-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EUTLDxgeoAJz6d4dColmrS3+JJlpb00K2fWrqxY5yfW1SJsmKhAwjBg3rAvvrMvR RZHeS/dxGYlJ5l+gCzrWiw== 0000899243-98-000432.txt : 19980326 0000899243-98-000432.hdr.sgml : 19980326 ACCESSION NUMBER: 0000899243-98-000432 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980325 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRICO MARINE SERVICES INC CENTRAL INDEX KEY: 0000921549 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 721252405 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 033-77512 FILM NUMBER: 98572899 BUSINESS ADDRESS: STREET 1: 250 NORTH AMERICAN COURT CITY: HOUMA STATE: LA ZIP: 70364 BUSINESS PHONE: 5048513833 MAIL ADDRESS: STREET 1: P.O. BOX 2468 CITY: HOUMA STATE: LA ZIP: 70361 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] Annualreport pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1997 [_] Transitionreport pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 COMMISSION FILE NUMBER 0-28316 TRICO MARINE SERVICES, INC. (Exact name of registrant as specified in its charter) DELAWARE 72-1252405 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 250 NORTH AMERICAN COURT HOUMA, LOUISIANA 70363 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (504) 851-3833 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value per share Preferred Stock Purchase Rights Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of the voting stock held by non-affiliates of the Registrant at March 11, 1998 was approximately $404,860,000. The number of shares of the Registrant's common stock, $0.01 par value per share, outstanding at March 11, 1998 was 20,295,066. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Proxy Statement for its 1998 Annual Meeting of stockholders have been incorporated by reference into Part III of this Form 10-K. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TRICO MARINE SERVICES, INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 TABLE OF CONTENTS
PAGE ---- PART I................................................................... 1 Items 1 and 2. Business and Properties............................... 1 Item 3. Legal Proceedings..................................... 7 Item 4. Submission of Matters To a Vote Of Security Holders... 7 Item 4A. Executive Officers of The Registrant.................. 7 PART II.................................................................. 9 Item 5. Market for Registrant's Common Stock and Related Stockholder Matters................................... 9 Item 6. Selected Financial Data............................... 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 11 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................................................. 17 Item 8. Financial Statements and Supplementary Data........... 18 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.................. 40 PART III................................................................. 40 Item 10. Directors and Executive Officers of the Registrant.... 40 Item 11. Executive Compensation................................ 40 Item 12. Security Ownership of Certain Beneficial Owners and Management............................................ 40 Item 13. Certain Relationships and Related Transactions........ 40 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................................. 40 SIGNATURES............................................................... 42 FINANCIAL STATEMENT SCHEDULE............................................. S-1 EXHIBIT INDEX............................................................ E-1
i PART I ITEMS 1 AND 2. BUSINESS AND PROPERTIES GENERAL Trico Marine Services, Inc. ("Trico" or the "Company") is a leading provider of marine support vessels to the oil and gas industry in the U.S. Gulf of Mexico (the "Gulf"), the North Sea and offshore Brazil. The services provided by Trico's diversified fleet include transportation of drilling materials, supplies and crews to offshore facilities, towing mobile drilling rigs and equipment from one location to another, and support for the construction, installation, maintenance and removal of those facilities. During 1997, the Company significantly expanded its international operations by acquiring all of the outstanding stock of Saevik Supply ASA (together with its subsidiaries, "Saevik Supply"), a then publicly-traded Norwegian company, for approximately $293.7 million, which amount includes certain costs of the transaction, and increased its Gulf fleet by acquiring 19 supply boats. As a result, Trico is now the second largest owner and operator of supply boats in the Gulf and a leading operator in the North Sea. Trico has a total fleet of 100 vessels, including 54 supply vessels, 11 large capacity platform supply vessels ("PSV"), six large anchor handling, towing and supply vessels ("AHTS"), 14 crew boats, six lift boats and nine line-handling vessels. The Company's aggressive strategy of growth through acquisitions, together with increased day rates and strong vessel utilization, has enabled the Company to significantly increase total revenues and achieve strong operating results. Trico is also expanding its fleet through the construction of five new vessels, including (i) a 275-foot, technologically advanced AHTS for use in the North Sea which is expected to be delivered in May 1999, (ii) two 230-foot supply boats which are expected to be delivered in July and December 1998, respectively, and (iii) a "small water area twin hull" crew boat ("SWATH vessel") for use in Brazil, which is expected to be completed in April 1998. THE INDUSTRY Marine support vessels are primarily used to transport personnel, equipment and supplies to drilling rigs, to support the construction and ongoing operation of offshore oil and gas production platforms and as work platforms for offshore construction and platform maintenance. The principal services provided are the transportation of equipment, fuel, water and supplies to offshore facilities; the transfer of personnel between shore bases and offshore facilities; and towing services for drilling rigs and platforms. The principal types of vessels operated by the Company and their competitors can be summarized as follows: SUPPLY BOATS. Supply boats are generally at least 150 feet in length, serve drilling and production facilities and support offshore construction and maintenance work. Supply boats are differentiated from other types of vessels by cargo flexibility and capacity. In addition to transporting deck cargo, such as pipe or drummed materials, supply boats transport liquid mud, potable and drilling water, diesel fuel, dry bulk cement and dry bulk mud. Accordingly, larger supply boats which have greater liquid mud and dry bulk cement capacities, as well as larger areas of open deck space than smaller supply boats, are generally in higher demand than vessels without those capabilities. However, other characteristics such as maneuverability, fuel efficiency, anchor handling ability and firefighting capacity may also be in demand in certain circumstances. PLATFORM SUPPLY VESSELS. PSVs serve drilling and production facilities and support offshore construction and maintenance work. They are differentiated from other offshore support vessels by their cargo handling capabilities, particularly their large capacity and versatility. Utilizing space on and below deck, they are used to transport supplies such as fuel, water, drilling fluids, equipment and provisions. PSVs range in size from 150 feet to 275 feet and are particularly suited for supporting large concentrations of offshore production locations because of their large deck space and below deck capacities. The Company's PSVs are primarily in this classification but also are capable of providing construction support services. 1 ANCHOR HANDLING, TOWING AND SUPPLY VESSELS. AHTSs are used to set anchors for drilling rigs and tow mobile drilling rigs and equipment from one location to another. In addition, these vessels typically can be used in limited supply roles when they are not performing anchor handling and towing services. They are characterized by large horsepower (generally up to 18,000 brake horsepower for the most powerful North Sea Class AHTS vessels), shorter after decks and special equipment such as towing winches. CREW BOATS. Crew boats are generally at least 100 feet in length and are chartered principally for the transportation of personnel and light cargo, including food and supplies, to and among production platforms, rigs and other offshore installations. These boats can be chartered together with supply boats as support vessels for drilling or construction operations, and also can be chartered on a stand-alone basis to support the various requirements of offshore production platforms. Crew boats are constructed from aluminum, and as a result generally have useful lives beyond those of steel-hulled supply boats. These vessels also provide a cost-effective alternative to airborne transportation services and can operate reliably in virtually all types of weather conditions. Generally, utilization and day rates for crew boats are more stable than those of other types of vessels because crew boats are typically used to provide services for production platforms and construction projects, as well as for exploration and drilling activities. The majority of the Company's crew boats are the larger 120-foot vessels. LIFT BOATS. Lift boats are self-propelled, self-elevating and self- contained vessels that can efficiently assist offshore platform construction and well servicing tasks that traditionally have required the use of larger, more expensive, mobile offshore drilling units or derrick barges. For example, lift boats can dismantle offshore rigs, set production facilities and handle a variety of tasks for existing platform upgrade work. These boats have also been used successfully as the main work platform for applications such as diving and salvaging, and have been used as an adjacent support platform for applications ranging from crew accommodations to full workovers on existing platforms. Historically, lift boats command higher day rates but experience lower average utilization rates than other classes of marine support vessels. Lift boats have different water depth capacities, with leg lengths ranging from 65 to 200 feet. The Company's lift boats have leg lengths ranging from 130 to 170 feet, enabling them to operate in water depths where the majority of the offshore structures currently in the Gulf are located. LINE HANDLING BOATS. Line handling boats are generally outfitted with special equipment to assist tankers while they are loading from single buoy mooring systems. These vessels support oil off-loading operations from production facilities to tankers and transport supplies and materials to and between deepwater platforms. Gulf of Mexico. The demand for marine equipment and related services in the Gulf has increased significantly during the past few years. The Company's average supply boat day rate, which management believes reflects industry-wide day rates, increased to $8,037 for the fourth quarter of 1997 compared to $6,014 in the fourth quarter of 1996. This increase in day rates was due in large part to the increased demand for marine services that has resulted from overall increased activity levels in the Gulf and also to the reduction in the number of vessels serving the Gulf and overall industry consolidation. The number of offshore supply boats available for service in the Gulf decreased from a peak of approximately 700 in 1985 to approximately 320 at the end of 1997. During the same period, the number of companies operating supply boats of at least 150 feet in length decreased from approximately 80 to 17. Recently, however, several newly-built vessels have entered the Gulf fleet, and the Company and several of its competitors are building new supply boats, several of which will be greater than 220 feet in length and are specially designed for the deep water market. The Company estimates that contracts for the construction of as many as 80 new supply boats have been awarded to Gulf Coast shipyards. Although the ongoing transportation, maintenance and repair requirements of offshore production platforms create a baseline demand for marine support vessels, incremental demand is primarily impacted by the level of offshore oil and gas drilling activity. The level of drilling activity is influenced by a number of factors, including oil and gas prices and drilling budgets of exploration and production companies. As a result, utilization and day rates generally correlate to oil and gas prices and drilling activity. Natural gas currently accounts for approximately 70% of all hydrocarbon production in the Gulf, and as a result, activity in this region is highly dependent upon natural gas prices. 2 North Sea. The North Sea market area consists of offshore Norway, Denmark, the Netherlands, Germany, Great Britain and Ireland, and the area west of the Shetlands. Historically, it has been the most demanding of all exploration frontiers due to harsh weather, erratic sea conditions, significant water depth and long sailing distances. Exploration and production operators in the North Sea market are typically large and well capitalized entities (such as major oil companies and state owned oil companies), in large part because of the significant financial commitment required in this market. In comparison to the Gulf, projects in the region tend to be fewer in number, but larger in scope, with longer planning horizons. Consequently, vessel demand in the North Sea is generally more steady and less susceptible to abrupt swings than vessel demand in other regions. Activity in the North Sea generally is at its highest level during the months from April to August and at their lowest levels during November to February. The North Sea market area can be broadly divided into three areas: exploration, production platform support and field development or construction. Support of the volatile exploration segment of the market represents the primary demand for AHTS vessels. While PSVs also support the exploration segment, they additionally support the production and field construction segments, which generally are not affected by frequent short-term swings in demand. However, because AHTS vessels are capable of performing in a supply role during periods of weakness in the exploration segment, AHTS vessels can put downward pressure on PSV demand. The number of vessels in the North Sea has decreased significantly from the mid-1980s, from a peak of approximately 290 in 1986 to approximately 205 in 1997. As a result of this reduction, together with increased activity in the North Sea, day rates for AHTSs and PSVs of comparable size to those operated by the Company have increased by 50% since September 1996. Recently, however, there has been an increase in new building activity in the North Sea market. Brazil. Offshore exploration and production activity in Brazil is concentrated in the deep water Campos Basin, located 60 to 100 miles from the Brazilian coast. Over 50 fields have been discovered in this Basin, including an estimated 600 currently producing offshore oil wells. A number of fields in the Campos Basin are being produced using floating production facilities. In addition, exploration activity has expanded south to the Santos Basin and to the northeastern and northern continental shelves. Activity levels in the Brazilian market have primarily been driven by the establishment by the Brazilian government of national goals for self-sufficiency in oil production. The primary operator in this market is Petrobras, the Brazilian national oil company, but the Brazilian government has announced its intention to allow foreign participation in exploration and production activities in Brazilian waters. THE COMPANY'S FLEET Existing Fleet. The following table sets forth information regarding the vessels owned by the Company as of March 1, 1998:
NO. OF TYPE OF VESSEL VESSELS LENGTH HORSEPOWER -------------- ------- ------ ---------- Supply Boats........................ 54(1) 166' - 225' 1,950 - 5,750 PSVs................................ 11(2) 176' - 276' 4,050 - 10,800 AHTSs............................... 6 196' - 237' 11,140 - 15,612 Lift Boats.......................... 6 130' - 170' - - Crew/Line Handling Boats............ 23(3) 105' - 125' 1,200 - 2,700 --- 100 ===
- ------- (1) Includes the Palma River, which is scheduled for delivery in March 1998 and will be dedicated to the Brazilian market. (2) Includes the Northern River which is scheduled for delivery in March 1998. (3) Includes one line-handling vessel owned by the Company's 40%-owned, unconsolidated Brazilian affiliate. 3 All the Company's PSVs and AHTSs operate in the North Sea, and the average age of the Company's North Sea fleet is approximately ten years. All of the Company's line-handling vessels are located in Brazil and operate under long- term charters with Petrobras. The average age of the Company's Gulf fleet is approximately 17 years. Vessel Construction. Trico has entered into definitive agreements to acquire two 230-foot supply vessels that are currently under construction. Delivery of these vessels is expected in July and December 1998, respectively. The Company is also constructing the Northern River, a 276-foot PSV for use in the North Sea, which is scheduled for delivery in March 1998, and a 275-foot, technologically advanced AHTS, with 23,800 horsepower that is scheduled for delivery in May 1999. The Company also has an option with the shipbuilder to construct a similar AHTS for delivery in 2000. The Company is also constructing the SWATH vessel which will be used to transport up to 250 passengers to offshore platforms for Petrobras, the Brazilian national oil company, under a five-year contract. Construction on the SWATH vessel is expected to be completed in April 1998. The Company is also completing the construction of the Palma River, a 200-foot supply boat, which will be dedicated to the Brazilian market. Construction of this vessel is expected to be completed in March 1998. Lift Boat Management. All of the Company's lift boats are managed by Power Offshore, Inc. ("Power Offshore"), a leading operator of lift boats in the Gulf, pursuant to a management agreement that expires in March 1999. Power Offshore receives a management fee of 10% of the lift boats' monthly gross income and is eligible to receive an incentive fee based on a percentage of the lift boats' net operating income. Total management and incentive fees paid to Power Offshore cannot exceed 13% of the lift boats' gross monthly income. The Company is also required to reimburse Power Offshore for all operating expenses relating to the lift boats, excluding marketing and general and administrative expenses. Power Offshore has a right of first refusal if the Company intends to sell to a third party any of the lift boats that are managed by Power Offshore. Vessel Maintenance. The Company incurs routine drydock inspection, maintenance and repair costs under U.S. Coast Guard Regulations and to maintain American Bureau of Shipping ("ABS") certification for its vessels. In addition to complying with these requirements, the Company has implemented its own comprehensive vessel maintenance program which management believes will help Trico to continue to provide its customers with well maintained, reliable vessels. The Company incurred approximately $2.1 million, $2.3 million and $10.0 million in drydocking and marine inspection costs for the years ended December 31, 1995, 1996 and 1997, respectively. OPERATIONS BASES The Company supports its operations in the Gulf from a 62.5 acre docking, maintenance and office facility in Houma, Louisiana located on the intracoastal waterway that provides direct access to the Gulf. The Company also leases a 3,600 square foot office in Houston, Texas. The Company's North Sea operations are supported from leased offices in Fosnavag, Norway, Kristiansand, Norway and Aberdeen, Scotland. Brazilian operations are supported from a maintenance facility in Macae, Brazil, which is owned by the Company's 40%-owned, unconsolidated Brazilian affiliate, and a sales and administrative office in Rio de Janeiro. CUSTOMERS AND CHARTER TERMS The Company has entered into master service agreements with substantially all of the major and independent oil companies operating in the Gulf. The majority of the Company's charters in the Gulf are short-term contracts (60-90 days) or spot contracts (less than 30 days) and are cancelable upon short notice. Because of frequent renewals, the stated duration of charters frequently has little relationship to the actual time vessels are chartered to a particular customer. Recently, several of the Company's customers have expressed increased interest in longer term contracts (over six months), and the Company has entered into several charters ranging from six months to three years. All of the Company's vessels in Brazil operate pursuant to two to five year contracts. 4 The principal customers in the North Sea market are major integrated oil companies and large independent oil and natural gas exploration and production companies, as well as foreign government owned or controlled organizations and companies that provide logistic, construction and other services to such oil companies and foreign government organizations. The charters with these customers are industry standard time charters. Current charters in the North Sea market include periods ranging from just a few days or months to several years. Nine of the Company's North Sea vessels are on long-term contracts (at least one year in duration). Five of these nine vessels are on long-term charters to Statoil and Norsk Hydro, which run to 1999 and 2002, respectively, with options. Either charterer can, however, terminate its contract during the period upon payment of agreed compensation. Charters are obtained through competitive bidding or, with certain customers, through negotiation. The percentage of revenues attributable to an individual customer varies from time to time, depending upon the level of exploration and development activities undertaken by a particular customer, the availability and suitability of the Company's vessels for the customer's projects, and other factors, many of which are beyond the Company's control. For the year ended December 31, 1996, approximately 10% of the Company's total revenues were received from Vastar Resources, Inc. For the year ended December 31, 1997, no customer accounted for more than 10% of the Company's revenues. COMPETITION The Company's business is highly competitive. Competition in the marine support services industry primarily involves factors such as (i) price, service and reputation of vessel operators and crews and (ii) availability and quality of vessels of the type and size needed by the customer. Although some of the Company's principal competitors are larger and have greater financial resources and international experience than the Company, the Company believes that its operating capabilities and reputation enable it to compete effectively with other fleets in the markets in which the Company operates. Certain of the Company's competitors are building new vessels for use in the Gulf, North Sea and other areas in which the Company operates. Continued new construction of these vessels could further increase levels of competition within these markets. REGULATION The Company's operations are materially affected by federal, state and local regulation, as well as certain international conventions, private industry organizations and laws and regulations in jurisdictions where the Company's vessels operate and are registered. These regulations govern worker health and safety and the manning, construction and operation of vessels. For example, the Company is subject to the jurisdiction of the U.S. Coast Guard, the National Transportation Safety Board, the U.S. Customs Service and the Maritime Administration of the U.S. Department of Transportation, as well as private industry organizations such as the American Bureau of Shipping. These organizations establish safety criteria and are authorized to investigate vessel accidents and recommend improved safety standards. The U.S. Coast Guard regulates and enforces various aspects of marine offshore vessel operations, such as classification, certification, routes, drydocking intervals, manning requirements, tonnage requirements and restrictions, hull and shafting requirements and vessel documentation. Coast Guard regulations require that each of the Company's vessels be drydocked for inspection at least twice within a five-year period. The Company believes it is in compliance in all material respects with all U.S. Coast Guard Regulations. Under the Merchant Marine Act of 1920, as amended, the privilege of transporting merchandise or passengers in domestic waters extends only to vessels that are owned by U.S. citizens and are built in and registered under the laws of the U.S. A corporation is not considered a U.S. citizen unless, among other things, no more than 25% of any class of its voting securities are owned by non-U.S. citizens. If the Company should fail to comply with these requirements, during the period of such noncompliance it would not be permitted to continue operating its vessels in coastwise trade. 5 The Company's operations are also subject to a variety of federal and state statutes and regulations regarding the discharge of materials into the environment or otherwise relating to environmental protection. Included among these statutes are the Clean Water Act, the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the Outer Continental Shelf Lands Act ("OCSLA") and the Oil Pollution Act of 1990 ("OPA"). The Clean Water Act imposes strict controls on the discharge of pollutants into the navigable waters of the U.S., and imposes potential liability for the costs of remediating releases of petroleum and other substances. The Clean Water Act provides for civil, criminal and administrative penalties for any unauthorized discharge of oil and other hazardous substances in reportable quantities and imposes substantial potential liability for the costs of removal and remediation. Many states have laws which are analogous to the Clean Water Act and also require remediation of accidental releases of petroleum in reportable quantities. The Company's vessels routinely transport diesel fuel to offshore rigs and platforms, and also carry diesel fuel for their own use. The Company's supply boats transport bulk chemical materials used in drilling activities, and also transport liquid mud which contains oil and oil by-products. All offshore companies operating in the U.S. are required to have vessel response plans to deal with potential oil spills. RCRA regulates the generation, transportation, storage, treatment and disposal of onshore hazardous and non-hazardous wastes, and requires states to develop programs to ensure the safe disposal of wastes. The Company generates non-hazardous wastes and small quantities of hazardous wastes in connection with routine operations, and management believes that all of the wastes that the Company generates are handled in compliance with RCRA and analogous state statutes. CERCLA contains provisions dealing with remediation of releases of hazardous substances into the environment and imposes strict, joint and several liability for the costs of remediating environmental contamination upon owners and operators of contaminated sites where the release occurred and those companies who transport, dispose of or who arrange for disposal of hazardous substances released at the sites. Although the Company handles hazardous substances in the ordinary course of business, the Company's management is not aware of any hazardous substance contamination for which it may be liable. OSCLA provides the federal government with broad discretion in regulating the release of offshore resources of oil and gas production. Because the Company's operations rely on offshore oil and gas exploration and production, if the government were to exercise its authority under OSCLA to restrict the availability of offshore oil and gas leases, such an action would have a material adverse effect on the Company's financial condition and the results of operations. OPA contains provisions specifying responsibility for removal costs and damages resulting from discharges of oil into navigable waters or onto the adjoining shorelines. Among other requirements, OPA requires owners and operators of vessels over 300 gross tons to provide the U.S. Coast Guard with evidence of financial responsibility to cover the costs of cleaning up oil spills from such vessels. The Company has provided satisfactory evidence of financial responsibility to the U.S. Coast Guard for all of its Gulf vessels over 300 tons. Among the more significant of the conventions applicable to the Company's North Sea operations are: (i) the International Convention for the Prevention of Pollution of the Sea, 1973, 1979 Protocol, (ii) the International Convention on the Safety of Life at Sea, 1974, 1978 and 1981/1983 Protocol, and (iii) the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers. Operation of Company vessels in foreign territories is also potentially subject to regulatory controls concerning environmental protection similar to those in force in the Gulf. The Company believes it is in compliance in all material respects with all applicable environmental laws and regulations to which it is subject in the foreign markets in which the Company's vessels operate. The Company further believes that compliance with any existing environmental requirements of U.S. or foreign governmental bodies will not materially affect the Company's capital expenditures, earnings, cash flows or competitive position. 6 INSURANCE The operation of the Company's vessels is subject to various risks, such as catastrophic marine disaster, adverse weather conditions, mechanical failure, collision and navigation errors, all of which represent a threat to personnel safety and to Company vessels and cargo. The Company maintains insurance coverage against certain of these risks, which management considers to be customary in the industry. The Company believes that its insurance coverage is adequate and the Company has not experienced a loss in excess of its policy limits; however, there can be no assurance that the Company will be able to maintain adequate insurance at rates which management considers commercially reasonable, nor can there be any assurance that such coverage will be adequate to cover all claims that may arise. EMPLOYEES As of March 1, 1998, the Company had 1,158 employees worldwide, including 1,062 operating personnel and 96 corporate, administrative and management personnel. None of the Company's U.S. employees are unionized or employed pursuant to any collective bargaining agreement or any similar arrangement. The Company's Norwegian seamen are covered by three union contracts that are between the Norwegian Employer Association for Ship and Offshore Vessels and (i) masters and mates on offshore vessels, (ii) able-bodied seamen, electricians and cooks and (iii) engineers, respectively. The Company's U.K. seamen are covered by two union contracts between Guernsey Ship Management Limited acting on behalf of the Company and two separate unions, respectively. The Company believes its relationship with its employees is satisfactory and to date has not been interrupted by strikes or work stoppages. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various legal and other proceedings which are incidental to the conduct of its business. The Company believes that none of these proceedings, if adversely determined, would have a material adverse effect on its financial condition, results of operations or cash flows. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The name, age and offices held by each of the executive officers of the Company as of March 1, 1998 are as follows:
NAME AGE POSITION ---- --- ----------------------------------------------------- Ronald O. Palmer..... 51 Chairman of the Board Thomas E. Fairley.... 50 President and Chief Executive Officer Victor M. Perez...... 45 Vice President, Chief Financial Officer and Treasurer Kenneth W. Bourgeois. 50 Vice President and Controller Michael D. Cain...... 49 Vice President, Marketing Charles E. Tizzard... 47 Vice President, Administration
Ronald O. Palmer has been a director of the Company since October 1993 and Chairman of the Board since May 1997. Mr. Palmer also served as Executive Vice President from February 1995 to May 1997. Mr. Palmer joined Mr. Fairley in founding the Company's predecessor in 1980 and served as Vice President, Treasurer and Chief Financial Officer until February 1995. From 1974 to 1980, Mr. Palmer was employed by GATX Leasing Corporation ("GATX Leasing") where he was responsible for the marketing of financial leases for industrial and marine equipment in eight southwestern states and all marine activity in the Gulf of Trans Marine International ("TMI"), an offshore marine service company and wholly-owned subsidiary of GATX Leasing. 7 Thomas E. Fairley, who co-founded the Company's predecessor with Mr. Palmer in 1980, has been President and Chief Executive Officer and a director of the Company since October 1993. From October 1993 to May 1997, Mr. Fairley also served as Chairman of the Board of the Company. From 1978 to 1980, Mr. Fairley served as Vice President of TMI. From 1975 to 1978, Mr. Fairley served as General Manager of International Logistics, Inc. ("ILI"), a company engaged in the offshore marine industry. For more than five years prior to joining ILI, Mr. Fairley held various positions with Petrol Marine Company, an offshore marine service company. Mr. Fairley is also a director of Gulf Island Fabrication, Inc. Victor M. Perez has served as Vice President, Chief Financial Officer and Treasurer of the Company since February 1995. From 1990 to 1995, Mr. Perez served as Senior Vice President--Corporate Finance of Offshore Pipelines, Inc. Mr. Perez was Vice President--Investments for Graham Resources, Inc., from August 1987 to October 1990 and from January 1976 to August 1987 served as a Vice President with InterFirst Bank Dallas in its international and energy banking group. Kenneth W. Bourgeois has served as the Company's Vice President and Controller since October 1993. Mr. Bourgeois also served as Controller of the Company's predecessor from December 1981 to October 1993. From 1972 to December 1981, Mr. Bourgeois worked for George Engine Company, Inc., where he held the position of Assistant Controller and subsequently, Director of Internal Auditing. From 1969 to 1972, Mr. Bourgeois was employed by Price Waterhouse & Co. Mr. Bourgeois is a Certified Public Accountant. Michael D. Cain has served as the Company's Vice President--Marketing since February 1993. From 1986 to 1993, Mr. Cain served as Marketing Manager for the Company's predecessor. Prior to 1986, Mr. Cain served in the same capacity for Seahorse, Inc., an offshore marine services company. Charles E. Tizzard has served as the Company's Vice President-- Administration since June 1997. From October 1994 to June 1997, Mr. Tizzard served as Manager of Administration and Planning for the Company. From 1987 to October 1994, Mr. Tizzard served as Vice President and General Manager of Chrysler Capital Corporation's ("Chrysler Capital") Marine Asset Management subsidiary and from 1979 to 1987 he served as District Operations Manager for Chrysler Capital. 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's common stock, $0.01 par value per share (the "Common Stock"), is listed for quotation on the Nasdaq National Market under the symbol "TMAR". At March 18, 1998, the Company had 41 holders of record of Common Stock. The following table sets forth the range of high and low bid prices of the Company's Common Stock as reported by the Nasdaq National Market for the quarters indicated since trading in the Common Stock began on May 16, 1996 (adjusted to give retroactive effect for a 100% stock dividend paid in June 1997).
HIGH LOW ------- ------- 1996 Second quarter (commencing May 16, 1996)................ $11.750 $ 9.875 Third quarter........................................... 15.250 10.625 Fourth quarter.......................................... 25.000 14.750 1997 First quarter........................................... $28.125 $17.375 Second quarter.......................................... 24.375 15.250 Third quarter........................................... 37.000 21.500 Fourth quarter.......................................... 45.500 22.875 1998 First quarter (through March 18, 1998).................. $ 30.50 $ 15.75
The Company has never paid cash dividends on its Common Stock. The Company intends to retain any future earnings otherwise available for cash dividends on its Common Stock for use in its operations and for expansion and does not anticipate that any cash dividends will be paid in the foreseeable future. In addition, the Company's Amended Facility (as defined herein) contains provisions that prohibit the Company from paying dividends on its Common Stock. The Company is also a holding company which conducts its business through its subsidiaries. As a result, the Company's cash flow and ability to make dividend payments primarily depend on the earnings and cash flow of its subsidiaries and on dividends and other payments therefrom. The Amended Facility also imposes restrictions on the ability of certain of the Company's subsidiaries who are borrowers under the Amended Facility from paying dividends or making other distributions to the Company. Any future determination to pay cash dividends will be made by the Board of Directors in light of the Company's earnings, financial position, capital requirements, credit agreements and such other factors as the Board of Directors deems relevant at that time. 9 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial data for the dates and periods indicated. The financial information for each of the years ended December 31, 1997, 1996, 1995 and 1994 and the two month period ended December 31, 1993 and as of December 31, 1997, 1996, 1995, 1994 and 1993 is derived from the Company's audited consolidated financial statements and notes thereto. The financial information for the ten month period ending October 28, 1993 reflects operating results for the vessels acquired by the Company from Chrysler Capital in October 1993. This information should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
YEAR ENDED DECEMBER 31, ------------------------------------------------------------ TWO MONTHS TEN MONTHS ENDED ENDED DECEMBER 31, OCTOBER 28, 1997(1) 1996 1995 1994 1993(2) 1993(2) -------- -------- ------- ------- ------------ ----------- (FINANCIAL DATA IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Revenues................ $125,480 $ 53,484 $26,698 $29,034 $ 6,145 $26,871 Direct operating expenses............... 50,945 29,894 21,972 21,476 3,553 19,974 ------- Revenues less direct operating expenses..... -- -- -- -- -- $ 6,897 ======= Depreciation and amortization........... 12,734 4,478 2,740 2,786 502 -------- -------- ------- ------- ------- Operating income........ $ 61,801 $ 19,112 $ 1,986 $ 4,772 $ 2,090 ======== ======== ======= ======= ======= Income (loss) before extraordinary item..... 35,299 10,891 (1,299) 486 846 Extraordinary item, net of taxes............... -- (917) -- -- -- -------- -------- ------- ------- ------- Net income (loss)....... $ 35,299 $ 9,974 $(1,299) $ 486 $ 846 ======== ======== ======= ======= ======= DILUTED PER SHARE DATA:(3) Income (loss) before extraordinary item..... $ 2.11 $ 0.88 $ (0.21) $ 0.08 $ 0.14 Extraordinary item, net of taxes............... -- (0.07) -- -- -- -------- -------- ------- ------- ------- Net income (loss)....... $ 2.11 $ 0.81 $ (0.21) $ 0.08 $ 0.14 ======== ======== ======= ======= ======= BALANCE SHEET DATA: Working capital (deficit).............. $ 7,831 $ 10,753 $ (844) $ 1,550 $(2,704) Property and equipment, net.................... $505,056 $119,142 $39,264 $38,508 $45,191 Total assets............ $698,781 $144,035 $52,113 $51,419 $55,207 Long term debt.......... $359,385 $ 21,000 $36,780 $35,452 $37,560 Stockholder's equity.... $261,500 $103,980 $ 5,712 $ 7,002 $ 6,450
- ------- (1) Reflects results of operations of Saevik Supply for December 1997 and the consolidation of Saevik Supply's assets with those of the Company at December 31, 1997. (2) Reflects the historical results of operations of the Company for the two months ended December 31, 1993 and the historical results of operations for the vessels acquired from Chrysler Capital on October 29, 1993, for the ten months ended October 28, 1993. Accordingly, depreciation, operating income and net income are not presented for such vessels because such items would be based on Chrysler Capital's historical cost and borrowings and are not relevant to the ongoing results of the Company. (3) Per share data have been adjusted to reflect a 100% stock dividend paid in June 1997. 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Since its initial public offering in May 1996, the Company has focused on growth through acquisitions. During this period, the Company significantly expanded its international operations by acquiring Saevik Supply for approximately $289.0 million in cash, pursuant to a public bid made in accordance with the rules of the Oslo Stock Exchange and acquired 37 supply boats for use in the Gulf at an aggregate cost of $177.0 million. As a result of this growth, Trico is now the second largest owner and operator of supply boats in the Gulf and a leading operator in the North Sea. This aggressive strategy of growth through acquisitions, together with increased vessel day rates and strong vessel utilization, has enabled the Company to significantly increase total revenues and achieve strong operating results. The Company's results of operations are affected primarily by day rates and fleet utilization. Demand for the Company's vessels is primarily impacted by the level of offshore oil and gas drilling activity, which can be influenced by a number of factors, including oil and gas prices and drilling budgets of exploration and production companies, and, to a lesser extent, the market for the maintenance, repair and salvage of existing platforms. As a result, trends in oil and gas prices may significantly affect utilization and day rates. The Company's day rates and utilization rates are also affected by the size, configuration and capabilities of the Company's fleet. In the case of supply boats, PSVs and AHTSs, the deck space and liquid mud and dry bulk cement capacity are important attributes. In certain markets and for certain customers, horsepower and dynamic positioning systems are also important requirements. For crew boats, size and speed are important factors, and in the case of lift boats, longer leg length and greater crane capacity add versatility and marketability. The Company's day rates and utilization can also be affected by the supply of other vessels available in a given market with similar configuration and capabilities. The Company's operating costs primarily are a function of fleet size and utilization levels. The most significant direct operating costs are wages paid to vessel crews, maintenance and repairs and marine insurance. Generally, increases or decreases in vessel utilization only affect that portion of the Company's direct operating costs that is incurred when the vessels are active. As a result, direct operating costs as a percentage of revenues may vary substantially due to changes in day rates and utilization. In addition to these variable costs, the Company incurs fixed charges related to the depreciation of its fleet and costs for the routine drydock inspection, maintenance and repair designed to ensure compliance with U.S. Coast Guard regulations and to maintain ABS certification for its vessels. Maintenance and repair expense and marine inspection amortization charges are generally determined by the aggregate number of drydockings and other repairs undertaken in a given period. Costs incurred for drydock inspection and regulatory compliance are capitalized and amortized over the period between such drydockings, typically two to three years. 11 RESULTS OF OPERATIONS The table below sets forth by vessel class, the average day rates and utilization for the Company's vessels and the average number of vessels owned during the periods indicated.
YEAR ENDED DECEMBER 31 --------------------- 1997 1996 1995 ------- ------ ------ Average vessel day rates: Supply boats........................................... $ 7,377 $4,917 $3,060 Supply/Anchor handling (North Sea)(1).................. 14,056 -- -- Lift boats............................................. 5,955 4,995 4,656 Crew/line handling boats (2)(3)........................ 1,964 1,579 1,480 Average vessel utilization rate: Supply boats........................................... 85% 94% 78% Supply/Anchor handling (North Sea)(1).................. 97% -- -- Lift boats............................................. 71% 67% 45% Crew/line handling boats (2)(3)........................ 97% 95% 85% Average number of vessels: Supply boats........................................... 42.0 21.2 16.0 Supply/Anchor handling (North Sea)(1).................. 1.4 -- -- Lift boats............................................. 6.0 6.0 5.9 Crew/line handling boats(3)............................ 23.8 23.3 16.8
- ------- (1) Vessels purchased in December 1997 through the acquisition of Saevik Supply. Day rate and utilization data is for December 1997 only. (2) Average utilization and day rates for all line handling vessels reflect the contract rates for the Company's 40%-owned, unconsolidated Brazilian affiliate. (3) Includes one line-handling vessel owned by the Company's 40%-owned, unconsolidated Brazilian affiliate. Set forth below is the Company's internal allocation of its charter revenues and charter revenues less direct operating expenses among vessel classes for each of the periods indicated.
