-----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, BzxXRooOCxfyrzNq2VnZhxe535YGKqO6Um5afMiEsbPycrOdwwN1+82HcrAOa+Xt rEsufxG4zFRitnIg5FY7uw== 0000950123-99-002893.txt : 19990403 0000950123-99-002893.hdr.sgml : 19990403 ACCESSION NUMBER: 0000950123-99-002893 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARINE TRANSPORT CORP CENTRAL INDEX KEY: 0000732780 STANDARD INDUSTRIAL CLASSIFICATION: DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412] IRS NUMBER: 132625280 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-11573 FILM NUMBER: 99583481 BUSINESS ADDRESS: STREET 1: 1200 HARBOR BOULEVARD CITY: WEEHAWKEN STATE: NJ ZIP: 07087 BUSINESS PHONE: 2013300200 MAIL ADDRESS: STREET 1: 1200 HARBOR BOULEVARD CITY: WEEHAWKEN STATE: NJ ZIP: 07087 FORMER COMPANY: FORMER CONFORMED NAME: OMI CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: OGDEN MARINE INC DATE OF NAME CHANGE: 19831212 10-K 1 MARINE TRANSPORT CORPORATION 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 ------------------------ COMMISSION FILE NUMBER 000-11573 MARINE TRANSPORT CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-2625280 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: 201-330-0200 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
TITLE OF CLASS NAME OF EXCHANGE ON WHICH REGISTERED -------------- ------------------------------------ COMMON STOCK, PAR VALUE $.50 PER SHARE NASDAQ STOCK MARKET
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. YES [ ] NO [ ] Aggregate market value of registrant's voting stock, held by non-affiliates, based on the closing price on the Nasdaq Stock Market as of the close of business on March 26, 1999: $18,436,973 Number of shares of the registrant's common stock outstanding as of March 26, 1999: 6,555,368 The following document is hereby incorporated by reference into Part III of this Form 10-K: - --------------- (1) Portions of the Marine Transport Corporation 1998 Proxy Statement to be filed with the Securities and Exchange Commission. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INDEX
ITEMS PAGE ----- ----- Part I 1. and 2. Business and Properties..................................... 2-6 3. Legal Proceedings........................................... 6 4. Submission of Matters to a Vote of Security Holders......... 6 Part II 5. Market for Marine Transport Corporation's Common Stock and Related Shareholder Matters................................. 7 6. Selected Financial Data..................................... 7-9 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 9-15 8. Financial Statements and Supplementary Data................. 15-38 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 39 Part III 10. Management.................................................. 39 11. Executive Compensation...................................... 39 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 40 13. Certain Relationships and Related Transactions.............. 40 Part IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................................... 40-42 SIGNATURES.............................................................. 43
1 3 PART I ITEM 1. BUSINESS AND ITEM 2. PROPERTIES GENERAL Marine Transport Corporation ("MTC" or the "Company"), formerly named OMI Corp., was established in its present form through a series of transactions, culminating June 17, 1998, through which OMI Corp.: (a) acquired Marine Transport Lines, Inc. in a stock-for-stock exchange (the "Acquisition") and (b) distributed to its shareholders the stock of a newly created Marshall Islands corporation named OMI Corporation ("New OMI") containing OMI Corp.'s international businesses (the "Distribution"). OMI Corp. then changed its name to Marine Transport Corporation. Upon completion of the Distribution, the assets, liabilities and equity for OMI Corp.'s international businesses were removed from the Company's balance sheet at their recorded values. For periods prior to the Distribution, the historical financial statements of the Company reflect the financial position and results of operations of OMI Corp. as reported for such periods including the international businesses. For periods subsequent to the Acquisition and Distribution, the Company's financial statements include the assets, liabilities, equity and operations of OMI Corp.'s domestic business and reflect the acquisition of Marine Transport Lines, Inc. under the purchase method of accounting. The financial position and results of operations of the Company should be read and analyzed with careful consideration of the above transactions and presentations. Marine Transport Corporation is a U.S.-based supplier of marine transportation services. The Company owns and operates a fleet of ships for its own account, and it also manages vessels for other vessel owners. It presently operates one of the largest U.S.