 6
and 7 of this Agreement, as and when required, or (2) any term,
condition or covenant contained in this Agreement or any other Loan
Document other than as set forth in (1) above, as and when required and
such failure shall continue for a period of thirty (30) days or more.
(c) Representations, Warranties. Any representation or warranty made or
deemed to be made by the Holt Companies herein or in any Loan Document
or in any exhibit, schedule, report or certificate delivered pursuant
hereto or thereto shall prove to have been false, misleading or
incorrect in any material respect when made or deemed to have been made.
(d) Bankruptcy. Any Holt Company or any Subsidiary of any Holt Company
is dissolved or liquidated, makes an assignment for the benefit of
creditors, files a petition in bankruptcy, is adjudicated insolvent or
bankrupt, petitions or applies to any tribunal for any receiver or
trustee, commences any proceeding relating to itself under any
bankruptcy, reorganization, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, has commenced against it
any such proceeding which remains undismissed for a period of sixty (60)
days, or indicates its consent to, approval of or acquiescence in any
such proceeding, or any receiver of or trustee for any Holt Company or
any Subsidiary of any Holt Company or any substantial part of the
property of any Holt Company or any Subsidiary of any Holt Company is
appointed, or if any such receivership or trusteeship to continues
undischarged for a period of sixty (60) days.
(e) Certain Other Defaults. Any Holt Company or any Subsidiary of any
Holt Company shall fail to pay when due any Indebtedness for Borrowed
Money, which singularly or in the aggregate exceeds $1,000,000, and such
failure shall continue beyond any applicable cure period, or any the
Holt Company or any Subsidiary of any Holt Company shall suffer to exist
any default or event of default in the performance or observance,
subject to any applicable grace period, of any agreement, term,
condition or covenant with
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Credit Agreement February 25, 1999
<PAGE>
respect to any agreement or document relating to Indebtedness for
Borrowed Money if the effect of such default is to permit, with the
giving of notice or passage of time or both, the holders thereof, or any
trustee or agent for said holders, to terminate or suspend any
commitment (which is equal to or in excess of $1,000,000) to lend money
or to cause or declare any portion of any borrowings thereunder to
become due and payable prior to the date on which it would otherwise be
due and payable, provided that during any applicable cure period the
Bank's obligations hereunder to make further Loans shall be suspended.
(f) Judgments. Any judgments against any Holt Company or any Subsidiary
of any Holt Company or against their assets or property for amounts in
excess of $1,000,000 in the aggregate remain unpaid, unstayed on appeal,
undischarged, unbonded and undismissed for a period of thirty (30) days.
(g) Attachments. Any assets of any Holt Company or any Subsidiary of any
Holt Company shall be subject to attachments, levies, or garnishments
for amounts in excess of $1,000,000 in the aggregate which have not been
dissolved or satisfied within thirty (30) days after service of notice
thereof to the Holt Company or any Subsidiary.
(h) ERISA. Excluding any liability related to withdrawal from Port
Elizabeth as disclosed on Schedule 1, any Reportable Event or any other
fact or circumstance which the Bank in good faith determines constitutes
ground for the termination of any employee benefit plan maintained for
employees of any Holt Company or any ERISA Affiliate and covered by
Title IV of ERISA or grounds for the appointment by an appropriate
United States District Court of a trustee to administer any such plan,
shall have occurred and be continuing for five days, or any such plan
shall be terminated within the meaning of such Title IV, or a trustee
shall be appointed by the appropriate United States District Court to
administer such plan or the Pension Benefit Guaranty Corporation shall
institute proceedings to terminate any such plan or to appoint a trustee
to administer such plan, if upon the termination of the plan or plans
with respect to which any of the foregoing events shall have occurred
there is or would be, in the reasonable judgment of the Bank, a material
resultant liability of the Holt Companies or any ERISA Affiliate.
(i) Security Interests. Any security interest created pursuant to any
Loan Document shall cease to be in full force and effect, or shall cease
in any material respect to give First Union the Liens, rights, powers
and privileges purported to be created thereby (including, without
limitation, a perfected security interest in, and Lien on, all of the
Collateral), superior to and prior to the rights of all third Persons,
and subject to no other Liens.
(j) Material Adverse Change. There occurs any Material Adverse Change.
(k) Change in Control. Thomas J. Holt, Sr., together with any family
trusts created by him and members of his immediate family, shall cease
to be (of record and beneficially) the owner of at least an aggregate of
51% of the issued and outstanding voting and capital stock of The Holt
Group, Inc.
THEN and in every such event other than those specified in clause (d) above,
First Union may, in its sole discretion, or at the written request of the
Required Banks shall, terminate the Aggregate Revolving Loan Commitment,
terminate the Aggregate Term Loan Commitment, and declare the Notes (Revolving
Notes and Term Notes) together with accrued interest thereon and all other
amounts payable under any Loan Document to be, and the same shall thereupon
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Credit Agreement February 25, 1999
<PAGE>
become, due and payable without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Holt Companies. Upon the
occurrence of any event specified in clause (d) above, the Aggregate Revolving
Loan Commitment and the Aggregate Term Loan Commitment shall automatically
terminate and the Notes (Revolving Notes and Term Notes) together with accrued
interest thereon and all other amounts payable under any Loan Document shall
immediately be due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Holt Companies. From
and after the date an Event of Default shall have occurred and for so long as
any Event of Default shall be continuing, the Loans (Revolving Loans and Term
Loans) shall bear interest at the Default Rate. Upon the occurrence of an Event
of Default, in addition to the rights set forth above, First Union shall have
the immediate right to enforce or realize on any collateral security granted to
it in any manner or order it deems expedient without regard to any equitable
principles of marshaling or otherwise. In addition to any rights granted
hereunder or in any of the other Loan Documents, First Union and each Bank shall
have all the rights and remedies granted by applicable law, all of which shall
be cumulative in nature.
9. Collateral
9.1. Collateral.
(i) Revolving Loans. Except as otherwise specifically set forth herein
or in any other Loan Document, any and all Revolving Loans and Letters of Credit
made and outstanding and their repayment at all times shall be secured by a
first priority, perfected, security interest in certain assets owned by one or
more of the Holt Companies as listed and described in Schedule 2 attached hereto
under the caption "Revolving Loans".
(ii) Term Loans. Except as otherwise specifically set forth herein or
in any other Loan Document, any and all Term Loans made and outstanding and
their repayment at all times shall be secured by a first priority, perfected,
security interest in certain assets owned by one or more of the Holt Companies
as listed and described in Schedule 2 attached hereto under the caption "Term
Loans".
9.2. Release of Collateral.
(i) Revolving Loans. Upon the payment in full of the entire principal
balance of all Revolving Loans and Letters of Credit and any interest, fees and
other amounts payable under all Loan Documents, and the termination of the
Aggregate Revolving Loan Commitment, First Union shall release the lien and
security interest it holds in assets owned by one or more of the Holt Companies
as listed and described in Schedule 2 attached hereto under the caption
"Revolving Loans", and do such things as are reasonably requested by the Holt
Companies to effect such release.
(ii) Term Loans. Upon the payment in full of the entire principal
balance of all Term Loans and any interest, fees and other amounts payable under
all Loan Documents, and the termination of the Aggregate Term Loan Commitment,
First Union shall release the lien and security interest it holds in assets
owned by one or more of the Holt Companies as listed and described in Schedule 2
attached hereto under the caption "Term Loans", and do such things as are
reasonably requested by the Holt Companies to effect such release.
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Credit Agreement February 25, 1999
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10. Agent
10.1. Appointment and Authorization. Each Bank hereby irrevocably appoints
and authorizes First Union, as Agent hereunder and as collateral agent and
security trustee with respect to the First Preferred Ship Mortgages and any
other Collateral, to take such action on its behalf and to exercise such powers
under this Agreement and the Loan Documents as are specifically delegated to it
as Agent by the terms hereof or thereof, together with such other powers as are
reasonably incidental thereto. The relationship between First Union and each
Bank has no fiduciary aspects, and First Union's duties as Agent hereunder are
acknowledged to be only ministerial and not involving the exercise of discretion
on its part. Nothing in this Agreement or any Loan Document shall be construed
to impose on First Union any duties or responsibilities other than those for
which express provision is made herein or therein. In performing its duties and
functions under this Article 10, First Union does not assume and shall not be
deemed to have assumed, and hereby expressly disclaims, any obligation with or
for any Holt Company. As to matters not expressly provided for in this Agreement
or any Loan Document, First Union shall not be required to exercise any
discretion or to take any action or communicate any notice, but shall be fully
protected in so acting or refraining from acting upon the instructions of the
Required Banks and their respective successors and assigns; provided, however,
that in no event shall First Union be required to take any action which exposes
it to individual liability or which is contrary to this Agreement, any Loan
Document or applicable law, and First Union shall be fully justified in failing
or refusing to take any action hereunder unless it shall first be specifically
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or omitting to take any
such action. If an indemnity furnished to First Union for any purpose shall, in
its reasonable opinion, be insufficient or become impaired, First Union may call
for additional indemnity from the Banks and not commence or cease to do the acts
for which such indemnity is requested until such additional indemnity is
furnished.