YEAR ENDED DECEMBER 31, --------------------------------------- 1997 % 1996 % 1995 % --------- --- ------- --- ------- --- Charter Revenues: Supply boats....................... $ 95,817 76% $35,723 67% $13,868 52% Supply/Anchor handling (North Sea)(1)........................... 7,244 6% -- -- -- -- Crew and line-handling boats....... 11,989 10% 9,733 18% 7,735 29% Lift boats......................... 10,426 8% 7,986 15% 5,054 19% --------- --- ------- --- ------- --- $ 125,476 100% $53,442 100% $26,657 100% ========= === ======= === ======= === Charter Revenues less direct operating expenses: Supply boats....................... $ 69,145 83% $23,481 80% $ 6,599 68% Supply/Anchor handling (North Sea)(1)........................... 4,739 6% -- -- -- -- Crew and line-handling boats....... 4,913 6% 2,645 9% 1,945 20% Lift boats......................... 4,412 5% 3,166 11% 1,125 12% --------- --- ------- --- ------- --- $ 83,209 100% $29,292 100% $ 9,669 100% ========= === ======= === ======= ===
- ------- (1) Includes results of operations of the vessels purchased through the acquisition of Saevik Supply for December 1997 only. 12 Comparison of the Year Ended December 31, 1997 to the Year Ended December 31, 1996 Revenues for 1997 were $125.5 million, an increase of 134.6%, compared to $53.5 million in revenues for 1996. This increase was primarily due to the growth in the Company's Gulf fleet, improved average vessel day rates for the Company's vessels and the addition of North Sea operations beginning in December 1997. Average supply boat day rates in the Gulf rose 50% to $7,377 for 1997, compared to $4,917 for 1996; average lift boat day rates increased 19.2% to $5,955, compared to $4,995 for 1996; and average day rates for the Company's crew boats and line handling vessels increased 24.3% to $1,964, compared to $1,579 during 1996. The increase in vessel day rates was primarily the result of strong market conditions in the Gulf for marine support vessels and, with respect to the lift boats, improved market conditions in the Gulf for offshore platform repair and maintenance and well-servicing activities. While the Company's supply boats experienced strong demand and effectively full utilization during the year, utilization for the Company's Gulf of Mexico supply boat fleet decreased in 1997 due to large number of scheduled vessel drydockings in 1997 compared to 1996. Utilization for the Company's lift boats was 71% during 1997, compared to 67% for the year-ago period. Utilization for the crew boats and line handling vessels increased to 97% in 1997, compared to 95% in 1996 due to continued strong demand for crew boats in the Gulf and the long-term contracts for the line handling vessels in Brazil. During 1997, direct vessel operating expenses increased to $42.2 million (33.6% of revenues), compared to $24.5 million (45.7% of revenues) for 1996, due to the expanded vessel fleet and increased labor, repair and maintenance costs. Direct vessel operating expenses decreased as a percentage of revenues due to the increase in average vessel day rates during 1997 and the growth in the Company's supply boat fleet which enjoys higher profit margins than the overall fleet. Depreciation and amortization expense increased to $12.7 million for 1997, up from $4.5 million for 1996 due to the expanded vessel fleet. Amortization of marine inspection costs increased to $3.0 million for 1997, from $2.2 million in 1996, due to the amortization of increased drydocking and marine inspection costs associated with the Company's larger vessel fleet and the Company's fleet refurbishment program. General and administrative expenses increased to $5.7 million (4.6% of revenues) in 1997, from $3.3 million (6.1% of revenues) for 1996, due to additions of personnel in connection with the growth in the Company's operations. General and administrative expenses, as a percentage of revenues, decreased in 1997 as the increase in revenues and additions to the vessel fleet did not require proportionate increases in administrative expenses. Interest expense increased to $8.0 million during 1997 compared to $2.3 million for 1996. This increase was due to increased borrowings in 1997 which were used to fund the Company's acquisition of supply boats in the Gulf, the Company's various vessel construction and upgrade projects and the acquisition of Saevik Supply. In July 1997, the Company issued $110.0 million principal amount of 8-1/2% Senior Notes due 2005 (the "Notes"), the proceeds of which were used to purchase 11 supply boats in the Gulf and to repay outstanding amounts under the Company's revolving credit facility. In November and December 1997, the Company issued an additional $170 million principal amount of the Notes, the proceeds of which were used to fund the acquisition of Saevik Supply. Interest expense decreased in 1996 due to the repayment of all borrowings under the Company's credit facility and all of its subordinated debt in May 1996 with proceeds from the Company's initial public offering. In 1997, the Company had income tax expense of $19.0 million, compared to income tax expense of $5.8 million in 1996. Comparison of the Year Ended December 31, 1996 to the Year Ended December 31, 1995 Revenues for 1996 were $53.5 million, an increase of 100% compared to $26.7 million in revenues for 1995. This increase was primarily due to the expansion in the Company's vessel fleet, both in the Gulf and 13 offshore Brazil, the strong improvement in average day rates and utilization for the Company's supply boats, and the increase in utilization for the Company's lift boats. In 1996, the Company added 26 vessels to its total fleet. In March 1996, the Company acquired 8 line handling vessels, including one vessel owned by the Company's 40%-owned affiliate, that currently operate under long-term charters offshore Brazil. In May 1996, with the proceeds from the Company's initial public offering, the Company acquired four supply boats and in the remainder of 1996, acquired a total of 13 additional supply boats in three separate transactions. All classes of vessels in the Company's fleet reported higher utilization during 1996 compared to 1995. The greatest increase in utilization was experienced by the Company's supply boats and lift boats. Supply boat utilization averaged 94% for 1996, up from 78% for 1995. Average supply boat day rates for 1996 increased 60.7% to $4,917 compared to $3,060 for 1995. These increases reflected strong market conditions in the Gulf during 1996 and the substantial downtime incurred in 1995 for the vessel upgrade program, during which three of the Company's supply boats were lengthened from 165 feet to 180, one was lengthened from 165 feet to 190 feet, and the boats' capacities for liquid mud and bulk cargo were increased. Additionally, the Company rebuilt and lengthened a crew boat which was placed in service late in 1995. Utilization of the Company's lift boats increased to 67% for 1996, from 45% during 1995. The lift boats experienced unusually low utilization in 1995 due to drydocking related downtime and weak market conditions which existed in the first half of 1995. The Company's lift boats are operated by Power Offshore, a leading operator of lift boats in the Gulf. Management and incentive fees payable to Power Offshore in 1996 totaled $979,000 as compared to $468,000 for 1995 due to the increased revenue and operating income generated by the lift boats. Utilization of the crew boats and line handling vessels increased to 95% for 1996, compared to 85% during the same period in 1995, due to the improved market conditions in the Gulf for crew boats and the additional eight line handling vessels acquired in March 1996, which operate under long-term charters offshore Brazil. During 1996, direct vessel operating expenses increased to $24.2 million from $17.0 million during 1995, due to the expanded vessel fleet and increased labor, repair and maintenance costs. Due to the increase in average vessel day rates, direct vessel operating expenses decreased as a percentage of revenues from 63.6% during 1995 to 45.2% during 1996. Depreciation expense increased to $4.5 million during 1996 from $2.7 million for 1995 due to the expanded vessel fleet. Amortization of marine inspection costs increased to $2.2 million during 1996 from $1.9 million for 1995 due to the amortization of increased drydocking and marine inspection costs. General and administrative expense increased to $3.3 million during 1996 from $2.5 million during 1995 due to the additional personnel needed in connection with the growth in the Company's vessel fleet and the addition of operations in Brazil. General and administrative expenses, as a percentage of revenues, decreased from 9.4% during 1995 to 6.1% in 1996 because the increase in revenues and additions to the vessel fleet did not require proportionate increases in administrative expenses. Interest expense decreased to $2.3 million for 1996, from $3.9 million for 1995. The decrease in interest expense was due to a reduction in the Company's average bank debt outstanding and lower borrowing costs for the Company in 1996 as compared to 1995. As a result of the Company's two public offerings of Common Stock completed in May and November 1996, respectively, average bank debt outstanding decreased to $18.5 million for 1996, compared to $26.6 million for 1995. In 1995 the Company recorded gains on the sales of certain crew boats of $247,000 versus gains of $50,000 in 1996. In 1996, the Company had income tax expense of $5.8 million compared to an income tax benefit of $670,000 in 1995. 14 As a result of the prepayment of all debt outstanding under the Company's bank credit facility and its subordinated debt in the second quarter of 1996, the Company recorded an extraordinary charge of $917,000, net of taxes of $494,000, for the write-off of unamortized debt issuance costs. LIQUIDITY AND CAPITAL RESOURCES Since its initial public offering in May 1996, the Company's strategy has been to enhance its position as a leading supplier of marine support services by pursuing opportunities to acquire vessel fleets or single vessels and by diversifying into international markets. Primarily as a result of acquisitions, the Company's total assets have grown from $52.1 million at December 31, 1995, to $698.8 million at December 31, 1997. During this period, the Company completed the acquisition of Saevik Supply, a then publicly traded Norwegian company, for approximately $293.7 million, which amount includes certain costs of the transaction, and acquired 37 supply boats at an aggregate cost of $177.0 million. Capital expenditures for 1997 consisted principally of $293.7 million for the acquisition of Saevik Supply, $105.3 million for the acquisition of 19 supply vessels and one utility vessel for use in the Gulf, and $10.0 million of U.S. Coast Guard drydocking costs. The Company also made approximately $36.7 million in capital expenditures related to vessel upgrades and construction. During 1997, funds were provided by $494.2 million in net proceeds from the issuance of the Notes and borrowings under the Company's bank credit facility, $123.7 million in net proceeds from the Common Stock Offering (as defined herein), $67.3 million in funds from operating activities and $1.2 million from the sale of assets. During the period, the Company repaid $254.0 million of debt. In 1997, the Company issued $280.0 million in aggregate principal amount of the Notes. The Notes were issued in three transactions which were completed in July, November and December 1997, respectively. The Notes are unsecured and are required to be guaranteed by all of the Company's Significant Subsidiaries (as such term is defined in the Indentures governing the Notes, the "Subsidiary Guarantors"). Except in certain circumstances, the Notes may not be prepaid until August 1, 2001, at which time they may be redeemed, at the option of the Company, in whole or in part, at a redemption price equal to 104.25% plus accrued and unpaid interest, with the redemption price declining ratably on August 1 of each of the succeeding three years. The indentures governing the Notes contain certain covenants that, among other things, limit the ability of the Company to incur additional indebtedness, pay dividends or make other distributions, create certain liens, sell assets, or enter into certain mergers or acquisitions. Net proceeds received from the July issuance of the Notes were $106.1 million and were used to acquire 11 supply boats for $62.0 million and to repay $44.1 million of debt outstanding under the Company's credit facility. As part of this acquisition, the Company agreed to purchase an additional supply boat once the seller completed lengthening the vessel from 205 to 225 feet. In October 1997 the vessel upgrade was completed by the seller and the Company took possession of the vessel. The vessel, renamed Kings River, will be placed in service by the Company in March 1998. The Company borrowed $4.5 million under its bank credit facility to fund a portion of the vessel's $7.0 million purchase price. The Company used the $98.9 million in net proceeds from the November issuance of Notes, together with borrowings under its bank credit facility, to fund the acquisition of Saevik Supply. To facilitate the acquisition of Saevik Supply, effective December 1, 1997, the Company amended and restated its existing bank credit facility to provide for a $150.0 million revolving credit facility and $200.0 million in term loans (collectively, the "Bank Credit Facility"). In order to fund the acquisition of Saevik Supply and certain related expenses, the Company borrowed $125.0 million in term loans under the Bank Credit Facility and approximately $68.5 million under the revolving portion. The term loans were repaid with the net proceeds of the Company's issuance of 4,600,000 shares of Common Stock (approximately $123.7 million), which was completed in December 1997 (the "Common Stock Offering"). Of the $68.7 million in net proceeds from the December issuance of Notes, $64.0 million was used to repay outstanding amounts under the revolving portion of the Bank Credit Facility. 15 As a result of the repayment of substantially all of its borrowings under the Bank Credit Facility with proceeds from the December issuance of Notes and the Common Stock Offering, the Company renegotiated and amended the terms of the Bank Credit Facility (the "Amended Facility") in March 1998. The Amended Facility provides a $150.0 million revolving line of credit that can be used for acquisitions and general corporate purposes. The Amended Facility is collateralized by a mortgage on certain of the Company's vessels. Amounts borrowed under the Amended Facility mature on December 1, 2002 and bear interest at LIBOR plus a margin that depends on the Company's leverage ratio (currently approximately 7.15%). The Amended Facility requires the Company to maintain certain financial ratios and limits the ability of the Company to incur additional indebtedness, pay dividends or make certain other distributions, create certain liens, sell assets or enter into certain mergers or acquisitions. Although the Amended Facility does impose some limitations on the ability of the Company's subsidiaries to make distributions to the Company, it expressly permits distributions to the Company by the Subsidiary Guarantors for scheduled principal and interest payments on the Notes. In addition to the Notes and the Amended Facility, as a result of the acquisition of Saevik Supply, the Company also incurred debt under several bank credit facilities (collectively, the "Saevik Bank Facilities"), which were used by Saevik Supply to fund vessel acquisitions. As of March 1, 1998, the Company had approximately $75.7 million (NOK 573.5 million) of debt outstanding under the Saevik Bank Facilities. The principal credit facility totals $67.3 million (NOK 510.0 million) and, as of March 1, 1998, had $43.5 million (NOK 330 million) of outstanding borrowings and $23.8 million (NOK 180 million) available to be drawn. The Saevik Bank Facilities are collateralized by a security interest in substantially all of the assets of Saevik Supply, require Saevik Supply to maintain certain financial ratios and limit the ability of Saevik Supply to create liens, or merge or consolidate with other entities. Amounts borrowed under the Saevik Bank Facilities bear interest at NIBOR (Norwegian Interbank Offered Rate) plus a margin which varies among the different credit facilities. The weighted average interest rate for the Saevik Bank Facilities was 5.67% as of March 1, 1998. Amounts outstanding are due in annual installments of various amounts through 2006. The Company expects to amend the Saevik Bank Facilities to, among other things, consolidate all the facilities into one facility, reduce the interest rate, and reduce the collateral securing the facility. Capital expenditures planned for 1998 consist primarily of construction costs. To expand its North Sea operations, the Company is completing construction of a 276-foot PSV that is scheduled for delivery in March 1998 and is committed to a three year charter for a U.K. oil and gas operator. The Company also has entered into a contract to build a 275-foot, technologically advanced AHTS with 23,800 horsepower that is scheduled to be delivered no later than May 1999. Expenditures for these vessels are expected to total $32.0 million in 1998. The Company also expects to spend approximately $16.0 million to complete two 230-foot supply vessels, which are currently under construction at a shipyard on the U.S. Gulf Coast. The first vessel, which is expected to be completed by July 1998, has been committed to a three year charter to an oil and gas company active in the Gulf. The second vessel is expected to be delivered at the end of 1998. The remainder of the Company's planned capital expenditures for 1998 include (i) costs to complete the upgrade of two supply boats for the Gulf, (ii) costs to complete the construction of the SWATH vessel and a supply boat for use in the Brazilian market and (iii) U.S. Coast Guard drydocking costs. The Company has received a commitment from the Maritime Administration's Title XI ship financing program to provide long-term financing for approximately $9.6 million of the SWATH vessel's cost. The Company believes that cash generated from operations together with available borrowings under the Amended Facility will be sufficient to fund the Company's currently planned capital projects and working capital requirements. The Company's strategy, however, is to make other acquisitions and to selectively construct new special-purpose vessels as part of an effort to expand its worldwide presence. To the extent the Company is successful in identifying such opportunities, it most likely will require additional debt or equity financing depending on the size of the investments required. During 1997 the Company began an evaluation of its existing software systems to determine which computer programs need to be upgraded or modified to become year 2000 compliant. The Company has determined that the cost to upgrade or modify those software systems which are not already year 2000 compliant will not have a material effect on the Company's financial position, operations or cash flows. 16 CURRENCY FLUCTUATIONS As a result of the growth in the Company's international operations, especially following the acquisition of Saevik Supply, the Company is exposed to currency fluctuations and exchange risks. All charter contracts and indebtedness of the Company's North Sea subsidiaries are denominated in either Norwegian kroner, British pounds or Danish kroner. The Company is unable to predict the effect of fluctuations in these currencies, but a significant decline in their value relative to the U.S. dollar could have a material adverse effect on the Company's results of operations and financial condition. NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," is required to be implemented during the first quarter of the Company's fiscal year ending December 31, 1998 and Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information," and Statement of Financial Accounting Standards No. 132 "Employer's Disclosures about Pension and Other Postretirement Benefits" are required to be implemented during the Company's fiscal year ending December 31, 1998. Management believes adoption of these statements will have a financial statement disclosure impact only and will not have a material effect on the Company's financial position, operations or cash flows. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 17 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE ---- Index to Consolidated Financial Statements Report of Independent Accountants....................................... 19 Consolidated Balance Sheet as of December 31, 1997 and 1996............. 20 Consolidated Statement of Operations for the Years Ended December 1997, 1996 and 1995.......................................................... 21 Consolidated Statement of Stockholders' Equity for the Years Ended December 31, 1997, 1996 and 1995....................................... 22 Consolidated Statement of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995.................................................... 23 Notes to Consolidated Financial Statements.............................. 24
18 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Trico Marine Services, Inc.: We have audited the accompanying consolidated balance sheet of Trico Marine Services, Inc. and Subsidiaries (the "Company") as of December 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for the three years ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trico Marine Services, Inc. and Subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for the three years ended December 31, 1997, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. New Orleans, Louisiana February 19, 1998 19 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996 ------ ----------- ----------- (DOLLARS IN THOUSANDS) Current assets: Cash and cash equivalents.......................... $ 10,940 $ 1,047 Accounts receivable, net........................... 34,519 17,409 Prepaid expenses and other current assets.......... 3,448 591 Deferred income taxes.............................. 38 680 ----------- ----------- Total current assets............................. 48,945 19,727 ----------- ----------- Property and equipment, at cost: Land and buildings ................................ 2,429 1,565 Marine vessels..................................... 480,920 120,403 Construction-in-progress .......................... 42,256 7,135 Transportation and other........................... 2,433 853 ----------- ----------- 528,038 129,956 Less accumulated depreciation and amortization....... 22,982 10,814 ----------- ----------- Net property and equipment....................... 505,056 119,142 ----------- ----------- Goodwill, net........................................ 118,737 664 Other assets......................................... 26,043 4,502 ----------- ----------- $ 698,781 $ 144,035 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Current portion of long-term debt.................. $ 12,701 $ -- Accounts payable................................... 9,114 5,162 Accrued expenses................................... 10,012 3,540 Accrued interest................................... 5,514 272 Income tax payable................................. 3,773 -- ----------- ----------- Total current liabilities........................ 41,114 8,974 ----------- ----------- Long-term debt....................................... 359,385 21,000 Deferred income taxes................................ 32,561 10,081 Other liabilities.................................... 4,221 -- ----------- ----------- Total liabilities.................................... 437,281 40,055 ----------- ----------- Commitments and contingencies Stockholders' equity: Common stock, $.01 par value, 40,000,000 and 30,000,000 shares authorized, 20,367,098 and 15,601,960 shares issued and 20,295,066 and 15,529,928 shares outstanding at December 31, 1997 and 1996, respectively............................ 204 156 Additional paid-in capital......................... 218,528 93,818 Retained earnings.................................... 45,306 10,007 Cumulative foreign translation adjustment.......... (2,537) -- Treasury stock, at par value, 72,032 shares at December 31, 1997 and 1996, respectively ......... (1) (1) ----------- ----------- Total stockholders' equity....................... 261,500 103,980 ----------- ----------- $ 698,781 $ 144,035 =========== ===========
The accompanying notes are integral part of these consolidated financial statements. 20 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995 ---------- ---------- --------- (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Revenues: Charter fees.............................. $ 125,476 $ 53,442 $ 26,657 Other vessel income....................... 4 42 41 ---------- ---------- --------- Total revenues.......................... 125,480 53,484 26,698 ---------- ---------- --------- Operating expenses: Direct vessel operating expenses and other.................................... 42,188 24,459 17,533 General and administrative................ 5,736 3,277 2,509 Amortization of marine inspection costs... 3,021 2,158 1,930 ---------- ---------- --------- Total operating expenses................ 50,945 29,894 21,972 Depreciation expense and amortization....... 12,734 4,478 2,740 ---------- ---------- --------- Operating income............................ 61,801 19,112 1,986 Interest expense............................ (7,994) (2,282) (3,850) Amortization of deferred financing costs.... (372) (263) (381) Gain on sales of assets..................... 252 59 244 Other income, net........................... 594 79 32 ---------- ---------- --------- Income (loss) before income taxes and extraordinary item......................... 54,281 16,705 (1,969) Income tax expense (benefit)................ 18,982 5,814 (670) ---------- ---------- --------- Income (loss) before extraordinary item..... 35,299 10,891 (1,299) Extraordinary item, net of taxes............ -- (917) -- ---------- ---------- --------- Net income (loss)........................... $ 35,299 $ 9,974 $ (1,299) ========== ========== ========= Basic earnings per common share: Income before extraordinary item.......... $ 2.22 $ 0.99 $ (0.21) Extraordinary item, net of taxes.......... -- (0.09) -- ---------- ---------- --------- Net income................................ $ 2.22 0.90 (0.21) ========== ========== ========= Average common shares outstanding......... 15,895,023 11,044,884 6,101,042 ========== ========== ========= Diluted earnings per common share: Income before extraordinary item.......... $ 2.11 $ 0.88 $ (0.21) Extraordinary item, net of taxes.......... -- (0.07) -- ---------- ---------- --------- Net income................................ $ 2.11 0.81 (0.21) ========== ========== ========= Average common shares outstanding......... 16,758,466 12,380,902 6,101,042 ========== ========== =========
The accompanying notes are an integral part of these consolidated financial statements. 21 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
COMMON STOCK CUMULATIVE TREASURY STOCK ------------------ ADDITIONAL FOREIGN -------------- TOTAL PAID-IN RETAINED TRANSLATION PAR STOCKHOLDERS' SHARES DOLLARS CAPITAL EARNINGS ADJUSTMENT SHARES VALUE EQUITY ---------- ------- ---------- -------- ----------- -------- ----- ------------- (DOLLARS IN THOUSANDS) Balance, January 1, 1995................... 6,165,518 $ 61 $ 5,610 $ 1,332 $ -- $ 72,032 $(1) $ 7,002 Issuance of common stock................. 9,166 -- 9 -- -- -- -- 9 Net loss............... -- -- -- (1,299) -- -- -- (1,299) ---------- ---- -------- ------- ------- -------- --- -------- Balance, December 31, 1995................... 6,174,684 61 5,619 33 -- 72,032 (1) 5,712 Issuance of common stock................. 8,285,000 83 79,455 -- -- -- -- 79,538 Debt conversion........ 935,226 10 7,471 -- -- -- -- 7,481 Stock options exercised............. 207,050 2 1,273 -- -- -- -- 1,275 Net income............. -- -- -- 9,974 -- -- -- 9,974 ---------- ---- -------- ------- ------- -------- --- -------- Balance, December 31, 1996................... 15,601,960 156 93,818 10,007 -- 72,032 (1) 103,980 Issuance of common stock................. 4,600,000 46 123,259 -- -- -- -- 123,305 Stock options exercised............. 165,138 2 1,451 -- -- -- -- 1,453 Loss on foreign currency translation.. -- -- -- -- (2,537) -- -- (2,537) Net income............. -- -- -- 35,299 -- -- -- 35,299 ---------- ---- -------- ------- ------- -------- --- -------- Balance, December 31, 1997................... 20,367,098 $204 $218,528 $45,306 $(2,537) 72,032 $(1) $261,500 ========== ==== ======== ======= ======= ======== === ========
Share amounts have been adjusted to reflect a 3.0253-for-1 common stock split effective April 26, 1996 and a 100% stock dividend effective June 9, 1997. The accompanying notes are an integral part of these consolidated financial statements. 22 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995 --------- -------- ------- (DOLLARS IN THOUSANDS) Net income (loss)............................... $ 35,299 $ 9,974 $(1,299) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization................. 16,141 6,899 5,051 Deferred income taxes......................... 11,689 3,811 (670) Interest on subordinated debt................. -- 461 1,117 Extraordinary item............................ -- 1,411 -- Gain on sales of assets....................... (252) (59) (244) Provision for doubtful accounts............... (310) 130 240 Equity in loss of affiliate................... 160 18 -- Change in operating assets and liabilities: Accounts receivable........................... (9,076) (10,123) 91 Prepaid expenses and other current assets..... 624 (435) 25 Accounts payable and accrued expenses......... 14,207 3,526 2,327 Other, net.................................... (1,158) (661) (227) --------- -------- ------- Net cash provided by operating activities... 67,324 14,952 6,411 --------- -------- ------- Cash flows from investing activities: Purchases of property and equipment........... (141,986) (79,135) (5,343) Deferred marine inspection costs.............. (9,950) (2,292) (2,115) Proceeds from sales of assets................. 1,152 439 1,337 Investment in unconsolidated affiliate........ (670) (1,293) -- Acquisition of business, net of cash acquired. (270,551) -- -- Other ........................................ 987 -- -- --------- -------- ------- Net cash used in investing activities....... (421,018) (82,281) (6,121) --------- -------- ------- Cash flows from financing activities: Net proceeds from issuance of common stock.... 123,732 79,726 9 Proceeds from issuance of Senior Notes........ 280,603 -- -- Proceeds from issuance of long-term debt...... 223,907 57,669 4,517 Repayment of long-term debt................... (254,000) (63,364) (5,305) Deferred financing costs and other............ (10,331) (707) (164) Payments of subordinated debt and accrued interest thereon............................. -- (6,065) -- --------- -------- ------- Net cash provided by (used in) financing activities................................. 363,911 67,259 (943) --------- -------- ------- Effect of exchange rate changes on cash and cash equivalents.................................... (324) -- -- --------- -------- ------- Net increase (decrease) in cash and cash equivalents.................................... 9,893 (70) (653) Cash and cash equivalents at beginning of period......................................... 1,047 1,117 1,770 --------- -------- ------- Cash and cash equivalents at end of period...... $ 10,940 $ 1,047 $ 1,117 ========= ======== ======= Supplemental information: Income taxes paid............................. $ 2,563 $ 6 $ 2 ========= ======== ======= Income taxes refunded......................... $ -- $ -- $ 330 ========= ======== ======= Interest paid................................. $ 2,969 $ 4,737 $ 2,865 ========= ======== =======
The accompanying notes are an integral part of these consolidated financial statements. 23 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY: Trico Marine Services, Inc. (the "Company") is a leading provider of marine support vessels and related services to the oil and gas industry in the U.S. Gulf of Mexico (the "Gulf"), offshore Brazil and the North Sea. The Company is the second largest owner and operator of supply boats in the Gulf and a leading operator in the North Sea. At December 31, 1997, the Company had a total fleet of 98 vessels, including 53 supply vessels, 10 large capacity platform supply vessels ("PSV"), six large anchor handling, towing and supply vessels ("AHTS"), 14 crew boats, six lift boats and nine line-handling vessels. The services provided by the Company's diversified fleet include transportation of drilling materials, supplies and crews to offshore facilities and support for the construction, installation, maintenance and removal of those facilities. The Company's financial position, results of operations and cash flows are affected primarily by day rates and fleet utilization in the Gulf of Mexico and the North Sea which primarily depend on the level of drilling activity, which ultimately is dependent upon both short-term and long-term trends in oil and natural gas prices. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Consolidation Policy The consolidated financial statements include the Company and its subsidiaries. Subsidiaries consolidated include wholly-owned Trico Marine Assets, Inc. ("Trico Assets") and Trico Marine Operators, Inc. ("Trico Operators") and 99% owned Saevik Supply, ASA ("Saevik") which was acquired on December 1, 1997 (see Note 3). Subsequent to December 31, 1997, the Company acquired all of the remaining stock of Saevik. All significant intercompany accounts and transactions have been eliminated. The Company's 40% interest in Walker Servicos Maritimos, Ltd. ("Walker") is accounted for using the equity method. Cash and Cash Equivalents All highly liquid debt instruments with original maturity dates of three months or less are considered to be cash equivalents. Property and Equipment Marine vessels, transportation and other equipment are stated at cost. Depreciation for financial statement purposes is provided on the straight-line method, assuming 10% salvage value for marine vessels. Marine vessels are depreciated over a useful life of fifteen to twenty-two years from the date of acquisition. Buildings and improvements are depreciated over a useful life of fifteen to forty years. Major modifications which extend the useful life of marine vessels are capitalized and amortized over the adjusted remaining useful life of the vessel. When assets are retired or disposed, the cost and accumulated depreciation thereon are removed and any resultant gains or losses are recognized in current operations. Depreciation expense amounted to approximately $12,378,000, $4,478,000 and $2,740,000 in 1997, 1996 and 1995, respectively. Marine vessel spare parts are stated at average cost. Drydocking expenditures incurred in connection with marine inspections are capitalized and amortized on a straight-line basis over the period to be benefited (generally 24 to 36 months). Deferred Financing Costs Deferred financing costs include costs associated with the issuance of the Company's debt and are amortized on a straight-line basis over the life of the related debt agreement. 24 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Goodwill Goodwill, or cost in excess of fair value of the net assets of companies acquired, is amortized on a straight-line basis over 10 to 37.5 years. On an annual basis the Company reviews the recoverability of goodwill based primarily upon an analysis of undiscounted cash flows from the acquired businesses. Accumulated amortization amounted to $399,000 and $43,000 at December 31, 1997 and 1996, respectively. Income Taxes The Company accounts for income taxes using the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Deferred income taxes are provided at the currently enacted income tax rates for the difference between the financial statement and income tax bases of assets and liabilities and carryforward items. The Company intends to permanently reinvest the unremitted earnings of its non-U.S. subsidiaries and postpone their repatriation indefinitely. Accordingly, no provision for U.S. income taxes was recorded on such earnings during the year ended December 31, 1997. There were no such earnings in the years ended December 31, 1996 and 1995. Revenue and Expense Recognition Charter revenue is earned and recognized on a daily rate basis. Operating costs are expensed as incurred. Direct Vessel Operating Expenses Direct vessel operating expenses principally include crew costs, insurance, repairs and maintenance, management fees, and casualty losses. Foreign Currency Translation All assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect at the end of the period and revenue and expenses are translated at weighted average exchange rates prevailing during the period. The resulting translation adjustments are reflected as a separate component of shareholders' equity. Stock Compensation On January 1, 1996, the Company elected to continue to use the intrinsic value method of accounting for stock-based compensation prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and, accordingly, adopted only the disclosure provisions of Statement of Financial Accounting Standards No. 123 "Accounting for Stock- based Compensation" ("SFAS No. 123"). Earnings Per Share The Company has adopted the provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128") and accordingly has included a dual presentation of basic and diluted earnings per share on its consolidated statement of operations. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. All prior periods have been restated in accordance with SFAS No. 128. 25 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Authorized Shares and Stock Splits On April 26, 1996, the Company's Board of Directors approved a 3.0253-for-1 split of the Company's common stock in the form of a stock dividend. The financial statements have been restated to reflect the effects of this stock split, including all share amounts and per share data. On May 22, 1997, the Company's stockholders approved an amendment to the Company's Certificate of Incorporation to increase the number of shares of common stock which the Company is authorized to issue from 15 million to 40 million (the "Amendment"). A two-for-one split of the Company's common stock in the form of a 100% stock dividend that was previously declared by the Company's Board of Directors subject to approval of the Amendment by the Company's stockholders, was paid on June 9, 1997. The financial statements have been restated to reflect the effects of this stock split, including all share amounts and per share data. 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. Reclassifications Certain prior-period amounts have been reclassified to conform with the presentation shown in the current year's financial statements. These reclassifications had no effect on net income (loss), total stockholders' equity or cash flows. 3. ACQUISITIONS: Saevik Acquisition On December 1, 1997, the Company acquired approximately 99% of the outstanding shares of Saevik Supply ASA, a publicly traded Norwegian company ("Saevik") for approximately $293,654,000. Subsequent to December 31, 1997, the Company acquired the remaining outstanding shares of Saevik. Saevik provides marine support and transportation services to companies engaged in offshore exploration and production of oil and gas in the North Sea. The acquisition has been accounted for by the purchase method, and Saevik's results are included in the accompanying consolidated financial statements from the date of acquisition. Goodwill of $118,310,000 was recorded in conjunction with the purchase of Saevik. The goodwill is being amortized over 37.5 years. The effect of the acquisition of Saevik at the date of purchase on the consolidated financial statements was as follows for the year ended December 31, 1997 (in thousands): Current assets, excluding cash acquired........................ $ 11,989 Property and equipment, net.................................... 261,681 Goodwill....................................................... 118,310 Other assets................................................... 1,048 Current liabilities............................................ (5,147) Long-term debt................................................. (102,447) Other liabilities.............................................. (14,883) --------- Cash used for acquisition, net of cash acquired................ $ 270,551 =========
26 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following table reflects, on an unaudited pro forma basis, the combined operations of the Company and Saevik as though the acquisition had taken place at the beginning of the respective periods presented. Appropriate adjustments have been made to reflect the accounting basis used in recording the acquisition. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have resulted had the combination been in effect on the dates indicated, that have resulted since the date of acquisition or that may result in the future (in thousands except share and per share amounts).