-based fleets of ocean-going vessels. Prior to the Acquisition and Distribution, OMI Corp.'s major business was providing seaborne transportation services for crude oil and refined petroleum products in two distinct international market segments: Suezmax tankers and Handymax product tankers. These businesses were separated from the Company and distributed to its shareholders in the Distribution. In addition, as a separate domestic business segment, the Company provided lightering services in the Gulf of Mexico, operated four tank vessels in the U.S. Jones Act trade and provided ship management services to the U.S. Government for its Ready Reserve Fleet. As a result of the Acquisition and the Distribution, the major businesses of MTC are: - marine transportation of chemicals, petroleum products and crude oil for U.S.-based industrial customers, including lightering services for crude oil customers in the Gulf of Mexico, and - ship management services for third-party shipowners, including the U.S. Government. 2 4 As of March 15, 1999, the ocean fleet of Marine Transport Corporation consisted of the following vessels:
OWNED, MANAGED YEAR VESSEL NAME OR CHARTERED BUILT SIZE EMPLOYMENT TRADE/CARGO - ----------- ------------ ----- ---- ---------- ----------- TRANSPORTATION SERVICES FOR ENERGY AND CHEMICALS: Marine Chemist................ Owned 1970 35,491 dwt Affreightment and Spot Chemical Parcel Chemical Pioneer(a)........... Managed 1983 36,526 dwt Affreightment and Spot Chemical Parcel MBC-1 (Barge)................. Owned 1973 4,000 dwt Affreightment and Spot Chemical Parcel Calina(b)..................... Owned 1964 13,000 cm Time charter Ammonia Marine Duval(b)(c)............ Owned 1970 25,131 dwt Time charter Molten Sulphur Courier....................... Owned 1977 35,662 dwt Time charter Oil Products Patriot....................... Owned 1976 35,662 dwt Spot Oil Products Rover......................... Owned 1977 35,662 dwt Spot Oil Products Marine Columbia(d)............ Chartered 1983 138,698 dwt Time charter Crude Oil BT Alaska(e).................. Managed 1978 191,120 dwt Management Crude Oil Deneb......................... Chartered 1985 79,900 dwt Lightering Crude Oil Jahre Prince.................. Chartered 1986 94,491 dwt Lightering Crude Oil Stena Commander............... Chartered 1989 95,758 dwt Lightering Crude Oil Rich Duke..................... Chartered 1986 81,279 dwt Lightering Crude Oil SHIP MANAGEMENT: Harbel Cutlass................ Managed 1980 11,734 dwt Management Latex Harbel Tapper................. Managed 1981 11,682 dwt Management Latex Lykes Explorer................ Managed 1987 3,000 teu Management Container Lykes Discoverer.............. Managed 1987 3,000 teu Management Container Lykes Navigator............... Managed 1987 3,000 teu Management Container Lykes Liberator............... Managed 1987 3,000 teu Management Container Marine Reliance(f)............ Chartered 1987 4,000 cars Time charter Car Carrier
VESSELS MANAGED FOR U.S. MARITIME ADMINISTRATION Eighteen vessels, primarily large roll-on/roll-off cargo vessels, are managed under contracts which expired in June 1998 and have been extended to the present time; MTC is presently bidding on five year renewal of these contracts. NOTES: (a) MTC manages this vessel for the owner and provides commercial management for open parcel space. (b) Vessel residual value at end of charter term shared with charterer. (c) Cargo forebody 1970; stern steam/electric 1944. (d) Time chartered in, with fixed purchase option. (e) Vessel bareboat chartered in and time chartered out, with all operating costs paid by time charterer. (f) Time chartered in and time chartered out, with fixed profit. DESCRIPTION OF THE COMPANY'S SERVICES BY SEGMENT The market for the Company's major business segments are further described in the following sections. Transportation Services for Energy and Chemicals: MTC pursues an industrial shipping philosophy, serving the chemical and petroleum liquid bulk market for large commercial customers. 3 5 In a number of cases the Company has entered into long-term contracts of affreightment providing for base amounts of cargo to be shipped on an annual schedule of voyages on its owned vessels and a managed vessel. These contracts are typically arranged with major oil and chemical companies. Spot market movements are used to fill out cargo capacity on vessels not fully utilized in the carriage of contract cargo. The Company's vessels MARINE CHEMIST and MBC-1 are employed on this basis. These vessels are complemented by a commercial agreement between the Company and the owner of the vessel CHEMICAL PIONEER which is managed both commercially and technically by the Company and is employed on a basis similar to the above-mentioned vessels. The Company charters-in other vessels to carry contract cargo in excess of the Company's own vessel capacities. Contracts are renewed periodically (contract terms range from one to five years) and rate fluctuations due to a changing market environment are generally not as large as experienced in the spot market for chemical and petroleum tankers. The vessels CALINA and MARINE DUVAL operate under long-term contracts to third party customers who pay all direct costs of operating the vessels. The vessel COURIER is employed on a two-year timecharter to a major oil company. The vessels PATRIOT and ROVER operate in the spot market for petroleum product bulk movements or other cargo which may become available from time to time, including, PL-480 