10.2. Duties and Obligations. In performing its functions and duties
hereunder on behalf of the Banks, First Union shall exercise the same care and
skill as it would exercise in dealing with loans for its own account. Neither
First Union nor any of its directors, officers, employees or other agents shall
be liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or any Loan Document except for its or their own
gross negligence or willful misconduct. Without limiting the generality of the
foregoing, First Union (a) may consult with legal counsel and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith and in accordance with the advice of such experts; (b)
makes no representation or warranty to any Bank as to, and shall not be
responsible to any Bank for, any recital, statement, representation or warranty
made in or in connection with this Agreement, any Loan Document or in any
written or oral statement (including a financial or other such statement),
instrument or other document delivered in connection herewith or therewith or
furnished to any Bank by or on behalf of any Holt Company; (c) shall have no
duty to ascertain or inquire into any Holt Company's performance or observance
of any of the covenants or conditions contained herein or to inspect any of the
property (including the books and records) of any Holt Company or inquire into
the use of the proceeds of the Loans or (unless the officers of First Union
active in their capacity as officers of First Union on the Holt Companies'
account have actual knowledge thereof or have been notified in writing thereof)
to inquire into the existence or possible existence of any Event of Default or
Potential Default; (d) shall not be responsible to any Bank for the due
execution, legality, validity, enforceability, effectiveness, genuineness,
sufficiency, collectability or value of this Agreement or any other Loan
Document or any instrument or document executed or issued pursuant hereto or in
connection herewith, except to the extent that such may be dependent on the due
authorization and execution by First Union itself; (e) except as expressly
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Credit Agreement February 25, 1999
<PAGE>
provided herein in respect of information and data furnished to First Union for
distribution to the Banks, shall have no duty or responsibility, either
initially or on a continuing basis, to provide to any Bank any credit or other
information with respect to any Holt Company, whether coming into its possession
before the making of the Loans or at any time or times thereafter; and (f) shall
incur no liability under or in respect of this Agreement or any other Loan
Document for, and shall be entitled to rely and act upon, any notice, consent,
certificate or other instrument or writing (which may be by facsimile
(telecopier), telegram, cable, or other electronic means) believed by it to be
genuine and correct and to have been signed or sent by the proper party or
parties.
10.3. First Union as a Bank. With respect to its Revolving Loan Commitment
and the Loans made and to be made by it, First Union shall have the same rights
and powers under this Agreement and all other Loan Documents as the other Banks
and may exercise the same as if it were not the Agent. The terms "Bank" and
"Banks" as used herein shall, unless otherwise expressly indicated, include
First Union in its individual capacity. First Union and any successor Agent
which is a commercial bank, and their respective affiliates, may accept deposits
from, lend money to, act as trustee under indentures of and generally engage in
any kind of business with, any Holt Company and its affiliates from time to
time, all as if such entity were not the Agent hereunder and without any duty to
account therefor to any Bank.
10.4. Independent Credit Decisions. Each Bank acknowledges to First Union
that it has, independently and without reliance upon First Union or any other
Bank, and based upon such documents and information as it has deemed
appropriate, made its own independent credit analysis and decision to enter into
this Agreement. Each Bank also acknowledges that it will, independently or
through other advisers and representatives but without reliance upon First Union
or any other Bank, and based upon such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or refraining from taking any action under this Agreement or any Loan
Document.
10.5. Indemnification. The Banks agree to indemnify First Union (to the
extent not previously reimbursed by the Holt Companies or any Holt Company),
ratably in proportion to each Bank's Commitment Percentage, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against First Union
in its capacity as Agent in any way relating to or arising out of this Agreement
or any Loan Document or any action taken or omitted to be taken by First Union
in its capacity as Agent hereunder or under any Loan Document; provided that
none of the Banks shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from First Union's gross negligence or
willful misconduct. Without limiting the generality of the foregoing, each Bank
agrees to reimburse First Union, promptly on demand, for such Bank's ratable
share (based upon the aforesaid apportionment) of any out-of-pocket expenses
(including counsel fees and disbursements) incurred by First Union in connection
with the preparation, execution, administration or enforcement of, or the
preservation of any rights under, this Agreement and the Loan Documents to the
extent that First Union is not reimbursed for such expenses by the Holt
Companies or any Holt Company.
10.6. Successor Agent. First Union may resign at any time by giving written
notice of such resignation to the Banks and the Holt Companies, such resignation
to be effective only upon the appointment of a successor Agent as hereinafter
provided. Upon any such notice of resignation, the Banks shall
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<PAGE>
jointly appoint a successor Agent upon written notice to the Holt Companies and
First Union. If no successor Agent shall have been jointly appointed by such
Banks and shall have accepted such appointment within thirty (30) days after
First Union shall have given notice of resignation, First Union may, upon notice
to the Holt Companies and the Banks, appoint a successor Agent. Upon its
acceptance of any appointment as Agent hereunder, the successor Agent shall
succeed to and become vested with all the rights, powers, privileges and duties
of First Union, and First Union shall be discharged from its duties and
obligations as Agent under this Agreement and the Loan Documents. After First
Union's resignation hereunder, the provisions hereof shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was the Agent
under this Agreement and the Loan Documents.
10.7. Allocations Made By First Union. As between First Union and the
Banks, unless a Bank objecting to a determination or allocation made by First
Union pursuant to this Agreement delivers to First Union written notice of such
objection within one hundred twenty (120) days after the date any distribution
was made by First Union, such determination or allocation shall be conclusive on
such one hundred twentieth day and only those items expressly objected to in
such notice shall be deemed disputed by such Bank. First Union shall not have
any duty to inquire as to the application by the Banks of any amounts
distributed to them.
11. Miscellaneous
11.1. Waiver. No failure or delay on the part of First Union or any Bank or
any holder of any Note in exercising any right, power or remedy under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under any
Loan Document. The remedies provided under the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
11.2. Amendments. No amendment, modification, termination or waiver of any
Loan Document or any provision thereof nor any consent to any departure by the
Holt Companies therefrom shall be effective unless the same shall have been
approved in writing by the Required Banks, be in writing and be signed by First
Union, the Required Banks and the Holt Companies and then any such waiver or
consent shall be effective only in the instance and for the specific purpose for
which given, provided, however, that unanimous written consent of all of the
Banks shall be required for: (a) any increase in the amount of the Aggregate
Revolving Loan Commitment or the Aggregate Term Loan Commitment; (b) any
reduction in principal, interest, or fees payable by the Holt Companies under
this Agreement; (c) any extension of the Revolving Credit Termination Date, Term
Credit Termination Date or the maturity date of any Loan (Revolving Loan or Term
Loan); (d) any extension of the due date for payment of any principal, interest
or fees to be collected on behalf of the Banks; and (e) except as otherwise
expressly set forth herein, any release of all or substantially all of the
Collateral. In addition to the foregoing, none of the voting rights established
under this Section 11.2 shall be modified without the written consent of that
number of Banks which would have been required to take the action to which such
voting rights apply. No notice to or demand on the Holt Companies shall entitle
the Holt Companies to any other or further notice or demand in similar or other
circumstances.
11.3. Governing Law. The Loan Documents and all rights and obligations of
the parties thereunder shall be governed by and be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
Pennsylvania or federal principles of conflict of laws.
11.4. Participations and Assignments. The Holt Companies hereby acknowledge
and agree that any Bank may at any time with the consent of the Holt Group, Inc.
(which consent shall not be unreasonably withheld): (a) grant
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<PAGE>
participations in all or any portion of its Revolving Note or Term Note or of
its right, title and interest therein or in or to this Agreement (collectively,
"Participations") to any other lending office of such Bank or to any other bank,
lending institution or other entity which has the requisite sophistication to
evaluate the merits and risks of investments in Participations ("Participants");
provided, however, that: (i) all amounts payable by the Holt Companies hereunder
shall be determined as if such Bank had not granted such Participation; and (ii)
any agreement pursuant to which such Bank may grant a Participation: (x) shall
provide that such Bank shall retain the sole right and responsibility to enforce
the obligations of the Holt Companies hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provisions of
this Agreement; and (y) such participation agreement may provide that such Bank
will not agree to any modification, amendment or waiver of this Agreement
without the consent of the Participant if such modification, amendment or waiver
would reduce the principal of or rate of interest on any Revolving Loan or Term
Loan or postpone the date fixed for any payment of principal of or interest on
any Revolving Loan or Term Loan or increase the Aggregate Revolving Loan
Commitment or Aggregate Term Loan Commitment; and (b) assign any of its
obligations under this Agreement and the Loan Documents, provided it shall
retain at least $5,000,000 of the Aggregate Revolving Loan Commitment,
$2,500,000 of the Aggregate Term Loan Commitment and shall serve as agent for
all its assignees. For so long as First Union shall be the Agent, its Revolving
Loan Commitment shall be at least $15,000,000.
11.5. Captions. Captions in the Loan Documents are included for convenience
of reference only and shall not constitute a part of any Loan Document for any
other purpose.