YEAR ENDED DECEMBER 31, ----------------- 1997 1996 -------- -------- (UNAUDITED) Revenues.............................................. $194,973 $103,160 ======== ======== Income before extraordinary item...................... $ 47,731 $ 5,746 ======== ======== Net income............................................ $ 47,731 $ 4,829 ======== ======== Basic earnings per common share: Income before extraordinary item.................... $ 2.36 $ 0.37 ======== ======== Net income.......................................... $ 2.36 $ 0.31 ======== ======== Diluted earnings per common share: Income before extraordinary item.................... $ 2.26 $ 0.34 ======== ======== Net income.......................................... $ 2.26 $ 0.28 ======== ========
Other Acquisitions On March 15, 1996, the Company acquired seven line handling vessels and a 40% interest in Walker, a marine operating company located in Brazil, for a combined price of $4,200,000. Walker owns an eighth line handling vessel and operates it and the seven other acquired vessels under long-term contracts with a customer located in Brazil. The acquisition has been accounted for by the purchase method of accounting. Of the purchase price, $3,565,000 has been allocated to the acquired vessels based upon their relative fair value, $270,000 has been allocated to the Company's investment in the stock of Walker with the remaining $365,000 allocated to goodwill. In addition to the purchase price above, $300,000 of contingent purchase price was paid on August 27, 1996 based upon the attainment by the Company of a certain contract to provide offshore marine services in Brazil. This amount has been recorded as additional goodwill. An additional $119,000 was recorded as goodwill in 1997 relating to the realization of certain acquired assets and liabilities. On May 22, 1996, the Company acquired for $11,000,000 all of the outstanding capital stock of HOS Marine Partners, Inc. ("HOS"), a special purpose company whose sole assets consisted of four supply vessels. HOS was subsequently merged into Trico Marine Assets, Inc. In addition to the purchase price, the Company recognized, in accordance with Statement of Financial Accounting Standards No. 109, a deferred income tax liability of $5,780,000 for the deferred tax consequences of the differences between the assigned values and the tax bases of the assets owned by HOS. On September 30, 1996, the Company acquired three supply vessels for $11,600,000. The Company borrowed $10,000,000 under its credit agreement to fund a portion of the purchase. On October 10, 1996, the Company acquired seven supply vessels for approximately $32,000,000. The Company borrowed $30,500,000 under its credit agreement to fund a portion of the purchase. 27 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In December 1996, the Company purchased three supply vessels for $11,450,000 in cash. The acquisition was funded with borrowings under the Company's credit agreement and cash generated from operations. In January 1997, the Company entered into agreements with two companies to acquire seven supply vessels and one utility vessel for $36,300,000. The first transaction for the acquisition of five of the supply vessels and the utility vessel was completed on January 31, 1997, with the Company borrowing $22,000,000 under its bank credit facility to fund a portion of the purchase price. The second transaction for two supply vessels was completed with the acquisition of the first vessel on June 25, 1997 and the second vessel on July 3, 1997. The Company borrowed $8,000,000 under its bank credit facility to fund a portion of the purchase price of these two vessels. In June 1997 the Company entered into an agreement to acquire 12 supply vessels for $69,000,000. Eleven of the vessels were acquired for a total of $62,000,000 on July 21, 1997. The purchase was funded with a portion of the proceeds of the Company's $110,000,000 of 8 1/2% Senior Notes issued July 21, 1997. The Company acquired the twelfth vessel on October 29, 1997, with the Company borrowing $4,500,000 under its bank credit facility to fund a portion of the purchase. 4. PUBLIC OFFERINGS OF COMMON STOCK: In May 1996, the Company completed an initial public offering of 6,585,000 shares of $.01 par value common stock. The proceeds received from the offering were $48,394,000, net of underwriting discounts and other costs of $4,286,000. Of the proceeds, the Company used $31,150,000 to repay senior debt, $6,065,000 to pay subordinated debt and $11,000,000 to acquire four supply vessels. The balance of the proceeds was used by the Company for additional working capital. In November 1996, the Company completed a second offering that included the issuance of 1,700,000 shares of $.01 par value common stock. The proceeds from the offering were $31,144,000, net of underwriting discounts and other costs of $2,006,000. The proceeds were used to repay $30,500,000 of the Company's revolving line of credit, with the balance of the proceeds used for working capital and other purposes. In December 1997, the Company completed an offering that included the issuance of 4,600,000 shares of $.01 par value common stock. The proceeds from the offering were $123,305,000, net of underwriting discounts and other costs of $5,495,000. The net proceeds were used to repay a portion of the indebtedness incurred to fund the acquisition of Saevik (see Note 3) and certain related expenses. 5. ACCOUNTS RECEIVABLE: The Company's accounts receivable, net consists of the following at December 31, 1997 and 1996 (in thousands):
1997 1996 ------- ------- Trade receivables, net of allowance for doubtful accounts of $571 and $610 in 1997 and 1996, respectively......... $30,121 $16,172 Insurance and other...................................... 4,398 1,237 ------- ------- Accounts receivable, net............................... $34,519 $17,409 ======= =======
The Company's receivables are primarily due from entities operating in the oil and gas industry in the Gulf of Mexico, Brazil and the North Sea. 28 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 6. OTHER ASSETS: The Company's other assets, net consists of the following at December 31, 1997 and 1996 (in thousands):
1997 1996 ------- ------ Deferred marine inspection costs, net of accumulated amortization of $6,276 and $3,335 in 1997 and 1996, respectively................................................... $11,879 $2,667 Deferred financing costs, net of accumulated amortization of $432 and $28 in 1997 and 1996, respectively.................... 10,703 205 Marine vessels spare parts...................................... 1,607 939 Investment in and advances to unconsolidated subsidiary......... 1,391 568 Other........................................................... 463 123 ------- ------ Other assets, net............................................. $26,043 $4,502 ======= ======
7. LONG-TERM DEBT: The Company's long-term debt consists of the following at December 31, 1997 and 1996 (in thousands):
1997 1996 -------- ------- Revolving loan, interest at a base interest rate plus a margin, as defined, on the date of borrowing (weighted average rate of 7.36% and 7.09% at December 31, 1997 and 1996, respectively) payable at the end of the interest period or quarterly, principal due October 8, 2002.................. $ 9,000 $21,000 Senior Notes, interest at 8.5%, due 2005...................... 280,000 -- Note payable, bearing interest at NIBOR (Norwegian Interbank Offered Rate) plus 1%, (5.13% at December 31, 1997), principal and interest due in 14 semiannual installments, maturing July 2004, collateralized by marine vessels......... 46,785 -- Note payable, bearing interest at NIBOR plus 1% (5.13% at December 31, 1997), principal and interest due in 19 semiannual installments, maturing October 2006, collateralized by a marine vessel............................ 10,307 -- Note payable, bearing interest at NIBOR plus .5%--1% (4.63%-- 5.13% at December 31, 1997), principal and interest due in 14 semiannual installments, maturing July 2004, collateralized by a marine vessel........................................... 2,394 -- Note payable, bearing interest at NIBOR plus .75% (4.88% at December 31, 1997), principal and interest payments due in 14 semiannual installments, maturing October 2004, collateralized by a marine vessel............................ 7,945 -- Note payable, bearing interest at 6.49%, principal and interest due in 17 semiannual installments, maturing March 2003, collateralized by a marine vessel...................... 4,425 -- Note payable, bearing interest at NIBOR plus .75% (4.88% at December 31, 1997), principal and interest due in 16 semiannual installments, maturing June 2005, collateralized by a marine vessel........................................... 8,518 -- Note payable, bearing interest at NIBOR plus 1% (5.13% at December 31, 1997), principal and interest due in 10 semiannual installments, maturing January 1998, collateralized by a marine vessel............................ 2,712 -- -------- ------- 372,086 21,000 Less current maturities....................................... 12,701 -- -------- ------- $359,385 $21,000 ======== =======
29 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Annual maturities on long-term debt during the next five years are as follows: 1998............................................................ $ 12,701 1999............................................................ 11,345 2000............................................................ 9,989 2001............................................................ 9,989 2002............................................................ 18,989 Thereafter...................................................... 309,073 -------- $372,086 ========
During 1995, the Company had a revolving credit and term loan agreement with The First National Bank of Boston (the "Credit Agreement"). Availability under the revolving loan was based on the Company's accounts receivable. The Company incurred a commitment fee of 0.5% per annum on the unused amount. Substantially all of the Company's assets served as collateral for the Credit Agreement. Effective June 28, 1995, the Company amended its Credit Agreement ("Second Amendment") to establish $5 million of availability under the revolving credit loan and extend principal payments. Under the Second Amendment, the Company had the right to convert $2,000,000 of outstanding amounts under the revolving credit loan into a term loan. The Company converted $1,700,000 of its outstanding revolving credit loan into a term loan in November 1995 and $300,000 of amounts outstanding under the revolving credit loan were converted into a term loan in January 1996. Effective March 6, 1996, the Company amended its Credit Agreement ("Third Amendment") to provide for an increased total credit facility, extend principal payments and restructure other portions of the Credit Agreement. The Third Amendment contained a revolving credit facility and term loan provisions. The $3,000,000 revolving credit facility, which would have matured in July 1997, bore interest at 1.75% above a base rate. The Third Amendment contained $33,000,000 of term loans in three separate tranches which all bore interest at 1.75% above a base rate. The outstanding principal balance of the Credit Agreement of $31,150,000 was repaid on May 21, 1996, together with a prepayment fee of $75,000, from the proceeds of the Company's initial public offering of common stock. The balance of $6,065,000 of the 9% Subordinated Notes and accrued interest thereon was also retired with proceeds from the initial public offering. As a result of the prepayment of all of the Company's senior and subordinated debt, the Company recorded an extraordinary charge of $917,000, net of taxes of $494,000, for the write-off of the unamortized balance of related debt issuance costs. Effective July 26, 1996, the Company executed a new $30,000,000 revolving credit agreement (the "Bank Credit Facility") with the same group of lenders that provided the Company's previous Credit Agreement, which was prepaid on May 21, 1996 with proceeds from the initial public offering. The Bank Credit Facility was increased to $35,000,000 effective August 26, 1996 and to $50,000,000 effective October 8, 1996. The Bank Credit Facility bore interest at LIBOR plus 1 1/2% per annum with a commitment fee of 3/8% per annum on the undrawn portion. The Bank Credit Facility contained certain covenants which required the Company to maintain certain debt coverage ratios and net worth levels, limit capital expenditures and prohibit equity distributions. In connection with the acquisition of Saevik, on December 1, 1997, the Company amended and restated the Bank Credit Facility to provide for a $150.0 million revolving line of credit and $200.0 million in term loans (the "Amended and Restated Facility"). The Amended and Restated Facility matures December 1, 2002 and bears interest at LIBOR plus a margin that depends on the Company's leverage ratio with a commitment fee of .25% to .5% on the undrawn portion. The Amended and Restated Facility is collateralized, to the extent permitted by the indentures that govern the Senior Notes (as defined herein), 30 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) by a security interest in substantially all of the assets of the Company's subsidiaries and a pledge of the stock of certain of the Company's subsidiaries. The Amended and Restated Facility contains certain covenants which require the Company to maintain certain debt coverage ratios and minimum net worth and which restrict the Company's ability to incur additional indebtedness, pay dividends or make certain other distributions. The Amended and Restated Facility may be used to borrow in U.S. dollars or Norwegian kroner. During 1997, the Company issued three Series of 8 1/2% Senior Notes due 2005, Series A/B Notes--$110,000,000, Series C/D Notes--$100,000,000 and Series E/F Notes--$70,000,000 (the "Senior Notes"). The Senior Notes are uncollateralized and are required to be guaranteed by all of the Company's Significant Subsidiaries (as such term is defined in the Indentures that govern the Senior Notes). Interest on the Senior Notes is payable semi- annually on February 1 and August 1 of each year commencing February 1, 1998. Except in certain circumstances the Senior Notes may not be prepaid until August 1, 2001, at which time they may be redeemed, at the option of the Company, in whole or in part, at a redemption price equal to 104.25%, plus accrued and unpaid interest, with the redemption price declining ratably on August 1 of each of the succeeding three years. No sinking fund payments are required on the Senior Notes until their final maturity. The Senior Notes contain certain covenants that, among other things, limit the ability of the Company to incur additional indebtedness, pay dividends or make other distributions, create certain liens, sell assets, or enter into certain mergers or acquisitions. 8. INCOME TAXES: Earnings (loss) before income taxes and extraordinary item derived from U.S. and international operations for the years ended December 31 are as follows (in thousands):
1997 1996 1995 ------- ------- -------- United States....................................... $50,780 $16,705 $(1,969) International....................................... 3,501 -- -- ------- ------- -------- $54,281 $16,705 $(1,969) ======= ======= ========
The components of income tax expense (benefit) from continuing operations of the Company for the periods ended December 31, 1997, 1996 and 1995, are as follows (in thousands):
1997 1996 1995 ------- ------ ------ Current income taxes: U.S. federal income taxes........................... $ 6,486 $1,999 $ -- State income taxes.................................. 62 4 -- Foreign taxes....................................... 66 -- -- Deferred income taxes: U.S. federal income taxes........................... 11,096 3,713 (667) State income taxes.................................. 328 98 (3) Foreign taxes....................................... 944 -- -- ------- ------ ------ $18,982 $5,814 $(670) ======= ====== ======
The Company has not recognized a deferred tax liability of approximately $245,000 for the undistributed earnings of a non-U.S. subsidiary because the Company currently does not expect those unremitted earnings to reverse and become taxable to the Company in the foreseeable future. A deferred tax liability will be recognized when the Company expects that it will realize those undistributed earnings 31 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) in a taxable manner, such as through receipt of dividends or sale of investments. As of December 31, 1997, the undistributed earnings of this subsidiary were approximately $3,500,000. The Company's deferred income taxes at December 31, 1997 and 1996 represent the tax effect of the following temporary differences between the financial reporting and income tax accounting bases of its assets and liabilities (in thousands):
DEFERRED TAX DEFERRED TAX ASSETS LIABILITIES --------------- --------------- NON- NON- CURRENT CURRENT CURRENT CURRENT 1997 ------- ------- ------- ------- Depreciation and amortization................ $ -- $ -- $ -- $29,976 Deferral of foreign earnings................. -- -- -- 11,702 Insurance reserves........................... 588 -- -- -- Alternative minimum tax credits.............. -- 5,284 -- -- Net operating loss carryforward.............. -- 3,833 -- -- Other........................................ -- -- 550 -- ---- ------ ---- ------- $588 $9,117 $550 $41,678 ==== ====== ==== ======= Current deferred tax assets, net............. $ 38 ======= Non-current deferred tax liabilities, net.... $32,561 ======= 1996 Depreciation and amortization................ $ -- $ -- $ -- $15,988 Insurance reserves........................... 680 -- -- -- Alternative minimum tax credits.............. -- 451 -- -- Net operating loss carryforward.............. -- 5,199 -- -- Other........................................ -- 257 -- -- ---- ------ ---- ------- $680 $5,907 -- $15,988 ==== ====== ==== ======= Current deferred tax assets, net............. $ 680 ======= Non-current deferred tax liabilities, net.... $10,081 =======
The provisions (benefits) for income taxes as reported are different from the provisions (benefits) computed by applying the statutory federal income tax rate. The differences are reconciled as follow (in thousands):
1997 1996 1995 ------- ------ ------ Federal income taxes at statutory rate............. $18,998 $5,680 $ (670) State income taxes net of federal benefit.......... 386 55 -- Foreign tax rate differential...................... (245) -- -- Goodwill........................................... 124 23 -- Other.............................................. (281) 56 -- ------- ------ ------ Income tax expense (benefit)....................... $18,982 $5,814 $ (670) ======= ====== ====== Effective tax rate................................. 35% 35% (34)% ======= ====== ======
A tax benefit for the exercise of stock options in the amount of $1,026,000 and $1,088,000 that was not included in income for financial reporting purposes was credited directly to additional paid-in capital as of December 31, 1997 and 1996, respectively. 32 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The net operating loss carryforwards for federal and state tax purposes are approximately $11.1 million at December 31, 1997 and expire in 2010. Alternative minimum tax credits at December 31, 1997 are approximately $5,284,000. The Company completed an initial public offering in May 1996, which is considered a change of control for federal income tax purposes. This will limit the utilization of net operating loss carryforwards to a set level as provided by regulations. 9.COMMON STOCK OPTION PLANS: The Company sponsors two stock-based incentive compensation plans, the "1993 Stock Option Plan" (the "1993 Plan") and the "1996 Stock Incentive Plan" (the "1996 Plan"). Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" (SFAS No. 123) became effective for the Company in 1996. As allowed by SFAS No. 123, the Company has elected to continue to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for its stock option plans. Under APB 25, the Company does not recognize compensation expense on the issuance of its stock options because the option terms are fixed and the exercise price equals the market price of the underlying stock on the grant date. Under the 1993 Plan, the Company is authorized to issue shares of common stock pursuant to "Awards" granted in the form of incentive stock options (qualified under Section 422 of the Internal Revenue Code of 1986, as amended) and non-qualified stock options. Awards may be granted to key employees of the Company. The Compensation Committee administers the Plan and has broad discretion in selecting Plan participants and determining the vesting period and other terms applicable to Awards granted under the Plan. According to the 1993 Plan, Awards may be granted with respect to a maximum of 1,455,018 shares of common stock. In 1995, the Company granted to an officer of the Company a total of 302,530 Awards in the form of incentive stock options at the October 29, 1993 original cost of the common stock, which was determined by the Board of Directors to be the fair market value of the Company's stock at that time, and accordingly, no expense was recognized. As of December 31, 1996, Awards have been granted with respect to all 1,455,018 shares. All these Awards have a ten-year term and are fully exercisable. Under the 1996 Plan, the Company is authorized to issue shares of common stock pursuant to "Awards" granted in the form of incentive stock options (qualified under Section 422 to the Internal Revenue Code of 1986, as amended), non-qualified stock options, restricted stock, stock awards, or any combination of these forms of Awards. Awards may be granted to key employees of the Company, including directors who are also considered employees of the Company for purposes of the Plan. The Compensation Committee administers the Plan and has broad discretion in selecting Plan participants and determining the vesting period and other terms applicable to Awards granted under the Plan. According to the 1996 Plan, Awards may be granted with respect to a maximum of 900,000 shares of common stock. No participant may be granted, in any calendar year, Awards with respect to more than 100,000 shares of common stock. In 1996, the Company granted a total of 221,000 Awards in the form of incentive stock options under the Plan at exercise prices equal to the fair value of the Company's stock at that time, which ranged from $8.00 to $10.94 per share. The Awards have a ten-year term. In 1997, the Company granted 191,000 Awards in the form of incentive stock options under the 1996 Plan at exercise prices equal to the fair value of the Company's stock at that time which ranged from $20.13 to $23.13 per share. 33 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) A summary of the status of the Company's stock options as of December 31, 1997, 1996 and 1995 and the changes during the years ended on those dates are presented below:
INCENTIVE STOCK OPTIONS ----------------------------------------------------------- 1997 1996 1995 ------------------- ------------------- ------------------- NUMBER OF WEIGHTED NUMBER OF WEIGHTED NUMBER OF WEIGHTED SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE UNDERLYING EXERCISE UNDERLYING EXERCISE UNDERLYING EXERCISE OPTIONS PRICES OPTIONS PRICES OPTIONS PRICES ---------- -------- ---------- -------- ---------- -------- Outstanding at beginning of the year............ 1,468,968 $ 2.01 1,455,018 $0.91 1,152,488 $0.91 Granted................. 191,000 $20.90 221,000 $8.20 302,530 $0.91 Exercised............... 165,138 $ 2.59 207,050 $0.91 -- $0.91 Forfeited............... 9,500 $13.01 -- -- -- Outstanding at end of year................... 1,485,330 $ 4.30 1,468,968 $2.01 1,455,018 $0.91 Exercisable at end of year................... 1,314,330 $ 4.30 1,367,680 $2.01 1,800,78 $0.91
Weighted average fair value of options granted during 1997, 1996 and 1995 were $9.68, $4.25 and $0.32, respectively. The fair value of each stock option granted is estimated on the date of grant using the minimum value method of option pricing with the following weighted-average assumptions for grants in 1997, 1996, 1995, respectively: no dividend yield; risk-free interest rates are 6.40% in 1997, 6.56% in 1996 and 7.35% in 1995, respectively; expected terms of the options are 5 or 6 years; and the expected volatility is 39.35% for 1997, 43.91% in 1996 and 0% for 1995, respectively. In determining the "minimum value" SFAS No. 123 does not require the volatility of the Company's common stock underlying the options to be calculated or considered in 1995 because the Company was not publicly- traded when the options were granted. The following table summarizes information about stock options outstanding at December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------ -------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED NUMBER REMAINING AVERAGE NUMBER AVERAGE RANGE OF OUTSTANDING CONTRACT EXERCISE EXERCISABLE EXERCISE EXERCISE PRICES AT 12/31/97 LIFE PRICE AT 12/31/97 PRICE ---------------- ----------- --------- -------- ----------- -------- $0.91 to $10.94 1,296,330 6.37 $ 1.88 1,296,330 $ 1.88 $20.13 to $23.13 189,000 9.42 $20.91 18,000 $21.80 ---------------- --------- ---- ------ --------- ------ $0.91 to $23.13 1,485,330 6.76 $ 4.30 1,314,330 $ 2.15
Had the compensation cost for the Company's stock-based compensation plans been determined consistent with SFAS No. 123, the Company's net income and net income per common share for 1997, 1996 and 1995 would approximate the pro forma below:
AS PRO AS PRO AS PRO REPORTED FORMA REPORTED FORMA REPORTED FORMA 12/31/97 12/31/97 12/31/96 12/31/96 12/31/95 12/31/95 -------- -------- -------- -------- -------- -------- SFAS 123 Charge......... $ -- $ 528 $ -- $ 628 $ -- $ 8 APB 25 Charge........... $ -- $ -- $ -- $ -- $ -- $ -- Net income (loss)....... $35,299 $34,771 $9,974 $9,346 $(1,299) $(1,307) Diluted net income (loss) per average common share........... $ 2.11 $ 2.07 $ 0.81 $ 0.75 $ (0.21) $ (0.21)
The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. 34 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 10. EARNINGS PER SHARE: Following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (in thousands except share and per share data).
FOR THE YEAR ENDED DECEMBER 31, 1997 FOR THE YEAR ENDED DECEMBER 31, 1996 ---------------------------------------- ---------------------------------------- PER- PER- INCOME SHARES SHARE INCOME SHARES SHARE (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT ------------- --------------- --------- ------------- --------------- --------- Income (loss) before extraordinary item........... $ 35,299 -- $ 10,891 -- ----------- -------------- ----------- -------------- BASIC EPS Income (loss) available for common shareholders... 35,299 15,895,023 $ 2.22 10,891 11,044,884 $ 0.99 ========= ========= EFFECT OF DILUTIVE Stock option grants......... -- 863,443 -- 1,336,018 ----------- -------------- ----------- -------------- DILUTED EPS Income (loss) available to common shareholders plus assumed conversions.... $ 35,299 16,758,466 $ 2.11 $ 10,891 12,380,902 $ 0.88 =========== ============== ========= =========== ============== ========= FOR THE YEAR ENDED DECEMBER 31, 1995 ------------------------------------------ PER- INCOME SHARES SHARE (NUMERATOR) (DENOMINATOR) AMOUNT -------------- --------------- ----------- Income (loss) before extraordinary item........... $ (1,299) -- -------------- --------------- BASIC EPS Income (loss) available for common shareholders... (1,299) 6,101,042 $ (0.21) =========== EFFECT OF DILUTIVE Stock option grants......... -- -- -------------- --------------- DILUTED EPS Income (loss) available to common shareholders plus assumed conversions.... $ (1,299) 6,101,042 $ (0.21) ============== =============== ===========
11. OTHER RELATED PARTY TRANSACTIONS: Pursuant to an agreement effective October 29, 1993, Berkshire Partners, a shareholder, was entitled to receive $16,666 each month for five years for providing certain management and other consulting services (the "Berkshire Agreement"). The Berkshire Agreement was automatically renewable on an annual basis after the initial five year period upon agreement of the parties. The Berkshire Agreement was terminated upon the successful completion of the Company's initial public offering in May 1996. During February 1995, an officer of the Company purchased 4,583 shares of the Company's common stock at the original cost of the common stock and approximately $17,000 of the Company's 9% Subordinated Notes. 12.EMPLOYEE BENEFIT PLANS: Profit Sharing Plan The Company has a defined contribution profit sharing plan under Section 401(k) of the Internal Revenue Code (the "Plan") that covers substantially all U.S. employees meeting certain eligibility requirements. Employees may contribute up to 15% (subject to certain ERISA limitations) of their eligible compensation on a pre-tax basis. The Company will match 25% of the participants' before tax savings contributions up to 5% of the participants' taxable wages or salary. The Company may also make a matching contribution to the Plan at its discretion that is subject to approval by the Company's Board of Directors. The Company expensed contributions to the Plan for the years ended December 31, 1997, 1996 and 1995 of $129,000, $113,000 and $66,000, respectively. Pension Plan and Employee Benefits: Substantially all of the Company's Norwegian employees are covered by a number of noncontributory, defined benefit pension plans which were acquired in association with the acquisition of Saevik. Benefits are based primarily on participants' compensation and years of credited services. The Company's policy is to fund contributions to the plans based upon actuarial computations. Plan assets include investments in debt and equity securities and property. 35 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Net pension expense included the following components for the 1997 plan year.
(IN THOUSANDS) Service costs for benefits earned during the period.......... $168 Interest costs on projected benefit obligation............... 59 Return on plan assets........................................ (84) Net amortization and deferral................................ (74) Social security contributions................................ 23 ---- Net pension benefit cost..................................... $ 92 ==== Actuarial assumptions: Discount rate.............................................. 7.00% Rate of interest in future compensation.................... 3.30% Expected rate of return on plan assets..................... 8.00%
Due to the timing of the acquisition of Saevik, the Company's statement of operations for the year ending December 31, 1997 includes one-twelfth of the net pension benefit cost reflected above. The vested benefit obligation was calculated as the actuarial present value of the vested benefits to which employees are currently entitled based on the employees' expected date of separation or retirement. The employee pension plans' funded status as determined by the actuary at December 31, 1997 is presented in the following table.
PLANS IN PLANS IN WHICH PLAN WHICH ASSETS OBLIGATION EXCEED EXCEEDS OBLIGATION PLAN ASSETS ---------- ----------- (IN THOUSANDS) Actuarial present value of benefit obligation: Vested benefits................................... $ 303 $485 ----- ---- Accumulated benefit obligation.................... 303 485 Effect of projected future salary levels............ 111 169 ----- ---- Projected benefit obligation........................ 414 654 Plan assets at fair market value.................... 682 555 ----- ---- Plan assets in excess of (less than) projected benefit obligation................................. (268) 99 Unrecognized net gain............................... -- 56 Social security contribution........................ (23) 22 ----- ---- Accrued (prepaid) pension cost...................... $(291) $177 ===== ====
13.COMMITMENT AND CONTINGENCIES: The Company has an agreement with an unrelated company to provide management and operating services for certain lift boats. The agreement provides for management and incentive fees to be paid to the unrelated company based on percentages of gross monthly income and net operating income, respectively. Management fees of $1,271,000, $979,000 and $468,000 were included in direct vessel operating expenses for the years ended December 31, 1997, 1996 and 1995, respectively. Pursuant to the agreement, the operator has been granted a right of first refusal on any sale of the lift boats. In the ordinary course of business, the Company is involved in certain personal injury, pollution and property damage claims and related threatened or pending legal proceedings. Management, after review with legal counsel and insurance representatives, is of the opinion these claims and legal proceedings will 36 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) be settled within the limits of the Company's insurance coverages. At December 31, 1997 and 1996, the Company has accrued a liability in the amount of $1,560,000 and $1,963,000, respectively, based upon the insurance deductibles that management believes it may be responsible for paying in connection with these matters. The amounts the Company will ultimately be responsible for paying in connection with these matters could differ materially in the near term from amounts accrued. On August 15, 1996, the Company entered into a five year contract with Petroleo Brasileiro S.A. ("Petrobras"), to build and operate an advanced "small water area twin hull" crew boat (the "SWATH vessel") which will be used to transport personnel to offshore platforms. On October 7, 1996, the Company entered into an agreement with a shipyard to construct the SWATH vessel. In addition, the Company is constructing or refurbishing and upgrading five additional supply vessels. The total remaining committed costs of the six vessels, including equipment provided by the Company, is expected to be approximately $22,851,000. The Company expects the six vessels to commence operations at various times during 1998. Saevik is constructing one 276-foot platform supply vessel that is scheduled to be delivered in March of 1998. Saevik also recently commenced construction of a 275-foot, technologically advanced anchor handling, towing and supply vessel ("AHTS"), with 23,800 horsepower that is scheduled to be delivered no later than May 1999. Total remaining committed costs of the two vessels is expected to be approximately $53,085,000. Saevik also has an option with the shipbuilder to construct a similar AHTS for delivery during 2000. In February 1998, the Company Board of Directors approved the adoption of a Stockholder Rights Plan ("Plan"). In connection with the Plan, the Board of Directors approved the authorization of 100,000 shares of $0.01 par value preferred stock, designated the Series AA Participating Cumulative Preferred Stock. Under the Plan, Preference Stock Purchase Rights (the "Rights") will be distributed as a dividend at a rate of one Right for each share of the Company's common stock held as of record as of the close of business on March 6, 1998. Each Right will entitle holders of the Company's common stock to buy a fraction of a share of a new series of the Company's preferred stock at an exercise price of $105. The Rights will become exercisable and detach from the common stock, only if a person or group, with certain exceptions, acquires 15% or more of the outstanding common stock, or announces a tender or exchange offer that, if consummated would result in a person or group beneficially owning 15% or more of outstanding common stock. Once exercisable, each Right will entitle the holder (other than the acquiring person) to acquire common stock with a value of twice the exercise price of the Rights. The Company will generally be able to redeem the Rights at $0.01 per Right at any time until the close of business on the tenth day after the Rights become exercisable. 14.FAIR VALUE OF FINANCIAL INSTRUMENTS: The estimated fair values of financial instruments have been determined by the Company using available market information and valuation methodologies described below. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein may not be indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. The carrying amounts of cash and cash equivalents approximate fair value due to the short-term nature of these instruments. The carrying amount of debt approximates fair value because it bears interest rates currently available to the Company for debt with similar terms and remaining maturities. 37 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 15. QUARTERLY FINANCIAL DATA (UNAUDITED):
FIRST SECOND THIRD FOURTH ------- ------- ------- ------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31, 1997 Revenues.................................... $23,492 $26,293 $34,094 $41,601 Operating income............................ 10,992 12,754 17,296 20,759 Net income.................................. 6,671 7,974 9,801 10,853 Basic earnings per share: Net income per average common share outstanding(1)........................... 0.43 0.51 0.63 0.65 Diluted earnings per share: Net income per average common share outstanding(1)........................... 0.40 0.47 0.58 0.61 YEAR ENDED DECEMBER 31, 1996 Revenues.................................... $ 8,384 $11,111 $13,390 $20,599 Operating income............................ 1,678 3,165 5,000 9,269 Income before extraordinary item............ 364 1,618 3,218 5,691 Extraordinary item.......................... -- (917) -- -- Net income.................................. 364 701 3,218 5,691 Basic earnings per share: Income per average common share before extraordinary item(1).................... 0.06 0.16 0.24 0.39 Extraordinary item, net of tax(1)......... -- (0.09) -- -- Net income per average common share outstanding(1)........................... 0.06 0.07 0.24 0.39 Diluted earnings per share: Income per average common share before extraordinary item(1).................... 0.06 0.14 0.21 0.36 Extraordinary item, net of tax(1)......... -- (0.08) -- -- Net income per average common share outstanding(1)........................... 0.06 0.06 0.21 0.36
- ------- (1) Earnings per share data has been restated to reflect a 100% stock dividend effective June 9, 1997 and a 3.0253-for-1 common stock split effective April 26, 1996. Additionally, in accordance with SFAS No. 128 the Company has restated earnings per share data for all prior periods to reflect basic earnings per share and diluted earnings per share. 16. SEGMENT DATA: The Company is a provider of marine supply vessels and related services to the oil and gas industry in the U.S. Gulf of Mexico. With the acquisition of Saevik in 1997, the Company expanded its operation to provide marine supply vessels and related services to the oil and gas industry in the North Sea.
NORTH U.S. SEA CONSOLIDATED -------- -------- ------------ (IN THOUSANDS) Revenues: December 31, 1997............................ $118,236 $ 7,244 $125,480 Operating income, excluding depreciation and amortization: December 31, 1997............................ $ 72,955 $ 4,601 $ 77,556 Identifiable assets: December 31, 1997............................ $420,013 $278,768 $698,781 Depreciation and amortization: December 31, 1997............................ $ 14,930 $ 825 $ 15,755 Capital expenditures: December 31, 1997............................ $151,780 $ 156 $151,936
38 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) For the years ended December 31, 1997 and 1995, no customer accounted for more than 10% of the Company's revenues. For the year ended December 31, 1996 one customer accounted for approximately 10% of the Company's revenues. 17. SEPARATE FINANCIAL STATEMENTS FOR SUBSIDIARY GUARANTORS: Pursuant to the terms of the indentures governing the Senior Notes, the Senior Notes must be guaranteed by each of the Company's "significant subsidiaries" (the "Subsidiary Guarantors"), whether such subsidiary was a "significant subsidiary" at the time of the issuance of the Senior Notes or becomes a "significant subsidiary" thereafter. Separate financial statements of the Subsidiary Guarantors are not included in this report because (a) the Company is a holding company with no assets or operations other than its investments in its subsidiaries, (b) the Subsidiary Guarantors are wholly- owned subsidiaries of the Company, comprise all of the Company's direct and indirect subsidiaries (other than inconsequential subsidiaries) and, on a consolidated basis, represent substantially all of the assets, liabilities, earnings and equity of the Company, (c) each of the Subsidiary Guarantors must fully and unconditionally guarantee the Company's obligations under the Senior Notes on a joint and several basis (subject to a standard fraudulent conveyance savings clause) and (d) management has determined that separate financial statements and disclosures concerning the Subsidiary Guarantors are not material to investors. Saevik and its wholly-owned subsidiary, Saevik Shipping AS, executed guarantees of the Senior Notes that were deemed to be effective as of December 2, 1997, subsequent to December 31, 1997. 18.NEW ACCOUNTING STANDARDS: Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," is required to be implemented during the first quarter of the Company's fiscal year ending December 31, 1998 and Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information," and Statement of Financial Accounting Standards No. 132 "Employer's Disclosures about Pension and Other Postretirement Benefits" are required to be implemented during the Company's fiscal year ending December 31, 1998. Management believes adoption of these statements will have a financial statement disclosure impact only and will not have a material effect on the Company's financial position, operations or cash flows. 39 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning the Company's directors and officers called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1998 Annual Meeting of stockholders and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information concerning the compensation of the Company's executives called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1998 Annual Meeting of stockholders and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information concerning security ownership of certain beneficial owners and management called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1998 Annual Meeting of stockholders and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information concerning certain relationships and related transactions called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1998 Annual Meeting of stockholders and is incorporated herein by reference. ITEM. 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following financial statements, schedules and exhibits are filed as part of this Report: (1) Financial Statements. Reference is made to Item 8 hereof. (2) Financial Statement Schedules Report of Independent Accountants on Financial Statement Schedule Schedule II -- Valuation and Qualifying Accounts (3) Exhibits. See Index to Exhibits on page E-1. The Company will furnish to any eligible stockholder, upon written request of such stockholder, a copy of any exhibit listed upon the payment of a reasonable fee equal to the Company's expenses in furnishing such exhibit. (b) Reports on form 8-K: The Company filed a current report on Form 8-K under Items 5 and 7 on November 21, 1996. There were no financial statements filed with this report. On December 9, 1997, the Company filed a current report on Form 8-K under Items 2 and 7. This report was amended by a current report on Form 8- K/A filed on January 5, 1998 under Item 7. The report, as amended, included the following financial statements: 40 Saevik Supply ASA and Subsidiaries: Consolidated Balance Sheet as of December 31, 1996 (audited) and as of September 30, 1997 (unaudited) Consolidated Statement of Earnings for the year ended December 31, 1996 (audited) and for the nine months ended September 30, 1997 (unaudited) Consolidated Statement of Cash flows for the year ended December 31, 1996 (audited) and for the nine months ended September 30, 1997 (unaudited) Notes to the Accounts Viking Vessels (as defined therein): Statement of Assets Acquired and Liabilities Assumed as of December 31, 1996 (audited) Statement of Revenues less Direct Operating Expenses for the years ended December 31, 1994, 1995 and 1996 (audited) Notes to Financial Statements Pro Forma Consolidated Financial Statements (Unaudited): Pro Forma Consolidated Balance Sheet as of September 30, 1997 Pro Forma Statement of Operations for the nine months ended September 30, 1997 Pro Forma Consolidated Statement of Operations for the year ended December 31, 1996 Notes to Unaudited Pro Forma Consolidated Financial Statements 41 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Trico Marine Services, Inc. (Registrant) By: /s/ Thomas E. Fairley ---------------------------------- THOMAS E. FAIRLEY PRESIDENT AND CHIEF EXECUTIVE OFFICER Date: March 6, 1998 Pursuant to the requirements of the Securities Act of 1934, this Report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE /s/ Thomas E. Fairley President, Chief March 6, 1998 - ----------------------------------- Financial Officer and THOMAS E. FAIRLEY Director (Principal Executive Officer) /s/ Ronald O. Palmer Chairman of the March 6, 1998 - ----------------------------------- Board RONALD O. PALMER /s/ Victor M. Perez Vice President, March 6, 1998 - ----------------------------------- Chief Financial VICTOR M. PEREZ Officer and Treasurer (Principal Financial Officer) /s/ Kenneth W. Bourgeois Vice President and March 6, 1998 - ----------------------------------- Controller KENNETH W. BOURGEOIS (Principal Accounting Officer) /s/ Garth H. Greimann Director March 6, 1998 - ----------------------------------- GARTH H. GREIMANN /s/ H. K. Acord Director March 6, 1998 - ----------------------------------- H. K. ACORD /s/ Benjamin F. Bailar Director March 6, 1998 - ----------------------------------- BENJAMIN F. BAILAR /s/ Edward C. Hutcheson, Jr. Director March 6, 1998 - ----------------------------------- EDWARD C. HUTCHESON, JR. 42 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Trico Marine Services, Inc. Our report on the consolidated financial statements of Trico Marine Services, Inc. and Subsidiaries is included in Item 8 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in Item 14(a) of this Form 10- K. This financial statement schedule is the responsibility of the Company's management. In our opinion, this financial schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. New Orleans, Louisiana February 19, 1998 S-1 SCHEDULE II TRICO MARINE SERVICES, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN THOUSANDS) - ----------------------------------------------------------------------------
COLUMN COLUMN A COLUMN B COLUMN C COLUMN C COLUMN D E -------- --------- ---------- -------- ---------- ------- CHARGED BALANCE (CREDITED) BALANCE AT TO COSTS CHARGED AT BEGINNING AND TO OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD - ---------------------------------------------------------------------------- 1997 Deducted in balance sheet from accounts receivable: Allowance for doubtful accounts--trade $610 $(310) 271 -- $571 ==== ===== === === ==== 1996 Deducted in balance sheet from accounts receivable: Allowance for doubtful accounts--trade $480 $130 -- -- $610 ==== ===== === === ==== 1995 Deducted in balance sheet from accounts receivable: Allowance for doubtful accounts--trade $240 $240 -- -- $480 ==== ===== === === ====
S-2 TRICO MARINE SERVICES, INC. EXHIBIT INDEX EXHIBIT SEQUENTIALLY NUMBER NUMBERED ------- PAGES ------------ 3.1 Amended and Restated Certificate of Incorporation of the Company (1) 3.2 Bylaws of the Company, as amended (1) 4.1 Specimen Common Stock Certificate (2) 4.2 Indenture dated July 21, 1997 by and among the Company, Trico Marine Operators, Inc., Trico Marine Assets, Inc. and Texas Commerce Bank National Association, as Trustee ("July Indenture") (1) 4.3 Form of Note and Subsidiary Guarantee under the July Indenture (1) 4.4 First Supplemental Indenture to the July Indenture 4.5 Indenture dated November 14, 1997 by and among the Company, Trico Marine Operators, Inc., Trico Marine Assets, Inc. and Texas Commerce Bank National Association, as Trustee, including form of Note and Subsidiary Guarantee (the "November Indenture") (3) 4.6 First Supplemental Indenture to the November Indenture 4.7 Indenture dated December 24, 1997 by and among the Company, Trico Marine Operators, Inc., Trico Marine Assets, Inc. and Texas Commerce Bank National Association, as Trustee (the "December Indenture") (4) 4.8 Form of Note and Subsidiary Guarantee under the December Indenture (4) 4.9 First Supplemental Indenture to the December Indenture 10.1 Form of Indemnity Agreement by and between the Company and each of the Company's directors (2) 10.2 Second Amended and Restated Revolving Credit Agreement, dated as of March 13, 1998, by and among the Company, Trico Marine Operators, Inc., Trico Marine Assets, Inc., and BankBoston, N.A., as agent for itself and the other lending institutions that may become party thereto from time in accordance with the terms thereof 10.3 Vessel Purchase Agreement dated as of June 18, 1997, by and between Trico Marine Assets, Inc. and Otto Candies, Inc. (1) 10.4 Registration Rights Agreement, dated July 21, 1997, by and among the Company, Trico Marine Operators, Inc., Trico Marine Assets, Inc., and Bear, Stearns & Co. Inc., Jefferies & Company, Inc. and BancBoston Securities Inc. (1) 10.5 Registration Rights Agreement, dated November 14, 1997, by and among the Company, Trico Marine Operators, Inc., Trico Marine Assets, Inc. and Jefferies & Company, Inc., Bear, Stearns & Co. Inc and BancBoston Securities, Inc. (3) 10.6 Registration Rights Agreement, dated December 24, 1997, by and among the Company, Trico Marine Operators, Inc., Trico Marine Assets, Inc. and Jefferies & Company, Inc., Bear, Stearns & Co. Inc. and Schroder & Co. Inc. (4) 10.7 Sale of Purchase Agreement by and between Ensco Offshore Company and Trico Marine Assets, Inc. dated October 11, 1996 relating to Houma, Louisiana docking and maintenance facility (5) 10.8 Vessel Purchase Agreement dated as of August 1, 1996 among Trico Marine Assets, Inc. and Kim Susan, Inc., K&B Boat Rentals, Fagan Boat Services, Inc. (6) 10.9 Management and Operating Agreement dated as of October 28, 1993 by and among Power Offshore Services, Inc., Trico Marine Operators, Inc. and Trico Marine Assets, Inc., as amended (2) 10.10 The Company's 1996 Incentive Compensation Plan, as amended + 10.11 The Company's 1993 Stock Option Plan (2)+ 10.13 Form of Option Agreement under the 1996 Incentive Compensation Plan (2)+ 10.14 Form of Noncompetition, Nondisclosure and Severance Agreements between the Company and certain of its officers (2)+
E-1 EXHIBIT SEQUENTIALLY NUMBER NUMBERED ------- PAGES ------------ 10.15 Vessel Purchase Agreement dated as of January 6, 1997 by and between Trico Marine Assets, Inc. and Laborde Marine, L.L.C. (7) 21.1 Subsidiaries of the Company 23.1 Consent of Coopers & Lybrand L.L.P. 27.1 Financial Data Schedule