grain movements. The crude oil vessel MARINE COLUMBIA is on long-term charter (until December 2002) to BP Oil Shipping Company USA ("BP"). Along with the vessel BT ALASKA, managed by MTC under an agreement which lasts for the balance of the vessel's economic life, these two crude oil carriers operate in the Alaska North Slope oil trade moving Alaska oil to the U.S. West Coast and to the Far East for BP. Revenues from BP were approximately 9% of consolidated revenues for the year ended December 31, 1998. All of the above-mentioned vessels except CALINA operate in the protected U.S. Jones Act market. The Jones Act restricts participants in the U.S. coastwise shipping trade to those owners who are qualified U.S. citizens and to vessels which are built in the United States and are crewed with U.S. seafarers. Participants in the Jones Act trades are limited, but competition in most areas of the trade is intense. The Company attempts to differentiate itself in its energy and chemical segment by specializing in areas such as chemical parcels and Alaska crude oil where its unique vessel tonnage meets charterers' specific needs. This differentiation is more difficult in petroleum product movements, where competitors have similar vessels, cargo requirements are less demanding and some overcapacity exists at the present time. Other forms of competition include movement of energy sources and chemicals by pipeline and rail, and imports and exports of products by internationally registered vessels to and from geographic areas which are not restricted by Jones Act requirements. MTC also provides lightering services in the Gulf of Mexico through its subsidiary MTL Petrolink Corp. Lightering involves transfer of crude oil from large crude carriers ("VLCC's" or "ULCC's") to smaller vessels that bring the crude oil to refinery storage terminals. The Company timecharters-in four international flag Aframax tankers, and frequently charters in on a spot basis other vessels, to perform its services. MTL Petrolink Corp. provides assist vessels, equipment and personnel to discharge large crude oil vessels offshore and deliver cargo to ports in the U.S. Gulf. MTL Petrolink Corp. also provides repair services for its own assist vessels as well as for small vessels engaged in commercial offshore and fishing trades. MTL Petrolink Corp. has two main competitors for its services. The methods of competition include price as well as the quality and safety of services. MTL Petrolink Corp. believes it is the second largest company providing lightering services in the Gulf of Mexico. The Transportation Services for Energy and Chemicals segment usually experiences a slight seasonal downturn in the summer months due to refinery shutdowns and inventory adjustments by customers. Ship Management: MTC provides ship management services to industrial ship owners who use vessels in parts of their own businesses, and to the U.S. Government for its Ready Reserve Fleet. Ship management includes technical operation and maintenance, crewing, regulatory compliance, and other ship operating activities. MTC manages one of the largest U.S.-based fleets. Management contracts range in length from one to five years in term. Ship Management fees are the primary component of other operating revenues. There are a large number of competitors for ship management business. There are many international ship management 4 6 companies which are greater in size than MTC, but internationally-owned companies cannot perform ship management services for Jones Act vessels. Management fees, quality of service, and experience with particular vessel types are the significant forms of competition for ship management services. The Company also charters in and charters out the car carrier MARINE RELIANCE, retaining a small profit between the charters. Results of operation of this vessel are included in the Ship Management business segment. MEASUREMENT OF SEGMENT PROFITABILITY AND SEGMENT ASSETS The Company evaluates performance of each of its vessels engaged in the Transportation of Energy and Chemicals segment based on the cash contribution of each vessel in its specific trade. This contribution is determined by subtracting voyage and vessel operating costs (other than depreciation and amortization) from voyage revenues. For voyages in process at the measurement date, the percentage of completion accounting method is used. All of the Company's owned vessels are included in this business segment. For managed vessels participating in this business segment, the management fee and commercial management fee, if any, generate whatever cash is contributed. Ship management fee revenues, which are determined by contract with customers, are the measurement of performance used for the Ship Management segment. The owners of the managed vessels are responsible for their vessel operating costs. The Company operates its owned vessels as well as vessels for other owners. No allocation of general and administrative expense is made to the business segments, nor is any inter-company revenue allocated for the management services performed for the Transportation of Energy and Chemicals segment by the