11.6. Notices. All notices, requests, demands, directions, declarations and
other communications between the Banks and the Holt Companies provided for in
any Loan Document shall, except as otherwise expressly provided, be mailed by
registered or certified mail, return receipt requested, or telegraphed, or
faxed, or delivered in hand to the applicable party at its address indicated
opposite its name on the signature pages hereto. The foregoing shall be
effective and deemed received three days after being deposited in the mails,
postage prepaid, addressed as aforesaid and shall whenever sent by telegram,
telegraph or fax or delivered in hand be effective when received. Any party may
change its address by a communication in accordance herewith.
11.7. Sharing of Collections, Proceeds and Set-Offs; Application of
Payments.
(a) If any Bank, by exercising any right of set-off, counterclaim or
foreclosure against trade collateral or otherwise, receives payment of principal
or interest or other amount due on any Revolving Note or Term Note which is
greater than the percentage share of such Bank (determined as set forth below),
the Bank receiving such proportionately greater payment shall purchase such
participations in the Revolving Loans or Term Loans, as applicable, held by the
other Banks, and such other adjustments shall be made as may be required, so
that all such payments shall be shared by the Banks on the basis of their
percentage shares; provided that if all or any portion of such proportionately
greater payment of such indebtedness is thereafter recovered from, or must
otherwise be restored by, such purchasing Bank, the purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest being paid by such purchasing Bank. The percentage share of each Bank
shall be based on the portion of the outstanding Revolving Loans or Term Loans,
as applicable, of such Bank (prior to receiving any payment for which an
adjustment must be made under this Section in relation to the aggregate
outstanding Revolving Loans or Term Loans, as applicable, of all the Banks. The
Holt Companies agree, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Revolving Loan, Term
Loan or reimbursement obligation, whether or not acquired pursuant to the
foregoing arrangements, may exercise rights of set-off or counterclaim and other
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Credit Agreement February 25, 1999
<PAGE>
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Holt Companies in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law, any Bank receives a secured claim in lieu of a set-off to which this
Section would apply, such Bank shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Banks entitled under this Section to share in the benefits of any
recovery on such secured claim. If any Bank holds both a Revolving Note and a
Term Note any payment shall be deemed to be made in respect of its Term Note
until it shall have been paid in full.
(b) If an Event of Default or Potential Default shall have occurred and
be continuing First Union and each Bank and the Holt Companies agree that all
payments on account of the Loans shall be applied by First Union and the Banks
as follows. If the source of payments is generated from Collateral securing the
repayment of Revolving Loans, the proceeds of such payments shall be applied in
clauses Third through Sixth first in respect of the Revolving Loans until they
shall be paid in full. If the source of payments is generated from Collateral
securing the repayment of Term Loans, the proceeds of such payments shall be
applied in clauses Third through Sixth first in respect of the Term Loans until
they shall be paid in full.
First, to First Union for any Agent fees then due and payable under this
Agreement until such fees are paid in full;
Second, to First Union for any fees, costs or expenses (including
expenses described in ss.11.8) incurred by First Union under any of the
Loan Documents or this Agreement, then due and payable and not
reimbursed by the Holt Companies or the Banks until such fees, costs and
expenses are paid in full;
Third, to the Banks for their percentage shares of the Commitment Fee
then due and payable under this Agreement until such fee is paid in
full;
Fourth, to the Banks for their respective shares of all costs, expenses
and fees then due and payable from the Holt Companies until such costs,
expenses and fees are paid in full;
Fifth, to the Banks for their percentage shares of all interest then due
and payable from the Holt Companies until such interest is paid in full,
which percentage shares shall be calculated by determining each Bank's
percentage share of the amounts allocated in (a) above determined as set
forth in said clause (a); and
Sixth, to the Banks for their percentage shares of the principal amount
of the Loans then due and payable from the Holt Companies until such
principal is paid in full, which percentage shares shall be calculated
by determining each Bank's percentage share of the amounts allocated in
(a) above determined as set forth in said clause (a).
11.8. Expenses; Indemnification. The Holt Companies will from time to time
reimburse First Union promptly following demand for all reasonable out-of-pocket
expenses (including the reasonable fees and expenses of legal counsel) in
connection with (i) the preparation of the Loan Documents, (ii) the making of
any Loans, and (iii) the administration of the Loan Documents. The Holt
Companies also will from time to time reimburse First Union and each Bank for
all out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel) in connection with the enforcement of the Loan Documents. In
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Credit Agreement February 25, 1999
<PAGE>
addition to the payment of the foregoing expenses, the Holt Companies hereby
agree to indemnify, protect and hold First Union, each Bank and any holder of
any Note (Revolving Note or Term Note) and the officers, directors, employees,
agents, affiliates and attorneys of First Union, each Bank and each such holder
(collectively, the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature, including reasonable
fees and expenses of legal counsel, which may be imposed on, incurred by, or
asserted against such Indemnitee by the Holt Companies or other third parties
and arise out of or relate to this Agreement or the other Loan Documents or any
other matter whatsoever related to the transactions contemplated by or referred
to in this Agreement or the other Loan Documents; provided, however, that the
Holt Companies shall have no obligation to an Indemnitee hereunder to the extent
that the liability incurred by such Indemnitee has been determined by a court of
competent jurisdiction to be the result of gross negligence or willful
misconduct of such Indemnitee.
11.9. Survival of Warranties and Certain Agreements. All agreements,
representations and warranties made or deemed made herein shall survive the
execution and delivery of this Agreement, the making of the Loans hereunder and
the execution and delivery of the Notes. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of the Holt
Companies set forth in ss.ss.2.8, ss.2.9, and 11.8 shall survive the payment of
the Loans and the termination of this Agreement. This Agreement shall remain in
full force and effect until the repayment in full of all amounts owed by the
Holt Companies under the Notes or any other Loan Document.
11.10. Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement, the Note or
other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
the Notes or other Loan Documents or of such provision or obligation in any
other jurisdiction.
11.11. Banks' Obligations Several; Independent Nature of Banks' Rights. The
obligation of each Bank hereunder is several and not joint and no Bank shall be
the agent of any other (except to the extent the Agent is authorized to act as
such hereunder). No Bank shall be responsible for the obligation or commitment
of any other Bank hereunder. In the event that any Bank at any time should fail
to make a Loan as herein provided, the other Banks, or any of them as may then
be agreed upon, at their sole option, may make the Loan that was to have been
made by the Bank so failing to make such Loan. Nothing contained in any Loan
Document and no action taken by First Union or any Bank pursuant hereto or
thereto shall be deemed to constitute the Banks to be a partnership, an
association, a joint venture or any other kind of entity. The amounts payable at
any time hereunder to each Bank shall be a separate and independent debt, and,
subject to the terms of this Agreement, each Bank shall be entitled to protect
and enforce its rights arising out of this Agreement and it shall not be
necessary for any other Bank to be joined as an additional party in any
proceeding for such purpose.
11.12. No Fiduciary Relationship. No provision in this Agreement or in any
of the other Loan Documents and no course of dealing between the parties shall
be deemed to create any fiduciary duty by any Bank to any Holt Company.
11.13. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH HOLT COMPANY,
FIRST UNION AND EACH BANK HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE EASTERN DISTRICT OF PENNSYLVANIA AND
IRREVOCABLY AGREES THAT, ANY ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING
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Credit Agreement February 25, 1999
<PAGE>
TO THE NOTE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAYBE LITIGATED IN SUCH
COURTS. EACH HOLT COMPANY, FIRST UNION AND EACH BANK ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT, ANY NOTE, OR SUCH OTHER LOAN DOCUMENT.
11.14. ARBITRATION, WAIVER OF JURY TRIAL.
(a) ARBITRATION. Upon demand of any party hereto whether made before
or after institution of any judicial proceeding, any claim or controversy
arising out of, or relating to the Loan Documents between parties hereto (a
"Dispute") shall be resolved by binding arbitration conducted under and governed
by the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules")
of the American Arbitration Association (the "AAA") and the Federal Arbitration
Act. Disputes may include, without limitation, tort claims, counterclaims a
dispute as to whether a matter is subject to arbitration, claims brought as
class actions, or claims arising from documents executed in the future. A
judgment upon the award may be entered in any court having jurisdiction.
Notwithstanding the foregoing, this arbitration provision does not apply to
disputes under or related to swap agreements.
(b) SPECIAL RULES. All arbitration hearings shall be conducted in the
City of Philadelphia, PA. A hearing shall begin within 90 days of demand for
arbitration and all hearings shall be concluded within 120 days of demand for
arbitration. These time limitations may not be extended unless a party shows
cause for extension and then for no more than a total of 60 days. The expedited
procedures set forth in Rule 51 et. seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. Arbitrators shall be licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel of
the AAA. The parties do not waive applicable Federal or State substantive law
except as provided herein.
(c) PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the
preceding binding arbitration provisions, the parties agree to preserve without
diminution, certain remedies that any party may exercise before or after or
after an arbitration proceeding is brought. The parties shall have the right to
proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale or under applicable law by judicial foreclosure including a proceeding to
confirm the sale; (ii) all rights of self-help including peaceful occupation of
real property and collection of rents, set- off, and peaceful possession of
personal property, (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Any claim or controversy with
regard to any party's entitlement to such remedies is a Dispute.
The parties agree that they shall not have a remedy of punitive or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute, whether the Dispute is resolved by
arbitration or judicially.