- ------- (1) Incorporated by reference to the Company's Current Report on Form 8-K dated July 21, 1997 and filed with the Commission on August 1, 1997. (2) Incorporated by reference to the Company's Registration Statement on Form S-1 (Registration Statement No. 333-2990). (3) Incorporated by reference to the Company's Current Report on Form 8-K dated November 14, 1997 and filed with the Commission on November 21, 1997. (4) Incorporated by reference to the Company's Current Report on Form 8-K dated December 24, 1997 and filed with the Commission on January 14, 1998. (5) Incorporated by reference to the Company's Registration Statement on Form S-1 (Registration Statement No. 333-14871). (6) Incorporated by reference to the Company's current report on Form 8-K dated October 10, 1996 and filed with the Commission on October 22, 1997. (7) Incorporated by reference to the Company's current report on Form 8-K dated January 31, 1997 and filed with the Commission on February 14, 1997. +Management Contract or Compensation Plan or Arrangement. E-2 EX-4.4 2 FIRST SUPP INDENTURE TO JULY EXHIBIT 4.4 ================================================================================ TRICO MARINE SERVICES, INC. TRICO MARINE OPERATORS, INC. TRICO MARINE ASSETS, INC. and the Guarantors named herein -------------------------------------- SERIES A AND SERIES B 8-1/2% SENIOR NOTES DUE 2005 -------------------------------------- ---------------------- FIRST SUPPLEMENTAL INDENTURE AND AMENDMENT - SUBSIDIARY GUARANTEE ---------------------- CHASE BANK OF TEXAS NATIONAL ASSOCIATION Trustee ---------------------- ================================================================================ FIRST SUPPLEMENTAL INDENTURE This FIRST SUPPLEMENTAL INDENTURE, dated as of March 19, 1998 (this "Supplemental Indenture"), is among Trico Marine Services, Inc., a Delaware corporation (the "Company"), each of the parties identified under the caption "Guarantors" on the signature page hereto (the "Guarantors") and Chase Bank of Texas National Association, as successor to Texas Commerce Bank National Association, as Trustee. RECITALS WHEREAS, the Company, Trico Marine Operators, Inc., Trico Marine Assets, Inc. and the Trustee entered into an Indenture, dated as of July 21, 1997 (the "Indenture"), pursuant to which the Company issued $110,000,000 in principal amount of 8-1/2% Senior Notes due 2005 (the "Notes"); and WHEREAS, Section 9.01(f) of the Indenture provides that the Company and the Trustee may amend or supplement the Indenture in order to execute a guarantee (a "Subsidiary Guarantee") to comply with Section 10.02 thereof without the consent of the Holders of the Notes; and WHEREAS, all acts and things prescribed by the Indenture, by law and by the Certificate of Incorporation, bylaws or other similar organizational documents of the Company, of the Guarantors and of the Trustee necessary to make this Supplemental Indenture a valid instrument legally binding on the Company, the Guarantors and the Trustee, in accordance with its terms, have been duly done and performed; NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows: ARTICLE 1 Section 1.1 This Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes. Section 1.2 This Supplemental Indenture shall be deemed to have become effective as of December 2, 1997 (the "Effective Date"). ARTICLE 2 From the Effective Date, in accordance with Section 10.02 and by executing this Supplemental Indenture and the accompanying Subsidiary Guarantee (a copy of which is attached -1- hereto), the Guarantors whose signatures appear below shall be subject to the provisions of the Indenture to the extent provided for in Article 10 thereunder. ARTICLE 3 Section 3.01 Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture. Section 3.02 Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture. This Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto. Section 3.03 THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES. Section 3.04 The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first written above. TRICO MARINE SERVICES, INC. By: /s/ VICTOR M. PEREZ ------------------------------------- Victor M. Perez Vice President and Chief Financial Officer -2- GUARANTORS: TRICO MARINE INTERNATIONAL HOLDINGS, B.V. By: /s/ RONALD O. PALMER ----------------------------------- Name: Ronald O. Palmer Title: Managing Director SAEVIK SUPPLY ASA By: /s/ KIM DOBROWEN ----------------------------------- Name: Kim Dobrowen Title: Director SAEVIK SHIPPING AS By: /s/ KIM DOBROWEN ----------------------------------- Name: Kim Dobrowen Title: Director TRUSTEE: CHASE BANK OF TEXAS NATIONAL ASSOCIATION, as Trustee By: /s/ REBECCA A. NEWMAN ----------------------------------- Name: Rebecca A. Newman Title: Vice President and Trust Officer -3- SUBSIDIARY GUARANTEE Subject to Section 10.06 of the Indenture, dated July 21, 1997 (the "Indenture") by and among Trico Marine Services, Inc., a Delaware corporation (the "Company"), Trico Marine Operators, Inc., a Louisiana corporation, Trico Marine Assets, Inc., a Delaware corporation and Texas Commerce Bank National Association, as trustee, each of the undersigned (collectively, the "New Guarantors" and each a "New Guarantor") hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes and the Obligations of the Company under the Notes or under the Indenture, that: (a) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on overdue principal, premium, if any, (to the extent permitted by law) interest on any interest, if any, and Liquidated Damages, if any, on the Notes and all other payment Obligations of the Company to the Holders or the Trustee under the Indenture or under the Notes will be promptly paid in full and performed, all in accordance with the terms hereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other payment Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed or any performance so guaranteed for whatever reason, the New Guarantors will be jointly and severally obligated to pay the same immediately. An Event of Default under the Indenture or the Notes shall constitute an event of default under this Subsidiary Guarantee, and shall entitle the Holders to accelerate the Obligations of the New Guarantors hereunder in the same manner and to the same extent as the Obligations of the Company. The New Guarantors hereby agree that their Obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a New Guarantor. Each New Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Subsidiary Guarantee will not be discharged except by complete performance of the Obligations contained in the Notes and the Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, the New Guarantors or any Note Custodian, Trustee, liquidator or other similar official acting in relation to either the Company, the Guarantors or the New Guarantors, any amount paid by the Company, the Guarantors or any New Guarantor to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each New Guarantor agrees that it shall not be entitled to, and hereby waives, any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby. Each New Guarantor further agrees that, as between the New Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (a) the maturity of the Obligations -4- guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed thereby, and (b) in the event of any declaration of acceleration of such Obligations as provided in Article 6 of the Indenture, such Obligations (whether or not due and payable) shall forthwith become due and payable by the New Guarantor for the purpose of this Subsidiary Guarantee. The New Guarantors shall have the right to seek contribution from any non-paying Guarantor or New Guarantor as long as the exercise of such right does not impair the rights of the Holders under this or any other Subsidiary Guarantee. The obligations of the New Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The terms of Article 10 of the Indenture are incorporated herein by reference. This Subsidiary Guarantee is subject to release as and to the extent provided in Sections 10.4 and 10.5 of the Indenture. This is a continuing Guarantee and shall remain in full force and effect and shall be binding upon each New Guarantor and its respective successors and assigns to the extent set forth in the Indenture until full and final payment of all of the Company's Obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Subsidiary Guarantee of payment and not a guarantee of collection. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee or an authenticating agent under the Indenture by the manual signature of one of its authorized officers. For purposes hereof, each New Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and the Indenture, (ii) the amount, if any, which would not have (A) rendered such New Guarantor "insolvent" (as such term is defined in the Bankruptcy Law and in the Debtor and Creditor Law of the State of New York) or (B) left such New Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into and (iii) in the case of Saevik Supply ASA and Saevik Shipping AS, the maximum amount permitted under applicable Norwegian law; provided that, it will be a presumption in any lawsuit or other proceeding in which a New Guarantor is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such New Guarantor, or debtor in possession or trustee in bankruptcy of such New Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the New Guarantor is limited to the amount set forth in clauses (ii) or (iii) above. The Indenture provides that, in making any determination as to the solvency or sufficiency of capital of a New Guarantor in accordance with the previous sentence, the right of the New Guarantors to contribution -5- from the Guarantors and other New Guarantors and any other rights such New Guarantors may have, contractual or otherwise, shall be taken into account. Capitalized terms used and not defined herein have the same meanings given in the Indenture unless otherwise indicated. TRICO MARINE INTERNATIONAL HOLDINGS, B.V. By: ----------------------------------- Name: Title: SAEVIK SUPPLY ASA By: ----------------------------------- Name: Title: SAEVIK SHIPPING AS By: ----------------------------------- Name: Title: -6- EX-4.6 3 FIRST SUPP INDENTURE TO NOVEMBER EXHIBIT 4.6 ================================================================================ TRICO MARINE SERVICES, INC. TRICO MARINE OPERATORS, INC. TRICO MARINE ASSETS, INC. and the Guarantors named herein ----------------------------------------- SERIES C AND SERIES D 8-1/2% SENIOR NOTES DUE 2005 ----------------------------------------- --------------- FIRST SUPPLEMENTAL INDENTURE AND AMENDMENT - SUBSIDIARY GUARANTEE --------------- CHASE BANK OF TEXAS NATIONAL ASSOCIATION Trustee --------------- =============================================================================== FIRST SUPPLEMENTAL INDENTURE This FIRST SUPPLEMENTAL INDENTURE, dated as of March 19, 1998 (this "Supplemental Indenture"), is among Trico Marine Services, Inc., a Delaware corporation (the "Company"), each of the parties identified under the caption "Guarantors" on the signature page hereto (the "Guarantors") and Chase Bank of Texas National Association, as successor to Texas Commerce Bank National Association, as Trustee. RECITALS WHEREAS, the Company, Trico Marine Operators, Inc., Trico Marine Assets, Inc. and the Trustee entered into an Indenture, dated as of November 14, 1997 (the "Indenture"), pursuant to which the Company issued $100,000,000 in principal amount of 8-1/2% Senior Notes due 2005 (the "Notes"); and WHEREAS, Section 9.01(f) of the Indenture provides that the Company and the Trustee may amend or supplement the Indenture in order to execute a guarantee (a "Subsidiary Guarantee") to comply with Section 10.02 thereof without the consent of the Holders of the Notes; and WHEREAS, all acts and things prescribed by the Indenture, by law and by the Certificate of Incorporation, bylaws or other similar organizational documents of the Company, of the Guarantors and of the Trustee necessary to make this Supplemental Indenture a valid instrument legally binding on the Company, the Guarantors and the Trustee, in accordance with its terms, have been duly done and performed; NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, the Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows: ARTICLE 1 Section 1.01 This Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes. Section 1.02 This Supplemental Indenture shall be deemed to have become effective on December 2, 1997 (the "Effective Date"). ARTICLE 2 From the Effective Date, in accordance with Section 10.02 and by executing this Supplemental Indenture and the accompanying Subsidiary Guarantee (a copy of which is attached -1- hereto), the Guarantors whose signatures appear below shall be subject to the provisions of the Indenture to the extent provided for in Article 10 thereunder. ARTICLE 3 Section 3.01 Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture. Section 3.02 Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture. This Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto. Section 3.03 THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES. Section 3.04 The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first written above. TRICO MARINE SERVICES, INC. By: /s/ VICTOR M. PEREZ --------------------------------- Victor M. Perez Vice President and Chief Financial Officer -2- GUARANTORS: TRICO MARINE INTERNATIONAL HOLDINGS, B.V. By: /s/ RONALD O. PALMER --------------------------------- Name: Ronald O. Palmer Title: Managing Director SAEVIK SUPPLY ASA By: /s/ KIM DOBROWEN ----------------------------------- Name: Kim Dobrowen Title: Director SAEVIK SHIPPING AS By: /s/ KIM DOBROWEN ----------------------------------- Name: Kim Dobrowen Title: Director TRUSTEE: CHASE BANK OF TEXAS NATIONAL ASSOCIATION, as Trustee By: /s/ REBECCA A. NEWMAN ----------------------------------- Name: Rebecca A. Newman Title: Vice President and Trust Officer -3- SUBSIDIARY GUARANTEE Subject to Section 10.06 of the Indenture, dated November 14, 1997 (the "Indenture") by and among Trico Marine Services, Inc., a Delaware corporation (the "Company"), Trico Marine Operators, Inc., a Louisiana corporation, Trico Marine Assets, Inc., a Delaware corporation and Texas Commerce Bank National Association, as trustee, each of the undersigned (collectively, the "New Guarantors" and each a "New Guarantor") hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes and the Obligations of the Company under the Notes or under the Indenture, that: (a) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on overdue principal, premium, if any, (to the extent permitted by law) interest on any interest, if any, and Liquidated Damages, if any, on the Notes and all other payment Obligations of the Company to the Holders or the Trustee under the Indenture or under the Notes will be promptly paid in full and performed, all in accordance with the terms hereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other payment Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed or any performance so guaranteed for whatever reason, the New Guarantors will be jointly and severally obligated to pay the same immediately. An Event of Default under the Indenture or the Notes shall constitute an event of default under this Subsidiary Guarantee, and shall entitle the Holders to accelerate the Obligations of the New Guarantors hereunder in the same manner and to the same extent as the Obligations of the Company. The New Guarantors hereby agree that their Obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a New Guarantor. Each New Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Subsidiary Guarantee will not be discharged except by complete performance of the Obligations contained in the Notes and the Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, the New Guarantors or any Note Custodian, Trustee, liquidator or other similar official acting in relation to either the Company, the Guarantors or the New Guarantors, any amount paid by the Company, the Guarantors or any New Guarantor to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each New Guarantor agrees that it shall not be entitled to, and hereby waives, any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby. Each New Guarantor further agrees that, as between the New Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (a) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of -4- this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed thereby, and (b) in the event of any declaration of acceleration of such Obligations as provided in Article 6 of the Indenture, such Obligations (whether or not due and payable) shall forthwith become due and payable by the New Guarantor for the purpose of this Subsidiary Guarantee. The New Guarantors shall have the right to seek contribution from any non-paying Guarantor or New Guarantor as long as the exercise of such right does not impair the rights of the Holders under this or any other Subsidiary Guarantee. The obligations of the New Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The terms of Article 10 of the Indenture are incorporated herein by reference. This Subsidiary Guarantee is subject to release as and to the extent provided in Sections 10.4 and 10.5 of the Indenture. This is a continuing Guarantee and shall remain in full force and effect and shall be binding upon each New Guarantor and its respective successors and assigns to the extent set forth in the Indenture until full and final payment of all of the Company's Obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Subsidiary Guarantee of payment and not a guarantee of collection. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee or an authenticating agent under the Indenture by the manual signature of one of its authorized officers. For purposes hereof, each New Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and the Indenture, (ii) the amount, if any, which would not have (A) rendered such New Guarantor "insolvent" (as such term is defined in the Bankruptcy Law and in the Debtor and Creditor Law of the State of New York) or (B) left such New Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into and (iii) in the case of Saevik Supply ASA and Saevik Shipping AS, the maximum amount permitted under applicable Norwegian law; provided that, it will be a presumption in any lawsuit or other proceeding in which a New Guarantor is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such New Guarantor, or debtor in possession or trustee in bankruptcy of such New Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the New Guarantor is limited to the amount set forth in clauses (ii) or (iii) above. The Indenture provides that, in making any determination as to the solvency or sufficiency of capital of a New Guarantor in accordance with the previous sentence, the right of the New Guarantors to contribution from the Guarantors and other New Guarantors and any other rights such New Guarantors may have, contractual or otherwise, shall be taken into account. -5- Capitalized terms used and not defined herein have the same meanings given in the Indenture unless otherwise indicated. TRICO MARINE INTERNATIONAL HOLDINGS, B.V. By: ------------------------------------ Name: Title: SAEVIK SUPPLY ASA By: ------------------------------------ Name: Title: SAEVIK SHIPPING AS By: ----------------------------------- Name: Title: -6- EX-4.9 4 FIRST SUPP INDENTURE TO DECEMBER EXHIBIT 4.9 ================================================================================ TRICO MARINE SERVICES, INC. TRICO MARINE OPERATORS, INC. TRICO MARINE ASSETS, INC. and the New Guarantors named herein ------------------------------------------------ SERIES E AND SERIES F 8-1/2% SENIOR NOTES DUE 2005 ------------------------------------------------ ----------------------- FIRST SUPPLEMENTAL INDENTURE AND AMENDMENT - SUBSIDIARY GUARANTEE ----------------------- CHASE BANK OF TEXAS NATIONAL ASSOCIATION Trustee ----------------------- =============================================================================== FIRST SUPPLEMENTAL INDENTURE This FIRST SUPPLEMENTAL INDENTURE, dated as of March 19, 1998 (this "Supplemental Indenture"), is among Trico Marine Services, Inc., a Delaware corporation (the "Company"), Trico Marine Operators, Inc., a Louisiana corporation ("Operators"), Trico Marine Assets, Inc., a Delaware corporation ("Assets"), each of the parties identified under the caption "New Guarantors" on the signature page hereto (the "New Guarantors") and Chase Bank of Texas National Association, as successor to Texas Commerce Bank National Association, as Trustee. RECITALS WHEREAS, the Company, Operators, Assets and the Trustee entered into an Indenture, dated as of December 24, 1997 (the "Indenture"), pursuant to which the Company issued $70,000,000 in principal amount of 8-1/2% Senior Notes due 2005 (the "Notes"); and WHEREAS, Section 9.01(f) of the Indenture provides that the Company and the Trustee may amend or supplement the Indenture in order to execute a guarantee (a "Subsidiary Guarantee") to comply with Section 10.02 thereof without the consent of the Holders of the Notes; and WHEREAS, Section 9.01(a) of the Indenture provides that the Company and the Trustee may amend or supplement the Indenture to cure ambiguities, defects and inconsistencies without the consent of the holders of the Notes; and WHEREAS, all acts and things prescribed by the Indenture, by law and by the Certificate of Incorporation, bylaws or other similar organizational documents of the Company, Operators, Assets, the New Guarantors and of the Trustee necessary to make this Supplemental Indenture a valid instrument legally binding on the Company, Operators, Assets, the New Guarantors and the Trustee, in accordance with its terms, have been duly done and performed; NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Company, Operators, Assets, the New Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows: ARTICLE 1 Section 1.01 This Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes. Section 1.02 This Supplemental Indenture shall be deemed to have become effective on December 24, 1997 (the "Effective Date"). -1- ARTICLE 2 From the Effective Date, in accordance with Section 10.02 and by executing this Supplemental Indenture and the accompanying Subsidiary Guarantee (a copy of which is attached hereto), the New Guarantors whose signatures appear below shall be subject to the provisions of the Indenture to the extent provided for in Article 10 thereunder. ARTICLE 3 Section 4.09(d) of the Indenture is hereby amended, effective as of the Effective Date, by adding, immediately following the phrase "Guarantees of the Original Notes," the phrase "the Series F Notes, the Subsidiary Guarantees of the Series F Notes." ARTICLE 4 Section 4.01 Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture. Section 4.02 Except as otherwise expressly provided herein, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture. This Supplemental Indenture is executed and accepted by the Trustee subject to all the terms and conditions set forth in the Indenture with the same force and effect as if those terms and conditions were repeated at length herein and made applicable to the Trustee with respect hereto. Section 4.03 THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES. Section 4.04 The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first written above. TRICO MARINE SERVICES, INC. By: /s/ VICTOR M. PEREZ ------------------------ Victor M. Perez Vice President and Chief Financial Officer -2- TRICO MARINE OPERATORS, INC. By: /s/ VICTOR M. PEREZ -------------------------------- Name: Victor M. Perez Title: Vice President and Chief Financial Officer TRICO MARINE ASSETS, INC. By: /s/ VICTOR M. PEREZ --------------------------------- Name: Victor M. Perez Title: Vice President and Chief Financial Officer NEW GUARANTORS: TRICO MARINE INTERNATIONAL HOLDINGS, B.V. By: /s/ RONALD O. PALMER ---------------------------------- Name: Ronald O. Palmer Title: Managing Director SAEVIK SUPPLY ASA By: /s/ KIM DOBROWEN ---------------------------------- Name: Kim Dobrowen Title: Director SAEVIK SHIPPING AS By: /s/ KIM DOBROWEN ---------------------------------- Name: Kim Dobrowen Title: Director -3- TRUSTEE: CHASE BANK OF TEXAS NATIONAL ASSOCIATION, as Trustee By: /s/ REBECCA A. NEWMAN -------------------------------------- Name: Rebecca A. Newman Title: Vice President and Trust Officer SUBSIDIARY GUARANTEE Subject to Section 10.06 of the Indenture, dated December 24, 1997 (the "Indenture") by and among Trico Marine Services, Inc., a Delaware corporation (the "Company"), Trico Marine Operators, Inc., a Louisiana corporation, Trico Marine Assets, Inc., a Delaware corporation and Texas Commerce Bank National Association, as trustee, each of the undersigned (collectively, the "New Guarantors" and each a "New Guarantor") hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes and the Obligations of the Company under the Notes or under the Indenture, that: (a) the principal of, premium, if any, interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on overdue principal, premium, if any, (to the extent permitted by law) interest on any interest, if any, and Liquidated Damages, if any, on the Notes and all other payment Obligations of the Company to the Holders or the Trustee under the Indenture or under the Notes will be promptly paid in full and performed, all in accordance with the terms hereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other payment Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration, redemption or otherwise. Failing payment when so due of any amount so guaranteed or any performance so guaranteed for whatever reason, the New Guarantors will be jointly and severally obligated to pay the same immediately. An Event of Default under the Indenture or the Notes shall constitute an event of default under this Subsidiary Guarantee, and shall entitle the Holders to accelerate the Obligations of the New Guarantors hereunder in the same manner and to the same extent as the Obligations of the Company. The New Guarantors hereby agree that their Obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a New Guarantor. Each New Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first -4- against the Company, protest, notice and all demands whatsoever and covenants that this Subsidiary Guarantee will not be discharged except by complete performance of the Obligations contained in the Notes and the Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, the New Guarantors or any Note Custodian, Trustee, liquidator or other similar official acting in relation to either the Company, the Guarantors or the New Guarantors, any amount paid by the Company, the Guarantors or any New Guarantor to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each New Guarantor agrees that it shall not be entitled to, and hereby waives, any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby. Each New Guarantor further agrees that, as between the New Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (a) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed thereby, and (b) in the event of any declaration of acceleration of such Obligations as provided in Article 6 of the Indenture, such Obligations (whether or not due and payable) shall forthwith become due and payable by the New Guarantor for the purpose of this Subsidiary Guarantee. The New Guarantors shall have the right to seek contribution from any non-paying Guarantor or New Guarantor as long as the exercise of such right does not impair the rights of the Holders under this or any other Subsidiary Guarantee. The obligations of the New Guarantor to the Holders and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The terms of Article 10 of the Indenture are incorporated herein by reference. This Subsidiary Guarantee is subject to release as and to the extent provided in Sections 10.4 and 10.5 of the Indenture. This is a continuing Guarantee and shall remain in full force and effect and shall be binding upon each New Guarantor and its respective successors and assigns to the extent set forth in the Indenture until full and final payment of all of the Company's Obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Subsidiary Guarantee of payment and not a guarantee of collection. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee or an authenticating agent under the Indenture by the manual signature of one of its authorized officers. For purposes hereof, each New Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and the Indenture, (ii) the amount, if any, which would not have (A) rendered such New Guarantor "insolvent" (as such term is defined in the Bankruptcy Law and in the Debtor and Creditor Law of the State of New York) or -5- (B) left such New Guarantor with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into and (iii) in the case of Seivik Supply ASA and Seivik Shipping AS, the maximum amount permitted under applicable Norwegian law; provided that, it will be a presumption in any lawsuit or other proceeding in which a New Guarantor is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such New Guarantor, or debtor in possession or trustee in bankruptcy of such New Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the New Guarantor is limited to the amount set forth in clauses (ii) or (iii) above. The Indenture provides that, in making any determination as to the solvency or sufficiency of capital of a New Guarantor in accordance with the previous sentence, the right of the New Guarantors to contribution from the Guarantors and other New Guarantors and any other rights such New Guarantors may have, contractual or otherwise, shall be taken into account. Capitalized terms used and not defined herein have the same meanings given in the Indenture unless otherwise indicated. TRICO MARINE INTERNATIONAL HOLDINGS, B.V. By: ____________________________________ Name: Title: SAEVIK SUPPLY ASA By: ____________________________________ Name: Title: SAEVIK SHIPPING AS By: ____________________________________ Name: Title: -6- EX-10.2 5 SECOND AMENDED & RESTATED CREDIT AGREEMENT EXHIBIT 10.2 SECOND AMENDED AND RESTATED --------------------------- REVOLVING CREDIT AGREEMENT -------------------------- This SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, amended and restated as of March 13, 1998 is by and among (a) TRICO MARINE OPERATORS, INC. ("Marine Operators"), a Louisiana corporation having its principal place of business and chief executive office at 250 North American Court, Houma, Louisiana 70363, TRICO MARINE ASSETS, INC. ("Marine Assets"), a Delaware corporation having its principal place of business and chief executive office at 250 North American Court, Houma, Louisiana 70363 (each of Marine Operators and Marine Assets, a "Borrower", and, collectively, the "Borrowers"), (b) TRICO MARINE SERVICES, INC. (the "Parent"), a Delaware corporation having its principal place of business and chief executive office at 250 North American Court, Houma, Louisiana 70363, (c) the financial institutions listed on Schedule 1.1 hereto and such other financial institutions as may become parties to this Agreement from time to time in accordance with the terms hereof, and (d) BANKBOSTON, N.A. as agent for itself and such financial institutions (the "Agent"). WHEREAS, pursuant to an Amended and Restated Revolving Credit and Term Loan Agreement, dated as of December 1, 1997 (the "Existing Credit Agreement") among Marine Operators, Marine Assets, the Parent, Saevik Shipping AS, a Norwegian limited liability company having its registered office at Fosnavag, Norway ("Saevik Shipping"), Trico Marine International Holdings B.V., a private company with limited liability under the laws of the Netherlands having its registered office at Rotterdam, the Netherlands ("Trico B.V."), the banks party thereto (the "Existing Banks") and the Agent, the Existing Banks and the Agent have made loans to, and otherwise extended credit to Marine Operators, Marine Assets and Trico B.V.; WHEREAS, Saevik Shipping is not a party to the Existing Credit Agreement although it was intended that Saevik Shipping would become a party thereto and would be extended Loans thereunder; WHEREAS, Trico B.V. has no Outstanding Loans under the Existing Credit Agreement; WHEREAS, Marine Operators, Marine Assets, the Parent, Trico B.V., the Existing Banks and the Agent have agreed that Saevik Shipping and Trico B.V. will no longer be parties to the Second Amended and Restated Revolving Credit Agreement; WHEREAS, Marine Operators, Marine Assets and the Parent have requested that the Existing Banks and the Agent amend and restate the Existing Credit Agreement as set forth herein; and -1- WHEREAS, the Existing Banks and the Agent have agreed, subject to the terms and conditions set forth herein, to amend and restate the Existing Credit Agreement as set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree that, on and as of the Closing Date, the Existing Credit Agreement shall be amended and restated in its entirety as set forth herein and shall remain in full force and effect only as provided herein: (S)1. DEFINITIONS AND RULES OF INTERPRETATION. ----------------------------------------- (S)1.1. DEFINITIONS. The following terms shall have the meanings set forth in this (S)1 or elsewhere in the provisions of this Agreement referred to below: Adjusted Outstandings. With respect to any fiscal period, an amount equal to ten percent (10%) of the average daily amount of Loans Outstanding on each day during such period. Adjustment Date. The first day of the month immediately following the month in which a Compliance Certificate is delivered by the Borrowers pursuant to (S)8.4(c) hereof. Affiliate. Any Person that directly or indirectly controls, is controlled by or under common control with another Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. Agent. As defined in the introductory paragraph hereof. Agreement. This Second Amended and Restated Revolving Credit Agreement, including the Schedules and Exhibits hereto. Applicable Margin. (a) With respect to any Base Rate Loan or Eurocurrency Rate Loan and for each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date (each a "Rate Adjustment Period"), the Applicable Margin shall be the applicable margin per annum set forth below corresponding to the Leverage Ratio calculated on a Pro Forma Basis, if applicable, as of the last day of the fiscal quarter to which the Compliance Certificate corresponding to such Adjustment Date relates: -2-
Base Rate Eurocurrency Rate Level Leverage Ratio Loans Loans - ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- I greater than or equal to 3.0:1.0 0.25% 1.75% - ------------------------------------------------------------------------------------------------------------------------- II greater than or equal to 2.5:1.0 and less than 3.0:1.0 0% 1.50% - ------------------------------------------------------------------------------------------------------------------------- III greater than or equal to 2.0:1.0 and less than 2.5:1.0 0% 1.25% - ------------------------------------------------------------------------------------------------------------------------- IV less than 2.0:1.0 0% 1.00% - -------------------------------------------------------------------------------------------------------------------------
In the event that the Parent's long term senior unsecured debt rating (i) as assigned by Standard & Poor's Ratings Group is "B" or lower or (ii) as assigned by Moody's Corporation is "B2" or lower, or in the event that no such senior secured debt or corporate credit rating has been assigned, then the Applicable Margin for all Base Rate Loans and Eurocurrency Rate Loans for all Levels set forth in the table above shall increase by 0.25% with effect from the date such rating is assigned and at all times thereafter until the Parent's long term senior unsecured debt rating (i) as assigned by Standard & Poor's Ratings Group is "B+" or higher and (ii) as assigned by Moody's Corporation is "B1" or higher. (b) Notwithstanding the foregoing, the Applicable Margin for each Loan shall be the Applicable Margin for Level II set forth in the table above until the Adjustment Date next following the delivery to the Banks of the financial statements of the Parent and its Subsidiaries (and the corresponding Compliance Certificate relating thereto) for the fiscal quarter of the Parent ending on June 30, 1998. (c) If the Borrowers shall fail to deliver any Compliance Certificate pursuant to (S)8.4(c) hereof, then, for the period commencing on the date such Compliance Certificate was due pursuant to (S)8.4(c) through the Adjustment Date immediately following the date on which such Compliance Certificate is delivered, the Applicable Margin for each Base Rate Loan or Eurocurrency Rate Loan shall be that corresponding to Level I in the table above. Assignment and Acceptance. See (S)19.1 hereof. Balance Sheet Date. December 31, 1996. BankBoston. BankBoston, N.A. in its individual capacity. Banks. BankBoston, N.A. and the other lending institutions listed on Schedule 1.1 hereto and any other Person who becomes an assignee of any rights and obligations of a Bank pursuant to (S)19 hereof. Base Rate. The higher of (a) the annual rate of interest announced from time to time by BankBoston at its head office in Boston, Massachusetts, as its "base rate" for borrowings in Dollars and (b) one-half of one percent (1/2%) above the Federal Funds Effective Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall mean, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions in -3- Dollars with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three funds brokers of recognized standing selected by the Agent. Base Rate Loan. Any Loan or portion thereof bearing interest calculated by reference to the Base Rate. Borrowers. As defined in the preamble hereto. Business Day. Any day on which banking institutions in Boston, Massachusetts, and New Orleans, Louisiana are open for the transaction of banking business and, with respect to a Eurocurrency Rate Loan, also a day which is a Eurocurrency Business Day. Capital Assets. Fixed assets, both tangible (such as vessels, land, buildings, fixtures, machinery and equipment) and intangible (such as patents, copyrights, trademarks, franchises and good will); provided that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with generally accepted accounting principles. Capital Expenditures. Amounts paid or indebtedness incurred by a Person in connection with the purchase or lease by such Person of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with generally accepted accounting principles. Capitalized Leases. Leases under which a Person is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with generally accepted accounting principles. CERCLA. See (S)7.18 hereof. Closing Date. The first date on which the conditions set forth in (S)11 have been satisfied, which in no event shall be later than March 20, 1998. Code. The Internal Revenue Code of 1986, as amended. Collateral. Those Vessels and other property, rights and interests of the Borrowers that are or are intended to be subject to the security interests and mortgages created by the Security Documents. Commitment. With respect to each Bank, the amount set forth on Schedule 1.1 attached hereto as the amount of such Bank's commitment to make Loans to, and to participate in the issuance, extension and renewal of Letters of Credit for the account of the Borrowers, as the -4- same may be reduced from time to time; or if such commitment is terminated pursuant to the provisions hereof, zero. Commitment Fee. See (S)2.2. Commitment Fee Rate. (a) For each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date (each a "Rate Adjustment Period"), the Commitment Fee Rate shall be the rate per annum set forth below corresponding to the Leverage Ratio calculated on a Pro Forma Basis, if applicable, as of the last day of the fiscal quarter to which the Compliance Certificate corresponding to such Adjustment Date relates:
Commitment Fee Level Leverage Ratio Rate ========================================================================================================= I greater than or equal to 3.0:1.0 0.500% - ---------------------------------------------------------------------------------------------------------- II greater than or equal to 2.5:1.0 and less than 3.0:1.0 0.375% - ---------------------------------------------------------------------------------------------------------- III greater than or equal to 2.0:1.0 and less than 2.5:1.0 0.375% - ---------------------------------------------------------------------------------------------------------- IV less than 2.0:1.0 0.250% - ----------------------------------------------------------------------------------------------------------
(b) Notwithstanding the foregoing, the Commitment Fee Rate shall be the Commitment Fee Rate for Level II set forth in the table above until the Adjustment Date next following the delivery to the Banks of the financial statements of the Parent and its Subsidiaries (and the corresponding Compliance Certificate relating thereto) for the fiscal quarter of the Parent ending on June 30, 1998. (c) If the Borrowers shall fail to deliver any Compliance Certificate pursuant to (S)8.4(c) hereof, then, for the period commencing on the date such Compliance Certificate was due pursuant to (S)8.4(c) through the Adjustment Date immediately following the date on which such Compliance Certificate is delivered, the Commitment Fee Rate shall be that corresponding to Level I in the table above. Commitment Percentage. With respect to each Bank, the amount set forth on Schedule 1.1 attached hereto as such Bank's percentage of the Total Commitment. Consolidated or consolidated. With reference to any term defined herein, shall mean that term as applied to the accounts of the Parent and its Subsidiaries, consolidated in accordance with generally accepted accounting principles. Consolidated EBITDA. For any period, the consolidated Net Income of the Parent and its Subsidiaries for such period, after all expenses and other proper charges, but before payment or provision for any income taxes, interest expense, depreciation or amortization for such period, determined on a consolidated basis for such Persons in accordance with generally accepted accounting principles. Consolidated Net Tangible Assets. With respect to the Parent and its Restricted Subsidiaries and as at any date, the sum of the amounts that would appear on a consolidated -5- balance sheet of the Parent and its Restricted Subsidiaries as the total assets of the Parent and its Restricted Subsidiaries, determined on a consolidated basis for such Persons in accordance with generally accepted accounting principles and after deducting therefrom, (a) to the extent otherwise included, unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or development expenses and other intangible items and (b) the aggregate amount of liabilities of the Parent and its Restricted Subsidiaries which may properly be classified as current liabilities (including tax accrued as estimated), determined on a consolidated basis for such Persons in accordance with generally accepted accounting principles. Consolidated Total Interest Expense. For any period, the aggregate amount of interest required to be paid or accrued by the Parent and its Subsidiaries during such period on all Indebtedness of the Parent and its Subsidiaries outstanding during all or any part of such period, whether such interest was or is required to be reflected as an item of expense or capitalized, including payments consisting of interest in respect of any Capitalized Lease, and including commitment fees, agency fees, facility fees, balance deficiency fees and similar fees or expenses in connection with the borrowing of money. Conversion Request. A notice given by the Borrowers to the Agent of such Borrower's election to convert a Loan to a Loan of another Type or to continue a Loan as a Loan of a certain Type, in each case in accordance with (S)2.8. Debt Service Coverage Ratio. As at the end of any fiscal quarter, the ratio of (a) the consolidated Operating Cash Flow of the Parent and its Subsidiaries for the period of the four (4) consecutive fiscal quarters of the Parent ending on such date to (b) consolidated Total Debt Service of the Parent and its Subsidiaries for the period of four (4) consecutive fiscal quarters of the Parent ending on such date; provided, that for purposes of calculating the Debt Service Coverage Ratio for the fiscal quarter of the Borrower ending on (i) March 31, 1998, consolidated Operating Cash Flow and Total Debt Service shall be the consolidated Operating Cash Flow and Total Debt Service for the fiscal quarter then ending, (ii) June 30, 1998, consolidated Operating Cash Flow and Total Debt Service shall be the consolidated Operating Cash Flow and Total Debt Service for the period of the two fiscal quarters then ending, and (iii) September 30, 1998, consolidated Operating Cash Flow and Total Debt Service shall be the consolidated Operating Cash Flow and Total Debt Service for the period of the three fiscal quarters then ending. Default. See (S)13 hereof. Delinquent Bank. See (S)15.5.3 hereof. Distribution. The declaration or payment of any dividend on or in respect of any shares of any class of capital stock of any Person, other than dividends payable solely in shares of common stock of such Person; the purchase, redemption, or other retirement of any shares of any class of capital stock of any Person, directly or indirectly through a Subsidiary of such Person or otherwise; the return of capital by any Person to its shareholders as such; or any other distribution on or in respect of any shares of any class of capital stock of such Person. -6- Dollars or $. Dollars in lawful currency of the United States of America. Drawdown Date. The date on which any Loan is made or is to be made, and the date on which all or any portion of any Loan is converted or continued in accordance with (S)2.8. Eligible Assignee. Any of (a) a commercial bank or finance company organized under the laws of the United States, or any State thereof or the District of Columbia, and having total assets in excess of $1,000,000,000; (b) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having a net worth of at least $100,000,000, calculated in accordance with generally accepted accounting principles; (c) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; (d) the central bank of any country which is a member of the OECD; and (e) if, but only if, an Event of Default has occurred and is continuing, any other bank, insurance company, commercial finance company or other financial institution approved by the Agent, such approval not to be unreasonably withheld, provided, in each case, that such entity is a citizen of the United States within the meaning of Section 2 of the Shipping Act of 1916, as amended. Employee Benefit Plan. Any employee benefit plan within the meaning of (S)3(2) of ERISA maintained or contributed to by a Borrower or the Parent or any ERISA Affiliate, other than a Multiemployer Plan. Environmental Laws. See (S)7.18(a) hereof. ERISA. The Employee Retirement Income Security Act of 1974. ERISA Affiliate. Any Person which is treated as a single employer with a Borrower or the Parent under (S)414 of the Code. ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of (S)4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. Eurocurrency Business Day. Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in London or such other eurodollar interbank market as may be selected by the Agent in its sole discretion acting in good faith. Eurocurrency Lending Office. Initially, the Agent's head office; thereafter, such other office of the Agent, if any, that shall be making or maintaining Eurocurrency Rate Loans. -7- Eurocurrency Rate. For any Interest Period with respect to a Eurocurrency Rate Loan, the rate of interest equal to (a) the rate per annum (rounded upwards to the nearest 1/16 of one percent) at which the Agent's Eurocurrency Lending Office is offered Dollar deposits two (2) Eurocurrency Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations of such Eurocurrency Lending Office are customarily conducted at or about 10:00 a.m., Boston time, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Eurocurrency Rate Loan to which such Interest Period applies, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable. Eurocurrency Rate Loans. Loans or any portion thereof bearing interest calculated by reference to the Eurocurrency Rate. Eurocurrency Reserve Rate. For any day with respect to any Eurocurrency Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. Event of Default. See (S)13 hereof. Existing Banks. As defined in the preamble hereto. Existing Credit Agreement. As defined in the preamble hereto. Fee Letter. That certain letter agreement, dated as of November 26, 1997, between the Parent and the Agent, as the same may be amended, supplemented, modified or restated and in effect from time to time. Funded Debt. Without duplication and with respect to any Person and as at any date of determination, the aggregate principal amount of Indebtedness of such Person for borrowed money (other than short-term trade credit incurred in the ordinary course of business), the deferred purchase price of assets (other than short-term trade credit incurred in the ordinary course of business), Reimbursement Obligations (contingent or otherwise) in respect of Letters of Credit, and Capitalized Leases. Generally accepted accounting principles. (a) When used in (S)10, whether directly or indirectly through reference to a capitalized term used therein, means principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors in effect on the Balance Sheet Date and (b) when used in general, other than as provided above, means such principles as in effect from time to time. -8- Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of (S)3(2) of ERISA maintained or contributed to by a Borrower or the Parent or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. Guaranties. Collectively, the Parent Guaranty and any other guaranty of any of the Obligations hereunder from the Parent or any of its Subsidiaries to the Agent for the benefit of the Banks. Guarantors. Collectively, the Parent and each other Subsidiary (direct and indirect) of the Parent which shall deliver a guaranty of the Obligations pursuant to (S)8.14 hereof. Indebtedness. As to any Person, without duplication, all obligations, contingent and otherwise, that in accordance with generally accepted accounting principles should be classified upon the obligor's balance sheet as liabilities, or to which reference should be made by footnotes thereto, including in any event and whether or not so classified: (a) all debt and similar monetary obligations, whether direct or indirect; (b) all liabilities secured by any mortgage, pledge, security interest, lien, charge, or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; and (c) all guarantees, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness of others, including any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase indebtedness, or to assure the owner of indebtedness against loss, through an agreement to purchase goods, supplies, or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise, and the obligations, contingent and otherwise, to reimburse the issuer in respect of any letters of credit. Ineligible Securities. Securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1993 (12 U.S.C. (S)24, Seventh), as amended. Interest Payment Date. (a) As to any Base Rate Loan, the last day of the calendar quarter commencing with the calendar quarter that includes the Drawdown Date thereof; and (b) as to any Eurocurrency Rate Loan in respect of which the Interest Period is (i) three (3) months or less, the last day of such Interest Period and (ii) more than three (3) months, the date that is three (3) months from the first day of such Interest Period and, in addition, the last day of such Interest Period. Interest Period. With respect to each Loan, (a) initially, the period commencing on the Drawdown Date of such Loan and ending on the last day of one of the periods set forth below, as selected by the Borrowers in a Loan Request (i) for any Base Rate Loan, the last day of the calendar quarter; and (ii) for any Eurocurrency Rate Loan, 1, 2, 3, or 6 months; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as -9- selected by the Borrowers in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: (a) if any Interest Period with respect to a Eurocurrency Rate Loan would otherwise end on a day that is not a Eurocurrency Business Day, that Interest Period shall be extended to the next succeeding Eurocurrency Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Eurocurrency Business Day; (b) if any Interest Period with respect to a Base Rate Loan would end on a day that is not a Business Day, that Interest Period shall end on the next succeeding Business Day; (c) if the Borrowers shall fail to give notice as provided in (S)2.8, the Borrowers shall be deemed to have requested a conversion of the affected Eurocurrency Rate Loan to a Base Rate Loan, and the continuance of all Base Rate Loans as Base Rate Loans, as the case may be, on the last day of the then current Interest Period with respect thereto; (d) any Interest Period that begins on the last Eurocurrency Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Eurocurrency Business Day of a calendar month; and (e) any Interest Period relating to any Eurocurrency Rate Loan that would otherwise extend beyond the Maturity Date shall end on the Maturity Date. Investments. All expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of stock or Indebtedness of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other commitments as described under Indebtedness), or obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (a) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (b) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (c) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); and (d) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. Letter of Credit. See (S)3.1.1. Letter of Credit Application. See (S)3.1.1. Letter of Credit Fee(s). See (S)3.6. -10- Letter of Credit Participation. See (S)3.1.4. Letter of Credit Rate. At any time of determination, the Applicable Margin on Eurocurrency Rate Loans in effect at such time. Leverage Ratio. As at the end of any fiscal quarter, the ratio, determined for each fiscal quarter ending through September 30, 1998, on a pro forma basis after giving effect to the Takeover as if it had occurred on the first day of the four quarter period ending on such date, of (a) the consolidated Funded Debt of the Parent and its Subsidiaries at the end of the fiscal quarter of the Parent ending on such date to (b) Consolidated EBITDA of the Parent and its Subsidiaries for the period of four (4) consecutive fiscal quarters of the Parent ending on such date; provided, that for purposes of calculating the Leverage Ratio on (i) March 31, 1998, Consolidated EBITDA shall be Consolidated EBITDA of the Parent and its Subsidiaries on a pro forma basis for the period of two fiscal quarters ending March 31, 1998, multiplied by 2, and (ii) June 30, 1998, Consolidated EBITDA shall be Consolidated EBITDA of the Parent and its Subsidiaries on a pro forma basis for the period of three fiscal quarters then ending multiplied by 4/3; provided, however, when calculating the Leverage Ratio for any Test Period in which a Triggering Acquisition occurred, the calculation of the Leverage Ratio shall be made on a Pro Forma Basis. Loan Documents. Collectively, this Agreement, the Notes, the Letter of Credit Applications, the Letters of Credit, the Security Documents, and the Fee Letter. Loan Request. See (S)2.6 hereof. Loans. Loans made or to be made by the Banks to the Borrowers pursuant to (S)2 hereof. Majority Banks. As of any date, the Banks holding at least fifty-one percent (51%) of the outstanding principal amount of the Notes on such Date; and if no such principal is outstanding, the Banks whose aggregate Commitment Percentages on such date together constitute at least fifty-one percent (51%) of the Total Commitment. Marine Assets. As defined in the preamble. Marine Operators. As defined in the preamble. Maturity Date. December 1, 2002. Maximum Drawing Amount. The sum of the maximum aggregate amount from time to time that the beneficiaries may draw under outstanding Letters of Credit, as such aggregate amount may be reduced from time to time pursuant to the terms of the Letters of Credit. Multiemployer Plan. Any multiemployer plan within the meaning of (S)3(37) of ERISA maintained or contributed to by a Borrower, the Parent or any ERISA Affiliate. -11- Net Income. The consolidated net income (or deficit) of the Parent and its Subsidiaries, after deduction of all expenses, taxes and other proper charges, determined in accordance with generally accepted accounting principles, after eliminating therefrom all extraordinary nonrecurring items of income or loss. Net Worth. With respect to any Person, the excess of Total Assets over Total Liabilities, less to the extent otherwise includable in the computation of Net Worth, any subscriptions receivable. Notes. See (S)2.4. Obligations. All indebtedness, obligations and liabilities of any of the Parent, the Borrowers or the Guarantors to any of the Banks and the Agent, individually or collectively, existing on the date of this Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Agreement or the other Loan Documents or in respect of any of the Loans made or Reimbursement Obligations incurred or any other instruments at any time evidencing any thereof. OECD. See the definition of "Eligible Assignee". Operating Cash Flow. With respect to any Person and any particular fiscal period, an amount equal to (a) such Person's Net Income for such period, plus (b) all interest expense for such period, plus (c) all income tax expense for such period, plus (d) all depreciation and amortization charges for such period, less (e) without duplication, the aggregate amount of cash taxes paid by such Person with respect to such period, less (f) that portion of Capital Expenditures made by such Person during such period for the maintenance, repair, or dry-docking of, and inspection costs relating to, Capital Assets. Outstanding. With respect to any Loan, the aggregate unpaid principal thereof as of any date of determination. Parent Guaranty. The guaranty agreement dated as of the Closing Date, from the Parent to the Agent and each of the Banks, as amended, supplemented, modified or restated with the consent of the Banks and in effect from time to time. PBGC. The Pension Benefit Guaranty Corporation created by (S)4002 of ERISA and any successor entity or entities having similar responsibilities. Perfection Certificates. The Perfection Certificates as defined in the Security Agreement. Permitted Liens. Liens, security interests and other encumbrances permitted by (S)9.2 hereof. -12- Person. Any individual, corporation, partnership, limited partnership, limited liability company, limited liability partnership, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. Pro Forma Basis. Following a Triggering Acquisition, the calculation of the Funded Debt and EBITDA components of the Leverage Ratio for the fiscal quarter in which such Triggering Acquisition occurred and each of the three fiscal quarters immediately following such Triggering Acquisition with reference to the audited historical financial results of the Person, business, division or group of assets acquired in such Triggering Acquisition (or if such audited historical financial results are not available, such management prepared financial statements as are reasonably acceptable to the Agent) and the Parent and its Subsidiaries for the applicable Test Period after giving effect on a pro forma basis to such Triggering Acquisition and assuming that such Triggering Acquisition had been consummated at the beginning of such Test Period. Other reasonable cost savings, expenses and other income statement or operating statement adjustments which are attributable to the change in ownership and/or management resulting from such Triggering Acquisition as may be approved by the Agent in writing (which approval shall not be unreasonably withheld) shall also be deemed to have been realized on the first day of the Test Period. Record. The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Bank with respect to any Loan referred to in such Note. Reimbursement Obligation. The Borrowers' obligation to reimburse the Agent and the Banks on account of any drawing under any Letter of Credit as provided in (S)3.2. Restricted Subsidiary. A Subsidiary of the Parent designated as a "Restricted Subsidiary" under the Indentures relating to the Senior Notes. Saevik Supply. Saevik Supply ASA, a Norwegian public joint stock company (registration number 976853938) and a Subsidiary of the Parent. Section 20 Subsidiary. A Subsidiary of the bank holding company controlling any Bank, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities. Security Agreement. The Second Amended and Restated Security Agreement dated as of the Closing Date among the Borrowers and the Agent, as the same may be amended, supplemented, modified or restated and in effect from time to time. Security Documents. The Security Agreement, the Vessel Mortgages, the Guaranties, all guaranties delivered to the Agent and the Banks pursuant to (S)8.14 hereof, and all instruments and documents required to be delivered pursuant thereto, in each case, as the same may be amended and in effect from time to time. -13- Senior Notes. The 8 1/2% Senior Notes due 2005 of the Parent, in an aggregate principal amount not to exceed $280,000,000, guaranteed by the Borrowers and issued pursuant to such documentation as shall have been previously delivered to, and approved by, the Agent. Subsidiary. Any corporation, association, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding voting stock or other voting equity interests. SWATH Subsidiary. Trico Marine International, Inc., the special purpose Subsidiary of the Parent which was formed for the purpose of the ownership and operation of the SWATH Vessel. SWATH Vessel. The small waterline area twin hull crew boat to be built for the SWATH Subsidiary. Takeover. The purchase by Trico Marine International Holdings B.V., a Subsidiary of the Parent, of all of the share capital of Saevik Supply. Test Period. The period of four (4) fiscal quarters included in any calculation of the Leverage Ratio. Total Assets. All assets of a Person determined in accordance with generally accepted accounting principles. Total Commitment. The sum of the Commitments of the Banks as in effect from time to time. Total Debt Service. For any fiscal period of any Person, an amount equal to (a) the Total Financial Obligations of such Person for such period plus (b) the Total Interest Expense of such Person for such period, plus (c) Adjusted Outstandings of such Person for the fiscal quarter of the Borrowers most recently ended, in each case determined in accordance with generally accepted accounting principles consistently applied. Total Financial Obligations. With respect to any fiscal period and any Person, an amount equal to the sum of all principal payments (including the principal portion of Capitalized Lease payments) on Funded Debt that become due and payable or that are to become due and payable during such fiscal period pursuant to any agreement or instrument to which such Person is a party. Demand obligations shall be deemed to be due and payable during any fiscal period during which such obligations are outstanding. Total Interest Expense. For any period and with respect to any Person, the aggregate amount of interest required to be paid in cash by such Person during such period on all Indebtedness of such Person outstanding during all or any part of such period, whether such interest was or is required to be reflected as an item of expense or capitalized, including -14- payments consisting of interest in respect of Capitalized Leases and including commitment fees, agency fees, facility fees and similar fees or expenses in connection with the borrowing of money, but, with respect to the Borrowers, excluding the Closing Fee. Total Liabilities. All liabilities of any Person determined in accordance with generally accepted accounting principles. Triggering Acquisition. The acquisition by the Parent, the Borrower or any of its Subsidiaries of any Person, business, division or specified group of assets after the Closing Date involving consideration paid or to be paid by the Parent, the Borrower and its Subsidiaries (including assumption of liabilities) in one or a series of transactions in excess of $10,000,000. Type. As to any Loan, its nature as a Base Rate Loan or a Eurocurrency Rate Loan. Uniform Customs. With respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, or any successor version thereof adopted by the Agent in the ordinary course of its business as a letter of credit issuer and in effect at the time of issuance of such Letter of Credit. Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which the Borrowers do not reimburse the Agent and the Banks on the date specified in, and in accordance with, (S)3.2. US Flag Vessels. See (S)7.24(a). US Vessel Mortgage. The Second Amended and Restated First Preferred Fleet Mortgage with respect to certain of the US Flag Vessels, dated as of the Closing Date, as may be further amended, supplemented, modified or restated and in effect from time to time. Vessel Mortgages. Collectively, the US Vessel Mortgage and any other vessel mortgage from either of the Borrowers or any other Subsidiary of the Parent to the Agent for the benefit of any of the Banks. Vessel(s). Collectively, all vessels owned by either of the Borrowers, from time to time, including, without limitation those vessels listed on Schedules 7.24(a), and individually, any of such vessels. (S)1.2. RULES OF INTERPRETATION. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement, (b) the singular includes the plural and the plural includes the singular, (c) a reference to any law includes any amendment or modification to such law, (d) a reference to any Person includes its permitted successors -15- and permitted assigns, (e) accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer, (f) the words "include", "includes" and "including" are not limiting, (g) all terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in Massachusetts, have the meanings assigned to them therein, (h) reference to a particular "(S)" refers to that section of this Agreement unless otherwise indicated, (i) the words "herein", "hereof", "hereunder" and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement, and (j) the phrase "jointly and severally" as used herein shall mean, for purposes of Louisiana law, "jointly and severally and solidarily". (S)2. THE REVOLVING CREDIT FACILITY. (S)2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in this Agreement, each of the Banks severally agrees to lend to the Borrowers and the Borrowers may borrow, repay, and reborrow from time to time between the Closing Date and the Maturity Date upon notice by the Borrowers to the Agent given in accordance with (S)2.6, such sums as are requested by the Borrowers up to a maximum aggregate principal amount outstanding (after giving effect to all amounts requested) at any one time equal to such Bank's Commitment, minus such Bank's Commitment Percentage of the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations; provided that after giving effect to all amounts requested (i) the sum of the outstanding amount of the Loans plus the Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not at any time exceed the lesser of (a) the Total Commitment and (b) the amount to which the Borrowers' secured Obligations are limited as set forth in the proviso contained in (S)6 hereof; and (ii) the Borrowers are in compliance with the covenant contained in (S)10.4 hereof. The Loans shall be made pro rata in accordance with each Bank's Commitment Percentage. Each request for a Loan hereunder shall constitute a representation and warranty by the Borrowers that the conditions set forth in (S)11 and (S)12 hereof, in the case of the initial Loans to be made on the Closing Date, and (S)12 hereof, in the case of all other Loans, have been satisfied on the date of such request. The parties hereto hereby agree that, on and as of the Closing Date, the loans outstanding under the Existing Credit Agreement shall become Loans hereunder. (S)2.2. COMMITMENT FEE. The Borrowers hereby jointly and severally agree to pay to the Agent for the accounts of the Banks in accordance with their respective Commitment Percentages a commitment fee (the "Commitment Fee") at the applicable Commitment Fee Rate per annum on the average daily amount during each calendar quarter or portion thereof from Closing Date to the Maturity Date by which the Total Commitment exceeds the sum of the outstanding principal amount of Loans, plus the Maximum Drawing Amount and all Unpaid Reimbursement Obligations. The Commitment Fee shall be payable quarterly in arrears on the last day of each calendar quarter for the immediately preceding calendar quarter commencing on the first such date following the Closing Date, with a final payment on the Maturity Date or any earlier date on which the Commitments shall terminate. -16- (S)2.3. REDUCTION OF COMMITMENTS. (a) The Borrowers shall have the right at any time and from time to time on or before the Maturity Date upon five (5) Business Days' prior written notice to the Agent to reduce by $10,000,000 or a larger integral multiple of $5,000,000 or terminate entirely the unborrowed portion of the Total Commitment, whereupon the Commitments of the Banks shall be reduced pro rata in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated. Promptly after receiving any notice of the Borrowers delivered pursuant to this (S)2.3(a), the Agent will notify the Banks of the substance thereof. Upon the effective date of any such reduction or termination, the Borrowers shall pay to the Agent for the respective accounts of the Banks the full amount of any Commitment Fee then accrued on the amount of the reduction, provided that so long as the Total Commitment is not terminated entirely, the Borrowers may pay any such accrued Commitment Fee on the last Business Day of the then-current fiscal quarter. (b) No reduction or termination of the Total Commitment once made may be revoked; the portion of the Total Commitment reduced or terminated may not be reinstated; and amounts in respect of such reduced or terminated portion may not be reborrowed. (c) Promptly after the effectiveness of any partial reduction in the Total Commitment pursuant to this (S)2.3, the Agent shall distribute to each Bank an updated Schedule 1.1 reflecting such reduction. (S)2.4. THE NOTES. The Loans shall be evidenced by separate amended and restated promissory notes of the Borrowers in substantially the form of Exhibit A hereto (each a "Note"), dated as of the Closing Date and completed with appropriate insertions. One Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Commitment or, if less, the outstanding amount of all Loans made by such Bank, plus interest accrued thereon, as set forth below. The Borrowers irrevocably authorize each Bank to make or cause to be made, at or about the time of the Drawdown Date of any Loan or at the time of receipt of any payment of principal on such Bank's Note, an appropriate notation on such Bank's Record with respect to such Note reflecting the making of such Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Loans set forth on such Bank's Record with respect to such Note shall be prima facie evidence of the principal amount thereof owing and unpaid to such Bank, but the failure to record, or any error in so recording, any such amount on such Bank's Record shall not limit or otherwise affect the joint and several obligations of the Borrowers hereunder or under any Note to make payments of principal of or interest on any Note when due. (S)2.5. INTEREST ON LOANS. Except as otherwise provided in (S)5.8 hereof, (a) Each Loan shall bear interest at the rate per annum equal to (i) the Base Rate plus the Applicable Margin then applicable to Base Rate Loans, in the case of Loans that are Base Rate -17- Loans, and (ii) the Eurocurrency Rate plus the Applicable Margin then applicable to Eurocurrency Rate Loans, in the case of Loans that are Eurocurrency Rate Loans. (b) The Borrowers jointly and severally promise to pay interest on the outstanding amount of the Loans on each Interest Payment Date with respect thereto. (c) Any change in the interest rate resulting from a change in the Base Rate is to be effective at the beginning of the day of such change in the Base Rate. The Agent will give the Banks and the Borrowers prompt notice in writing of any change in the Base Rate. (S)2.6. REQUESTS FOR LOANS. The Borrowers shall give to the Agent written notice in the form of Exhibit B hereto (or telephonic notice confirmed in a writing in the form of Exhibit B hereto) of each Loan requested hereunder (a "Loan Request") no less than (a) one (1) Business Day prior to any Drawdown Date of any Loan that is a Base Rate Loan or (b) three (3) Eurocurrency Business Days prior to any Drawdown Date of any Loan that is a Eurocurrency Rate Loan. Each such notice shall specify (i) the principal amount of the Loan requested, (ii) the proposed Drawdown Date of such Loan, (iii) the Interest Period for such Loan, and (iv) the Type of such Loan. Promptly upon receipt of any such notice, the Agent shall notify each of the Banks thereof. Each such notice shall be irrevocable and binding on the Borrowers and shall obligate the Borrowers to accept the Loan requested from the Banks on the proposed Drawdown Date thereof. Each Loan Request shall be in a minimum aggregate amount of $2,000,000 or a larger integral multiple of $250,000. (S)2.7. LOANS TO COVER REIMBURSEMENT OBLIGATIONS. Notwithstanding the notice and minimum amount requirements set forth in (S)2.6, the Agent shall, unless otherwise instructed by the Majority Banks and subject to the satisfaction of the conditions set forth herein, make Loans to the Borrowers on the date that any draft presented under any Letter of Credit is honored by the Agent, or any date on which the Agent otherwise makes a payment with respect thereto in an amount sufficient to pay in full the obligations of the Borrowers under (S)3.2 in respect of the honor of such draft or the making of such payment. The Borrowers hereby request and authorize the Agent to make from time to time such Loans by means of appropriate entries in the books and records of the Agent and to notify the Banks of the date and amount of any such Loans. The Borrowers acknowledge and agree that the making of such Loans shall, in each case, be subject in all respects to the provisions of this Agreement as if they were Loans requested pursuant to a Loan Request, including the limitations set forth in (S)2.1 and the requirement that the applicable provisions of (S)12 be satisfied. Absent manifest error on the part of the Agent, all actions taken by the Agent pursuant to the provisions of this (S)2.7 shall be conclusive and binding on the Borrowers. Loans made pursuant to this (S)2.7 shall be Base Rate Loans (subject to conversion pursuant to (S)2.8 hereof) and shall bear interest at the rate provided for Loans in (S)2.5(a) hereof. Each of the Banks hereby acknowledges and agrees that a Loan made by the Agent pursuant to this (S)2.7 shall (i) be subject in all respects to the provisions of this Agreement (including, without limitation, (S)2.9 hereof) and (ii) obligate each Bank to advance to the Agent the amount of such Bank's Commitment Percentage of such Loan. -18- (S)2.8. ELECTION OF EUROCURRENCY RATE; NOTICE OF ELECTION; INTEREST PERIODS; MINIMUM AMOUNTS. (a) At the Borrowers' option, so long as no Event of Default has occurred and is then continuing, the Borrowers may (i) elect to convert any Base Rate Loan or a portion thereof to a Eurocurrency Rate Loan, (ii) at the time of any Loan Request specify that such requested Loan shall be a Eurocurrency Rate Loan, or (iii) upon expiration of the applicable Interest Period, elect to maintain an existing Eurocurrency Rate Loan as such, provided in each case that the Borrowers shall give notice thereof to the Agent pursuant to (S)2.8(b). Upon determining any Eurocurrency Rate, the Agent shall forthwith provide notice thereof to the Borrowers and the Banks, and each such notice to the Borrowers shall be considered prima facie correct and binding, absent manifest error. (b) Three (3) Eurocurrency Business Days prior to the making of any Eurocurrency Rate Loan or the conversion of any Base Rate Loan to a Eurocurrency Rate Loan, or, in the case of an outstanding Eurocurrency Rate Loan, the expiration date of the applicable Interest Period, the Borrowers shall give written notice to the Agent, not later that 12:00 noon (Boston time) of their election pursuant to (S)2.8(a). Each such notice delivered to the Agent shall specify the aggregate principal amount of applicable Loans to be borrowed or maintained as or converted to Eurocurrency Rate Loans and the requested duration of the Interest Period that will be applicable to such Eurocurrency Rate Loan, and shall be irrevocable and binding upon the Borrowers. If the Borrowers shall fail to give the Agent notice of their election hereunder, together with all of the other information required by this (S)2.8(b), with respect to any Loan, whether at the end of an Interest Period or otherwise, such Loan shall be deemed a Base Rate Loan. The Agent shall promptly notify the Banks in writing (or by telephone confirmed in writing or by facsimile) of any such election. (c) Notwithstanding anything herein to the contrary, the Borrowers may not specify an Interest Period with respect to all or any portion of any Loan that would extend beyond the Maturity Date. (d) No conversion of Loans pursuant to this (S)2.8 may result in a Eurocurrency Rate Loan with a principal amount less than $2,000,000. (S)2.9. FUNDS FOR LOANS. (S)2.9.1. FUNDING PROCEDURES. Not later than 11 o'clock a.m. (Boston time) on (i) the proposed Drawdown Date of any Loans, or (ii) the date that any draft presented under any Letter of Credit is honored by the Agent, or on any date on which the Agent otherwise makes payment with respect thereto, and in connection therewith the Agent makes Loans on behalf of the Banks to the Borrowers pursuant to (S)2.7 hereof, each of the Banks will make available to the Agent, at 100 Federal Street, Boston, Massachusetts 02110, in immediately available funds, the amount of such Bank's Commitment Percentage of such Loans made or to be made on such date. Upon receipt from each Bank of such amount, and upon receipt of the documents required by (S)(S)11 and 12 hereof -19- and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available to the Borrowers the aggregate amount of such Loans made available to the Agent by the Banks. The failure or refusal of any Bank to make available to the Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Loans shall not relieve any other Bank from its several obligation hereunder to make available to the Agent the amount of such other Bank's Commitment Percentage of any requested Loans. (S)2.9.2. ADVANCES BY AGENT. The Agent may, unless notified to the contrary by any Bank prior to a Drawdown Date of a Loan, assume that such Bank has made available to the Agent on such Drawdown Date the amount of such Bank's Commitment Percentage of the Loans to be made on such Drawdown Date, and the Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrowers a corresponding amount. If any Bank makes available to the Agent such amount on a date after such Drawdown Date, such Bank shall pay to the Agent on demand an amount equal to the product of (a) the average computed for the period referred to in clause (c) below, of the weighted average interest rate paid by the Agent for federal funds acquired by the Agent during each day included in such period, times (b) the amount of such Bank's Commitment Percentage of such Loans, times (c) a fraction, the numerator of which is the number of days that shall have elapsed from and including such Drawdown Date to the date on which the amount of such Bank's Commitment Percentage of such Loans shall become immediately available to the Agent, and the denominator of which is 365. A statement of the Agent submitted to such Bank with respect to any amounts owing under this paragraph shall be prima facie evidence of the amount due and owing to the Agent by such Bank. If the amount of such Bank's Commitment Percentage of such Loans is not made available to the Agent by such Bank within three (3) Business Days following such Drawdown Date, the Agent shall be entitled to recover such amount from the Borrowers on demand, with interest thereon at the rate per annum applicable to the Loans made on such Drawdown Date. (S)2.10. INTENTIONALLY OMITTED. (S)2.11. INTENTIONALLY OMITTED. (S)2.12. MATURITY OF THE LOANS. The Loans shall be due and payable on the Maturity Date. The Borrowers hereby jointly and severally promise to pay to the Agent for the pro rata accounts of the Banks, and there shall become absolutely due and payable on the Maturity Date, all of the Loans outstanding on the Maturity Date. (S)2.13. MANDATORY REPAYMENTS OF LOANS. If at any time (i) the sum of the outstanding principal amount of the Loans, the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the lesser of (a) the Total Commitment and (b) the amount to which the Borrowers' secured Obligations are limited as set forth in the proviso contained in (S)6 hereof; or (ii) the Borrowers are not in compliance with the covenant contained in (S)10.4 hereof; then the Borrowers shall immediately pay the amount of such excess or the amount which would cause -20- the Borrowers to be in compliance with such covenant to the Agent for the respective accounts of the Banks for application: first, to any Unpaid Reimbursement Obligations; second, to the Loans; and third, to provide to the Agent cash collateral for Reimbursement Obligations as contemplated by (S)3.2(b) and (c). Each payment of any Unpaid Reimbursement Obligations or prepayment of Loans shall be allocated among the Banks, in proportion, as nearly as practicable, to each Reimbursement Obligation owing to each such Bank or (as the case may be) the respective unpaid principal amount of the Loans owing to such Bank, with adjustments to the extent practicable to equalize any prior payments or repayments not exactly in proportion. (S)2.14 OPTIONAL REPAYMENTS OF LOANS. The Borrowers shall have the right, at their election, to repay the outstanding amount of the Loans, as a whole or in part, at any time without penalty or premium, provided that the full or partial prepayment of the Outstanding amount of any Loan that is a Eurocurrency Rate Loan pursuant to this (S)2.14 may be made only on the last day of the Interest Period relating thereto. The Borrowers shall give the Agent, no later than 10:00 a.m., Boston time, at least two (2) Business Days' prior written notice of any proposed repayment of a Loan that is a Base Rate Loan pursuant to this (S)2.14, and three (3) Eurocurrency Business Days' prior written notice of any proposed repayment of a Loan that is a Eurocurrency Rate Loan pursuant to this (S)2.14, in each case specifying the proposed date of payment of such Loans and the principal amount to be paid. Each such partial prepayment of the Loans shall be accompanied by the payment of accrued interest on the principal repaid to the date of payment and shall be in the minimum principal amount of $2,000,000 or a larger integral multiple of $250,000. Each partial prepayment shall be allocated among the Banks, in proportion, as nearly as practicable, to the respective unpaid principal amount of each Bank's Note, with adjustments to the extent practicable to equalize any prior repayments not exactly in proportion. (S)3. LETTERS OF CREDIT. (S)3.1. LETTER OF CREDIT COMMITMENT. (S)3.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and conditions hereof and the execution and delivery by the Borrowers of a letter of credit application on the Agent's customary form (a "Letter of Credit Application") the Agent on behalf of the Banks and in reliance upon the agreement of the Banks set forth in (S)3.1.4 and upon the representations and warranties of the Borrowers contained herein, agrees, in its individual capacity, to issue, extend and renew for the account of the Borrowers from time to time from the Closing Date to the date which is fourteen (14) Business Days prior to the Maturity Date one or more standby letters of credit (each, individually, a "Letter of Credit"), in such form as may be requested from time to time by the Borrowers and agreed to by the Agent; provided, however, that, after giving effect to such request, (a) the sum of the aggregate Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not exceed Twenty Million Dollars ($20,000,000) at any one time, (b) the sum of (i) the Maximum Drawing Amount, (ii) all Unpaid Reimbursement Obligations, and (iii) the amount of all Loans Outstanding shall not exceed the Total Commitment or, if less the amount to which the Borrowers' secured Obligations are limited as set forth in the proviso contained in (S)6 hereof and (c) the Borrowers are in -21- compliance with the covenant contained in (S)10.4 hereof. The parties hereto hereby agree that, on and as of the Closing Date, the letters of credit issued under the Existing Credit Agreement shall be deemed to be Letters of Credit hereunder. (S)3.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit Application shall be completed to the satisfaction of the Agent. In the event that any provision of any Letter of Credit Application shall be inconsistent with any provision of this Agreement, then the provisions of this Agreement shall, to the extent of any such inconsistency, govern. (S)3.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued, extended or renewed hereunder shall, among other things, (a) provide for the payment of sight drafts for honor thereunder when presented in accordance with the terms thereof and when accompanied by the documents described therein, (b) have an original expiry date no later than the date which is three hundred sixty-five (365) days from the date of issuance and (c) have a final expiry date no later than the date which is fourteen (14) Business Days prior to the Maturity Date. Each Letter of Credit so issued, extended or renewed shall be subject to the Uniform Customs. (S)3.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally agrees that it shall be absolutely liable, without regard to the occurrence of any Default or Event of Default or any other condition precedent whatsoever, to the extent of such Bank's Commitment Percentage, to reimburse the Agent on demand for the amount of each draft paid by the Agent under each Letter of Credit to the extent that such amount is not reimbursed by the Borrowers pursuant to (S)3.2 (such agreement for a Bank being called herein the "Letter of Credit Participation" of such Bank). (S)3.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a Bank in respect of a Letter of Credit Participation shall be treated as the purchase by such Bank of a participating interest in the Borrower's Reimbursement Obligation under (S)3.2 in an amount equal to such payment. Each Bank shall share in accordance with its participating interest in any interest which accrues pursuant to (S)3.2. (S)3.2. REIMBURSEMENT OBLIGATION OF THE BORROWERS. In order to induce the Agent to issue, extend and renew each Letter of Credit and the Banks to participate therein, the Borrowers hereby agree to reimburse or pay to the Agent, for the account of the Agent or (as the case may be) the Banks, with respect to each Letter of Credit issued, extended or renewed by the Agent hereunder, (a) on each date that any draft presented under such Letter of Credit is honored by the Agent or the Agent otherwise makes a payment under or pursuant to such Letter of Credit, (i) the amount paid by the Agent under or pursuant to such Letter of Credit (it being understood that such payment to the Agent may, subject to the satisfaction of the conditions set forth therein, be made from the proceeds of a Loan made to the Borrowers pursuant to (S)2.7), and (ii) the amount of any customary taxes, fees, -22- charges or other reasonable costs and expenses whatsoever incurred by the Agent or any Bank in connection with any payment made by the Agent or any Bank under, or pursuant to, such Letter of Credit (to the extent the reimbursement and payment of such taxes, fees, charges, costs, or expenses are not otherwise provided for elsewhere in this Agreement and excluding therefrom any amount payable to the Agent by a Bank pursuant to (S)3.3); (b) upon the reduction (but not termination) of the Total Commitment to an amount less than the Maximum Drawing Amount, an amount equal to such difference, which amount shall be held by the Agent for the benefit of the Banks and the Agent as cash collateral for the Reimbursement Obligations; and (c) upon the termination of the Total Commitment or the acceleration of the Reimbursement Obligations with respect to all Letters of Credit in accordance with (S)13, an amount equal to the then Maximum Drawing Amount, which amount shall be held by the Agent for the benefit of the Banks and the Agent as cash collateral for the Reimbursement Obligations. Each such payment shall be made to the Agent at 100 Federal Street, Boston, Massachusetts 02110, in immediately available funds or (in the case of clause (a)) from the direct application of the proceeds of a Loan made pursuant to (S)2.7 hereof. Interest on any and all amounts remaining unpaid by the Borrowers under this (S)3.2 at any time from the date such amounts become due and payable (whether as stated in this (S)3.2, by acceleration or otherwise) until payment in full (whether before or after judgment) shall be payable to the Agent on demand at the rate specified in (S)5.8 for overdue principal of the Loans. (S)3.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the Agent shall notify the Borrowers of the date and amount of the draft presented or demand for payment and of the date and time when it expects to pay such draft or honor such demand for payment. If the Borrowers fail to reimburse the Agent as provided in (S)3.2 on or before the date that such draft is paid or other payment is made by the Agent, the Agent may at any time thereafter notify the Banks of the amount of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston time) on the Business Day next following the receipt of such notice, each Bank shall make available to the Agent at the Agent's Head Office, in immediately available funds, such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, together with an amount equal to the product of (a) the average, computed for the period referred to in clause (c) below, of the weighted average interest rate paid by the Agent for federal funds acquired by the Agent during each day included in such period, times (b) the amount equal to such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, times (c) a fraction, the numerator of which is the number of days that shall have elapsed from and including the date the Agent paid the draft presented for honor or otherwise made payment to the date on which such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation shall become immediately available to the Agent, and the denominator of which is 360. The responsibility of the Agent to the Borrowers and the Banks shall be only to determine that the documents (including each draft) delivered under each Letter -23- of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit. (S)3.4. OBLIGATIONS ABSOLUTE. The Borrowers' obligations under this (S)3 shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff, counterclaim or defense to payment which the Borrowers may have or have had against the Agent, any Bank or any beneficiary of a Letter of Credit. The Borrowers further agree with the Agent and the Banks that the Agent and the Banks shall not be responsible for, and the Borrowers' Reimbursement Obligations under (S)3.2 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrowers, the beneficiary of any Letter of Credit or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of the Borrowers against the beneficiary of any Letter of Credit or any such transferee. The Agent and the Banks shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit. The Borrowers agree that any action taken or omitted by the Agent or any Bank under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith, shall be binding upon the Borrowers and shall not result in any liability on the part of the Agent or any Bank to the Borrowers; provided that the Agent or such Bank shall not be grossly negligent in taking or omitting to take any such action. (S)3.5. RELIANCE BY ISSUER. To the extent not inconsistent with (S)3.4, the Agent shall be entitled to rely, and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Majority Banks as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Majority Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Banks and all future holders of the Notes or of a Letter of Credit Participation. (S)3.6. FEES. The Borrowers shall pay to the Agent and the Banks in respect of each Letter of Credit the following fees (collectively, the "Letter of Credit Fees"): (a) on the date of issuance and on each anniversary of issuance of each Letter of Credit, a fee payable to the Agent, for the accounts of the Banks in accordance with their respective Commitment Percentages, annually in advance, equal to the Letter of Credit Rate then in effect per annum on the face amount of such Letter of Credit provided that, if such Letter of Credit has an expiry date that is less than one year from the date of the issuance of such Letter of Credit, such fee shall be multiplied by a fraction, -24- the numerator of which is the number of days from the date of issuance to the expiry date of such Letter of Credit and the denominator of which is 365 and (b) on the date of issuance, and at the time of each extension or renewal of each Letter of Credit, a fee payable to the Agent for its own account, equal to one- eighth percent (1/8%) of the face amount of such Letter of Credit plus the Agent's customary issuance fee, renewal fee or extension fee, as the case may be. (S)4. INTENTIONALLY OMITTED. (S)5. CERTAIN GENERAL PROVISIONS. (S)5.1. FEES. The Borrowers jointly and severally agree to pay to the Agent for its own account on the dates as set forth in the Fee Letter, the fees to be paid on such dates in the amounts set forth in the Fee Letter. (S)5.2. INTENTIONALLY OMITTED. (S)5.3. FUNDS FOR PAYMENTS. (S)5.3.1. PAYMENTS TO AGENT. All payments of principal, interest, the Reimbursement Obligations, the Letter of Credit Fees, the Commitment Fee, and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Agent, for the respective accounts of the Banks and the Agent, at the Agent's head office or at such other location that the Agent may from time to time designate, in each case in immediately available funds. -25- (S)5.3.2. NO OFFSET, ETC. (a) All payments by the Borrowers hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrowers are compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrowers with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrowers will pay to the Agent, for the account of the applicable Banks or (as the case may be) the Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the applicable Banks or the Agent to receive the same net amount which the applicable Banks or the Agent would have received on such due date had no such obligation been imposed upon the Borrowers. The Borrowers will deliver promptly to the Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrowers hereunder or under such other Loan Document. (b) On or before the date it becomes a party to this Agreement and from time to time thereafter upon any change in status rendering any certificate or document previously delivered pursuant to this (S)5.3.2 invalid or inaccurate, each Bank that is organized under the laws of a jurisdiction outside the United States shall (if legally able to do so) deliver to the Borrowers such certificates, documents or other evidence, as required by the Code or Treasury Regulations issued pursuant thereto, including Internal Revenue Service Form 1001 or Form 4224 and any other certificate or statement of exemption required by Treasury Regulation Section 1.1441-1, 1.1441-4 or 1.1441-6(c) or any subsequent version thereof or subsequent version thereto, properly completed and duly executed by such Bank establishing that such payment is (a) not subject to United States Federal withholding tax under the Code because such payment is effectively connected with conduct by such Bank of a trade or business in the United States or (b) totally exempt from United States Federal withholding tax or, if due to a change in law occurring after the date such Bank became a party hereto, subject to a reduced rate of such tax under a provision of an applicable tax treaty. The Borrower shall not be required to pay any additional amounts to any Bank pursuant to this (S)5.3.2 to the extent that the obligation to pay such additional amounts would not have arisen but for a failure by such Bank to comply with the provisions of the preceding sentence. (S)5.4. COMPUTATIONS. All computations of interest on Base Rate Loans, Letter of Credit Fees, or Commitment Fees shall be based on a 365-day year and paid for the actual number of days elapsed. All computations of interest on Eurocurrency Rate Loans shall be based on a 360-day year and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to Eurocurrency Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a -26- Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Loans as reflected on the Records from time to time shall be considered correct and binding on the Borrowers unless within fifteen (15) Business Days after receipt of any notice by the Agent or any of the Banks of such outstanding amount, the Agent or such Bank shall notify the Borrowers to the contrary. (S)5.5. ADDITIONAL COSTS, ETC. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Bank or the Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Bank or the Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, the Letters of Credit, such Bank's Commitment, or the Loans (other than taxes based upon or measured by the income or profits of such Bank or the Agent), or (b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to any Bank of the principal of or the interest on any Loans or any other amounts payable to any Bank or the Agent under this Agreement or the other Loan Documents, or (c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of an office of any Bank, or (d) impose on any Bank or the Agent any other conditions or requirements with respect to this Agreement, the other Loan Documents, any Letters of Credit, the Loans, such Bank's Commitment, or any class of loans, letters of credit or commitments of which any of the Loans or such Bank's Commitment forms a part, and the result of any of the foregoing is: (i) to increase the cost to any Bank of making, funding, issuing, renewing, extending or maintaining any of the Loans, any Letters of Credit, or such Bank's Commitment, or (ii) to reduce the amount of principal, interest or other amount payable to such Bank or the Agent hereunder on account of such Bank's Commitment, any Letter of Credit, or any of the Loans, or -27- (iii) to require such Bank or the Agent to make any payment or to forego any interest or Reimbursement Obligation or other sum payable hereunder, the amount of which payment or foregone interest or Reimbursement Obligation or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Bank or the Agent from any of the Borrowers hereunder, then, and in each such case, the Borrowers will, upon demand made by such Bank or (as the case may be) the Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Bank or the Agent such additional amounts as will be sufficient to compensate such Bank or the Agent for such additional cost, reduction, payment or foregone interest or Reimbursement Obligations or other sum. (S)5.6. CAPITAL ADEQUACY. If after the date hereof any Bank or the Agent determines that (a) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, or (b) compliance by such Bank or the Agent or any corporation controlling such Bank or the Agent with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect of reducing the return on such Bank's or the Agent's commitment with respect to any Loans to a level below that which such Bank or the Agent could have achieved but for such adoption, change or compliance (taking into consideration such Bank's or the Agent's then existing policies with respect to capital adequacy and assuming full utilization of such entity's capital) by any amount deemed by such Bank or (as the case may be) the Agent to be material, then such Bank or the Agent may notify the Borrowers of such fact. To the extent that the amount of such reduction in the return on capital is not reflected in the Base Rate, the Borrowers jointly and severally agree to pay such Bank or (as the case may be) the Agent for the amount of such reduction in the return on capital as and when such reduction is determined upon presentation by such Bank or (as the case may be) the Agent of a certificate in accordance with (S)5.7 hereof. Each Bank shall allocate such cost increases among its customers in good faith and on an equitable basis. (S)5.7. CERTIFICATE. A certificate setting forth any additional amounts payable pursuant to (S)(S)5.5 or 5.6 and a brief explanation of such amounts which are due, submitted by any Bank or the Agent to the Borrowers, shall be conclusive, absent manifest error, that such amounts are due and owing. (S)5.8. INTEREST AFTER DEFAULT. During the continuance of an Event of Default, the principal of the Loans not overdue shall, until such Event of Default has been cured or remedied or waived in accordance with (S)26, bear interest at a rate per annum equal to two percent (2%) above the rate of interest otherwise applicable to such Loans pursuant to this Agreement. All overdue amounts hereunder, including, without limitation, the principal of and interest on (to the extent permitted by applicable law) the Loans, Unpaid Reimbursement Obligations, -28- Commitment Fees and Letter of Credit Fees shall bear interest at the rate per annum equal to two percent (2%) above the rate of interest applicable to Base Rate Loans. (S)5.9. CONCERNING JOINT AND SEVERAL LIABILITY OF THE BORROWERS. (a) Each of the Borrowers is accepting joint and several liability hereunder in consideration of the financial accommodation to be provided by the Banks under this Agreement, for the mutual benefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings of each of the Borrowers to accept joint and several liability for the obligations of each of them. (b) Each of the Borrowers jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrower with respect to the payment and performance of all of the Obligations arising under this Agreement, it being the intention of the parties hereto that all the Obligations shall be the joint and several obligations of both of the Borrowers without preferences or distinction among them. (c) If and to the extent that either of the Borrowers shall fail to make any payment with respect to any of the obligations hereunder as and when due or to perform any of such obligations in accordance with the terms thereof, then in each such event, the other Borrower will make such payment with respect to, or perform, such obligation. (d) The obligations of each Borrower under the provisions of this (S)5.9 constitute full recourse obligations of such Borrower, enforceable against it to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstances whatsoever. (e) Except as otherwise expressly provided herein, each Borrower hereby waives notice of acceptance of its joint and several liability, notice of any and all Loans made under this Agreement, notice of occurrence of any Event of Default, or of any demand for any payment under this Agreement, notice of any action at any time taken or omitted by the Banks under or in respect of any of the Obligations hereunder, any requirement of diligence and, generally, all demands, notices and other formalities of every kind in connection with this Agreement. Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations hereunder, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by the Banks at any time or times in respect of any default any Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by the Banks in respect of any of the Obligations hereunder, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of such Obligations or the addition, substitution or release, in whole or in part, of any Borrower. Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or failure to act on the part of the Banks, including, without -29- limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder which might, but for the provisions of this (S)5.9, afford grounds for terminating, discharging or relieving such Borrower, in whole or in part, from any of its obligations under this (S)5.9, it being the intention of each Borrower that, so long as any of the Obligations hereunder remain unsatisfied, the obligations of such Borrower under this (S)5.9 shall not be discharged except by performance and then only to the extent of such performance. The obligations of each Borrower under this (S)5.9 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any reconstruction or similar proceeding with respect to any Borrower or any Bank. The joint and several liability of the Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of any Borrower or any Bank. (f) The provisions of this (S)5.9 are made for the benefit of the Banks and their successors and assigns, and may be enforced by them from time to time against either of the Borrowers as often as occasion therefor may arise and without requirement on the part of the Banks first to marshall any of their claims or to exercise any of their rights against the other Borrower or to exhaust any remedies available to them against the other Borrower or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this (S)5.9 shall remain in effect until all the Obligations hereunder shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by any of the Banks upon the insolvency, bankruptcy or reorganization of the Borrowers, or otherwise, the provisions of this (S)5.9 will forthwith be reinstated in effect, as though such payment had not been made. (S)5.10. INABILITY TO DETERMINE EUROCURRENCY RATE. In the event that, prior to the commencement of any Interest Period relating to any Eurocurrency Rate Loan, the Agent shall determine or be notified by the Majority Banks that adequate and reasonable methods do not exist for ascertaining the Eurocurrency Rate that would otherwise determine the rate of interest to be applicable to any Eurocurrency Rate Loan during any Interest Period, the Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrowers and the Banks) to the Borrowers. In such event (a) each Loan Request or Conversion Request with respect to each Eurocurrency Rate Loan shall be automatically withdrawn and shall be deemed a request for a Base Rate Loan, (b) each Eurocurrency Rate Loan will automatically, on the last day of the then current Interest Period thereof, become a Base Rate Loan, and (c) the obligations of the Banks to make Eurocurrency Rate Loans shall be suspended until the Agent or the Majority Banks determine that the circumstances giving rise to such suspension no longer exist, whereupon the Agent shall so notify the Borrowers. (S)5.11. ILLEGALITY. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it -30- unlawful for the Banks to make or maintain Eurocurrency Rate Loans, the Agent shall forthwith give notice of such circumstances to the Borrowers and thereupon (a) the commitment of the Banks to make Eurocurrency Rate Loans or convert Loans of another Type to Eurocurrency Rate Loans shall forthwith be suspended and (b) the Loans then outstanding as Eurocurrency Rate Loans, if any, shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such Eurocurrency Rate Loans or within such earlier period as may be required by law. The Borrowers hereby jointly and severally agree promptly to pay the Agent, for the pro rata accounts of the Banks, upon demand, any additional amounts necessary to compensate the Banks for any costs incurred by the Banks in making any conversion in accordance with this (S)5.11, including any interest or fees payable by the Banks to lenders of funds obtained by it in order to make or maintain its Eurocurrency Rate Loans hereunder. (S)5.12. INDEMNITY. Except to the extent of breakage costs arising from a prepayment of a Eurocurrency Rate Loan as a result of an event set forth in (S)5.10, each of the Borrowers agrees to indemnify the Banks and to hold the Banks harmless from and against any loss, cost or expense (including loss of anticipated profits) that the Banks may sustain or incur as a consequence of (a) default by such Borrower in payment of the principal amount of or any interest on any Eurocurrency Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by the Banks to lenders of funds obtained by it in order to maintain its Eurocurrency Rate Loans, (b) default by such Borrower in making a borrowing after such Borrower has given (or is deemed to have given) a Loan Request or a Conversion Request relating thereto in accordance with (S)2.6, (S)2.7 or (S)2.8 or (c) the making of any payment on a Eurocurrency Rate Loan or the making of any conversion of any such Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by any Bank to lenders of funds obtained by it in order to maintain any such Loans. (S)5.13. REPLACEMENT OF BANKS. If any Bank (an "Affected Bank") (i) makes demand upon a Borrower for (or if a Borrower is otherwise required to pay) amounts pursuant to (S)(S)5.3.2, 5.5 or 5.6, (ii) is unable to make or maintain Eurocurrency Rate Loans as a result of a condition described in (S)5.10 or (iii) defaults in its obligation to make Loans, in accordance with the terms of this Agreement (such Bank being referred to as a "Defaulting Bank"), the Borrowers within ninety (90) days of receipt of such demand, notice (or the occurrence of such other event causing the Borrower to be required to pay such compensation or causing (S)5.10 to be applicable), or default, as the case may be, by notice (a "Replacement Notice") in writing to the Agent and such Affected Bank (A) request the Affected Bank to cooperate with the Borrowers in obtaining a replacement bank satisfactory to the Agent and the Borrower (the "Replacement Bank"); (B) request the non-Affected Banks to acquire and assume all of the Affected Bank's Loans and Commitments, as provided herein, but none of such Banks shall be under an obligation to do so; or (C) designate a Replacement Bank approved by the Agent, such approval not to be unreasonably withheld or delayed. If any satisfactory Replacement Bank shall be obtained, and/or if any one or more of the non-Affected Banks shall agree to acquire and assume all of the Affected Bank's Loans and Commitment, then such Affected Bank shall assign, in accordance with (S)19, all of its Commitment, Loans, Letter of Credit Participations, Notes and other rights and obligations under this Agreement and all other Loan Documents to such Replacement Bank -31- or non-Affected Banks, as the case may be, in exchange for payment of the principal amount so assigned and all interest and fees accrued on the amount so assigned, plus all other Obligations then due and payable to the Affected Bank; provided, however, that (i) such assignment shall be without recourse, representation or warranty and shall be on terms and conditions reasonably satisfactory to such Affected Bank and such Replacement Bank and/or non-Affected Banks, as the case may be, and (ii) prior to any such assignment, the Borrowers shall have paid to such Affected Bank all amounts properly demanded and unreimbursed under (S)(S)5.3.2, 5.5 or 5.6. Upon the effective date of such assignment, the Borrowers shall issue replacement Notes to such Replacement Bank and/or non-Affected Banks, as the case may be, and such institution shall become a "Bank" for all purposes under this Agreement and the other Loan Documents. (S)6. COLLATERAL SECURITY AND GUARANTIES. The Obligations of the Borrowers shall be guaranteed equally and ratably by the Parent and each other Subsidiary (direct and indirect) of the Parent, to the extent that such other Subsidiary of the Parent is required to guaranty the obligations of the Parent under the terms of the Indentures relating to the Senior Notes. The Obligations of the Borrowers shall be secured by a perfected first priority security interest (subject only to Permitted Liens entitled to priority under applicable law) in (i) certain US Flag Vessels to the extent contemplated by the US Vessel Mortgage, and (ii) certain other assets of the Borrowers to the extent contemplated by the Security Documents; provided that, notwithstanding anything to the contrary contained in the Security Documents, the aggregate amount of Obligations of the Parent and the Borrowers which is secured pursuant to the Security Documents shall not, at any time, exceed the sum of (i) $65,000,000 plus (ii) fifteen percent (15%) of Consolidated Net Tangible Assets. (S)7. REPRESENTATIONS AND WARRANTIES. The Parent and each of the Borrowers jointly and severally represent and warrant to the Banks and the Agent on the Closing Date, on each Drawdown Date and on the date of any issuance, extension or renewal of a Letter of Credit as follows: (S)7.1. CORPORATE AUTHORITY. (S)7.1.1. INCORPORATION; GOOD STANDING. Each of the Parent, the Borrowers, and the Parent's other Subsidiaries, (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (b) has all requisite corporate power to own its property and conduct its business as now conducted, and (c) is in good standing as a foreign corporation and is duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified would not have a material adverse effect on the business, assets or financial condition of Borrowers or the Parent, the Borrowers, and the Parent's other Subsidiaries, taken as a whole. (S)7.1.2. AUTHORIZATION. The execution, delivery and performance of this Agreement and the other Loan Documents to which the Parent and its Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby (a) are within the corporate authority of each of such Persons, (b) have been duly authorized by all -32- necessary corporate proceedings by each of such Persons, (c) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which any of such Persons is subject or any judgment, order, writ, injunction, license, exemption or permit applicable to any of such Persons or make any such Person ineligible for any beneficial tax treatment or other regulatory or contractual treatment or status which is of material importance to its business or financial status, (d) do not require any waivers, consents or approvals by any of such Person's creditors which have not been obtained, (e) do not require any consents or approvals by any of such Person's shareholders (except such as will be duly obtained on or prior to the Closing Date and will be in full force and effect on and as of such date), and (f) do not conflict with any provision of the corporate charter or bylaws of, or any agreement or other instrument binding upon any of such Persons. (S)7.1.3. ENFORCEABILITY. The execution and delivery of this Agreement and each of the other Loan Documents to which the Parent and its Subsidiaries is or is to become a party will result in valid and legally binding obligations of each of such Persons enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. (S)7.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance of this Agreement and the other Loan Documents to which the Parent and its Subsidiaries is or is to become a party and the transactions contemplated hereby and thereby do not and will not require any approval, consent, order, authorization or license by, filing with, or notice to, any governmental or regulatory agency or authority other than those already obtained or given. (S)7.3. TITLE TO PROPERTIES; LEASES. Except as indicated on Schedule 7.3 attached hereto, the Parent and its Subsidiaries own all of the assets reflected in the consolidated balance sheet of the Parent and its Subsidiaries as at the Balance Sheet Date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date), subject to no rights of others, including any mortgages, leases, charters, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens. (S)7.4. FINANCIAL STATEMENTS (a) There have been furnished to each of the Banks a consolidated balance sheet of the Parent and its Subsidiaries as at the Balance Sheet Date, and consolidated statements of income and cash flows for the fiscal year then ended, certified by Coopers & Lybrand LLP. Such balance sheet and statements of income and cash flows were prepared in accordance with generally accepted accounting principles and fairly present the financial condition of the Parent and its Subsidiaries as of the close of business on the Balance Sheet Date and the results of operations for the fiscal year then ended. There are -33- no liabilities, contingent or otherwise, of the Parent or any of its Subsidiaries, as of the Balance Sheet Date, that would in accordance with generally accepted accounting principles be required to be disclosed on a balance sheet or footnotes thereto, which were not disclosed in such balance sheet and the notes related thereto. (b) There have also been furnished to each of the Banks the unaudited consolidated balance sheet of the Parent and its Subsidiaries as at December 31, 1997, and consolidated statements of income and cash flows for the portion of the fiscal year then ended. Such balance sheet and statements of income and cash flows were prepared in accordance with generally accepted accounting principles and fairly present the financial condition of the Parent and its Subsidiaries as of the close of business on such date and the results of operations for the portion of the fiscal year then ended. There are no liabilities, contingent or otherwise, of the Parent or any of its Subsidiaries, as of such date, that would in accordance with generally accepted accounting principles be required to be disclosed on a balance sheet or footnotes thereto, which were not disclosed in such balance sheet and the notes related thereto. (S)7.5. NO MATERIAL CHANGES; SOLVENCY. (a) Since the Balance Sheet Date there have been no changes in the business or financial condition or results of operations of the Parent and its Subsidiaries which have been, either individually or in the aggregate, materially adverse to the Borrowers or the Parent and its Subsidiaries, taken as a whole. (b) Each of the Parent and its Subsidiaries (before and after giving effect to the transactions contemplated by this Agreement and the other Loan Documents) (i) is solvent, (ii) has assets having a fair value in excess of its liabilities, (iii) has assets having a fair value in excess of the amount required to pay its liabilities on existing debts as such debts become absolute and matured, and (iv) has, and expects to continue to have, access to adequate capital for the conduct of its business and the ability to pay its debts from time to time incurred in connection with the operation of its business as such debts mature. (S)7.6. BUSINESS. Each of the Parent and its Subsidiaries enjoys peaceful and undisturbed possession under all leases of real or personal property of which it is lessee, none of which contains any unusual or burdensome provision which will materially adversely affect or impair the operations of such Person and all such leases are valid and subsisting and in full force and effect. Each such Person owns or possesses the right to use all the franchises, rights, licenses, operating rights, patents, trademarks, permits, service marks, trade names, and copyrights necessary for the conduct of its business as conducted and as proposed to be conducted, without any conflict with the rights of others. (S)7.7. LITIGATION. There is no restraining order, injunction or pending litigation applicable to the transactions contemplated by this Agreement or the other Loan Documents. -34- There are no actions, suits, proceedings or investigations of any kind pending or threatened against the Parent or any of its Subsidiaries before any court, arbitrator, tribunal or administrative agency or board that, if adversely determined, would be likely, either in any case or in the aggregate, to materially adversely affect the properties, assets, financial condition, prospects or business of the Parent and its Subsidiaries, taken as a whole, or materially impair the right of any of such Persons to carry on its business substantially as now conducted by it, or result in any substantial liability not adequately covered by insurance, or for which adequate reserves are not maintained on the consolidated balance sheet of the Parent and its Subsidiaries, or which question the validity of this Agreement or any of the other Loan Documents, or any action taken or to be taken pursuant hereto or thereto. (S)7.8. INTENTIONALLY OMITTED. (S)7.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Parent nor any of its Subsidiaries is in violation of any provision of its charter documents, bylaws, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of the Borrowers or the Parent and its Subsidiaries, taken as a whole. (S)7.10. TAX STATUS. The Parent and its Subsidiaries (a) have made or filed all federal, state or other income and all other tax returns, reports and declarations required by any jurisdiction to which any of them is subject, (b) have paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (c) have set aside on their books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of such Persons know of no basis for any such claim. (S)7.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing. (S)7.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Parent nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor is it an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. (S)7.13. ABSENCE OF ENCUMBRANCES, ETC. Except with respect to Permitted Liens, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry, or other public office, that purports -35- to cover, affect or give notice of any present or possible future lien on, or security interest in, any assets or property of the Parent or any of its Subsidiaries or rights thereunder. (S)7.14. PERFECTION OF SECURITY INTEREST; COLLATERAL. All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary under applicable law, to establish and perfect the Agent's security interest in the Collateral. The Collateral and the Agent's rights with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses. A Borrower is the owner of the Collateral free from any lien, security interest, encumbrance and any other claim or demand, except for Permitted Liens. All of the Obligations of the Borrowers to the Banks and the Agent under or in respect of the Loan Documents will, at all times from and after the execution and delivery of each of the Security Documents, be entitled to the benefits of and be secured by each of such Security Documents in accordance with the terms hereof and thereof. (S)7.15. CERTAIN TRANSACTIONS. Except for arm's length transactions pursuant to which the Parent or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than such Person could obtain from third parties, none of the officers, directors, or employees of the Parent or any of its Subsidiaries is presently a party to any contract, agreement or other arrangement providing for the furnishing of services (other than for services as employees, officers and directors) to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of such Person, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. (S)7.16. EMPLOYEE BENEFIT PLANS. (S)7.16.1. IN GENERAL. Each Employee Benefit Plan has been maintained and operated in compliance in all material respects with the provisions of ERISA and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions. (S)7.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit Plan which is an employee welfare benefit plan within the meaning of (S)3(1) or (S)3(2)(B) of ERISA, no benefits are due unless the event giving rise to the benefit entitlement occurs prior to plan termination (except as required by Title I, Part 6 of ERISA). Either of the Borrowers or the Parent or an ERISA Affiliate, as appropriate, may terminate each such Plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) in the discretion of such Person without liability to any Person. (S)7.16.3. GUARANTEED PENSION PLANS; MULTIEMPLOYER PLANS. Neither of the Borrowers, the Parent nor any ERISA Affiliate has sponsored, maintained, made any contributions to or has any liability in respect of any Guaranteed Pension Plan or Multiemployer Plan. -36- (S)7.17. REGULATIONS U AND X; USE OF PROCEEDS. The Borrowers will use the proceeds of the Loans solely for working capital and for general corporate purposes. The Borrowers will obtain Letters of Credit solely for general corporate purposes. No portion of any Loan is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. No portion of the proceeds of any Loans is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of (a) knowingly purchasing, or providing credit support for the purchase of, Ineligible Securities from a Section 20 Subsidiary during any period in which such Section 20 Subsidiary makes a market in such Ineligible Securities, (b) knowingly purchasing, or providing credit support for the purchase of, during the underwriting or placement period, any Ineligible Securities being underwritten or privately placed by a Section 20 Subsidiary, or (c) making, or providing credit support for the making of, payments of principal or interest on Ineligible Securities underwritten or privately placed by a Section 20 Subsidiary and issued by or for the benefit of the Parent or any of its Subsidiaries. (S)7.18. ENVIRONMENTAL COMPLIANCE. Each of the Parent and its Subsidiaries has taken all steps reasonably necessary to investigate the past and present condition and usage of the real estate owned or leased by it and the operations conducted thereon and, based upon such diligent investigation, has determined that: (a) none of the Parent or its Subsidiaries or any operator of its real estate or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any statute, regulation, ordinance, order or decree of the United States of America or any state or other jurisdiction thereof, or any other nation or jurisdiction relating to health, safety or the environment, including, without limitation, any international conventions to which their business or assets are subject (hereinafter "Environmental Laws"), which violation could reasonably be expected to have a material adverse effect on the business, assets or financial condition of such Persons, taken as a whole; (b) except as set forth on Schedule 7.18 attached hereto, none of the Parent or its Subsidiaries has received notice from any third party including, without limitation any federal, state or local governmental authority, (i) that any one of them has been identified by the United States Environmental Protection Agency ("EPA") as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste, as defined by 42 U.S.C. (S) 9601(5), any hazardous substances as defined by 42 U.S.C. (S) 9601(14), any pollutant or contaminant as defined by 42 U.S.C. (S)9601(33) and any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental -37- Laws ("Hazardous Substances") which any one of them has generated, transported or disposed of has been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that any of such Persons conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party's incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances; (c) except as set forth on Schedule 7.18 attached hereto: (i) no portion of the real estate owned or leased by the Parent or its Subsidiaries and no Vessel has been used for the handling, processing, storage or disposal of Hazardous Substances except in accordance in all material respects with applicable Environmental Laws; and no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Real Estate; (ii) in the course of any activities conducted by such Persons or operators of such Person's properties, no Hazardous Substances have been generated or are being used on the Real Estate or any Vessel except in accordance in all material respects with applicable Environmental Laws; (iii) there have been no releases (i.e. any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping) or threatened releases of Hazardous Substances on, upon, into or from the properties (including, without limitation, the Vessels) of any of such Persons which releases could reasonably be expected to have a material adverse effect on the business, assets or financial condition of such Person; (iv) to the best of such Person's knowledge, there have been no releases on, upon, from or into any real property in the vicinity of any of such real estate which, through soil or groundwater contamination, may have come to be located on, and which could reasonably be expected to have a material adverse effect on the business, assets or financial condition of such Person; and (v) in addition, any Hazardous Substances that have been generated on any of the real estate have been transported offsite only by carriers having an identification number issued by the EPA, treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities have been and are, to the best of such Person's knowledge, operating in material compliance with such permits and applicable Environmental Laws; (d) none of the Parent or its Subsidiaries nor any of the real estate is subject to any applicable environmental law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any governmental agency or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or as a condition to the effectiveness of any transactions contemplated hereby; and (e) all of the Vessels comply in all material respects with all applicable international conventions, national, federal, state and other governmental laws and -38- regulations; the rules of the classification societies under which the Vessels are classed and any contractual obligations regarding the prevention of pollution and other marine environmental hazards, including the transportation and management of hazardous substances and waste disposal, and the Parent and its Subsidiaries have made all required payments and contributions to statutory environmental insurance schemes and other environmental insurance schemes applicable to the Parent and its Subsidiaries and customary for the business and operations conducted by them. (S)7.19. SUBSIDIARIES. Each Subsidiary (whether direct or indirect) of the Parent is set forth on Schedule 7.19 attached hereto. Except to the extent permitted under (S)9.3(f), neither the Parent nor its Subsidiaries is engaged in any joint venture or partnership with any other Person. (S)7.20. CHIEF EXECUTIVE OFFICE; BOOKS AND RECORDS. (a) Each of the Borrowers' and the Parent's chief executive office is at 250 North American Court, Houma, Louisiana 70363, at which location their respective books and records are kept. (b) Marine Operators' federal employer identification number is 72- 109-6124. Marine Assets' federal employer identification number is 72-125- 2404. The Parent's federal employer identification number is 72-125-2405. (S)7.21. DISCLOSURE. None of this Agreement, the other Loan Documents or the other information furnished by the Parent or its Subsidiaries to the Agent or the Banks contains any untrue statement of a material fact or omits to state a material fact (known to such Person in the case of any document or information not furnished by it) necessary in order to make the statements herein or therein not misleading. There is no fact known to any such Person which materially adversely affects, or which is reasonably likely in the future to materially adversely affect, exclusive of effects resulting from changes in general economic conditions, the business, assets, financial condition or prospects of such Persons, taken as a whole. (S)7.22. FISCAL YEAR. The Parent and each of its Subsidiaries has a fiscal year which is the twelve months ending on December 31 of each year. (S)7.23. NO LABOR AGREEMENTS. Except as described on Schedule 7.23, none of the Parent nor any of its Subsidiaries has any labor agreements in effect with any unionized group of employees. (S)7.24. CONCERNING THE VESSELS. (a) Schedule 7.24(a) sets forth a true and correct list describing each of the Vessels registered under the laws of the United States of America (the "US Flag Vessels") owned on the Closing Date by either of the Borrowers and correctly sets forth whether each such Vessel is owned by Marine Assets or Marine Operators. Each Vessel has been appropriately registered under the laws of its jurisdiction or registration, -39- including, with respect to each US Flag Vessel, the laws of the United States of America, and as of the Closing Date except as disclosed to the Banks in writing, neither of the Borrowers own any Vessels registered under the laws of the United States of America other than the US Flag Vessels. (b) Each Vessel complies with all applicable maritime laws and regulations, including, with respect to each US Flag Vessel, all applicable requirements of the Shipping Act of 1916, as amended and in effect, and all applicable regulations thereunder and all applicable requirements of the maritime laws of the United States of America and all applicable regulations thereunder. Each of the Borrowers and the Parent is a citizen of the United States for purposes of operating each of the US Flag Vessels in the coastwise trade in accordance with Section 2 of the Shipping Act of 1916, as amended and in effect, and the regulations thereunder. Each bareboat or demise charterer of each of the US Flag Vessels operated in the coastwise trade of the United States (i) is a citizen of the United States for purposes of operating and maintaining such US Flag Vessels in the coastwise trade in accordance with Section 2 of the Shipping Act of 1916, as amended and in effect, and the regulations thereunder or (ii) is in compliance with the citizenship requirements set forth in 46 App. U.S.C.A. (S)883-1. Each of the US Flag Vessels listed on Schedule 7.24(b) attached hereto is covered by a valid Coast Guard Certificate of Inspection, and Schedule 7.24(c) attached hereto lists the load line Certificate or Class of those US Flag Vessels classed by the American Bureau of Shipping (or any other classification society or societies satisfactory to the Agent and the Banks). Each US Flag Vessel operated and maintained as a vessel in the coastwise trade of the United States is so operated in accordance with the Shipping Act of 1916, as amended and in effect, and the regulations thereunder, and all other US Flag Vessels if operated and maintained in the coastwise trade would be eligible to be so operated in accordance with the Shipping Act of 1916, as amended and in effect, and the regulations thereunder. (c) Each Vessel subject to a Vessel Mortgage is covered by hull and machinery, protection and indemnity, war risk, loss of earnings and excess liability insurance in accordance with the requirements of such Vessel Mortgage. (S)8. AFFIRMATIVE COVENANTS. The Parent and each of the Borrowers jointly and severally covenant and agree that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank has any obligation to make any Loans or the Agent has any obligation to issue, extend or renew any Letters of Credit hereunder: (S)8.1. PUNCTUAL PAYMENT. The Borrowers will duly and punctually pay or cause to be paid the principal and interest on the Loans, all Reimbursement Obligations, the Letter of Credit Fees, the Commitment Fees and all other amounts provided for in this Agreement, all in accordance with the terms of this Agreement, the Notes and the other Loan Documents. (S)8.2. MAINTENANCE OF OFFICE. Each of the Borrowers and the Parent will maintain its chief executive office at 250 North American Court, Houma, Louisiana 70363, or at such other place in the United States of America as such Person shall designate upon written notice to the -40- Agent, where notices, presentations and demands to or upon such Person in respect of the Loan Documents may be given or made. (S)8.3. RECORDS AND ACCOUNTS. Each of the Borrowers and the Parent will and the Parent will cause each of its other Subsidiaries to (a) keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles and (b) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties, contingencies, and other reserves. (S)8.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Parent and the Borrowers will deliver to each of the Banks: (a) as soon as practicable, but in any event not later than ninety (90) days after the end of each fiscal year of the Parent, the consolidated balance sheet of the Parent and its Subsidiaries as at the end of such year, and the related consolidated statement of income and consolidated statement of cash flow for such year, each setting forth in comparative form the figures for the previous fiscal year and all statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and certified without qualification by Coopers & Lybrand LLP or by other independent certified public accountants of recognized national standing, which statements shall include a footnote which identifies any Default or Event of Default; (b) as soon as practicable, but in any event not later than forty-five (45) days after the end of each of the first three fiscal quarters of the Parent, copies of the unaudited consolidated balance sheet of the Parent and its Subsidiaries as at the end of such quarter, and the related consolidated statement of income and consolidated statement of cash flow for the portion of the Parent's fiscal year then elapsed, all in reasonable detail and prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officers of each of the Borrowers and the Parent that the information contained in such financial statements fairly presents the financial position of the Parent and its Subsidiaries on the date thereof (subject to year-end adjustments); (c) promptly upon the delivery of the financial statements referred to in subsections (a) and (b) above, a statement certified by the principal financial or accounting officers of the Borrowers and the Parent in substantially the form of Exhibit C attached hereto and setting forth in reasonable detail computations (i) calculating the Leverage Ratio for purposes of determining the Applicable Margin and (ii) evidencing compliance with the covenants contained in (S)10 hereof and (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date; -41- (d) promptly upon the filing or mailing thereof, copies of all material information of a financial nature filed with the Securities and Exchange Commission or sent to the stockholders of the Parent; (e) from time to time such other financial data and information (including accountants' management letters) as the Agent or any Bank may reasonably request; and (f) once each calendar year, or more frequently as determined by the Agent or the Majority Banks, upon the request of the Agent or the Majority Banks, the Borrowers will, at their own expense, obtain and deliver to the Agent and the Banks appraisal reports in form and substance and from appraisers satisfactory to the Agent, stating the then current fair market values of all or any portion of the Vessels subject to a Vessel Mortgage, provided, that no more than one such appraisal per calendar year shall be conducted and made at the expense of the Borrowers. The first such appraisal following the Closing Date shall be completed by January 31, 1999. Such appraisal may include an inspection of each such Vessel by marine engineers or other surveyors selected by the Agent in its sole discretion. (S)8.5. NOTICES. (S)8.5.1. DEFAULTS. The Parent and the Borrowers will promptly notify the Agent in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Agreement or any other note, evidence of indebtedness, indenture or other obligation to which or with respect to which the Parent or any of its Subsidiaries is a party or obligor, whether as principal or surety, the Parent and the Borrowers shall forthwith give written notice thereof to the Agent, describing the notice or action and the nature of the claimed default. (S)8.5.2. ENVIRONMENTAL EVENTS. The Parent and the Borrowers will promptly give notice to the Agent (a) of any material violation of any Environmental Law that the Parent or any of its Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (b) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, or any national, federal, state or local environmental agency or board, that has the potential to materially adversely affect the assets, liabilities, financial conditions or operations of the Parent and its Subsidiaries, taken as a whole, or the Agent's security interests pursuant to the Security Documents. (S)8.5.3. NOTIFICATION OF CLAIMS AGAINST COLLATERAL. The Parent and the Borrowers will, immediately upon becoming aware thereof, notify the Agent in writing of any setoff, claims, withholdings or other defenses to which any of the Collateral, or the Agent's rights with respect to the Collateral, are subject, involving in any one case an amount of $1,000,000 or more. -42- (S)8.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The Parent and the Borrowers will, and the Parent will cause each of its other Subsidiaries to, give notice to the Agent in writing within fifteen (15) days of becoming aware of any litigation or proceedings or any pending litigation and proceedings affecting the Parent or any of its Subsidiaries or to which the Parent or any of its Subsidiaries is or becomes a party involving an uninsured claim against the Parent or any of its Subsidiaries that could reasonably be expected to have a materially adverse effect on the Parent and its Subsidiaries, taken as a whole, and stating the nature and status of such litigation or proceedings. The Parent and the Borrowers will, and the Parent will cause each of its other Subsidiaries to, give notice to the Agent, in writing, in form and detail satisfactory to the Agent, within ten (10) days of any judgment not covered by insurance, final or otherwise, against the Parent or any of its Subsidiaries in an amount in excess of $1,000,000. (S)8.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. Except as permitted under (S)9.5.1 hereof, the Parent and each of the Borrowers will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises and those of the Parent's other Subsidiaries. The Parent and each of the Borrowers (a) will cause all of its properties and those of the Parent's other Subsidiaries used or useful in the conduct of its business or the business of such Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (b) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of such Person may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, and (c) will, and the Parent will cause each of its other Subsidiaries to, continue to engage primarily in the businesses now conducted by them and in related businesses; provided that nothing in this (S)8.6 shall prevent the Parent or any of the Borrowers from discontinuing the operation and maintenance of any of its properties or those of the Parent's other Subsidiaries if such discontinuance is, in the judgment of such Person, desirable in the conduct of its or their business and does not in the aggregate materially adversely affect the business of the Parent and its Subsidiaries on a consolidated basis. (S)8.7. INSURANCE. The Parent and each of the Borrowers will, and the Parent will cause each of its other Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent and in accordance with the terms of the Security Documents. (S)8.8. TAXES AND CLAIMS. The Parent and each of the Borrowers will, and the Parent will cause each of its other Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges (other than taxes, assessments and other governmental charges imposed by jurisdictions other than those in which such Person's business is principally conducted that in the aggregate are not material to the business or assets of the Borrowers on an individual basis or of the Parent and its Subsidiaries on a consolidated basis) imposed upon it and its real properties, sales and -43- activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property; provided that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if such Person shall have set aside on its books adequate reserves with respect thereto to the extent required in accordance with generally accepted accounting principles; and provided further that the Parent, each of the Borrowers and each other Subsidiary of the Parent will pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor. (S)8.9. INSPECTION OF PROPERTIES AND BOOKS, ETC. The Parent and each of the Borrowers shall permit the Banks, through the Agent or any of the Banks' other designated representatives, to visit and inspect any of the properties of the Parent, the Borrowers or any of the Parent's other Subsidiaries to examine the books of account of the Parent and its Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of the Parent and its Subsidiaries with, and to be advised as to the same by, its and their officers, all at such reasonable times and intervals as the Agent or any Bank may reasonably request. (S)8.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The Parent and each of the Borrowers will, and the Parent will cause each of its other Subsidiaries to, comply in all material respects with (a) the applicable laws and regulations wherever its business is conducted or its assets are owned or situated, including all Environmental Laws, (b) the provisions of its charter documents and by-laws, (c) all stock exchange or other applicable regulatory rules, (d) all agreements and instruments by which it or any of its properties may be bound, (e) all applicable decrees, orders, and judgments, and (f) the rules and requirements of any classification society in which any Vessel is classed. If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Parent, the Borrower or any of the Parent's other Subsidiaries may fulfill any of its obligations hereunder, the Parent and the Borrower will, or will cause such other Subsidiary to, immediately take or cause to be taken all reasonable steps within the power of such Person to obtain such authorization, consent, approval, permit or license and furnish the Agent and the Banks with evidence thereof. (S)8.11. USE OF PROCEEDS. The Borrowers will use the proceeds of the Loans solely for working capital and for general corporate purposes. The Borrowers will obtain Letters of Credit solely for general corporate purposes. (S)8.12. CONCERNING THE VESSELS. Each of the Borrowers shall at all times operate each Vessel in compliance in all respects with all applicable governmental rules, regulations and requirements pertaining to such Vessels (including, without limitation, all requirements of the Shipping Act of 1916, as amended and in effect, applicable to each US Flag Vessel) and, to the extent required to be classed, in compliance in all respects with all rules, regulations and requirements of the applicable classification society. Each of the Borrowers and the Parent shall at all times maintain and shall assure that each demise or bareboat charterer of the US Flag Vessels operated and maintained in the coastwise trade of the United States shall maintain, as -44- required, its citizenship of the United States for purposes of operating each of the US Flag Vessels in the coastwise trade in accordance with Section 2 of the Shipping Act of 1916, as amended and in effect, and the regulations thereunder or the citizenship requirements set forth in 46 App. U.S.C.A. (S)883-1. Upon request of the Agent, the Borrowers shall furnish to the Agent and the Banks the certificate of each classification society covering each of the US Flag Vessels listed on Schedule 7.24(c) attached hereto no later than thirty (30) days after the end of each fiscal year of the Parent. The Borrowers shall keep each Vessel registered under the laws of the United States or other applicable jurisdiction and shall maintain in full force and effect the Coast Guard Certificate of Inspection (or the equivalent for any Vessel registered under the laws of another jurisdiction) of each such Vessel which requires such a certificate and furnish to the Agent copies of all renewals and extensions thereof. (S)8.13. FURTHER ASSURANCES. The Parent and the Borrowers will and will cause each of the Parent's other Subsidiaries to cooperate with the Banks and the Agent and execute such further instruments and documents as the Banks or the Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents. (S)8.14. ADDITIONAL GUARANTORS. The Parent and the Borrowers will cause each Subsidiary acquired or formed after the Closing Date, contemporaneously with such formation or acquisition, to guaranty the Obligations pursuant to a guaranty in form and substance satisfactory to the Agent, which guaranty shall be a Security Document hereunder; provided that the requirements of this (S)8.14 shall not apply to (a) the SWATH Subsidiary and (b) any other Subsidiary formed after the Closing Date to the extent, in each case, that such Subsidiary does not, and is not required pursuant to the terms of the Indentures relating thereto, to guaranty the obligations of the Parent under the Senior Notes. (S)9. CERTAIN NEGATIVE COVENANTS. The Parent and each of the Borrowers jointly and severally covenant and agree that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank has any obligation to make any Loans or the Agent has any obligation to issue, extend or renew any Letters of Credit hereunder: (S)9.1. RESTRICTIONS ON INDEBTEDNESS. The Parent and each of the Borrowers will not, and the Parent will not permit any of its other Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (a) Indebtedness to the Banks and the Agent arising under any of the Loan Documents; (b) Indebtedness of the Borrowers or the Parent or their Subsidiaries in respect of current liabilities incurred in the ordinary course of business not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; -45- (c) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of (S)8.8; (d) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which such Person shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; (e) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; (f) Indebtedness existing on the Closing Date of this Agreement and listed and described on Schedule 9.1 hereto and Indebtedness issued to refinance or replace such Indebtedness, provided that (i) the obligor on the Indebtedness so refinanced or replaced is the obligor on such refinancing or replacement Indebtedness, (ii) the aggregate amount of such refinancing or replacement Indebtedness plus the amount of Indebtedness listed on Schedule 9.1 which is still outstanding does not exceed the aggregate principal amount of the Indebtedness set forth on Schedule 9.1 hereto (such principal amount to include commitments under revolving credit facilities), (iii) such refinancing or replacement Indebtedness has a final maturity date no earlier than December 1, 2002, (iv) such Indebtedness is on terms and conditions (including, without limitation, terms relating to interest rate, covenants, defaults, mandatory prepayments and the ability of such Subsidiary to make dividends or loans to the Parent or the Borrowers) not materially more onerous to the Borrower or such Subsidiary than the Indebtedness set forth on Schedule 9.1 hereto, (v) if secured, such Indebtedness is not secured by liens on any assets of the Borrower or such Subsidiary which were not previously subject to liens securing the Indebtedness set forth on Schedule 9.1 hereto; and (vi) after giving effect to the incurrence of such refinancing or replacement Indebtedness no Default or Event of Default shall have occurred and be continuing and the Borrower shall be in compliance with the borrowing limitations set forth in (S)2.1; (g) (i) Indebtedness incurred after the date hereof in connection with the acquisition or construction (and within 120 days of such acquisition or construction) of any real or personal property by the Parent, the Borrowers or any other Subsidiary of the Parent and Indebtedness assumed in connection with any acquisition (whether of assets or stock) of a business by any of such Persons, including Indebtedness issued to refinance or replace such Indebtedness so long as such refinancing or replacement Indebtedness otherwise complies with the criteria set forth in (S)(S)9.1(f)(i), (ii), (iv), (v) and (vi) (without reference to Schedule 9.1 hereto) and (ii) Capitalized Leases; provided (A) that the aggregate principal amount of all such Indebtedness under this clause (g) shall not exceed $50,000,000 at any time and (B) after giving effect to the incurrence of any such Indebtedness no Default or Event of Default shall have occurred and be continuing and the Borrower shall be in compliance with the borrowing limitations set forth in (S)2.1; -46- (h) Indebtedness of a wholly-owned Subsidiary of the Parent or a Borrower owing to the Parent or such Borrower, provided that the Investment corresponding to such Indebtedness is permitted pursuant to (S)9.3(e); (i) contingent obligations arising in connection with (i) surety, performance or other similar bonds obtained in the ordinary course of business, consistent with past practices, and (ii) standby letters of credit issued in lieu of such bonds; (j) Indebtedness in respect of the Senior Notes and guaranties thereof in an aggregate principal amount not to exceed $280,000,000; (k) Indebtedness of the Parent or either of the Borrowers with respect to the SWATH Vessel in an aggregate principal amount not to exceed $10,000,000; (l) additional unsecured subordinated Indebtedness in an aggregate principal amount and on terms and conditions (including, without limitation, with respect to tenor, interest rate, and terms of the subordination provisions relating thereto) acceptable to the Agent and the Majority Banks, in their sole discretion; (m) additional unsecured Indebtedness in an aggregate principal amount not to exceed $10,000,000; and (n) Indebtedness of the Parent consisting of guaranties of Indebtedness of Saevik Supply or its Subsidiaries permitted pursuant to (S)9.1(f) and (S)9.1(g). (S)9.2. RESTRICTIONS ON LIENS. The Parent and each of the Borrowers will not, and the Parent will not permit any of its other Subsidiaries to, (a) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (b) transfer any of such property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (c) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (d) suffer to exist for a period of more than sixty (60) days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; (e) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; or (f) enter into or permit to remain in effect any agreement by which such Person agrees not to encumber, mortgage, pledge, restrict or grant a security interest in any of its assets, provided that the Parent, each of the Borrowers and any other Subsidiary of the Parent may create or incur or suffer to be created or incurred or to exist any one or more of the following Permitted Liens: -47- (i) liens to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties to secure claims for labor, material or supplies or other Vessel operating expenses in respect of obligations not overdue; (ii) deposits or pledges made in connection with, or to secure payment of, payroll taxes, workmen's compensation, unemployment insurance, old age pensions or other social security obligations; (iii) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and performance bonds and other obligations of a similar nature, in each case made or incurred in the ordinary course of business and in respect of obligations which are not overdue; (iv) liens on properties in respect of judgments or awards, the Indebtedness with respect to which is permitted by (S)9.1(d) hereof; (v) liens of carriers, warehousemen, mechanics and materialmen, and other like liens on properties in existence less than 120 days from the date of creation thereof in respect of obligations not overdue; (vi) encumbrances consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which such Person is a party, and other minor liens or encumbrances none of which in the opinion of such Person interferes materially with the use of the property affected in the ordinary conduct of the business of such Person, which defects do not individually or in the aggregate have a materially adverse effect on the business of the Parent and its Subsidiaries on a consolidated basis; (vii) liens outstanding on the Closing Date and listed on Schedule 9.2 attached hereto and liens securing replacement or refinancing Indebtedness permitted pursuant to (S)9.1(f), provided that (i) such liens do not extend to any property of such Person not previously subject to a lien securing the Indebtedness set forth on Schedule 9.2 hereto; and (ii) after giving effect to incurrence of such lien no Default or Event of Default shall have occurred and be continuing and the Borrower shall be in compliance with the borrowing limitations set forth in (S)2.1; (viii) security interests in and mortgages or negative pledges on real or personal property acquired or constructed after the