Ship Management segment. MTC considers Ship Management to be a core competence for a major ship owner. However, because the business segments are managed separately within the Company, and are marketed separately to the Company's potential customers, they are presented separately. See Note 14 -- Financial Information Relating to Segments of the Notes to Consolidated Financial Statements for more information concerning industry segments. CONTRACTUAL RELATIONSHIPS With the exception of two vessels operating on the spot market for petroleum products and PL-480 grain movements, and the vessels operated by the Company for the U.S. Maritime Administration, all of the vessels are employed on either (a) year to year contracts or vessel operating agreements which renew annually unless terminated by MTC's customer, or (b) charters or contracts of affreightment or vessel operating agreements having terms which expire more than one year into the future. The termination of any significant contract, charter or operating agreement could have a material impact on the Company. The management contracts between MTC and the U.S. Maritime Administration expired in June 1998, but have been extended for the convenience of the government until new awards are made on the basis of a competitive bidding process. This process is expected to be completed by May 1999. MTC cannot predict the extent to which it will be successful in renewing its contracts to manage vessels for the Maritime Administration. Net fees derived from these contracts accounted for 6% of consolidated revenues for the year ended December 31, 1998. REGULATION AND ENVIRONMENTAL IMPACT The Company and its vessel operations are subject to numerous U.S. and international regulations impacting the manner in which vessels are constructed, operated, and maintained, as well as the operation of the Company, and its potential liability arising from accidents which result in oil pollution. In particular, the Oil Pollution Act of 1990 ("OPA 90") provides, among other things, for the (a) phase-in of the exclusive use of double-hulled tankers in petroleum trades in the United States waters; and (b) potentially unlimited 5 7 liability of owners, operators and bareboat charterers for certain oil spills and other accidents in the U.S. and in U.S. waters. OPA 90 applies to a number of MTC vessels. The MARINE CHEMIST must be refitted with a double hull (at an estimated cost of $15-20 million) or be remeasured by November 2000 in order to be eligible to continue carrying petroleum products. Such remeasurement has the effect of reducing the vessel's cubic cargo capacity by approximately 15%. The COURIER, PATRIOT, ROVER and MARINE COLUMBIA will no longer be able to carry petroleum products in the U.S. under OPA 90 in 2003, 2003, 2004 and 2006, respectively. OFFICE AND EMPLOYEES MTC's offices are located at 1200 Harbor Boulevard, Weehawken, New Jersey, 07087-0901. The Company leases approximately 16,500 square feet of space at this location under a lease which expires in 2004. The Company employs approximately 160 people ashore and has approximately 800 positions, or berths, filled on its vessels when all are engaged in operation. Generally, each berth on a vessel requires full employment of at least two people during a twelve-month period. Most of the positions filled on the Company's vessels are covered by multi-year maritime union contracts, none of which expire before May 2000. ITEM 3. LEGAL PROCEEDINGS In February 1999, the Company paid $1 million in full settlement of an income tax indemnity claim by a subsidiary of the Fuji Bank and Trust Company (the "Bank") in connection with an earlier transaction between a subsidiary of the Company and the Bank. The settlement amount has been reflected in the accompanying consolidated financial statements as an adjustment of the purchase price of MTL, and is included in accrued expenses at December 31, 1998. As of August 15, 1998, the Company and/or its subsidiary Marine Transport Lines, Inc. ("MTL" and together with MTC and a number of present or former affiliates or subsidiaries of MTC or MTL, the "Companies") have been named as defendants in over 8,900 personal injury lawsuits filed in: (a) federal courts in Ohio (8,827 cases), Michigan (97 cases), and the U.S. Virgin Islands (39 cases); and (b) state courts in Texas (6 cases), Washington (4 cases), Virginia (3 cases) and Louisiana (1 case). The cases have been filed on behalf of current, retired or deceased seamen who allege that they suffered unspecified asbestos-related injuries or diseases as a result of occupational exposure to fibers emitted from asbestos-containing products in the course of employment aboard vessels owned or operated by the Companies and other vessel owners. Damages are sought in unspecified amounts in most cases. The cases filed in Federal courts, which comprise the vast majority of the suits pending against the Companies, are subject to administration for all pretrial purposes by the United States District Court for the Eastern District of Pennsylvania (United States District Judge Charles R. Weiner) pursuant to orders of the Judicial Panel on Multidistrict Litigation issued commencing in 1991. By order of Judge Weiner, the federal cases have been administratively dismissed, with the court retaining jurisdiction and the cases subject to later reinstatement upon submission of proof of the existence of an asbestos-related disease. Little, if any, activity has occurred since 1991 in the cases filed in Federal courts, although additional cases continue to be filed. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders of the Company during the fourth quarter of 1998. 6 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS Marine Transport Corporation's common stock is traded on the Nasdaq Stock Market under the symbol MTLX. Prior to the Distribution, the Company's common stock was traded on the New York Stock Exchange under the symbol OMM. As of March 15, 1999, the number of shareholders of Marine Transport Corporation stock was approximately 3,443. The Company's historical stock prices should be analyzed carefully in the context of the Acquisition and the Distribution which are more fully described earlier in this report. The high and low sales prices of the common stock, as reported by the Nasdaq Stock Market (New York Stock Exchange prior to Distribution), were as follows:
1ST 2ND 3RD 4TH ---- ---- ---- ---- 1998 Quarter High................................................ 98 3/4 108 1/8 4 2 15/16 Low................................................. 81 7/8 3 3/4 1 23/32 1 5/8 1997 Quarter High................................................ 112 1/2 106 1/4 145 137 1/2 Low................................................. 82 1/2 90 95 91 1/4
In June 1998 the Company completed the Acquisition and the Distribution, effecting a separation of the Company, and completed a 1 for 10 reverse stock split. The above prices give effect to the reverse split on a retroactive basis. Payment of dividends is restricted by the terms of the Company's long term debt agreements. ITEM 6. SELECTED FINANCIAL DATA Comparisons of Selected Financial Data for the periods presented should be made with consideration of the Acquisition and the Distribution. See Notes to the Consolidated Financial Statements. For pro forma information giving effect to the Acquisition and the Distribution see Note 2 to the Consolidated Financial Statements. MARINE TRANSPORT CORPORATION AND SUBSIDIARIES (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------- 1998 1997 1996 1995 1994 -------- -------- -------- -------- -------- Revenues: Voyage revenues........................... $173,118 $224,413 $225,578 $232,589 $261,357 Other operating revenues.................. 11,660 7,127 7,044 7,520 5,135 -------- -------- -------- -------- -------- 184,778 231,540 232,622 240,109 266,492 -------- -------- -------- -------- -------- Operating expenses: Vessel and voyage......................... 151,930 174,363 167,259 212,963 223,540 Depreciation and amortization............. 22,407 28,944 30,448 34,734 37,770 General and administrative................ 16,396 23,998 16,438 15,303 18,972 Provision for losses: Impaired value of vessels.............. -- -- -- 8,707 14,798 Lease obligation....................... -- -- -- 6,687 19,800 -------- -------- -------- -------- -------- 190,733 227,305 214,145 278,394 314,880 -------- -------- -------- -------- -------- Operating income (loss)..................... (5,955) 4,235 18,477 (38,285) (48,388) -------- -------- -------- -------- --------
7 9
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------- 1998 1997 1996 1995 1994 -------- -------- -------- -------- -------- Other income (expense): Net gain on disposal of assets............ 538 870 11,153 5,480 10,222 Interest expense.......................... (8,378) (12,249) (26,462) (26,708) (28,808) Interest income........................... 4,529 3,257 2,810 2,076 2,843 Equity in income of unconsolidated joint ventures......................... 2,353 737 2,482 5,528 5,402 Provision for write down of investments... -- -- -- -- (1,250) Other -- net.............................. -- -- -- 1,040 (191) -------- -------- -------- -------- -------- Net other expenses........................ (958) (7,385) (10,017) (12,584) (11,782) -------- -------- -------- -------- -------- Income (loss) before income taxes, extraordinary item and cumulative effect of change in accounting principle......... (6,913) (3,150) 8,460 (50,869) (60,170) Benefit (provision) for income taxes........ 39,985 180 (2,271) 18,973 22,305 -------- -------- -------- -------- -------- Income (loss) before extraordinary item and cumulative effect of changes in accounting principle................................. 33,072 (2,970) 6,189 (31,896) (37,865) Extraordinary loss, net of income tax benefit of $1,493......................... -- -- (2,772) -- -- Cumulative effect of change in accounting principle -- net of income tax expense of $7,429................................. -- 13,797 -- -- -- -------- -------- -------- -------- -------- Net income (loss)........................... $ 33,072 $ 10,827 $ 3,417 $(31,896) $(37,865) ======== ======== ======== ======== ======== Basic earnings (loss) per common share: Income (loss) before extraordinary item and cumulative effect of change in accounting principle...................... $ 6.31 $ (0.69) $ 1.85 $ (10.37) $ (12.45) ======== ======== ======== ======== ======== Net income (loss)......................... $ 6.31 $ 2.52 $ 1.02 $ (10.37) $ (12.45) ======== ======== ======== ======== ======== Diluted earnings (loss), per common share: Income (loss) before extraordinary item and cumulative effect of change in accounting principle...................... $ 6.31 $ (0.69) $ 1.83 $ (10.37) $ (12.45) ======== ======== ======== ======== ======== Net income (loss)......................... $ 6.31 $ 2.52 $ 1.01 $ (10.37) $ (12.45) ======== ======== ======== ======== ======== Weighted average shares outstanding......... 5,244 4,291 3,344 3,075 3,042 ======== ======== ======== ======== ========