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Credit Agreement February 25, 1999
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(d) WAIVER OF JURY TRIAL. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO
BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO A
JURY TRIAL WITH REGARD TO A DISPUTE.
11.15. Counterparts; Effectiveness. This Agreement and any amendment hereto
or waiver hereof may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement and any amendments hereto
or waivers hereof shall become effective when First Union shall have received
signed counterparts or notice by fax of the signature page that the counterpart
has been signed and is being delivered to it or facsimile that such counterparts
have been signed by all the parties hereto or thereto.
11.16. Use of Defined Terms. All words used herein in the singular or
plural shall be deemed to have been used in the plural or singular where the
context or construction so requires. Any defined term used in the singular
preceded by "any" shall be taken to indicate any number of the members of the
relevant class.
11.17. Offsets. Nothing in this Agreement shall be deemed a waiver or
prohibition of any Bank's right of banker's lien or offset.
11.18. Entire Agreement. This Agreement, the Notes issued hereunder and the
other Loan Documents constitute the entire understanding of the parties hereto
as of the date hereof with respect to the subject matter hereof and thereof and
supersede any prior agreements, written or oral, with respect hereto or thereto.
11.19. 1997 Credit Agreement. Simultaneously with the execution and
delivery of this Agreement on November 17, 1998, the commitment of First Union
National Bank, successor by merger with CoreStates Bank, to make loans or issue
letters of credit under the 1997 Credit Agreement was terminated, and First
Union National Bank was released in full for all matters in connection therewith
or relating thereto. This amended and restated Credit Agreement shall not affect
said termination and release. This amendment and restatement hereby confirms
said termination and release.
11.20. Consolidated Basis. Unless the context otherwise requires,
references to the Holt Companies in this Agreement shall mean the Holt Companies
and their Subsidiaries.
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Credit Agreement February 25, 1999
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed by their duly authorized representatives as of the date
first above written.
THE HOLT GROUP, INC.
HOLT CARGO SYSTEMS, INC.
HOLT HAULING AND WAREHOUSING SYSTEM, INC.
MURPHY MARINE SERVICES, INC.
NPR HOLDING CORPORATION, INC.
NPR, INC.
NPR-NAVIERAS RECEIVABLES, INC.
NPR S.A., INC.
SAN JUAN INTERNATIONAL TERMINALS, INC.
S.J.I.T., INC.
WILMINGTON STEVEDORES, INC.
By /s/ John A. Evans
-----------------------
Name: John A. Evans
Title: Vice President
Notices To:
Mr. Bernard Gelman
The Holt Group, Inc.
101 S. King Street
Gloucester City, NJ 08030
FAX No. (609) 742-3066
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Credit Agreement February 25, 1999
<PAGE>
FIRST UNION NATIONAL BANK,
for itself and as agent
By: /s/ Roy O. Young
------------------------------
Name: Roy O. Young
Title: Vice President
Notices To:
Roy O. Young
Vice President
First Union National Bank
Transportation and Equipment Finance
PA 4827
1339 Chestnut Street
Philadelphia, PA 19107
FAX No. 215-786-7704
SUMMIT BANK
By: /s/ Gail L. Powers
------------------------------
Name: Gail L. Powers
Title: Vice President
Notices To:
Gail L. Powers
Vice President
Summit Bank
1800 Chapel Avenue West
Cherry Hill, NJ 08002
FAX No. 609-486-3716
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Credit Agreement February 25, 1999
<PAGE>
WILMINGTON TRUST OF PENNSYLVANIA
By: /s/ Joseph M. Finley
------------------------------
Name: Joseph M. Finley
Title: Vice President
Notices To:
Joseph M. Finley
Vice President
Wilmington Trust of Pennsylvania
795 East Lancaster Avenue
Villanova, PA 19085
FAX No. 610-431-1792
MBC LEASING CORP.
By: /s/ Keith Moore
------------------------------
Name: Keith Moore
Title: Vice President
Notices To:
Keith Moore
Vice President
MBC Leasing Corp.
2 Hopkins Plaza, 5th floor
Baltimore, MD 21201
FAX No. 410-237-5430
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Credit Agreement February 25, 1999
<PAGE>
Reference Table of Definitions
definition page defined
1995 Credit Agreement....................................................2
1997 Credit Agreement....................................................2
AAA.....................................................................46
Additional Amount.......................................................19
Adjusted EBIT............................................................2
Adjusted EBITDA..........................................................2
Adjusted Funded Debt.....................................................2
Adjusted Net Income......................................................2
Adjusted Net Worth.......................................................2
Affiliate................................................................2
Affiliate Transaction...................................................34
Aggregate Revolving Loan Commitment.....................................11
Aggregate Term Loan Commitment..........................................12
Agreement................................................................3
Arbitration Rules.......................................................46
Assignment of Insurance Claims...........................................3
Bank.....................................................................1
Banks....................................................................1
Base Rate................................................................3
Base Rate Margin.........................................................3
Business Day.............................................................3
Capital Lease............................................................3
Capitalized Lease Obligations............................................3
Cargo....................................................................1
Code.....................................................................3
Compliance Certificate...................................................3
CPLTD....................................................................3
Debt.....................................................................4
Default Rate.............................................................4
Dispute.................................................................46
Dollars..................................................................4
Environmental Control Statutes...........................................4
ERISA....................................................................4
ERISA Affiliate..........................................................4
Event of Default........................................................37
Exempt Affiliate Transaction.............................................4
Federal Funds Rate.......................................................4
First Preferred Ship Mortgage............................................5
First Union..............................................................1
Fiscal Quarter...........................................................5
Fiscal Year..............................................................5
Fixed Charges............................................................5
GAAP.....................................................................5
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Credit Agreement February 25, 1999
<PAGE>
Generally Accepted Accounting Principles.................................5
Governmental Authority...................................................5
Hauling..................................................................1
Hazardous Substances.....................................................5
Holt Companies...........................................................1
Holt Company.............................................................1
Holt Group...............................................................1
Indebtedness for Borrowed Money..........................................5
Indemnitees.............................................................45
Insurance Claims.........................................................5
Interest Period..........................................................5
Investment...............................................................6
Letter of Credit........................................................12
LIBO Rate................................................................6
LIBO Rate Loans..........................................................6
LIBO Rate Margin.........................................................6
LIBO Rate Reserve Percentage.............................................6
Lien.....................................................................7
Loan....................................................................11
Loan Documents...........................................................7
Loans...................................................................11
Material Adverse Change..................................................7
Material Adverse Effect..................................................7
Multiemployer Plan.......................................................7
Murphy...................................................................1
Net Worth................................................................7
Note....................................................................13
Notes...................................................................13
NPR Holding..............................................................1
NPR S.A..................................................................1
NPR, Inc.................................................................1
NPR-Navieras.............................................................1
Obligations..............................................................7
Participants............................................................43
Participations..........................................................43
PBGC.....................................................................8
Pension Plan.............................................................8
Permitted Liens..........................................................8
Person...................................................................8
Plan.....................................................................8
Pledge Agreement.........................................................8
Potential Default........................................................9
Prohibited Transaction...................................................9
Regulation...............................................................9
Regulation D.............................................................9
Regulatory Change........................................................9
Release..................................................................9
Reportable event.........................................................9
-51-
Credit Agreement February 25, 1999
<PAGE>
Request for Advance.....................................................14
Required Banks...........................................................9
Revolving Credit Termination Date.......................................14
Revolving Loan..........................................................11
Revolving Loan Commitment...............................................11
Revolving Loan Commitment Fee...........................................16
Revolving Loans.........................................................10
Revolving Note..........................................................13
Revolving Notes.........................................................13
Riverfront...............................................................1
San Juan.................................................................1
Security Agreement......................................................10
SJIT.....................................................................1
Solvent.................................................................10
Subsidiary..............................................................10
Taxes...................................................................10
Term Credit Termination Date............................................14
Term Loan...............................................................12
Term Loan Borrowing Base................................................40
Term Loan Commitment....................................................12
Term Loan Commitment Fee................................................17
Term Loans..............................................................12
Term Note...............................................................14
Term Notes..............................................................14
Termination Event.......................................................10
Unfunded Capital Expenditures...........................................10
Unfunded Pension Liabilities............................................11
Unrecognized Retiree Welfare Liability..................................11
Vessel..................................................................11
Wilmington...............................................................1
Year 2000 Problem.......................................................11
-52-
Credit Agreement February 25, 1999
<PAGE>
EXHIBIT A-1
Revolving Loan Commitments and Percentages
Revolving Loan
Revolving Loan Commitment
Bank Commitment Percentage
---- ---------- ----------
First Union National Bank $25,000,000 50.00%
Transportation and Equipment Finance
1339 Chestnut Street - 11th Floor
PA 4827
Philadelphia, PA 19107
Fax No. (215) 786-7704
Summit Bank $10,000,000 20.00%
1800 Chapel Avenue West
Cherry Hill, NJ 08002
FAX No. 609-486-3716
Wilmington Trust of Pennsylvania $10,000,000 20.00%
795 East Lancaster Avenue
Villanova, PA 19085
FAX No. 610 431 1792
MBC Leasing Corp. $5,000,000 10.00%
2 Hopkins Plaza - 5th floor
Baltimore, MD 21201
FAX No. 410 237 5430
<PAGE>
EXHIBIT A-2
Term Loan Commitments and Percentages
Term Loan
Term Loan Commitment
Bank Commitment Percentage
First Union National Bank $ 8,625,000 50.00%
Transportation and Equipment Finance
1339 Chestnut Street - 11th Floor
PA 4827
Philadelphia, PA 19107
Fax No. (215) 786-7704
Summit Bank $ 3,450,000 20.00%
1800 Chapel Avenue West
Cherry Hill, NJ 08002
FAX No. 609-486-3716
Wilmington Trust of Pennsylvania $ 3,450,000 20.00%
795 East Lancaster Avenue
Villanova, PA 19085
FAX No. 610 431 1792
MBC Leasing Corp. $ 1,725,000 10.00%
2 Hopkins Plaza - 5th floor
Baltimore, MD 21201
FAX No. 410 237 5430
<PAGE>
EXHIBIT B-1
Revolving Note
$___,000,000 Philadelphia, PA
February 25, 1999
For Value Received, THE HOLT GROUP, INC., a Delaware corporation, HOLT CARGO
SYSTEMS, INC., a Delaware corporation, HOLT HAULING AND WAREHOUSING SYSTEM,
INC., a Pennsylvania corporation, MURPHY MARINE SERVICES, INC., a Delaware
corporation, NPR HOLDING CORPORATION, a Delaware corporation, NPR, INC., a
Delaware corporation, NPR- NAVIERAS RECEIVABLES, INC., a Delaware corporation,
NPR S.A., Inc., a Delaware corporation, SAN JUAN INTERNATIONAL TERMINALS, INC.,
a Delaware corporation, S.J.I.T., INC., a Delaware corporation, and WILMINGTON
STEVEDORES, INC., a Delaware corporation, (together, sometimes referred to
herein as the "Holt Companies" and individually, as a "Holt Company"), jointly
and severally, hereby promise to pay to the order of __________________ (the
"Bank"), in lawful currency of the United States of America in immediately
available funds at the offices of FIRST UNION NATIONAL BANK located at Broad and
Chestnut Streets, Philadelphia, Pennsylvania, on the earlier to occur of
acceleration of the maturity date as provided in the Credit Agreement described
below or the Revolving Credit Termination Date as therein defined, the principal
sum of ____________________ MILLION DOLLARS ($___,000,000) or, if less, the then
unpaid principal amount of all Revolving Loans made by the Bank pursuant to the
Credit Agreement (defined below).