Closing Date and liens on assets acquired subject to such liens or negative pledges, to secure Indebtedness of the type and amount permitted by (S)9.1(g) hereof, incurred or assumed in connection with the acquisition of such property, which security interests, mortgages or negative pledges cover only the real or personal property so acquired (and the accounts, contracts and insurance proceeds associated with such property); -48- (ix) liens in favor of the Agent for the benefit of the Banks and the Agent under the Loan Documents; and (ix) liens on the SWATH Vessel, charters thereof and construction and related agreements with respect thereto, to secure the Indebtedness permitted by (S)9.1(k) hereof. (S)9.3. RESTRICTIONS ON INVESTMENTS. The Parent and each of the Borrowers will not, and the Parent will not permit any of its other Subsidiaries to, make or permit to exist or to remain outstanding any Investment except: (a) Investments in marketable direct or guaranteed obligations of the United States of America, the Netherlands or Norway that mature within one (1) year from the date of purchase by such Person and repurchase agreements relating to the foregoing; (b) Investments in demand deposits, certificates of deposit, bankers acceptances and time deposits of commercial banks organized under the laws of any country which is a member of the OECD (having total assets in excess of $1,000,000,000); (c) Investments in securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than "P 1" if rated by Moody's Investors Service, Inc. and not less than "A 1" if rated by Standard and Poor's Ratings Group or similar Dutch or Norwegian securities; (d) Investments existing on the Closing Date and listed on Schedule 9.3 attached hereto; (e) (i) Investments by the Parent, a Borrower or a Guarantor in a Borrower or a Guarantor; and (ii) Investments by the Parent or a Borrower in non-Guarantor Subsidiaries; provided that (A) the aggregate amount of all such Investments made pursuant to this (S)9.3(e)(ii) shall not exceed $30,000,000, (B) no Default or Event of Default exists at the time of the making of such Investment or would result therefrom; and (C) the proceeds of such Investment shall be used by such Subsidiary only to repay outstanding Indebtedness owed to third parties not Affiliated with the Parent or any of its Subsidiaries. (f) Investments in joint ventures and non-Guarantor Subsidiaries in lines of business related to the Borrowers' business not to exceed $25,000,000 in the aggregate; and (g) Investments by the Parent in the Swath Subsidiary in an aggregate amount not to exceed $4,000,000. -49- (S)9.4. DISTRIBUTIONS. None of the Borrowers nor the Parent will make any Distributions other than (a) Distributions by the Borrowers to the Parent in an aggregate amount for all Borrowers not to exceed in any one fiscal year of the Borrowers the greater of (i) the sum of (A) the scheduled payments of principal and interest under the Senior Notes for such fiscal year plus (B) the Borrowers' allocable share of income taxes, franchise taxes, professional fees and other operating expenses for such year (it being understood that, with respect to the amount of each Borrower's allocable share of income taxes, such amount shall not exceed the amount of income taxes for which such Borrower would have been liable had the accounts of such Borrower not been consolidated with the accounts of the Parent) and (ii) an amount equal to twenty-five percent (25%) of the net income of the Borrowers for such fiscal year; (b) Distributions by the Borrowers to the Parent in an aggregate amount for all such Distributions made after the Closing Date not to exceed $25,000,000; and (c) Distributions by the Parent in an aggregate amount for all such Distributions made after the Closing Date not to exceed $25,000,000, consisting of the purchase or redemption by the Parent of the capital stock of the Parent; provided that no Distribution (other than Distributions in respect of taxes) shall be made if, after giving effect to such Distribution or such payment of principal or interest under the Senior Notes, a Default or Event of Default shall have occurred and be continuing. (S)9.5. MERGER, CONSOLIDATION AND SALE OF ASSETS. (S)9.5.1. MERGERS AND ACQUISITIONS. The Parent and each of the Borrowers will not, and the Parent will not permit any of its other Subsidiaries to, become a party to any merger or consolidation, except so long as no Default or Event of Default then exists or would result therefrom, (i) the merger or consolidation of one or more of the Subsidiaries of the Parent with and into the Parent, (ii) the merger or consolidation of two or more Subsidiaries of the Parent provided, that in the case of the merger of a guarantor Subsidiary with a non-guarantor Subsidiary, the guarantor Subsidiary shall be the surviving corporation in such merger, or (iii) so long as such merger would not otherwise violate this Agreement, the merger of one or more other corporations with and into the Parent, a Borrower or a Subsidiary of a Borrower, provided that in the case of any merger permitted under this (S)9.5.1, if such merger or consolidation involves either of the Borrowers, such Borrower is the surviving corporation. The Parent and each of the Borrowers will not, and the Parent will not permit any of its other Subsidiaries to agree to or effect any asset acquisition of a business which is not engaged primarily in a line of business substantially similar to the business now conducted by the Borrowers. (S)9.5.2. DISPOSITION OF ASSETS. The Parent and each of the Borrowers will not, and the Parent will not permit any of its other Subsidiaries to, become a party to or agree to or effect any sale or other disposition of assets, provided, that the Parent, the Borrowers and the Parent's other Subsidiaries may sell or otherwise dispose of any assets so long as: (i) immediately prior to and after, and after giving effect to such sale or other disposition, no Default or Event of Default shall then exist; -50- (ii) the aggregate net book value of all such assets sold or otherwise disposed of during the period of the four consecutive fiscal quarters most recently ended prior to the date of such sale or disposition shall not exceed an amount equal to five percent (5%) of Consolidated Net Tangible Assets, determined as at the end of the most recently ended fiscal quarter; (iii) each such sale is to a third party on an arms length basis for cash in an amount representing fair and reasonable market value therefor; and (iv) the Borrowers shall use the net proceeds of such sale or disposition to prepay the principal balance of the Loans, if such disposition of assets would otherwise result in a violation of (S)10.4 hereof. (S)9.6. COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as otherwise set forth on Schedule 7.18 attached hereto, the Parent and each of the Borrowers will not, and the Parent will not permit any of its other Subsidiaries to, (a) use any of the real estate or any portion thereof or any Vessel for the handling, processing, storage or disposal of Hazardous Substances, except in accordance in all material respects with applicable Environmental Laws, (b) cause or permit to be located on any of the real estate any underground tank or other underground storage receptacle for Hazardous Substances, except in accordance in all material respects with applicable Environmental Laws, (c) generate any Hazardous Substances on any of the real estate or any Vessel, except in accordance in all material respects with applicable Environmental Laws, (d) conduct any activity at any real estate or use any real estate or any Vessel in any manner so as to cause a release (i.e. releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) or threatened release of Hazardous Substances on, upon or into the real estate or on or from such Vessel, except in accordance in all material respects with applicable Environmental Laws, or (e) otherwise conduct any activity at any real estate or on any Vessel or use any real estate or any Vessel in any manner that would violate, in any material respect, any Environmental Law or bring such real estate or Vessel in violation, in a material respect, of any Environmental Law. (S)9.7. EMPLOYEE BENEFIT PLANS. None of the Borrowers nor the Parent nor any ERISA Affiliate will: (a) engage in any "prohibited transaction" within the meaning of (S)406 of ERISA or (S)4975 of the Code which could result in a material liability for the Parent or any of its Subsidiaries; or (b) sponsor, maintain, make contributions to or incur liabilities in respect of any Guaranteed Pension Plan or Multiemployer Plan. (S)9.8. BUSINESS ACTIVITIES. None of the Borrowers, the Guarantors nor the Parent will engage directly or indirectly (whether through Subsidiaries or otherwise) in any type of business other than business involving the operation, ownership or management of vessels used for transportation or service. -51- (S)9.9. CHANGE OF CHIEF EXECUTIVE OFFICE OR CORPORATE NAME. None of the Borrowers, the Guarantors nor the Parent will change its chief executive office, federal employer identification number or registered number (as the case may be) or its corporate name, unless it shall have (a) given the Banks at least 30 days' advance written notice of such change, and (b) filed in all necessary jurisdictions such UCC-3 financing statements or other documents as may be necessary to continue without impairment or interruption the perfection and priority of the liens on the Collateral in favor of the Agent pursuant to the Security Documents. (S)9.10. FISCAL YEAR. The Parent and its Subsidiaries will not change the date of the end of its fiscal year from that set forth in (S)7.22 hereof. (S)9.11. TRANSACTIONS WITH AFFILIATES. Except as otherwise expressly permitted by the terms hereof, the Parent and each of the Borrowers will not and will not permit any of the Parent's other Subsidiaries to engage in any transaction with any Affiliate on terms more favorable to such Affiliate than would have been obtainable on an arm's-length basis, considered from the perspective of the Parent or such Borrower or Subsidiaries, as the case may be. (S)9.12. MODIFICATION OF CERTAIN DOCUMENTS. The Parent and the Borrowers will not and will not permit the Parent's other Subsidiaries to, amend, supplement or waive in any material respect any of the terms or conditions of the Senior Notes as set forth in the forms thereof delivered to the Agent on or prior to the Closing Date. (S)9.13. UPSTREAM LIMITATIONS. The Parent and the Borrowers will not, nor will the Parent permit any of its Subsidiaries to, enter into any agreement, contract or arrangement (other than this Agreement and the other Loan Documents) restricting the ability of any Subsidiary of the Parent to pay or make dividends or distributions in cash or kind or to make loans or advances; provided that this limitation does not apply (i) to the SWATH Subsidiary, (ii) to other Subsidiaries that are not Restricted Subsidiaries, (iii) to other special purpose non-Guarantor Subsidiaries formed after the date hereof the Investment in which is permitted pursuant to (S)9.3(f), or (iv) to restrictions on dividends or distributions arising from an event of default under an agreement by Saevik Supply or its Subsidiaries governing Indebtedness permitted under (S)9.1(f) and (S)9.1(g) hereof. (S)9.14. INCONSISTENT AGREEMENTS. The Parent and the Borrower will not, nor will the Parent permit any of its Subsidiaries to, enter into any contract, arrangement or agreement containing any provision which would be violated or breached by the performance by the Parent, the Borrowers or any of the Parent's other Subsidiaries of its obligations hereunder, under any of the Loan Documents. (S)10. FINANCIAL COVENANTS. (S)10.1. DEBT SERVICE COVERAGE RATIO. The Parent and the Borrowers will not permit the Debt Service Coverage Ratio, determined at the end of each fiscal quarter of the Parent, -52- commencing with the fiscal quarter ending March 31, 1998, to be less than 1.35:1 for the fiscal quarter ending March 31, 1998 and 1.5:1 for each fiscal quarter thereafter. (S)10.2. LEVERAGE RATIO. The Parent and the Borrowers will not, permit the Leverage Ratio, determined as at the end of each fiscal quarter of the Parent, to be more than 3.5 to 1.0. (S)10.3. FUNDED DEBT TO NET WORTH. The Parent and the Borrowers will not, at any time, permit the ratio of the consolidated Funded Debt of the Parent and its Subsidiaries to the consolidated Net Worth of the Parent and its Subsidiaries to exceed 2.0 to 1. (S)10.4. MINIMUM MORTGAGED VESSEL VALUE. The Parent and the Borrowers will not, at any time, permit the appraised fair market value of the Vessels subject to a first priority preferred mortgage in favor of the Agent, for the benefit of the Banks and the Agent, pursuant to the Security Documents (as stated in the most current appraisals delivered to the Agent pursuant to (S)8.4(h) hereof) to be less than 140% of the sum of (i) the Outstanding Loans, plus (ii) the Maximum Drawing Amount, plus (iii) all Unpaid Reimbursement Obligations. (S)11. CLOSING CONDITIONS. The obligations of the Banks to amend and restate the Existing Credit Agreement and to convert the loans outstanding under the Existing Credit Agreement into Loans and the letters of credit outstanding under the Existing Credit Agreement into Letters of Credit hereunder and to make the initial Loans hereunder and of the Agent to issue the initial Letter of Credit hereunder shall be subject to the satisfaction of the following conditions precedent on or prior to the Closing Date: (S)11.1. DELIVERY OF DOCUMENTS. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Banks. Each Bank shall have received a fully executed copy of each such document. (S)11.2. CERTIFIED COPIES OF CORPORATE DOCUMENTS. Each of the Banks shall have received from the Parent, each of the Borrowers and each of the Guarantors a copy, certified by a duly authorized officer of such Person to be true and complete on the Closing Date, of each of (a) its charter or other incorporation documents as in effect on such date of certification, and (b) its by-laws as in effect on such date (or certifying that there have been no changes to such documents from the copies thereof delivered to the Banks and the Agent in connection with the closing of the Existing Credit Agreement). (S)11.3. CORPORATE ACTION. All corporate action necessary for the valid execution, delivery and performance by the Parent, each of the Borrowers and each of the Guarantors of this Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Banks shall have been provided to each of the Banks. (S)11.4. INCUMBENCY CERTIFICATE. Each of the Banks shall have received from the Parent, each of the Borrowers and each of the Guarantors an incumbency certificate, dated as of the -53- Closing Date, signed by a duly authorized officer of such Person, and giving the name and bearing a specimen signature of each individual who shall be authorized (a) to sign, in the name and on behalf of such Person, each of the Loan Documents to which such Person is or is to become a party; (b) in the case of each of the Borrowers, to make Loan Requests; and (c) to give notices and to take other action on such Person's behalf under the Loan Documents. (S)11.5. VALIDITY OF LIENS. The Security Documents shall be effective to create in favor of the Agent a legal, valid and enforceable first (except for Permitted Liens entitled to priority under applicable law) security interest in the Collateral. The US Vessel Mortgage shall constitute a first preferred mortgage as defined in 46 U.S.C. (S)31322. All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Agent to perfect, protect and preserve such security interests shall have been duly effected. The Agent shall have received evidence thereof in form and substance satisfactory to the Agent. (S)11.6. PERFECTION CERTIFICATES AND LIEN SEARCH RESULTS. The Agent shall have received from each of the Borrowers a completed and fully executed Perfection Certificate and the results of UCC and other lien searches with respect to its Collateral, indicating no encumbrances other than Permitted Liens and otherwise in form and substance satisfactory to the Agent; provided that the requirements of this (S)11.6 may be satisfied by receipt by the Agent of such lien search results no later than 30 days after the Closing Date. (S)11.7. CERTIFICATES OF INSURANCE. The Agent shall have received (a) a certificate of insurance from an independent insurance broker dated as of the Closing Date, identifying insurers, types of insurance, insurance limits, and policy terms, and otherwise describing the insurance obtained in accordance with the provisions of the Security Documents and (b) certified copies of all policies evidencing such insurance (or certificates therefore signed by the insurer or an agent authorized to bind the insurer) showing the Agent as additional insured or loss payee, as applicable. (S)11.8. FINANCIAL CONDITION. The Banks shall have received the financial statements referred to in (S)7.4 hereof, and the Banks shall be satisfied that such financial statements fairly present the business and financial condition of the Parent and its Subsidiaries as of the dates thereof and for the periods then ended. (S)11.9. SOLVENCY CERTIFICATE. Each of the Banks shall have received an officer's certificate from each of the Parent, the Borrowers and the Guarantors dated as of the Closing Date as to the solvency of such Person following the consummation of the transactions contemplated hereby, which such certificates shall be in form and substance satisfactory to the Banks. (S)11.10. OPINIONS OF COUNSEL. Each of the Banks and the Agent shall have received a favorable opinion addressed to the Banks and the Agent, dated as of the Closing Date, in form and substance satisfactory to the Banks and the Agent, from: Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., counsel to the Parent and the Borrowers. -54- (S)11.11. PAYMENT OF FEES AND EXPENSES. The Borrowers shall have paid to the Agent for the accounts of the Banks, the Closing Fees pursuant to (S)5.1 hereof, all fees and expenses of the Agent's special counsel through the Closing Date, and all other amounts to be paid pursuant to (S)16 as accrued through the Closing Date. The Borrowers shall have paid all interest, commitment fees and any other fees and expenses in respect of the Existing Credit Agreement through the Closing Date, calculated as of the Closing Date (pro-rated in the case of any fractional periods). (S)11.12. BORROWING NOTICE. The Borrowers shall have delivered to the Agent a Loan Request with respect to any Loan requested to be made on the Closing Date. (S)11.13. APPRAISALS OF VESSELS, CLASS CONFIRMATIONS. The Agent shall have received from marine surveyors satisfactory to the Agent a market value appraisal of each of the Vessels owned by the Borrowers subject to a Vessel Mortgage . Such appraisals shall be satisfactory to the Agent in all respects. The Agent shall have received a certificate from the classification society with respect to each such Vessel, issued as of a recent date and indicating that such Vessel is in compliance with the requirements of applicable law for use as intended. (S)12. CONDITIONS TO ALL BORROWINGS. Each Banks' obligation to make any Loan and of the Agent to issue, extend or renew any Letters of Credit, whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent: (S)12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the representations and warranties of the Parent and its Subsidiaries contained in this Agreement, the other Loan Documents, or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan or the issuance, extension or renewal of such Letter of Credit, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing. (S)12.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Bank would make it illegal for such Bank to make such Loan. It shall not be unlawful for the Agent, with respect to any request relating to the issuance, extension or renewal of a Letter of Credit, to issue, extend, or renew, or for any Bank to participate in the issuance, extension or renewal of, such Letter of Credit. (S)12.3. GOVERNMENTAL REGULATION. Each Bank shall have received such statements in substance and form reasonably satisfactory to such Bank as such Bank shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System. -55- (S)12.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the transactions contemplated by this Agreement, the other Loan Documents and all other documents incident hereto and thereto shall be satisfactory in substance and in form to the Banks and to the Agent and the Agent's Special Counsel, and the Banks, the Agent and such counsel shall have received all information and such counterpart originals or certified or other copies of such documents as the Agent may reasonably request. (S)13. EVENTS OF DEFAULT: ACCELERATION; ETC. (S)13.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) the Borrowers shall fail to pay any principal of the Loans or any Reimbursement Obligation when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) the Borrowers shall fail to pay any interest on the Loans, the Commitment Fee, any Letter of Credit Fee or other sums due hereunder or under any of the other Loan Documents owing by the Borrowers, within three (3) days of when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (c) (i) the Borrowers or the Parent shall fail to comply with any of the covenants contained in (S)(S)8.4, 8.5, the first sentence of 8.6 or 9 hereof, or (ii) the Borrowers or the Parent shall fail to comply with any of the covenants contained in (S)10 hereof and such failure continues for fourteen (14) days; (d) the Borrowers or the Parent or any Guarantor shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this (S)13.1) for thirty (30) days after written notice of such failure has been given to the Parent by the Agent; (e) any representation or warranty of the Parent, either Borrower or any Guarantor in this Agreement or any of the other Loan Documents or in any other document or instrument delivered pursuant to or in connection with this Agreement shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (f) the Parent, the Borrowers, any Guarantor or any of the Parent's other Subsidiaries (other than Subsidiaries which are not Restricted Subsidiaries) shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money in excess of $1,000,000 or credit received or in respect of any Capitalized Leases, -56- or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing borrowed money in excess of $1,000,000 or credit received or in respect of any Capitalized Leases for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; (g) the Parent, the Borrowers or any of the Parent's other Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of any such Person or of any substantial part of the assets of any such Person or shall commence any case or other proceeding relating to any such Person under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against any such Person and such Person shall indicate its approval thereof, consent thereto or acquiescence therein; (h) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Parent, the Borrowers or any of the Parent's other Subsidiaries bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any such Person in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (i) there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty days, whether or not consecutive, any final judgment against the Parent, the Borrowers or any of the Parent's other Subsidiaries that, with other outstanding final judgments, undischarged, against such Persons exceeds in the aggregate $1,000,000; (j) if any of the Loan Documents shall be cancelled, terminated, revoked or rescinded otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Banks, or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Parent, the Borrowers or any of the Parent's other Subsidiaries party thereto or any of their respective stockholders, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof; (k) the Parent, the Borrowers or any of the Parent's other Subsidiaries shall be enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting any material part of its business; -57- (l) there shall occur any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty, which in any such case causes, for more than fifteen (15) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of the Parent, the Borrowers or any of the Parent's other Subsidiaries if such event or circumstance is not covered by business interruption insurance and would have a material adverse effect on the business or financial condition of the Parent and its Subsidiaries, taken as a whole; (m) the Parent, the Borrowers or any of the Parent's other Subsidiaries shall be indicted for a national or federal crime, a punishment for which could include the forfeiture of any assets of any such Person having a fair market value in excess of $500,000; (n) any person or group of persons (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, but excluding persons who are employees of the Parent or a Subsidiary of the Parent) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 25% or more of the outstanding shares of common stock of the Parent; or, during any period of twelve consecutive calendar months, individuals who were directors of the Parent on the first day of such period shall cease to constitute a majority of the board of directors of the Parent; (o) if the Parent shall at any time, legally or beneficially own less than 100% of the shares of the voting common stock of each of the Borrowers; then, and in any such event, so long as the same may be continuing, the Agent may, and upon the request of the Majority Banks shall, by notice in writing to the Borrowers declare all amounts owing with respect to this Agreement, the Notes and the other Loan Documents and all Reimbursement Obligations to be, and they shall thereupon forthwith become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers; provided that in the event of any Event of Default specified in (S)(S)13.1(g), 13.1(h) or 13.1(j), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Agent or any Bank. (S)13.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of Default specified in (S)13.1(g), (S)13.1(h) or (S)13.1(j) shall occur, any unused portion of the credit hereunder shall forthwith terminate and each of the Banks shall be relieved of all further obligations, if any, to make Loans to the Borrowers and the Agent shall be relieved of all further obligations to issue, extend or renew Letters of Credit. If any other Event of Default shall have occurred and be continuing, or if on any Drawdown Date or any date for issuing, extending or renewing any Letter of Credit the conditions precedent to the making of the Loans to be made on such Drawdown Date or (as the case may be) to issuing, extending or renewing such Letter of Credit on such other date are not satisfied, the Agent may and upon the request of the Majority Banks, -58- shall, by notice to the Borrowers, terminate the unused portion of the credit hereunder, and upon such notice being given such unused portion of the credit hereunder shall terminate immediately and each of the Banks shall be relieved of all further obligations to make Loans and the Agent shall be relieved of all further obligations, if any, to issue, extend or renew Letters of Credit. If any such notice is given to the Borrowers the Agent will forthwith furnish a copy thereof to each of the Banks. No termination of the credit hereunder shall relieve either of the Borrowers of any of the Obligations or any of their existing obligations to any of the Banks arising under any other agreements or instruments. (S)13.3. REMEDIES. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Banks shall have accelerated the maturity of the Loans pursuant to (S)13.1 hereof, each Bank, if owed any amount with respect to the Loans or the Reimbursement Obligations, may proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Bank are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Bank. No remedy herein conferred upon any Bank or the Agent or the holder of any Note or purchaser of any Letter of Credit Participation is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. (S)13.4. DISTRIBUTION OF COLLATERAL PROCEEDS. Subject to the limitations set forth in the proviso of Section 6 hereof, in the event that, following the occurrence or during the continuance of any Default or Event of Default, the Agent or any Bank, as the case may be, receives any monies in connection with the enforcement of any the Security Documents, or otherwise with respect to the realization upon any of the Collateral, such monies shall be distributed for application as follows: (a) First, to the payment of, or (as the case may be) the reimbursement of the Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Agent in connection with the collection of such monies by the Agent, for the exercise, protection or enforcement by the Agent of all or any of the rights, remedies, powers and privileges of the Agent under this Agreement or any of the other Loan Documents or in respect of the Collateral (including, without limitation, the protection, insurance, repair, costs of preparing for sale and sale of any Collateral) and to support the provision of adequate indemnity to the Agent against all taxes or liens which by law shall have, or may have, priority over the rights of the Agent to such monies; (b) Second, to all other Obligations in such order or preference as the Majority Banks may determine; provided, that (i) distributions in respect of such Obligations shall be made pari passu among Obligations with respect to the Agent's fee payable pursuant to -59- the Fee Letter and all other Obligations, (ii) Obligations owing to the Banks with respect to each type of Obligation such as interest, principal, fees and expenses shall be made among the Banks, pro rata and (iii) the Agent may in its discretion make proper allowance to take into account any Obligations not then due and payable; (c) Third, upon payment and satisfaction in full or other provisions for payment in full satisfactory to the Banks and the Agent of all of the Obligations, to the payment of any obligations required to be paid pursuant to (S)9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of Massachusetts; and (d) Fourth, the excess, if any, shall be returned to the Borrowers or to such other Persons as are entitled thereto. (S)14. SETOFF. Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits or other sums credited by or due from any of the Banks to the Borrowers and any securities or other property of the Borrowers in the possession of such Bank may be applied to or set off by such Bank against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrowers to such Bank. Each of the Banks agrees with each other Bank that (a) if an amount to be set off is to be applied to Indebtedness of the Borrowers to such Bank, other than Indebtedness evidenced by the Notes held by such Bank or constituting Reimbursement Obligations owed to such Bank, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by all such Notes held by such Bank or constituting Reimbursement Obligations owed to such Bank, and (b) if such Bank shall receive from either of the Borrowers, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim evidenced by the Notes held by, or constituting Reimbursement Obligations owed to, such Bank by proceedings against such Borrower at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the Note or Notes held by, or Reimbursement Obligations owed to, such Bank any amount in excess of its ratable portion of the payments received by all of the Banks with respect to the Notes held by, and Reimbursement Obligations owed to, all of the Banks, such Bank will make such disposition and arrangements with the other Banks with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Bank receiving in respect of the Notes held by it or Reimbursement Obligations owed it, its proportionate payment as contemplated by this Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Bank, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. (S)15. THE AGENT. (S)15.1. AUTHORIZATION. The Agent is authorized to take such action on behalf of each of the Banks and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed -60- herein or therein shall be implied to have been assumed by the Agent. The relationship between the Agent and each of the Banks is that of an independent contractor. The use of the term "Agent" is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Agent and each of the Banks. Nothing contained in this Agreement or any of the other Loan Documents shall be construed to create an agency, trust or other fiduciary relationship between the Agent and any of the Banks. As an independent contractor empowered by the Banks to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Loan Documents, the Agent is nevertheless a "representative" of the Banks, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Banks and the Agent with respect to all collateral security and guaranties contemplated by the Loan Documents. Such actions include the designation of the Agent as "secured party", "mortgagee" or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Obligations, all for the benefit of the Banks and the Agent. The Agent is hereby authorized and empowered to release Collateral without the consent of the Banks upon the sale of such Collateral pursuant to (S)9.5.2 hereof. (S)15.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents. The Agent may utilize the services of such Persons as the Agent in its sole discretion may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrowers. (S)15.3. NO LIABILITY. Neither the Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. (S)15.4. NO REPRESENTATIONS. The Agent shall not be responsible for the execution or validity or enforceability of this Agreement, the Notes, the Letters of Credit, any of the other Loan Documents or any instrument at anytime constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Parent, the Borrowers or the Guarantors, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any instrument at any time constituting, or intended to constitute, collateral security for the Obligations or the Notes or to inspect any of the properties, books or records of the Parent or any -61- of its Subsidiaries. The Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Parent, any of the Borrowers, any Guarantor or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Banks, with respect to the credit-worthiness or financial condition of the Parent, any of the Borrowers or any of the Parent's other Subsidiaries. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. (S)15.5. PAYMENTS. (S)15.5.1. PAYMENTS TO AGENT. A payment by any of the Borrowers or any Guarantor to the Agent hereunder or any of the other Loan Documents for the account of any Bank shall constitute a payment to such Bank. The Agent agrees promptly to distribute to each Bank its pro rata share of payments received by the Agent, except as otherwise expressly provided herein or in any of the other Loan Documents. (S)15.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making such distribution until its right to make such distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. (S)15.5.3. DELINQUENT BANKS. Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Bank that fails (a) to make available to the Agent its pro rata share of any Loan or to purchase any Letter of Credit Participation or (b) to comply with the provisions of (S)14 with respect to making dispositions and arrangements with the other Banks, where such Bank's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Banks, in each case as, when and to the full extent required by the provisions of this Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank until such time as such delinquency is satisfied. A Delinquent Bank shall be deemed to have assigned any and all payments due to it from the Borrowers, whether on account of outstanding Loans, Unpaid Reimbursement Obligations, interest, fees or otherwise, to the remaining nondelinquent Banks for application to, and reduction of, their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. The Delinquent Bank hereby authorizes the Agent to distribute such payments to such nondelinquent Banks in proportion to their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent Bank shall be deemed to have satisfied in full -62- a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans and Unpaid Reimbursement Obligations of such nondelinquent Banks, the Banks' respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. (S)15.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any Note or the purchaser of any Letter of Credit Participation as the absolute owner thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder. (S)15.7. INDEMNITY. The Banks hereby ratably agree to indemnify and hold harmless the Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Agent has not been reimbursed by the Borrowers as required by (S)16), and liabilities of every nature and character arising out of or related to this Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Agent's willful misconduct or gross negligence. (S)15.8. AGENT AS BANK. In its individual capacity, BankBoston shall have the same obligations and the same rights, powers and privileges in respect to its Commitments and the Loans made by it, and as the holder of any of the Notes and as the purchaser of any Letter of Credit Participations, as it would have were it not also the Agent. (S)15.9. RESIGNATION. The Agent may resign at any time by giving sixty (60) days' prior written notice thereof to the Banks and the Borrowers. Upon any such resignation, the Majority Banks shall have the right to appoint a successor Agent. Unless a Default or Event of Default shall have occurred and be continuing, such successor Agent shall be reasonably acceptable to the Borrowers. If no successor Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a financial institution having a rating of not less than A or its equivalent by Standard & Poor's Ratings Group. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations, if any, hereunder. After any retiring Agent's resignation, the provisions of this Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. (S)15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby agrees that, upon learning of the existence of a Default or an Event of Default, it shall promptly notify the Agent thereof. The Agent hereby agrees that upon receipt of any notice under this (S)15.10 it shall promptly notify the other Banks of the existence of such Default or Event of Default. -63- (S)15.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one or more Events of Default has occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Agent shall, if (i) so requested by the Majority Banks and (ii) the Banks have provided to the Agent such additional indemnities and assurances against expenses and liabilities as the Agent may reasonably request, proceed to enforce the provisions of the Security Documents authorizing the sale or other disposition of all or any part of the Collateral and exercise all or any such other legal and equitable and other rights or remedies as it may have in respect of such Collateral. The Majority Banks may direct the Agent in writing as to the method and the extent of any such sale or other disposition, the Banks hereby ratably agreeing to indemnify and hold the Agent harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Agent need not comply with any such direction to the extent that the Agent reasonably believes the Agent's compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction. (S)16. EXPENSES. The Borrowers hereby jointly and severally agree to pay (a) the reasonable costs of producing and reproducing this Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by the Agent or any of the Banks (other than taxes based upon the Agent's or any Bank's net income) on or with respect to the transactions contemplated by this Agreement (the Borrowers hereby jointly and severally agreeing to indemnify the Agent and each Bank with respect thereto), (c) the reasonable fees, expenses and disbursements of the Agent's special counsel or any local counsel to the Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder and the termination hereof, (d) except as otherwise specified herein, the fees, expenses and disbursements of the Agent incurred by the Agent in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, including all engineering and appraisal charges, (e) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys' fees and costs, which attorneys may be employees of any Bank or the Agent, and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by any Bank or the Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Parent, any of the Borrowers, any of the Guarantors or any of the Parent's other Subsidiaries or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to any Bank's or the Agent's relationship with the Parent, any of the Borrowers, any of the Guarantors or any of the Parent's other Subsidiaries under the Loan Documents or in connection with the transactions contemplated hereby and (f) all reasonable fees, expenses and disbursements of any Bank or the Agent incurred in connection with UCC or other lien searches, UCC filings or registration of any other Security Documents, vessel mortgage recordings, or mortgage recordings. The covenants of this (S)16 shall survive payment or satisfaction of payment of amounts owing with respect to the Notes. -64- (S)17. INDEMNIFICATION. The Borrowers jointly and severally agree to indemnify and hold harmless the Agent and the Banks from and against any and all claims, actions and suits whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of this Agreement or any of the other Loan Documents or the transactions contemplated hereby or thereby, including, without limitation, (a) any actual or proposed use by the Borrowers, the Parent or any of the Parent's other Subsidiaries of the proceeds of any of the Loans or Letters of Credit, (b) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Parent or any of the Borrowers or any of the Parent's other Subsidiaries comprised in the Collateral, (c) the Borrowers entering into or performing this Agreement or any of the other Loan Documents or (d) with respect to the Parent and its Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threatened release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding. In litigation, or the preparation therefor, the Banks and the Agent shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Borrowers hereby jointly and severally agree to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrowers under this (S)17 are unenforceable for any reason, the Borrowers hereby jointly and severally agree to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The obligations of the Borrowers under this (S)17 shall be "Obligations" hereunder. The covenants contained in this (S)17 shall survive payment of satisfaction in full of all other Obligations. (S)18. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Parent, any of the Borrowers or any of the Guarantors pursuant to this Agreement shall be deemed to have been relied upon by the Banks and the Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Banks of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any Letter of Credit, or any amount due under this Agreement or the Notes or any of the other Loan Documents remains outstanding or any Bank has any obligation to make any Loans or the Agent has any obligation to issue, extend or renew any Letter of Credit, and for such further time as may be otherwise expressly specified in this Agreement. All statements contained in any certificate or other paper delivered to any Bank or the Agent at any time by or on behalf of the Parent, any of the Borrowers or any of the Guarantors pursuant to this Agreement or in connection with the transactions contemplated hereby shall constitute representations and warranties by such Person hereunder. (S)19. ASSIGNMENT AND PARTICIPATION. -65- (S)19.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein, each Bank may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Commitment Percentage and Commitment and the same portion of Loans owing to it and the Note held by it and its participating interest in the risk relating to any Letters of Credit; provided that (a) each of the Agent and, unless a Default or an Event of Default shall have occurred and be continuing, the Borrowers shall have given its prior written consent to such assignment, which consent will not be unreasonably withheld, (b) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Bank's rights and obligations with respect to the Loans under this Agreement, (c) each assignment shall be in a minimum amount of $5,000,000 or a larger integral multiple of $1,000,000 (or less, if such assignment would be all of such Bank's interests, rights and obligations in respect of its Loans), and (d) the parties to such assignment shall execute and deliver to the Agent, for recording in the Register (as hereinafter defined), an Assignment and Acceptance, substantially in the form of Exhibit D hereto (an "Assignment and Acceptance"), together with any Notes subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (i) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Bank hereunder, and (ii) the assigning Bank shall, to the extent provided in such assignment and upon payment to the Agent of the registration fee referred to in (S)19.3, be released from its obligations under this Agreement. (S)19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By executing and delivering an Assignment and Acceptance, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Bank makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or the attachment, perfection or priority of any security interest or mortgage; (b) the assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Parent, any of the Borrowers, any of the Guarantors or any of the Parent's other Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Parent, any of the Borrowers, any of the Guarantors and the Parent's other Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (c) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in (S)7.4 and (S)8.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (d) such assignee will, independently and without reliance upon the assigning Bank, the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in -66- taking or not taking action under this Agreement; (e) such assignee represents and warrants that it is an Eligible Assignee; (f) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (g) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Bank; (h) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; and (i) such assignee acknowledges that it has made arrangements with the assigning Bank satisfactory to such assignee with respect to its pro rata share of Letter of Credit Fees, if any, in respect of outstanding Letters of Credit and with respect to its pro rata share of Commitment Fees. (S)19.3. REGISTER. The Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register or similar list (the "Register") for the recordation of (a) the names and addresses of the Banks, (b) the Commitment Percentages of the Banks from time to time, (c) the principal amount of the Loans owing to the Banks from time to time, and (d) the Letter of Credit Participations purchased by the Banks from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers and the Banks at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Bank agrees to pay to the Agent a registration fee in the sum of $3,500, as to which payment the Borrowers shall have no responsibility. (S)19.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrowers and the Banks (other than the assigning Bank). Within five (5) Business Days after receipt of such notice, the Borrowers, at their own expense, shall execute and deliver to the Agent, in exchange for each surrendered Note, a new Note to the order of such Eligible Assignee in an amount equal to the amount assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank has retained some portion of its obligations hereunder, a new Note to the order of the assigning Bank in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Notes. Within five (5) days of issuance of any new Notes pursuant to this (S)19.4, the Borrowers shall deliver an opinion of counsel, addressed to the Banks and the Agent, relating to the due authorization, execution and delivery of such new Notes and the legality, validity and binding effect thereof, in form and substance satisfactory to the Banks. The surrendered Notes shall be cancelled and returned to the Borrowers. (S)19.5. PARTICIPATIONS. Each Bank may sell participations to one or more banks or other entities in all or a portion of such Bank's rights and obligations under this Agreement and the -67- other Loan Documents; provided that (a) each such participation shall be in an amount of $2,000,000 or a larger integral multiple of $1,000,000, (b) any such sale or participation shall not affect the rights and duties of the selling Bank hereunder to the Borrowers and (c) the only rights granted to the participant pursuant to such participation arrangements with respect to waivers, amendments or modifications of the Loan Documents shall be the rights to approve waivers, amendments or modifications that would reduce the principal of or the interest rate on any Loans, extend the term or increase the amount of the Commitment of such Bank as it relates to such participant, reduce the amount of any Commitment Fee or Letter of Credit Fees to which such participant is entitled or extend any regularly scheduled payment date for principal or interest. (S)19.6. DISCLOSURE. The Parent and the Borrowers agree that in addition to disclosures made in accordance with standard and customary banking practices any Bank may disclose information obtained by such Bank pursuant to this Agreement to assignees or participants and potential assignees or participants hereunder; provided that such assignees or participants or potential assignees or participants shall agree (a) to treat in confidence such information unless such information otherwise becomes public knowledge, (b) not to disclose such information to a third party, except as required by law or legal process and (c) not to make use of such information for purposes of transactions unrelated to such contemplated assignment or participation. (S)19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER. If any assignee Bank is an Affiliate of the Parent or any of its Subsidiaries, then any such assignee Bank shall have no right to vote as a Bank hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Agent pursuant to (S)13.1 or (S)13.2, and the determination of the Majority Banks shall for all purposes of this Agreement and the other Loan Documents be made without regard to such assignee Bank's interest in any of the Loans. If any Bank sells a participating interest in any of the Loans or Reimbursement Obligations to a participant, and such participant is either of the Borrowers or an Affiliate of the Parent or any of its Subsidiaries, then such transferor Bank shall promptly notify the Agent of the sale of such participation. A transferor Bank shall have no right to vote as a Bank hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Agent pursuant to (S)13.1 or (S)13.2 to the extent that such participation is beneficially owned by either of the Borrowers or any Affiliate of either of the Borrowers, and the determination of the Majority Banks shall for all purposes of this Agreement and the other Loan Documents be made without regard to the interest of such transferor Bank in the Loans to the extent of such participation. (S)19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall retain its rights to be indemnified pursuant to (S)17 with respect to any claims or actions arising prior to the date of such assignment. If any assignee Bank is not incorporated under the laws of the United States of America or any state thereof, it shall, prior to the date on which any interest or fees are payable hereunder or under any of the other Loan Documents for its account, deliver to the Borrowers and the Agent certification as to its exemption from deduction or withholding of any -68- United States federal income taxes. Anything contained in this (S)19 to the contrary notwithstanding, any Bank may at any time pledge all or any portion of its interest and rights under this Agreement (including all or any portion of its Notes) to any of the twelve Federal Reserve Banks organized under (S)4 of the Federal Reserve Act, 12 U.S.C. (S)341. No such pledge or the enforcement thereof shall release the pledgor Bank from its obligations hereunder or under any of the other Loan Documents. (S)19.9. ASSIGNMENT BY BORROWERS. The Borrowers shall not assign or transfer any of their rights or obligations under any of the Loan Documents without the prior written consent of each of the Banks. (S)20. NOTICES, ETC. Except as otherwise expressly provided in this Agreement, all notices and other communications made or required to be given pursuant to this Agreement or the Notes or any Letter of Credit Applications shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows: (a) if to the Parent or any of the Borrowers, at Trico Marine Services, Inc., 2401 Fountainview, Suite 626, Houston, Texas 77057, Attention: President, or at such other address for notice as the Parent and the Borrowers shall last have furnished in writing to the Person giving the notice, with a copy to Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., Place St. Charles, 201 St. Charles Avenue, New Orleans, Louisiana 70170, Attention: William B. Masters, Esq.; (b) if to the Agent, at 100 Federal Street, Boston, Massachusetts 02110, USA, Attention: Daniel O'Connor, Managing Director, or such other address for notice as the Agent shall last have furnished in writing to the Person giving the notice; and (c) if to any Bank, at such Bank's address set forth on Schedule 1.1 hereto, or such other address for notice as such Bank shall have last furnished in writing to the Person giving the notice. Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof. (S)21. GOVERNING LAW. THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER SEAL UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF SAID COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO -69- CONFLICTS OR CHOICE OF LAW). EACH OF THE BORROWERS AND THE PARENT AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON SUCH BORROWER OR THE PARENT BY MAIL AT THE ADDRESS SPECIFIED IN (S)20. EACH OF THE BORROWERS AND THE PARENT HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. (S)22. HEADINGS. The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. (S)23. COUNTERPARTS. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. (S)24. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in (S)26. (S)25. WAIVER OF JURY TRIAL. The Parent and each of the Borrowers hereby waives its right to a jury trial with respect to any action or claim arising out of any dispute in connection with this Agreement, the Notes or any of the other Loan Documents, any rights or obligations hereunder or thereunder or the performance of such rights and obligations. Except as prohibited by law, the Parent and each of the Borrowers hereby waives any right it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Parent and each of the Borrowers (a) certifies that no representative, agent or attorney of any Bank or the Agent has represented, expressly or otherwise, that such Bank or the Agent would not, in the event of litigation, seek to enforce the foregoing waivers and (b) acknowledges that each of the Agent and the Banks have been induced to enter into this Agreement, the other Loan Documents to which it is a party by, among other things, the waivers and certifications contained herein. (S)26. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise expressly provided in this Agreement, any term of this Agreement or of any other instrument related hereto or mentioned herein may be amended with, but only with, the written consent of the Parent, the Borrowers and the Majority Banks, and any consent or approval required or permitted by this Agreement to be given by one or more or all of the Banks may be given, and -70- the performance or observance by the Parent and the Borrowers of any terms of this Agreement or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Majority Banks. Notwithstanding the foregoing, (i) the amount of the respective Loans, the rate of interest on the Notes (other than interest accruing pursuant to (S)5.8 following the effective date of any waiver by the Majority Banks of the Default or Event of Default relating thereto), the term of, and scheduled payments on, the Notes, the amount of the Commitments of the Banks, and the rate of the Commitment Fee and the Letter of Credit Fees hereunder may not be changed without the written consent of the Parent, the Borrowers and the written consent of each Bank affected thereby; (ii) the definitions of Majority Banks and of Commitment Percentage and this (S)26 may not be amended without the written consent of all of the Banks; (iii) no Collateral may be released without the written consent of all of the Banks if, after giving effect to such release, the Parent and the Borrowers would not be in compliance with (S)10.4 hereof; and (iv) the amount of the Letter of Credit Fees payable for the Agent's account, (S)3 and (S)15 may not be amended without the written consent of the Agent. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Parent, the Borrowers or any Guarantor shall entitle the Parent, the Borrowers or any Guarantor to other or further notice or demand in similar or other circumstances. (S)27. SEVERABILITY. The provisions of this Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. (S)28. PARI PASSU TREATMENT. (a) Notwithstanding anything to the contrary set forth herein, each payment or prepayment of principal and interest received after the occurrence of an Event of Default hereunder shall be distributed pari passu among the Banks, in accordance with the aggregate outstanding principal amount of the Obligations owing to each Bank (including its Letter of Credit Participations and any Reimbursement Obligations owing to it) divided by the aggregate outstanding principal amount of all Obligations (including any Obligations not then due and payable). (b) Following the occurrence and during the continuance of any Event of Default, each Bank agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrowers (pursuant to (s)14 or otherwise), including a secured claim under Section 506 of the Bankruptcy Code or other security or interest arising from or in lieu of, such secured claim, received by such Bank under any applicable bankruptcy, insolvency or other similar law or otherwise, obtain payment (voluntary or involuntary) in respect of the Notes, Loans and other Obligations held by it -71- as a result of which the unpaid principal portion of the Notes and the Obligations held by it shall be proportionately less than the unpaid principal portion of the Notes and Obligations held by any other Bank, it shall be deemed to have simultaneously purchased from such other Bank a participation in the Notes and Obligations held by such other Bank, so that the aggregate unpaid principal amount of the Notes, Obligations and participations in Notes and Obligations held by each Bank shall be in the same proportion to the aggregate unpaid principal amount of the Notes and Obligations then outstanding as the principal amount of the Notes and other Obligations held by it prior to such exercise of banker's lien, setoff or counterclaim was to the principal amount of all Notes and other Obligations outstanding prior to such exercise of banker's lien, setoff or counterclaim; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this (s)28 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustments restored without interest. (c) Following the occurrence and during the continuance of any Event of Default, each Bank agrees that it shall be deemed to have, automatically upon the occurrence of such Event of Default, purchased from each other Bank a participation in the risk associated with the Notes and Obligations held by such other Bank, so that the aggregate principal amount of the Notes and Obligations held by each Bank shall be equivalent to such Bank's Commitment Percentage as at the date of such Event of Default. Upon demand by the Agent, made at the request of the Majority Banks, each Bank that has purchased such participation shall pay the amount of such participation to one or more bank(s) whose outstanding Loans and Letter of Credit Participations exceed their respective Commitment Percentages as at such date. (d) The Borrowers expressly consent to the foregoing arrangements and agree that any Person holding such a participation in the Notes and the Obligations deemed to have been so purchased may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Borrowers to such Person as fully as if such Person had made a Loan directly to the Borrowers in the amount of such participation. (s)29. TRANSITIONAL ARRANGEMENTS. On the Closing Date the Existing Credit Agreement shall be amended and restated as set forth in this Agreement and the rights and obligations of the parties evidenced by the Existing Credit Agreement shall be evidenced by this Agreement and the other Loan Documents, the "Loans" as defined in Existing Credit Agreement shall be converted to Loans hereunder and the "Letters of Credit" as defined in the Existing Credit Agreement shall be converted to Letters of Credit hereunder, without constituting a novation or discharge thereof. All interest, fees and expenses, if any, owing or accrued under or in respect of the Existing Credit Agreement through the Closing Date shall be calculated as of the Closing Date (pro-rated in the case of any fractional periods), and shall be paid on the Closing Date. The Existing Banks agree to the collateral release of the "Vanuatu Vessel Mortgage," the "Parent Pledge Agreements," the "Dutch Guaranty," the "Dutch Pledge Agreement," the "Marine Assets Guaranty" and the "Marine Operators Guaranty," as those terms are defined in the -72- Existing Credit Agreement. The Existing Banks also agree to the partial release of certain Vessels subject to the "US Vessel Mortgage," as such term is defined in the Existing Credit Agreement. (S)30. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION. (S)30.1 SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. The Parent and the Borrowers acknowledge that from time to time financial advisory, investment banking and other services may be offered or provided to the Parent and/or the Borrowers or one or more of the Parent's other Subsidiaries, in connection with this Agreement or otherwise, by a Section 20 Subsidiary. Each of the Parent and the Borrowers, for itself and each of the Parent's other Subsidiaries, hereby authorizes (a) such Section 20 Subsidiary to share with the Agent and each Bank any information delivered to such Section 20 Subsidiary by the Parent or the Borrowers or any of the Parent's other Subsidiaries, and (b) the Agent and each Bank to share with such Section 20 Subsidiary any information delivered to the Agent or such Bank by the Parent or the Borrowers or any of the Parent's other Subsidiaries pursuant to this Agreement, or in connection with the decision of such Bank to enter into this Agreement; it being understood, in each case, that any such Section 20 Subsidiary receiving such information shall be bound by the confidentiality provisions of this Agreement. Such authorization shall survive the payment and satisfaction in full of all of Obligations. (S)30.2 CONFIDENTIALITY. Each of the Banks and the Agent agrees, on behalf of itself and each of its affiliates, directors, officers, employees and representatives, to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of the same nature and in accordance with safe and sound banking practices, any non-public information supplied to it by the Parent, the Borrowers or any of the Parent's other Subsidiaries pursuant to this Agreement that is identified by such Person as being confidential at the time the same is delivered to the Banks or the Agent, provided that nothing herein shall limit the disclosure of any such information (a) after such information shall have become public other than through a violation of this (s)30, (b) to the extent required by statute, rule, regulation or judicial process, (c) to counsel for any of the Banks or the Agent, (d) to bank examiners or any other regulatory authority having jurisdiction over any Bank or the Agent, or to auditors or accountants, (e) to the Agent, any Bank or any Section 20 Subsidiary, (f) in connection with any litigation to which any one or more of the Banks, the Agent or any Section 20 Subsidiary is a party, or in connection with the enforcement of rights or remedies hereunder or under any other Loan Document, (g) to a Subsidiary or affiliate of such Bank as provided in (s)30.1 or (h) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant agrees to be bound by the provisions of (s)19.6 and this (s)30.2. (S)30.3 PRIOR NOTIFICATION. Unless specifically prohibited by applicable law or court order, each of the Banks and the Agent shall, prior to disclosure thereof, notify the Parent and the Borrowers of any request for disclosure of any such non-public information by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such bank by such governmental agency) or pursuant to legal process. -73- (S)30.4 OTHER. In no event shall any Bank or the Agent be obligated or required to return any materials furnished to it or any Section 20 Subsidiary by the Parent, the Borrower or any of the Parent's other Subsidiaries. The Obligations of each Bank under this (s)30 shall be binding upon any assignee of, or purchaser of any participation in, any interest in any of the Loans or Reimbursement Obligations from any Bank. -74- IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a sealed instrument as of the date first set forth above. TRICO MARINE OPERATORS, INC. /s/ VICTOR M. PEREZ By:____________________________________ Name: Victor M. Perez Title: Vice President TRICO MARINE ASSETS, INC. /s/ VICTOR M. PEREZ By:____________________________________ Name: Victor M. Perez Title: Vice President TRICO MARINE SERVICES, INC. /s/ VICTOR M. PEREZ By:____________________________________ Name: Victor M. Perez Title: Vice President BANKBOSTON, N.A. individually and as Agent /s/ VICTOR GARCIA By:____________________________________ Name: Victor Garcia Title: Vice President BNY FINANCIAL CORPORATION /s/ JAMES BELANGER By:____________________________________ Name: James Belanger Title: Assitant Vice President -75- BANK OF SCOTLAND /s/ ANNIE CHIN TAT By:__________________________________________ Name: Annie Chin Tat Title: Vice President CHRISTIANIA BANK OG KREDITKASSE ASA, NEW YORK BRANCH /s/ MARTIN LUNDER /s/ HANS CHR KJELSRUD By:__________________________________________ Name: Martin Lunder Hans Chr. Kjelsrud Title: First Vice First Vice President President CORESTATES BANK, N.A. /s/ S. SCOTT GATES By:____________________________________ Name: S. Scott Gates Title: Vice President CREDIT LYONNAIS NEW YORK BRANCH /s/ PHILLIPPE SOUSTRA By:____________________________________ Name: Phillippe Soustra Title: Senior Vice President FIRST NATIONAL BANK OF COMMERCE /s/ J. CHARLES FREEL, JR. By:____________________________________ Name: J. Charles Freel, Jr. Title: Senior Vice President -76- THE FUJI BANK, LIMITED /s/ KENICHI TATARA By:____________________________________ Name: Kenichi Tatara Title: Vice President & Manager HIBERNIA NATIONAL BANK /s/ S. JOHN CASTELLANO By:____________________________________ Name: S. John Castellano Title: Vice President MEESPIERSON CAPITAL CORP. /s/ JOHN O'CONNOR /s/ SVEIN ENGH By:________________________________________ Name: John O'Connor Svein Engh Title: Managing Director Vice President WELLS FARGO BANK (TEXAS) NATIONAL ASSOCIATION /s/ FRANK W. SCHAGEMAN By:____________________________________ Name: Frank W. Schageman Title: Vice President -77- EX-10.10 6 1996 INCENTIVE COMPENSATION PLAN, AS AMENDED EXHIBIT 10.10 AMENDED AND RESTATED TRICO MARINE SERVICES, INC. 1996 INCENTIVE COMPENSATION PLAN 1. PURPOSE. The purpose of the 1996 Incentive Compensation Plan (the "Plan") of Trico Marine Services, Inc. ("Trico") is to increase shareholder value and to advance the interests of Trico and its subsidiaries (collectively, the "Company") by furnishing a variety of economic incentives (the "Incentives") designed to attract, retain and motivate employees and officers and to strengthen the mutuality of interests between such employees and officers and Trico's shareholders. Incentives may consist of opportunities to purchase or receive shares of Trico's common stock, $.01 par value per share (the "Common Stock"), on terms determined under the Plan. As used in the Plan, the term "subsidiary" means any corporation of which Trico owns (directly or indirectly) within the meaning of Section 425(f) of the Internal Revenue Code of 1986, as amended (the "Code"), 50% or more of the total combined voting power of all classes of stock. Any Incentives granted hereunder, prior to approval of the Plan by the shareholders of Trico, shall be granted subject to such approval. 2. Administration. 2.1 COMMITTEE. The Plan shall be administered by the compensation committee of the Board of Directors of Trico, or by a subcommittee of the compensation committee. The committee or subcommittee that administers the Plan shall be referred to hereinafter as the "Committee". The Committee shall consist of not fewer than two members of the Board of Directors, each of whom shall (a) qualify as a non-employee director under Rule 16b-3 under the Securities Exchange Act of 1934 (the "1934 Act"), as currently in effect or any successor rule, and (b) qualify as an "outside director" under Section 162(m) of the Code. 2.2 AUTHORITY. The Committee shall have plenary authority to award Incentives under the Plan, to interpret the Plan, to establish any rules or regulations relating to the Plan that it determines to be appropriate, to enter into agreements with participants as to the terms of the Incentives (the "Incentive Agreements") and to make any other determination that it believes necessary or advisable for the proper administration of the Plan. Its decisions in matters relating to the Plan shall be final and conclusive on the Company and participants. The Committee may delegate its authority hereunder to the extent provided in Section 3 hereof. 3. ELIGIBLE PARTICIPANTS. Officers and key employees of the Company (including officers who also serve as directors of the Company) shall become eligible to receive Incentives under the Plan when designated by the Committee. Participants may be designated individually or by groups or categories, as the Committee deems appropriate. With respect to participants not subject to Section 16 of the 1934 Act or Section 162(m) of the Code,, the Committee may delegate to appropriate personnel of the Company its authority to designate participants, to determine the size and type of Incentives to be received by those participants and to determine or modify performance objectives for those participants. -1- 4. TYPES OF INCENTIVES. Incentives may be granted under the Plan to eligible participants in any of the following forms, either individually or in combination, (a) non-qualified and incentive stock options; (b) stock appreciation rights ("SARs") (c) restricted stock; (d) performance shares; (e) stock awards; and (f) cash awards. 5. SHARES SUBJECT TO THE PLAN. 5.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 12.6, the total number of shares of Common Stock with respect to which Incentives may be granted under the Plan shall not exceed 450,000 shares during the effectiveness of the Plan. Incentives with respect to no more than 50,000 shares of Common Stock may be granted through the plan to a single participant in one calendar year. In the event that a stock option, SAR or performance share granted hereunder expires or is terminated or cancelled prior to exercise or payment, any shares of Common Stock that were issuable thereunder may be issued again under the Plan. In the event that shares of Common Stock are issued as Incentives under the Plan and thereafter are forfeited or reacquired by the Company pursuant to rights reserved upon issuance thereof, such forfeited and reacquired shares may be issued again under the Plan. If an Incentive is to be paid in cash by its terms, the Committee need not make a deduction from the shares of Common Stock issuable under the Plan with respect thereto. If and to the extent that an Incentive may be paid in cash or shares of Common Stock, the total number of shares available for issuance hereunder shall be decreased by the number of shares payable under such Incentive, provided that upon any payment of all or part of such Incentive in cash, the total number of shares available for issuance hereunder shall be increased by the appropriate number of shares represented by the cash payment, as determined in the sole discretion of the Committee. Additional rules for determining the number of shares granted under the Plan may be made by the Committee, as it deems necessary or appropriate. 5.2 TYPE OF COMMON STOCK. Common Stock issued under the Plan may be authorized and unissued shares or issued shares held as treasury shares. 6. STOCK OPTIONS. A stock option is a right to purchase shares of Common Stock from Trico. Each stock option granted by the Committee under this Plan shall be subject to the following terms and conditions: 6.1 PRICE. The exercise price per share shall be determined by the Committee, subject to adjustment under Section 12.6; provided that in no event shall the exercise price be less than the Fair Market Value of a share of Common Stock on the date of grant. 6.2 NUMBER. The number of shares of Common Stock subject to the option shall be determined by the Committee, subject to Section 5.1 and subject to adjustment as provided in Section 12.6. -2- 6.3 DURATION AND TIME FOR EXERCISE. Subject to ear lier termination as provided in Section 12.4, the term of each stock option shall be determined by the Committee. Each stock option shall become exercisable at such time or times during its term as shall be determined by the Committee. The Committee may accelerate the exercisability of any stock option at any time. 6.4 REPURCHASE. Upon approval of the Committee, the Company may repurchase all or a portion of a previously granted stock option from a participant by mutual agreement before such option has been exercised by payment to the participant of cash or Common Stock or a combination thereof with a value equal to the amount per share by which: (a) the Fair Market Value (as defined in Section 12.13) of the Common Stock subject to the option on the business day immediately preceding the date of purchase exceeds (b) the exercise price. 6.5 MANNER OF EXERCISE. A stock option may be exer cised, in whole or in part, by giving written notice to the Company, specifying the number of shares of Common Stock to be purchased. The exercise notice shall be accompanied by the full purchase price for such shares. The option price shall be payable in United States dollars and may be paid by (a) cash; (b) uncertified or certified check; (c) delivery of shares of Common Stock, which shares shall be valued for this purpose at the Fair Market Value on the business day immediately preceding the date such option is exercised and, unless otherwise determined by the Committee, shall have been held by the optionee for at least six months; (d) if permitted by the Committee, delivery of a properly executed exercise notice together with irrevocable instructions to a broker approved by the Company (with a copy to the Company) to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price; or (e) in such other manner as may be authorized from time to time by the Committee. In the case of delivery of an uncertified check upon exercise of a stock option, no shares shall be issued until the check has been paid in full. Prior to the issuance of shares of Common Stock upon the exercise of a stock option, a participant shall have no rights as a shareholder. 6.6 INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the grant of stock options that are intended to qualify as incentive stock options (as such term is defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"): (a) Any incentive stock option authorized under the Plan shall contain such other provisions as the Committee shall deem advisable, but shall in all events be consistent with and contain or be deemed to contain all provisions required in order to qualify the options as incentive stock options; (b) All incentive stock options must be granted within ten years from the date on which this Plan was adopted by the Board of Directors; -3- (c) Unless sooner exercised, all incentive stock options shall expire no later than ten years after the date of grant; (d) No incentive stock option shall be granted to any participant who, at the time such option is granted, would own (within the meaning of Section 422 of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the employer corporation or of its parent or subsidiary corporation; and (e) The aggregate Fair Market Value (determined with respect to each incentive stock option as of the time such incentive stock option is granted) of the Common Stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year (under the Plan or any other plan of the Company) shall not exceed $100,000. To the extent that such limitation is exceeded, such options shall not be treated, for federal income tax purposes, as incentive stock options. 7. RESTRICTED STOCK. 7.1 GRANT OF RESTRICTED STOCK. The Committee may award shares of restricted stock to such key employees as the Committee determines to be eligible pursuant to the terms of Section 3. An award of restricted stock may be subject to the attainment of specified performance goals or targets, restrictions on transfer, forfeitability provisions and such other terms and conditions as the Committee may determine, subject to the provisions of the Plan. To the extent restricted stock is intended to qualify as performance based compensation under Section 162(m) of the Code, it must meet the additional requirements imposed thereby. 7.2 THE RESTRICTED PERIOD. At the time an award of restricted stock is made, the Committee shall establish a period of time during which the transfer of the shares of restricted stock shall be restricted (the "Restricted Period"). Each award of restricted stock may have a different Restricted Period. A Restricted Period of at least three years is required, except that if vesting of the shares is subject to the attainment of specified performance goals, a Restricted Period of one year or more is permitted. Unless otherwise provided in the Incentive Agreement, the Committee may in its discretion declare the Restricted Period terminated and permit the sale or transfer of the restricted stock. The expiration of the Restricted Period shall also occur as provided under Section 12.4. 7.3 ESCROW. The participant receiving restricted stock shall enter into an Incentive Agreement with the Company setting forth the conditions of the grant. Certificates representing shares of restricted stock shall be registered in the name of the participant and deposited with the Company, together with a stock power endorsed in blank by the participant. Each such certificate shall bear a legend in substantially the following form: -4- The transferability of this certificate and the shares of Common Stock represented by it is subject to the terms and conditions (including conditions of forfeiture) contained in the Trico Marine Services, Inc. 1996 Incentive Compensation Plan (the "Plan") and an agreement entered into between the registered owner and Trico Marine Services, Inc. thereunder. Copies of the Plan and the agreement are on file and available for inspection at the principal office of the Company . 7.4 DIVIDENDS ON RESTRICTED STOCK. Any and all cash and stock dividends paid with respect to the shares of restricted stock shall be subject to any restrictions on transfer, forfeitability provisions or reinvestment requirements as the Committee may, in its discretion, prescribe in the Incentive Agreement. 7.5 FORFEITURE. In the event of the forfeiture of any shares of restricted stock under the terms provided in the Incentive Agreement (including any additional shares of restricted stock that may result from the reinvestment of cash and stock dividends, if so provided in the Incentive Agreement), such forfeited shares shall be surrendered and the certificates cancelled. The participants shall have the same rights and privileges, and be subject to the same forfeiture provisions, with respect to any additional shares received pursuant to Section 12.6 due to a recapitalization, merger or other change in capitalization. 7.6 EXPIRATION OF RESTRICTED PERIOD. Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Committee or at such earlier time as provided for in Section 7.2 and in the Incentive Agreement or an amendment thereto, the restrictions applicable to the restricted stock shall lapse and a stock certificate for the number of shares of restricted stock with respect to which the restrictions have lapsed shall be delivered, free of all such restrictions and legends other than those required by law, to the participant or the participant's estate, as the case may be. 7.7 RIGHTS AS A SHAREHOLDER. Subject to the terms and conditions of the Plan and subject to any restrictions on the receipt of dividends that may be imposed in the Incentive Agreement, each participant receiving restricted stock shall have all the rights of a shareholder with respect to shares of stock during any period in which such shares are subject to forfeiture and restrictions on transfer, including without limitation, the right to vote such shares. 8. STOCK APPRECIATION RIGHTS. A SAR is a right to receive, without payment to the Company, a number of shares of Common Stock, cash or any combination thereof, the amount of which is determined pursuant to the formula set forth in Section 8.4. A SAR may be granted (a) with respect to any stock option granted under the Plan, either concurrently with the grant of such stock option or at such later time as determined by the Committee (as to all or any portion of the shares of Common Stock subject to the stock option), or (b) alone, without reference to any related stock option. Each SAR granted by the Committee under the Plan shall be subject to the following terms and conditions: -5- 8.1 NUMBER. Each SAR granted to any participant shall relate to such number of shares of Common Stock as shall be determined by the Committee, subject to Section 5.1 and subject to adjustment as provided in Section 12.6. In the case of a SAR granted with respect to a stock option, the number of shares of Common Stock to which the SAR pertains shall be reduced in the same proportion that the holder of the option exercises the related stock option. 8.2 DURATION AND TIME FOR EXERCISE. The term and exercisability of each SAR shall be determined by the Committee. Unless otherwise provided by the Committee in the Incentive Agreement, each SAR issued in connection with a stock option shall become exercisable at the same time or times, to the same extent and upon the same conditions as the related stock option. The Committee may in its discretion accelerate the exercisability of any SAR at any time. 8.3 EXERCISE. A SAR may be exercised, in whole or in part, by giving written notice to the Company, specifying the number of SARs that the holder wishes to exercise. The Company shall, within 30 days of receipt of notice of exercise, deliver to the exercising holder certificates for the shares of Common Stock or cash or both, as determined by the Committee, to which the holder is entitled pursuant to Section 8.4. 8.4 PAYMENT. Subject to the right of the Committee to deliver cash in lieu of shares of Common Stock, the number of shares of Common Stock that shall be issuable upon the exercise of an SAR shall be determined by dividing: (a) the number of shares of Common Stock as to which the SAR is exercised multiplied by the dollar amount of the appreciation in such shares (for this purpose, the "appreciation" shall be the amount by which the Fair Market Value of the shares of Common Stock subject to the SAR on the Exercise Date exceeds (1) in the case of a SAR related to a stock option, the purchase price of the shares of Common Stock under the stock option or (2) in the case of a SAR granted alone, without reference to a related stock option, an amount equal to the Fair Market Value of a share of Common Stock on the date of grant, which shall be determined by the Committee at the time of grant, subject to adjustment under Section 12.6); by (b) the Fair Market Value of a share of Common Stock on the Exercise Date. In lieu of issuing shares of Common Stock upon the exercise of a SAR, the Committee may elect to pay the holder of the SAR cash equal to the Fair Market Value on the Exercise Date of any or all of the shares that otherwise would be issuable. No fractional shares of Common Stock shall be issued upon the exercise of a SAR; instead, the holder of a SAR shall be entitled to receive a cash adjustment equal to the same fraction of the Fair Market Value of a share of Common Stock on the Exercise Date or to purchase the portion necessary to make a whole share at its Fair Market Value on the Exercise Date. -6- 9. PERFORMANCE SHARES. A performance share consists of an award that may be paid in shares of Common Stock or in cash, as described below. The award of performance shares shall be subject to such terms and conditions as the Committee deems appropriate. 9.1 PERFORMANCE OBJECTIVES. Each performance share will be subject to performance objectives for Trico or one of its subsidiaries, divisions or departments to be achieved by the end of a specified period. The number of performance shares awarded shall be determined by the Committee and may be subject to such terms and conditions as the Committee shall determine. If the performance objectives are achieved, each participant will be paid (a) a number of shares of Common Stock equal to the number of performance shares initially granted to that participant; (b) a cash payment equal to the Fair Market Value of such number of shares of Common Stock on the date the performance objectives are met or such other date as may be provided by the Committee or (c) a combination of shares of Common Stock and cash, as may be provided by the Committee. If such objectives are not met, each award of performance shares may provide for lesser payments in accordance with a pre-established formula set forth in the Incentive Agreement. Notwithstanding the foregoing, unless otherwise provided in the Incentive Agreement, the Committee may in its discretion declare the performance objectives achieved or waived. To the extent a performance share is intended to qualify as performance based compensation under Section 162(m) of the Code, it must meet the additional requirements imposed thereby. 9.2 NOT A SHAREHOLDER. The award of performance shares to a participant shall not create any rights in such participant as a shareholder of the Company, until the payment of shares of Common Stock with respect to an award, at which time such stock shall be considered issued and outstanding. 9.3 DIVIDEND EQUIVALENT PAYMENTS. A performance share award may be granted by the Committee in conjunction with dividend equivalent payment rights or other such rights. Dividend equivalent payments may be made to the participant at the time of the payment of the dividend or issuance of the other right or at the end of the specified performance period or may be deemed to be invested in additional performance shares at the Fair Market Value of a share of Common Stock on the date of payment of the dividend or issuance of the right. 10. STOCK AWARDS. A stock award consists of the transfer by the Company to a participant of shares of Common Stock, without other payment therefor, as additional compensation for services previously provided to the Company. The number of shares to be transferred by the Company to a participant pursuant to a stock award shall be determined by the Committee. 11. CASH AWARDS. A cash award consists of a monetary payment made by the Company to a participant as additional compensation for his services to the Company. Payment of a cash award may, but is not required to, relate to the tax liability of a participant in connection with the grant, exercise, or payment of an Incentive or depend upon the achievement of performance objectives by the Company or by individuals. The amount of any monetary payment constituting -7- a cash award shall be determined by the Committee in its sole discretion. Cash awards may be subject to other terms and conditions, which may vary from time to time among participants, as the Committee determines to be appropriate. 12. GENERAL. 12.1 DURATION. Subject to Section 12.11, the Plan shall remain in effect until all Incentives granted under the Plan have either been satisfied by the issuance of shares of Common Stock or the payment of cash or been terminated under the terms of the Plan and all restrictions imposed on shares of Common Stock in connection with their issuance under the Plan have lapsed. 12.2 TRANSFERABILITY OF INCENTIVES. No Incentives granted hereunder may be transferred, pledged, assigned or otherwise encumbered by a participant except: (i) by will; (ii) by the laws of descent and distribution; (iii) pursuant to a domestic relations order, as defined in the Code, if permitted by the Committee and so provided in the Incentive Agreement or an amendment thereto; or (iv) as to options only, if permitted by the Committee and so provided in the Incentive Agreement or an amendment thereto, (a) to Immediate Family Members, (b) to a partnership in which Immediate Family Members, or entities in which Immediate Family Members are the sole owners, members or beneficiaries, as appropriate, are the only partners, (c) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the sole owners, members or beneficiaries, as appropriate, are the only members, or (d) to a trust for the sole benefit of Immediate Family Members. "Immediate Family Members" shall be defined as the spouse and natural or adopted children or grandchildren of the participant and their spouses. To the extent that an incentive stock option is permitted to be transferred during the lifetime of the participant, it shall be treated thereafter as a nonqualified stock option. Any attempted assignment, transfer, pledge, hypothecation or other disposition of Awards, or levy of attachment or similar process upon Incentives not specifically permitted herein, shall be null and void and without effect. 12.3 LOANS. In order to assist a participant in acquiring shares of Common Stock pursuant to an Incentive granted under the Plan, the Committee may authorize, subject to the provisions of Regulation G of the Board of Governors of the Federal Reserve System, at either the time of the grant of the Incentive, at the time of the acquisition of Common Stock pursuant to the Incentive, or at the time of the lapse of restrictions on shares of restricted stock granted under the Plan, the extension of a loan to the participant by the Company. The terms of any loans, including the interest rate, collateral and terms of repayment, will be -8- subject to the discretion of the Committee. The maximum credit available hereunder shall be equal to the aggregate purchase price of the shares of Common Stock to be acquired pursuant to the Incentive plus the maximum tax liability that may be incurred in connection with the Incentive. 12.4 EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. In the event that a participant ceases to be an employee of the Company for any reason, including death, disability, early retirement or normal retirement, any Incentives may be exercised, shall vest or shall expire at such times as may be determined by the Committee in the Incentive Agreement. 12.5 ADDITIONAL CONDITION. Anything in this Plan to the contrary notwithstanding: (a) the Company may, if it shall determine it necessary or desirable for any reason, at the time of award of any Incentive or the issuance of any shares of Common Stock pursuant to any Incentive, require the recipient of the Incentive, as a condition to the re ceipt thereof or to the receipt of shares of Common Stock issued pursuant thereto, to deliver to the Company a written representation of present intention to acquire the Incentive or the shares of Common Stock issued pursuant thereto for his own account for investment and not for distribution; and (b) if at any time the Company further determines, in its sole discretion, that the listing, registration or qualifi cation (or any updating of any such document) of any Incen tive or the shares of Common Stock issuable pursuant thereto is necessary on any securities exchange or under any federal or state securities or blue sky law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with the award of any Incentive, the issuance of shares of Common Stock pursuant thereto, or the removal of any restrictions imposed on such shares, such Incentive shall not be awarded or such shares of Common Stock shall not be issued or such restrictions shall not be removed, as the case may be, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. 12.6 ADJUSTMENT. In the event of any merger, consolidation or reorganization of the Company with any other corporation or corporations, there shall be substituted for each of the shares of Common Stock then subject to the Plan, including shares subject to restrictions, options or achievement of performance share objectives, the number and kind of shares of stock or securities to which the holder of the shares of Common Stock will be entitled pursuant to the transaction. In the event of any recapitalization, stock dividend, stock split, combination of shares or other change in the Common Stock, the number of shares of Common Stock then subject to the Plan, including shares subject to outstanding Incentives, shall be adjusted in proportion to the change in outstanding shares of Common Stock. In the event of any such adjustments, the purchase price of any option, the performance objectives of any Incentive, and the shares of Common Stock issuable pursuant to any Incentive shall be adjusted as and to the extent appropriate, in the reasonable discretion of the Committee, to provide participants with the same relative rights before and after such adjustment. -9- 12.7 INCENTIVE AGREEMENTS. The terms of each Incentive shall be stated in an agreement approved by the Committee. 12.8 WITHHOLDING. At any time that a participant is required to pay to the Company an amount required to be withheld under the applicable income tax laws in connection with the issuance of shares of Common Stock under the Plan or upon the lapse of restrictions on shares of restricted stock, the participant may, subject to the Committee's right of disapproval, satisfy this obligation in whole or in part by electing (the "Election") to have the Company withhold from the distribution shares of Common Stock having a value equal to the amount required to be withheld. The value of the shares withheld shall be based on the Fair Market Value of the Common Stock on the date that the amount of tax to be withheld shall be determined (the "Tax Date"). Each Election must be made prior to the Tax Date. The Committee may disapprove of any Election or may suspend or terminate the right to make Elections. If a participant makes an election under Section 83(b) of the Internal Revenue Code with respect to shares of restricted stock, an Election is not permitted to be made. A participant may also satisfy his or her total tax liability related to the Incentive by delivering shares of Common Stock that have been owned by the participant for at least six months. The value of the shares delivered shall be based on the Fair Market Value of the Common Stock on the Tax Date. 12.9 NO CONTINUED EMPLOYMENT. No participant under the Plan shall have any right, because of his or her participation, to continue in the employ of the Company for any period of time or to any right to continue his or her present or any other rate of compensation. 12.10 DEFERRAL PERMITTED. Payment of cash or distribution of any shares of Common Stock to which a participant is entitled under any Incentive shall be made as provided in the Incentive Agreement. Payment may be deferred at the option of the participant if provided in the Incentive Agreement. 12.11 AMENDMENT OF THE PLAN. The Board may amend or discontinue the Plan at any time; provided, however, that no such amendment or discontinuance shall change or impair, without the consent of the recipient, an Incentive previously granted. 12.12 CHANGE OF CONTROL. (a) A Change of Control shall mean: (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of more than 30% of the outstanding shares of the Common Stock; provided, however, that for -10- purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: a) any acquisition of Common Stock directly from Trico, b) any acquisition of Common Stock by Trico, c) any acquisition of Common Stock by any employee benefit plan (or related trust) sponsored or maintained by Trico or any corporation controlled by Trico, or d) any acquisition of Common Stock by any corporation pursuant to a transaction that complies with clauses a), b) and c) of subsection (iii) of this Section 12.12(a); or (ii) individuals who, as of the date this Plan was adopted by the Board of Directors (the "Approval Date"), constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Approval Date whose election, or nomination for election by Trico's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board; or (iii) consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of Trico (a "Business Combination"), in each case, unless, following such Business Combination, a) all or substantially all of the individuals and entities who were the beneficial owners of Trico's outstanding common stock and Trico's voting securities entitled to vote generally in the election of directors immediately prior to such Business Combination have direct or indirect beneficial ownership, respectively, of more than 50% of the then outstanding shares of common stock, and more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the corporation resulting from such Business Combination (which, for purposes of this paragraph (A) and paragraphs (B) and (C), shall include a corporation which as a result of such transaction owns Trico or all or substantially all of Trico's assets either directly or through one or more subsidiaries), and -11- b) except to the extent that such ownership existed prior to the Business Combination, no person (excluding any corporation resulting from such Business Combination or any employee benefit plan or related trust of Trico or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common stock of the corporation resulting from such Business Combination or 20% or more of the combined voting power of the then outstanding voting securities of such corporation, and c) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) approval by the shareholders of Trico of a plan of complete liquidation or dissolution of Trico. (b) Upon a Change of Control, or immediately prior to the closing of a transaction that will result in a Change of Control if consummated, all outstanding options and SARs granted pursuant to the Plan shall automatically become fully exercisable, all restrictions or limitations on any Incentives shall lapse and all performance criteria and other conditions relating to the payment of Incentives shall be deemed to be achieved or waived by Trico without the necessity of action by any person. (c) The Committee may take such other action with respect to an Incentive as shall be provided in an agreement with the participant. 12.13 DEFINITION OF FAIR MARKET VALUE. Whenever "Fair Market Value" of Common Stock shall be determined for purposes of this Plan, it shall be determined as follows: (i) if the Common Stock is listed on an established stock exchange or any automated quotation system that provides sale quotations, the closing sale price for a share of the Common Stock on such exchange or quotation system on the applicable date; (ii) if the Common Stock is not listed on any exchange or quotation system, but bid and asked prices are quoted and published, the mean between the quoted bid and asked prices on the applicable date, and if bid and asked prices are not available on such day, on the next preceding day on which such prices were available; and (iii) if the Common Stock is not regularly quoted, the fair market value of a share of Common Stock on the applicable date as established by the Committee in good faith. 13. STOCK OPTIONS FOR OUTSIDE DIRECTORS. 13.1 GRANT OF OPTIONS. For as long as the Plan remains in effect and shares of Common Stock remain available for issuance hereunder, each person who is not an employee -12- of the Company and who becomes a director of the Company (an "Outside Director") after January 1, 1997 shall automatically be granted a non- qualified stock option to acquire 5,000 shares of Common Stock on the later of the date of adoption by the Board of Directors of the amendment to the Plan that added this Section 13 or the date such person becomes an Outside Director. Each Outside Director shall also automatically be granted a non- qualified stock option to acquire 1,000 shares of Common Stock each year on the date immediately following the Company's annual meeting of stockholders. 13.2 EXERCISABILITY OF STOCK OPTIONS. The stock options granted to Outside Directors under this Section 13 shall be exercisable immediately after the date of grant and shall expire ten years following the date of grant. 13.3 EXERCISE PRICE. The exercise price of the stock options granted to Outside Directors shall be equal to the Fair Market Value, as defined in the Plan, of a share of Common Stock on the date of grant. The exercise price may be paid as provided in Section 6.5 of the Plan, including pursuant to a brokerage arrangement approved in advance by the Committee. 13.4 EXERCISE AFTER TERMINATION OF BOARD SERVICE. In the event an Outside Director ceases to serve on the Board, the stock options granted hereunder must be exercised, to the extent otherwise exercisable at the time of termination of Board service, within one year from termination of Board service; provided, however, that in the event of termination of Board service as a result of retirement on or after reaching age 65, the stock options must be exercised within five years from the date of retirement; and further provided, that no stock options may be exercised later than ten years after the date of grant. *Numbers contained herein have not been adjusted to reflect the 100% stock dividend paid on the Company's Common Stock in June 1997. -13- EX-21.1 7 SUBSIDIARIES OF THE COMPANY EXHIBIT 21.1 Subsidiaries of the Company
Company State or Jurisdiction of Incorporation Trico Marine Assets, Inc. Delaware Trico Marine Operators, Inc. Louisiana Trico Marine International, Inc. Louisiana Trico Marine International, Ltd. Cayman Islands Trico Marine International Holdings, B.V. The Netherlands Saevik Supply ASA Norway Saevik Shipping AS Norway Saevik Supply (UK) Limited England Albyn Marine Limited Scotland
EX-23.1 8 CONSENT OF COOPERS & LYBRAND L.L.P. EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Trico Marine Services, Inc. on Form S-8 (SEC File Nos. 333-07149 and 333-44221) of our reports dated February 19, 1998, on our audits of the consolidated financial statements and financial statement schedule of Trico Marine Services, Inc. and Subsidiaries as of December 31, 1997 and 1996, and for the years ended December 31, 1997, 1996 and 1995, which reports are included in this Annual Report on Form 10-K. New Orleans, Louisiana March 24, 1998 EX-27.1 9 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDING DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 10,940 0 35,090 571 0 48,945 528,038 22,982 698,781 41,114 359,385 0 0 204 261,296 698,781 125,476 125,480 63,679 63,679 372 0 7,994 54,281 18,982 35,299 0 0 0 35,299 2.22 2.11
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