8 10 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------- 1998 1997 1996 1995 1994 -------- -------- -------- -------- -------- Other Financial Data: Cash flows provided (used) by: Operating activities...................... $ 15,529 $ 8,279 $ (5,721) $ (4,601) $ 1,647 Investing activities...................... (71,455) 49,343 31,989 (9,959) 9,739 Financing activities...................... 31,915 (73,762) (10,960) 15,332 (24,910) Balance Sheet Data: Cash and cash equivalents................. $ 8,652 $ 32,489 $ 47,877 $ 32,569 $ 31,797 Vessel and other property -- net.......... 38,878 314,193 341,309 368,441 400,998 Construction in progress.................. -- 56,032 10,754 -- -- Investments in, and advances to joint ventures............................... -- 28,155 59,322 84,915 81,868 Total assets.............................. 106,470 518,587 552,282 565,486 605,132 Total debt................................ 27,145 162,916 237,148 283,866 272,139 Total stockholders' equity................ 15,969 221,023 207,578 145,415 179,896
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following presentation of management's discussion and analysis of Marine Transport Corporation's financial condition and results of operations should be read in connection with the Consolidated Financial Statements, accompanying notes thereto and other financial information appearing elsewhere in this document, as well as the Form S-1 filed on May 15, 1998 which fully describes the Acquisition and Distribution, and the documents incorporated by reference thereto. Users of these financial statements should be aware that future results of operations will significantly differ from the historical results of operations because of the changes in the Company which occurred as a result of the Acquisition and the Distribution. PRO FORMA FINANCIAL INFORMATION Certain pro forma financial information has been presented to give effect to the Acquisition and Distribution as if such events had occurred on January 1, 1997. The pro forma information does not purport to represent what the operations actually would have been or to project operating results for any projected period. The pro forma financial information is based on certain assumptions the Company believes are reasonable. See Notes to the Consolidated Financial Statements. FORWARD-LOOKING STATEMENTS The information below and elsewhere in this document contains certain forward-looking statements which reflect the current view of the Company with respect to future events and financial performance, as well as potential impacts of the Year 2000 issue on the Company. Wherever used, the words "expect", "plan", "anticipate" and similar expressions identify forward-looking statements. Such statements are based on management's current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. The Company does not normally publicly update its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. OVERVIEW The Company's vessels may operate on time, bareboat or voyage ("spot") charters. Each type of charter denotes a method by which revenues are recorded and expenses are allocated. Under a time charter, revenue is measured based on a daily or monthly rate and the charterer assumes certain voyage expenses, such as fuel and port charges. Under a bareboat charter, the charterer assumes all voyage and operating expenses. This 9 11 means that the revenues generated by a bareboat charter are likely to be lower than those generated by a time charter. Under a voyage charter revenue is calculated based on the amount of cargo carried, most expenses are for the shipowner's account and the length of the charter is one voyage. Revenue may be higher in the spot market, as the owner is responsible for most of the costs of the voyage. Other factors affecting net voyage revenues for voyage charters are waiting time between cargoes, port costs, and bunker prices. Vessel expenses include operating expenses such as crew payroll/benefits/travel, stores, maintenance and repairs, insurance and communications. These expenses vary depending on the fleet size, utilization levels and requirements under laws, by charterers and Company standards. Insurance expense varies with the overall insurance market conditions as well as the insured's loss record, level of insurance and desired coverage. The Company processes most of the transactions required for operation of the vessels it manages for