The Holt Companies promise also to pay interest on the unpaid principal amount
hereof in like money at such office from the date hereof until paid in full at
the rates and at the times provided in the Credit Agreement, dated February 25,
1999, by and among the Holt Companies and the bank institutions named therein,
with First Union National Bank as Agent (as such may be amended, modified,
supplemented, restated or replaced from time to time, the "Credit Agreement").
This Note is a Revolving Note referred to in the Credit Agreement. This Note is
entitled to the benefits of and is secured by security interests referred to in
the Credit Agreement. Capitalized terms used in this Note but not defined herein
shall have the meanings ascribed to such terms in the Credit Agreement. This
Note is subject to voluntary prepayment and mandatory repayment prior to demand,
acceleration of maturity or the Revolving Credit Termination Date, in whole or
in part, as provided in the Credit Agreement.
In case an Event of Default shall occur and be continuing, the maturity date of
the principal of and the accrued interest on this Note may be accelerated and be
declared to be due and payable in the manner and with the effect provided in the
Credit Agreement.
The Holt Companies hereby waive presentment, demand, protest or notice of any
kind in connection with this Note.
Notwithstanding the face amount of this Note, the Holt Companies liability
hereunder shall be limited, at all times, to the actual aggregate outstanding
indebtedness to the Bank relating to the Bank's Loans, including all principal
and interest, together with all fees and expenses as provided in the Credit
Agreement, as established by the Bank's books and records which shall be
conclusive absent manifest error.
-1-
Revolving Note February 25, 1999
<PAGE>
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL
PRINCIPLES OR CONFLICT OF LAWS.
IN WITNESS WHEREOF, and intending to be legally bound hereby, each of the Holt
Companies has caused this Note to be executed by its duly authorized officer as
of the date and year first above written.
THE HOLT GROUP, INC.
HOLT CARGO SYSTEMS, INC.
HOLT HAULING AND WAREHOUSING SYSTEM, INC.
MURPHY MARINE SERVICES, INC.
NPR HOLDING CORPORATION, INC.
NPR, INC.
NPR-NAVIERAS RECEIVABLES, INC.
NPR S.A., INC.
SAN JUAN INTERNATIONAL TERMINALS, INC.
S.J.I.T., INC.
WILMINGTON STEVEDORES, INC.
By
------------------------------
Name:
Title:
-2-
Revolving Note February 25, 1999
<PAGE>
EXHIBIT B-2
Term Note
$___,000,000 Philadelphia, PA
February 25, 1999
For Value Received, THE HOLT GROUP, INC., a Delaware corporation, HOLT CARGO
SYSTEMS, INC., a Delaware corporation, HOLT HAULING AND WAREHOUSING SYSTEM,
INC., a Pennsylvania corporation, MURPHY MARINE SERVICES, INC., a Delaware
corporation, NPR HOLDING CORPORATION, a Delaware corporation, NPR, INC., a
Delaware corporation, NPR-NAVIERAS RECEIVABLES, INC., a Delaware corporation,
NPR S.A., Inc., a Delaware corporation, SAN JUAN INTERNATIONAL TERMINALS, INC.,
a Delaware corporation, S.J.I.T., INC., a Delaware corporation, and WILMINGTON
STEVEDORES, INC., a Delaware corporation, (together, sometimes referred to
herein as the "Holt Companies" and individually, as a "Holt Company"), jointly
and severally, hereby promise to pay to the order of __________________ (the
"Bank"), in lawful currency of the United States of America in immediately
available funds at the offices of FIRST UNION NATIONAL BANK located at Broad and
Chestnut Streets, Philadelphia, Pennsylvania, on the earlier to occur of
acceleration of the maturity date as provided in the Credit Agreement described
below or the Term Credit Termination Date as therein defined, the principal sum
of ____________________ MILLION DOLLARS ($___,000,000) or, if less, the then
unpaid principal amount of all Term Loans made by the Bank pursuant to the
Credit Agreement (defined below).
The Holt Companies promise also to pay interest on the unpaid principal amount
hereof in like money at such office from the date hereof until paid in full at
the rates and at the times provided in the Credit Agreement, dated February 25,
1999, by and among the Holt Companies and the bank institutions named therein,
with First Union National Bank as Agent (as such may be amended, modified,
supplemented, restated or replaced from time to time, the "Credit Agreement").
This Note is a Term Note referred to in the Credit Agreement. This Note is
entitled to the benefits of and is secured by security interests referred to in
the Credit Agreement. Capitalized terms used in this Note but not defined herein
shall have the meanings ascribed to such terms in the Credit Agreement. This
Note is subject to voluntary prepayment and mandatory repayment prior to demand,
acceleration of maturity or the Term Credit Termination Date, in whole or in
part, as provided in the Credit Agreement.
In case an Event of Default shall occur and be continuing, the maturity date of
the principal of and the accrued interest on this Note may be accelerated and be
declared to be due and payable in the manner and with the effect provided in the
Credit Agreement.
The Holt Companies hereby waive presentment, demand, protest or notice of any
kind in connection with this Note.
Notwithstanding the face amount of this Note, the Holt Companies liability
hereunder shall be limited, at all times, to the actual aggregate outstanding
indebtedness to the Bank relating to the Bank's Loans, including all principal
and interest, together with all fees and expenses as provided in the Credit
Agreement, as established by the Bank's books and records which shall be
conclusive absent manifest error.
-1-
Term Note February 25, 1999
<PAGE>
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL
PRINCIPLES OR CONFLICT OF LAWS.
IN WITNESS WHEREOF, and intending to be legally bound hereby, each of the Holt
Companies has caused this Note to be executed by its duly authorized officer as
of the date and year first above written.
THE HOLT GROUP, INC.
HOLT CARGO SYSTEMS, INC.
HOLT HAULING AND WAREHOUSING SYSTEM, INC.
MURPHY MARINE SERVICES, INC.
NPR HOLDING CORPORATION, INC.
NPR, INC.
NPR-NAVIERAS RECEIVABLES, INC.
NPR S.A., INC.
SAN JUAN INTERNATIONAL TERMINALS, INC.
S.J.I.T., INC.
WILMINGTON STEVEDORES, INC.
By
-----------------------------
Name:
Title:
-2-
Term Note February 25, 1999
<PAGE>
Exhibit C
FIRST PREFERRED SHIP MORTGAGE
-1-
First Preferred Ship Mortgage November, 1998
<PAGE>
Exhibit D
PLEDGE AGREEMENT
-1-
Pledge Agreement November, 1998
<PAGE>
Exhibit E
ACCOUNTS AND GENERAL INTANGIBLES
SECURITY AGREEMENT
This Security Agreement (the "Agreement"), dated February 25, 1999, is made
by THE HOLT GROUP, INC., a Delaware corporation ("Holt Group"), HOLT CARGO
SYSTEMS, INC., a Delaware corporation ("Cargo"), HOLT HAULING AND WAREHOUSING
SYSTEM, INC., a Pennsylvania corporation ("Hauling"), MURPHY MARINE SERVICES,
INC., a Delaware corporation ("Murphy"), NPR HOLDING CORPORATION, a Delaware
corporation ("NPR Holding"), NPR, INC., a Delaware corporation ("NPR, Inc."),
NPR-NAVIERAS RECEIVABLES, INC., a Delaware corporation ("NPR-Navieras"), NPR
S.A., Inc., a Delaware corporation ("NPR S.A."), SAN JUAN INTERNATIONAL
TERMINALS, INC., a Delaware corporation ("San Juan"), S.J.I.T., INC., a Delaware
corporation ("SJIT"), and WILMINGTON STEVEDORES, INC., a Delaware corporation
("Wilmington"), (together, sometimes referred to herein as the "Debtors" and
individually, as a "Debtor"), in favor of FIRST UNION NATIONAL BANK (the
"Secured Party"), as agent for itself and on behalf of each of the banks now or
hereafter party to the Credit Agreement (defined below). All references in this
Agreement to "Secured Party" shall mean First Union National Bank as agent for
itself and the other Banks under the Credit Agreement. All capitalized terms not
defined in this Agreement shall have the meanings assigned to them in the Credit
Agreement.
Preliminary Statement
This Security Agreement is entered into in accordance with and is a
condition precedent to any Loan under the Credit Agreement.
Agreement
Each Debtor and the Secured Party, intending to be legally bound, agree as
follows:
1. Definitions.
As used herein the following terms shall have the meanings indicated:
(a) "Accounts", "General Intangibles", "Instruments" and "Proceeds" shall
have the meanings assigned to them under the Uniform Commercial Code as in
effect in the Commonwealth of Pennsylvania and shall be applicable solely for
purposes of the Collateral.
(b) "Collateral" means all, (i) Accounts and General Intangibles related to
said Accounts, (ii) all right, title and interest in and to American
International Insurance Company of Puerto Rico insurance policy No. 026-16761,
for the period July 1, 1998 through July 1, 1999, (iii) existing and future
books and records and other General Intangibles relating to all of the
foregoing, and (iv) Proceeds of any of the foregoing.
-1-
Security Agreement February 25, 1999
<PAGE>
(c) "Credit Agreement" means that certain Credit Agreement, dated February
25, 1999, (as such agreement may be amended, restated, modified, replaced or
substituted hereafter) by and among the Debtors and certain banking institutions
named therein, with First Union National Bank, as Agent.
(d) "Insurance Policy" means American International Insurance Company of
Puerto Rico insurance policy No. 026-16761, for the period July 1, 1998 through
July 1, 1999.
(e) "Liabilities" means all existing and future indebtedness and other
liabilities, absolute or contingent, direct or indirect, primary or secondary,
of the Debtors and any of them to the Banks, arising hereunder or in respect of
the Term Notes plus all obligations of the Debtor to the Secured Party in
respect of any interest rate swap agreement, interest rate cap agreement,
interest collar agreement, interest rate hedging agreement, interest rate floor
agreement or other similar agreement or arrangement which relates to the Term
Notes. The term "Liabilities" shall not include indebtedness or other
liabilities which relate only to the Revolving Notes.
(f) "Prevailing Interest Rate" as of any date means the highest rate of
interest then payable by the Debtors under any Term Loan.
2. Grant of Security.
To secure the payment, promptly when due, and the punctual performance
of all of the Liabilities, the Debtors and each of them hereby pledges and
assigns to the Secured Party, and grants to the Secured Party and agrees that
the Secured Party shall have, a general continuing lien upon and security
interest in all the Collateral, which lien and security interest shall be a
general continuing first priority lien upon and security interest in all the
Collateral.
3. Books and Records.
(a) Each Debtor shall faithfully keep complete and accurate books and
records and make all necessary entries therein to reflect the events and
transactions giving rise to any of the Collateral and all payments, credits and
adjustments applicable thereto, shall keep the Secured Party fully and
accurately informed as to the locations of all such books and records and shall
permit the Secured Party's agents to have such access to them and to any other
records pertaining to the Debtor's business as the Secured Party may request
from time to time in accordance with ss.5.9 of the Credit Agreement. If
requested by the Secured Party and if a Potential Default or Event of Default
hereunder or under the Credit Agreement shall exist, each Debtor will make
copies of such books and records and deliver such to the Secured Party,
promptly, or, in the alternative, permit the Secured Party from time to time to
remove such books and records from the Debtor's place of business or from any
other place where they may be found for the purpose of examining, auditing and
copying them. Any of such books or records so removed by the Secured Party's
agents shall be returned to the Debtor as soon as the Secured Party shall have
completed its inspection, audit or copying of them.
(b) The Secured Party's rights to take possession of such books and records
shall be enforceable by an action of replevin or by any other appropriate remedy
at law or in equity, and each Debtor consents to the entry of judicial orders
and injunctions enforcing such rights.
-2-
Security Agreement February 25, 1999
<PAGE>
4. Title to Collateral.
(a) Each Debtor has acquired or shall acquire absolute and exclusive title
to each and every item of the Collateral free and clear of all liens, claims,
security, interests and other encumbrances, except those in favor of the Secured
Party and Permitted Liens as defined in the Credit Agreement, and each Debtor
shall warrant and defend its title to the Collateral, subject to the rights of
the Secured Party, against the claims and demands of all persons whomsoever.
Without limiting the generality of the foregoing, no Debtor shall pledge, assign
or otherwise encumber, or permit any liens or security interests (other than
those in favor of the Secured Party) to attach to, any of the Collateral, nor
permit any of the Collateral to be levied upon under any legal process.
(b) Upon any breach of the foregoing covenant against encumbrances, the
Secured Party may, at its sole election but without obligation to do so,
discharge the encumbrance for the account of and without notice to any Debtor,
and all expenses incurred by the Secured Party in so doing, together with
interest thereon at the Prevailing Interest Rate, shall be added to the
Liabilities and shall be payable by the Debtors on demand.
5. Taxes and Liens. Each Debtor shall promptly notify the Secured Party in
the event there ever arises against any of the Collateral any lien, assessment
or tax or other liability, whether or not entitled to priority over the Secured
Party's security interest hereunder. In any such event, whether or not such
notice is given, the Secured Party shall have the right (but shall be under no
obligation) to pay any tax or other liability of the Debtor deemed by the
Secured Party in good faith to affect the Secured Party's interests hereunder.
The Debtor shall repay to the Secured Party on demand all sums which the Secured
Party shall have paid under this section in respect of taxes or other
liabilities of the Debtor, with interest thereon at the Prevailing Interest
Rate, and the Debtor's liability to the Secured Party for such repayment with
interest shall be included in the Liabilities. The Secured Party shall be
subrogated to the extent of any such payment by it to all the rights and liens
of the payee against the Debtor's assets.
6. Collection of Accounts, Etc.
(a) Until otherwise notified by the Secured Party, each Debtor may collect
all the Accounts but the Proceeds of all Accounts so collected by the Debtor
shall be held by the Debtor in trust for the Secured Party. The Secured Party
may at any time during the existence of an Event of Default terminate the
authority hereby given to any Debtor to collect the Proceeds of such Accounts
and, acting if it so chooses in the Debtor's name, collect such Accounts itself,
directly or through an agent, sell, assign, compromise, discharge or extend the
time for payment of such Accounts, institute legal action for the collection of
such Accounts and do all acts and things necessary or incidental thereto, and
each Debtor hereby ratifies all that the Secured Party shall lawfully do under
the authority hereby granted to it. Prior to the first such action permitted
hereunder by the Secured Party, the Secured Party shall furnish written notice
of such action to the Debtor. Thereafter, no further notices shall be required.
The Secured Party may at any time during the existence of an Event of Default,
without notice to any Debtor except the notice of first action stated above,
notify any account debtor on any such Account that such Account has been
assigned to the Secured Party and is to be paid directly to the Secured Party.
Alternatively during the existence of an Event of Default, at its election the
Secured Party may require each Debtor to, and in such event the Debtor at its
sole expense will, notify its account debtors that payments thereon are
thenceforth to be made directly to the Secured Party. Without the written
consent of the Secured Party in each case, no Debtor shall compromise,
discharge, extend the time for payment of or otherwise grant any indulgence or
allowance with respect to any such Account except for indulgences or allowances
in the ordinary course of business which are not related to an extension or
-3-
Security Agreement February 25, 1999
<PAGE>
restructuring of credit to an account debtor. Notwithstanding the foregoing, all
payments and proceeds with respect to the Insurance Policy shall be paid
directly and immediately to the Security Party until the Term Loans have been
paid in full. Thereafter all payments and proceeds with respect to the Insurance
Policy shall be paid to the Debtors.
(b) If any such Account arises out of a contract with the United States or
any department, agency or instrumentality thereof, the applicable Debtor will
immediately so notify the Secured Party in writing and will execute all
instruments and take all steps required by the Secured Party in order that the
security interest of the Secured Party hereunder in all such Accounts under such
contract and the Proceeds thereof shall be perfected under the Federal
Assignment of Claims Act.