other owners, including those related to crew payroll and transportation, repairs and maintenance, spare parts, drydocking and overhauls, communications, and insurance. MTC is administratively staffed to perform these functions for its large fleet of managed vessels; however, only the management fee is included in revenues for these vessels, not the actual revenue earned by commercial operation by third party owners. SIGNIFICANT ADJUSTMENTS RELATED TO DISTRIBUTION AND CHANGE IN ACCOUNTING PRINCIPLE Net income for the year ended December 31, 1998 was $33.1 million compared to $10.8 million for the year ended December 31, 1997. Included in the 1998 income is a benefit of $39.9 million for Federal income taxes. In connection with the Distribution, the subsidiary holding the Company's international business became a decontrolled corporation for income tax purposes and deferred income taxes, which had previously been recorded, were reversed. Similar adjustments are not expected to occur in the future. Included in the 1997 net income is $13.8 million, net of income taxes, from the cumulative effect of a change in accounting principle. Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 Voyage revenues decreased substantially in 1998 compared to 1997. The primary reason for the substantial decrease in revenues is the exclusion of the revenues and the results of operations of the Company's international businesses for periods after the Distribution. On a pro-forma basis, assuming the Distribution and Acquisition occurred on January 1, 1997, revenues increased $7 million, primarily resulting from operation of three product tankers which were placed in service in the third quarter of 1998; these same vessels were idle for most of 1997. Other operating revenues for all periods presented primarily represent revenues from ship management services, with the increases in ship management revenues for the 1998 year attributable to the Acquisition of Marine Transport Lines, Inc. Vessel and voyage operating expenses decreased primarily as a result of the impact of the Distribution (international businesses that were separated from the Company in June 1998). This decrease in expense was partially offset by the addition of vessels from Marine Transport Lines, Inc., and the costs associated with the start up expenses of activating three vessels that had been in extended lay-up periods. Operating lease expenses included in vessel and voyage operating expenses increased because of the Company's decision to charter in four Suezmax tankers during 1998. These chartered vessels were part of the international business distributed to shareholders in connection with the Distribution. The operating loss of $6 million for the year ended December 31, 1998 resulted from several factors: the decrease in market charter rates for the Company's previously-held international Suezmax and Product Tanker fleets; increased depreciation and amortization charges in connection with the Acquisition for periods after the Acquisition; and, general and administrative expense incurred in concluding the Acquisition and the Distribution. The actual charges for depreciation and amortization and general and administrative expense were lower in 1998 than 1997 due to the Distribution in June 1998. 10 12 The significant decrease in interest expense results from lower borrowings by the Company (mostly arising from the transfer to OMI Corporation of long-term debt in connection with the Distribution) as well as lower interest rates for current periods. In October 1998, the Company fixed interest rates on $19.9 million of floating rate long-term debt for three years through an interest rate swap (see Item 7A and Notes to the Consolidated Financial Statements). Equity in income of unconsolidated joint ventures primarily represents investments the Company had in vessels used in international trade which were part of the Distribution. The income tax benefit for the year ended December 31, 1998 represents principally the reversal of deferred taxes at the Distribution date for the Company's foreign subsidiaries which became decontrolled corporations though the Distribution; income taxes are no longer payable on the deferred taxable income of those companies and the deferred taxes were reversed. For current earnings, the income tax provision is similar to the statutory rate. Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 Net voyage revenues (voyage revenues less vessel and voyage expenses) of $50.1 million for the year ended December 31, 1997 decreased by a net $8.2 million from $58.3 million for the same period in 1996. Changes in net voyage revenues for the year ended 1997 compared to 1996 are discussed as follows by the market segments in which the Company primarily operated in periods prior to the Distribution. Domestic net voyage revenues decreased $24.1 million to a loss of $5.2 for the year ended December 31, 1997, as compared to $18.9 million for the same period in 1996. Decreases of approximately $8.5 million in net voyage revenues were attributable to the six vessels sold during 1996. Included in the $8.5 million decrease is a $3.8 million credit to drydock expense