(c) From and after the occurrence and during the continuance of any Event
of Default, if any of the Collateral is or becomes evidenced by a promissory
note, draft, trade acceptance, chattel paper, instrument or document of title,
each Debtor will promptly deliver the same to the Secured Party appropriately
endorsed to the Secured Party's order. Regardless of the form of such
endorsement, the Debtor hereby waives presentment, demand, notice of dishonor,
protest and notice of protest and all other notices with respect thereto. Each
Debtor will promptly notify the Secured Party of any material adverse change of
which it has knowledge in the financial condition of any account debtor on any
material Account pertaining to a Lease or in the collectibility of any of such
Accounts, and of all claims, rejections, returns and adjustments which may
result in a material reduction of the liability of an account debtor on any such
Account.
7. Locations of the Collateral; Name.
(a) If any of a Debtor's records concerning any of the Collateral are at
any time to be located on premises leased by the Debtor, or any premises owned
by the Debtor subject to a mortgage or other lien, the Debtor shall obtain and
deliver to the Secured Party, prior to the delivery of any such Collateral or
books or records to such premises, an agreement in form satisfactory to the
Secured Party waiving the landlord's, mortgagee's or other lienholder's right to
enforce against the Collateral or the Debtor's records concerning the same and
assuring the Secured Party's access to such Collateral and books and records to
facilitate the Secured Party's exercise of its rights to take possession
thereof. The location of each Debtor's chief executive office and all locations
at which each Debtor maintains books and records relating to the Collateral is
as set forth in Exhibit A hereto. Each Debtor agrees to provide the Secured
Party annually with a list of each location of any new or additional place of
business.
(b) Each Debtor represents and warrants that at no time during the past
five (5) years has it been known by or used any other name, including any trade
or fictitious name, except as set forth in Exhibit A hereto.
8. Further Assurances. Each Debtor shall continue to conduct its business
in substantially the manner heretofore conducted and will make no material
changes therein which might impair the security of the Secured Party. Each
Debtor shall execute and deliver to the Secured Party from time to time all such
other agreements, instruments and other documents (including without limitation
all requested financing and continuation statements) and do all such other and
further acts and things as the Secured Party may reasonably request in order to
further evidence or carry out the intent of this Agreement or to perfect the
liens and security interests created hereby or intended so to be.
-4-
Security Agreement February 25, 1999
<PAGE>
9. Default and Remedies.
(a) Each Debtor shall be in default hereunder upon the occurrence of any
one of the following events (each an "Event of Default"):
(i) any Debtor shall fail to pay any amount payable in respect of any
Liability when due (including the expiration of any applicable
grace periods).
(ii) any representation, warranty or information herein, heretofore or
hereafter furnished to the Secured Party by any Debtor in
connection with any of the Liabilities, including any warranty
made by the Debtor through the submission of any schedule,
statement, certificate or other document pursuant to or in
connection with this Agreement, shall be false in any material
respect.
(iii) there shall exist any Event of Default as defined under the
Credit Agreement.
(b) Upon the occurrence of any Event of Default which shall be continuing,
(i) unless the Secured Party elects otherwise, the entire unpaid amount of such
of the Liabilities as is not then otherwise due and payable shall become
immediately due and payable without notice to or demand on any Debtor, (ii) the
Secured Party or its agents may enter each Debtor's premises to exercise the
Secured Party's right to take possession of any Collateral, and (iii) the
Secured Party may at its option exercise from time to time any and all rights
and remedies available to it under the Uniform Commercial Code or otherwise,
including the right to assemble or foreclose or otherwise realize upon any of
the Collateral and to dispose of any of the Collateral at one or more public or
private sales or other proceedings. Each Debtor agrees that the Secured Party or
its nominee may become the purchaser at any such sale or sales. Each Debtor
further agrees that ten (10) days shall be reasonable prior notice of the date
of any public sale or other disposition of all or any part of the Collateral, or
of the date on or after which any private sale or other disposition of the same
may be made.
(c) The exercise by the Secured Party of any one right or remedy shall not
be deemed a waiver or release of or any election against any other right or
remedy, and the Secured Party may proceed against each Debtor and the Collateral
and any other collateral granted by each Debtor to the Secured Party under any
other agreement, all in any order and through any available remedies. A waiver
on any one occasion shall not be construed as a waiver or bar on any future
occasion. All property of any kind held at any time by the Secured Party as
Collateral shall stand as one general continuing collateral security for all the
Liabilities and may be retained by the Secured Party as security until all the
Liabilities are fully satisfied. Each Debtor shall pay to the Secured Party on
demand any and all expenses (including reasonable attorneys' fees and legal
expenses) which may have been incurred by the Secured Party with interest at the
Prevailing Interest Rate (i) in the prosecution or defense of any action growing
out of or connected with the subject matter of this Agreement, the Liabilities,
the Collateral or any of the Secured Party's rights therein or thereto; or (ii)
in connection with the custody, preservation, use, operation, preparation for
sale or sale of any of the Collateral, the incurring of all of which are hereby
authorized to the extent the Secured Party deems the same advisable. Each
Debtor's liability to the Secured Party for any such payment with interest shall
be included in the Liabilities. The Proceeds of any Collateral received by the
Secured Party at any time before or after default, whether from a sale or other
disposition of Collateral or otherwise, or the Collateral itself, may be applied
to the payment in full or in part of such of the Liabilities and in such order
and manner as the Secured Party may elect. Each Debtor to the extent of its
-5-
Security Agreement February 25, 1999
<PAGE>
rights in the Collateral waives and releases any right to require the Secured
Party to collect any of the Liabilities from any other of the Collateral or any
other collateral then held by the Secured Party under any theory of marshaling
of assets or otherwise.
10. Power of Attorney. Each Debtor hereby irrevocably appoints any officer,
employee or agent of the Secured Party as the Debtor's true and lawful
attorney-in-fact with power to (i) endorse the Debtor's name upon any notes,
checks, drafts, money orders, or other instruments or payments or other
Collateral that may come into the Secured Party's possession; (ii) sign and
endorse the Debtor's name upon any documents of title, invoices, freight or
express bills, assignments, verifications and notices in connection with any of
the Collateral, and any instruments or documents relating thereto or to the
Debtor's rights therein; and (iii) execute in the Debtor's name and file one or
more financing, amendment and continuation statements covering the Collateral.
Any such attorney of the Debtor shall have full power to do any and all things
necessary to be done with respect to the above transactions as fully and
effectually as the Debtor might do, and the Debtor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. Unless an Event
of Default shall exist, the Secured Party shall not exercise the foregoing power
of attorney with respect to the actions contemplated in clauses (i) and (ii)
above except with respect to proceeds relating to the Insurance Policy.
11. Financing Statements. Each Debtor shall execute all financing
statements and amendments thereto as the Secured Party may request from time to
time to evidence the security interest granted to the Secured Party hereunder
and will pay all filing fees and taxes, if any, necessary to effect the filing
thereof. Wherever permitted by law, each Debtor authorizes the Secured Party to
file financing statements with respect to the Collateral without the signature
of the Debtor. A copy of this Agreement or a copy of any financing statement
prepared in connection with this Agreement may itself be filed as a financing
statement.
12. Miscellaneous.
(a) This Agreement shall commence on the date hereof and shall continue in
full force and effect so long as any of the Liabilities or any Term Loan
Commitment shall exist from time to time.
(b) No modification or waiver of any provision hereof shall be effective
unless the same is in writing and signed by the party against whom its
enforcement is sought. This Agreement and any amendment hereto or waiver of any
provision hereof may be signed in any number of counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
(c) The representations, warranties, covenants and agreements contained
herein are all material and continuing, and any breach of them shall constitute
a material breach of this Agreement.
(d) All the rights and remedies of the Secured Party hereunder shall be
concurrent and cumulative with and not alternative to or in lieu of the Secured
Party's rights and remedies under any other agreement or agreements.
(e) This Agreement shall bind and inure to the benefit of the parties and
their respective successors and assigns, except that no Debtor shall assign any
of its rights hereunder without the Secured Party's prior written consent.
(f) Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
-6-
Security Agreement February 25, 1999
<PAGE>
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
(g) No persons other than the Debtors and the Secured Party, and the
assignees of the Secured Party, are intended to be benefitted hereby or shall
have any rights hereunder, as third-party beneficiaries or otherwise.
(h) Each Debtor acknowledges that this Agreement and the obligations of it
hereunder and the security created or intended to be created hereby have
constituted, and were intended by it to constitute, a material inducement to the
Secured Party to enter into the Credit Agreement and other agreements referred
to therein, knowing that the Secured Party will rely upon this Agreement. Each
Debtor intends to be legally bound hereby.
(i) This Agreement shall be deemed to be a contract made under and shall be
construed in accordance with the laws of the Commonwealth of Pennsylvania
without regard to Pennsylvania or federal principles of conflict of laws.
-7-
Security Agreement February 25, 1999
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement
to be duly executed by their duly authorized representatives as of the date
first above written.
DEBTORS
THE HOLT GROUP, INC.
HOLT CARGO SYSTEMS, INC.
HOLT HAULING AND WAREHOUSING SYSTEM, INC.
MURPHY MARINE SERVICES, INC.
NPR HOLDING CORPORATION, INC.
NPR, INC.
NPR-NAVIERAS RECEIVABLES, INC.
NPR S.A., INC.
SAN JUAN INTERNATIONAL TERMINALS, INC.
S.J.I.T., INC.
WILMINGTON STEVEDORES, INC.
By
-------------------------------
Name:
Title:
Notices To:
Mr. Bernard Gelman
The Holt Group, Inc.
101 S. King Street
Gloucester City, NJ 08030
FAX No. (609) 742-3066
-8-
Security Agreement February 25, 1999
<PAGE>
SECURED PARTY
FIRST UNION NATIONAL BANK,
Agent
By:
------------------------------
Name: Roy O. Young
Title: Vice President
Notices To:
Roy O. Young
Vice President
First Union National Bank
Transportation and Equipment Finance
PA 4827
1339 Chestnut Street
Philadelphia, PA 19107
FAX No. 215-786-7704
-9-
Security Agreement February 25, 1999
<PAGE>
Exhibit A to Security Agreement
1. None of the books and records relating to any of the Collateral is
or will be located at any location other than the following:
Name of Debtor Address (including county)
The Holt Group, Inc. 101 South King Street
Holt Cargo Systems, Inc. Gloucester City, NJ 08030
Holt Hauling and Warehousing System, Inc. (Camden County)
Murphy Marine Services, Inc.
NPR Holding Corporation
NPR, Inc.
NPR-Navieras Receivables, Inc.
NPR S.A.
San Juan International Terminals, Inc.
S.J.I.T., Inc.
Wilmington Stevedores, Inc.
2. The location of each Debtor's chief executive office is as follows:
Name of Debtor Address (including county)
The Holt Group, Inc. 101 South King Street
Holt Cargo Systems, Inc. Gloucester City, NJ 08030
Holt Hauling and Warehousing System, Inc. (Camden County)
Murphy Marine Services, Inc.
San Juan International Terminals, Inc.
S.J.I.T., Inc.
Wilmington Stevedores, Inc.
NPR Holding Corporation 212 Fernwood Avenue
NPR, Inc. Edison, NJ 08837
NPR-Navieras Receivables, Inc. (Middlesex County)
NPR S.A.
3. During the past five years no Debtor has used or been known by any
other name, including any trade or fictitious name.
-10-
Security Agreement February 25, 1999
<PAGE>
Exhibit F
ASSIGNMENT OF INSURANCE POLICY AND PROCEEDS
The Holt Group, Inc., Holt Cargo Systems, Inc., Holt Hauling and
Warehousing System, Inc., Murphy Marine Services, Inc., NPR Holding Corporation,
NPR, Inc., NPR-Navieras Receivables, Inc., NPR S.A., San Juan International
Terminals, Inc., S.J.I.T., Inc., Wilmington Stevedores, Inc. (collectively, the
"Holt Entities") have entered into a Credit Agreement (the "Agreement") with
certain banking institutions named therein (the "Banks"), with First Union
National Bank as agent. NPR, Inc. and Holt Oversight and Logistical Technologies
and their affiliated, subsidiary, and associated companies are the named
insureds under American International Insurance Company of Puerto Rico (the
"Insurer") insurance policy No. 026-16761, for the period July 1, 1998 through
July 1, 1999 (the "Policy"). The Agreement as it is to be amended and restated
requires that all interest of NPR and any other person with respect to claims
under the Policy be assigned to First Union National Bank, as agent, to secure
the obligations of the Holt Entities under the Agreement.
Holt Oversight and Logistical Technologies and the Holt Entities do hereby
assign to First Union National Bank (as agent for the Banks), for good and
valuable consideration, receipt of which is hereby acknowledged, all of their
right, title and interest in and to (i) the Policy and (ii) any proceeds
thereof. This Assignment of Insurance Policy and Proceeds (this "Assignment")
shall remain in effect until First Union National Bank (as agent for the Banks)
notifies the Insurer, the Holt Entities, and Holt Oversight and Logistical
Technologies in writing that this Assignment is terminated.
THE HOLT GROUP, INC.
HOLT CARGO SYSTEMS, INC.
HOLT HAULING AND WAREHOUSING SYSTEM, INC.
MURPHY MARINE SERVICES, INC.
NPR HOLDING CORPORATION, INC.
NPR, INC.
NPR-NAVIERAS RECEIVABLES, INC.
NPR S.A., INC.
SAN JUAN INTERNATIONAL TERMINALS, INC.
S.J.I.T., INC.
WILMINGTON STEVEDORES, INC.
By:
---------------------------------------
Name:
Title:
<PAGE>
HOLT OVERSIGHT AND LOGISTICAL TECHNOLOGIES
By:
---------------------------------------
Name:
Title:
ACKNOWLEDGMENT AND AGREEMENT
The Insurer hereby acknowledges the assignment by the insureds under the Policy
as set forth above and agrees that it will from and after the date hereof remit
all amounts paid with respect to claims under the Policy to First Union National
Bank, as agent, at
First Union National Bank
Transportation and Equipment Finance
1339 Chestnut Street, Philadelphia, PA 19107
Attn: Roy O. Young, Vice President
until it receives written notice from First Union National Bank addressed to it
at ___________________________________________________ that this Agreement has
been terminated by First Union National Bank, as agent.
AMERICAN INTERNATIONAL INSURANCE
COMPANY OF PUERTO RICO
By:
- -----------------------------------
Name:
Title:
Subscribed and sworn to before me this ___ day of _________, 1999.
- ------------------------------
Notary Public
My commission expires:
<PAGE>
Schedule 1
DISCLOSURE SCHEDULE
-1-
Schedule 1 February 25, 1999
<PAGE>
Schedule 2
COLLATERAL SCHEDULE
- -------------------------------------------------------------------------------
ASSETS SECURING REVOLVING LOANS:
A. The whole of five United States Registered Vessels:
1. S.S. Carolina, Official Number 530999
2. S.S. Guayama, Official Number 520694
3. S.S. Humacao, Official Number 514261
4. S.S. Mayaguez, Official Number 517450
5. S.S. Nuevo San Juan, Official Number 529004
B. Assignment of Insurances, dated November 17, 1998.
C. All of the issued and outstanding capital stock of:
1. NPR Holding Corporation
2. NPR, Inc.
3. NPR-Navieras Receivables, Inc.
4. NPR, S.A.
- -------------------------------------------------------------------------------
ASSETS SECURING TERM LOANS:
A. All Accounts and related General Intangibles of each of
the Holt Companies.
B. All Proceeds of the Insurance Claims.
-1-
Schedule 1 February 25, 1999
<PAGE>
Schedule 3
APPLICABLE MARGINS, COMMITMENT FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
REVOLVING LOANS:
Funded Debt/Adjusted
EBITDA Ratio Base Rate Margin LIBO Rate Margin Commitment Fee
<S> <C> <C> <C>
+4.00 75.0 basis points 275.0 basis points 50.00 basis points
+3.75 but=4.00 50.0 basis points 250.0 basis points 37.50 basis points
+3.50 but=3.75 25.0 basis points 225.0 basis points 37.50 basis points
+3.00 but=3.50 00.0 basis points 200.0 basis points 31.25 basis points
=3.00 00.0 basis points 175.0 basis points 31.25 basis points
+ equals Greater than or equal to
= equals Less than
- ------------------------------------------------------------------------------------------------
TERM LOANS:
Base Rate Margin LIBO Rate Margin Commitment Fee
At All Times 75.0 basis points 275.0 basis points 100.00 basis points
</TABLE>
-1-
Schedule 3 February 25, 1999
Consent of Independent Certified Public Accountants
The Holt Group, Inc.
Gloucester City, New Jersey
We hereby consent to the use in this Amendment No. 2 to Form S-4 Registration
Statement of our report dated April 13, 1999, relating to the consolidated
financial statements of The Holt Group, Inc. and subsidiaries and our report
dated April 24, 1998 on the consolidated financial statements of NPR Holding
Corporation and Subsidiaries which are contained in the Registration Statement.
We also consent to all references to us contained in the Registration Statement.
/s/ BDO Seidman, LLP
--------------------
BDO Seidman, LLP
Philadelphia, Pennsylvania
April 26, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 4,821
<SECURITIES> 26,143
<RECEIVABLES> 133,396
<ALLOWANCES> 22,354
<INVENTORY> 0
<CURRENT-ASSETS> 151,312
<PP&E> 262,404
<DEPRECIATION> (67,139)
<TOTAL-ASSETS> 436,230
<CURRENT-LIABILITIES> 143,342
<BONDS> 51,250
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 436,230
<SALES> 359,009
<TOTAL-REVENUES> 328,586
<CGS> 30,423
<TOTAL-COSTS> 376,253
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 346,914
<INCOME-PRETAX> 0
<INCOME-TAX> 8,016
<INCOME-CONTINUING> 18,780
<DISCONTINUED> 10,559
<EXTRAORDINARY> 0
<CHANGES> 10,599
<NET-INCOME> 10,559
<EPS-PRIMARY> 105.59
<EPS-DILUTED> 105.59
</TABLE>