relating to the reversals of the drydock accruals (the accrual method of accounting for drydock was used in 1996) for the vessels disposed of in 1996. Approximately $6.6 million of the decrease in net voyage revenues was a result of two product carriers which were on time charters in 1996 but were laid up for an aggregate 527 days in 1997. The third product carrier's net voyage revenues decreased by approximately $2.8 million primarily because it operated on a time charter in 1996 which ended in 1997 at a time when rates were lower. In addition, the vessel incurred 23 more offhire days due to idle time. Net voyage revenues generated by the MARINE COLUMBIA decreased $6.4 million as a result of the sale of the vessel in January 1997, as well as offhire incurred for repairs in 1997. On January 31, 1997, the MARINE COLUMBIA, a crude oil tanker which transports Alaskan North Slope oil for a major oil company, was sold and leased back under a charter agreement terminating December 31, 2002. MTC operates the MARINE COLUMBIA and the decrease in net voyage revenue mentioned above was attributable to charter hire expense. The Company received $40 million in cash and a $9 million note receivable for the vessel. A gain of approximately $25 million was deferred and is being amortized to the end of the lease term. The three remaining vessels in the domestic fleet were on time charters in the first half of 1996. Two of the vessels were redelivered in February and April 1997 having been on long-term time charters with the U.S. Military Sealift Command. One of the vessels was then on another time charter until February 1998. The third vessel was on time charter in 1996 which ended in February 1997. All of these vessels were idle at December 31, 1997. Net foreign voyage revenues increased $15.9 million to $55.3 million for the year ended December 31, 1997, as compared to $39.4 million for the same period in 1996. Decreases of $3.0 million relate to the sale of the LPG carrier which was disposed of in March 1997. Other changes are discussed as follows according to the two foreign market segments in which the Company previously operated. The product carrier fleet consisted of thirteen vessels (ten Handysize and three Panamaxes) at December 31, 1997 as compared to ten vessels (seven Handysize and three Panamaxes) at December 31, 11 13 1996. The Company maintained a mix of approximately half its product carriers on time charters in both years. Net voyage revenues include results of two product carriers acquired in 1996 and one vessel, purchased in April 1997, which contributed an additional $6.5 million to net voyage revenues during the twelve months ended 1997. With respect to the ten remaining vessels, net voyage revenues, in the aggregate, remained relatively unchanged during 1997 compared to 1996. In the year ending December 31, 1997, the crude oil fleet consisted of six wholly-owned vessels and four chartered-in vessels; eight were currently operating in the spot market and two vessels were operating on time charters. One vessel which had been on a long-term time charter was redelivered in the fourth quarter of 1997. In 1996, the Company owned seven vessels and chartered-in one vessel, with four of these vessels operating in the spot market. The Company maintained the majority of its crude oil tankers in the spot market. Net voyage revenues generated by the crude oil tanker fleet increased primarily for two reasons; first, by $9.9 million due to the acquisition of the ALTA and the TANANA, (two Suezmax tankers in which the Company acquired its partner's interest on December 30, 1996) and second, due to improved rates resulting from better market conditions in 1997. In addition, in order to maximize profits on voyages, the Company attempted to triangulate voyages for the new ships, that is, lessen the amount of the ballast leg (the part of the voyage where no cargo is carried), in order to increase the utilization of the vessel. The Company's operating expenses, other than vessel and voyage expenses, operating lease expenses and provision for losses, consisted of depreciation and amortization and general and administrative expenses. For the year ended December 31, 1997, these expenses increased $6.1 million to $52.9 million, from $46.8 million for the same period in 1996. General and administrative expenses increased $7.6 million primarily due to accruals for bonuses and severance aggregating approximately $5.3 million, expenses incurred in the relocation of corporate headquarters to Stamford, Connecticut of approximately $2.6 million, and expenses allocated to the anticipated spin off and formation of OMI Corporation ("New OMI") of approximately $.8 million. Other general and administrative expenses declined approximately $1.1 million. The decrease in depreciation expense of $1.5 million related to the sale of vessels (including the sale and leaseback of the MARINE COLUMBIA). Other income (expense) consisted of gain on disposal of assets-net, interest expense, interest income, equity in income of unconsolidated joint ventures and other-net. Net other expense decreased by $5.5 million for the year ended December 31, 1997 compared to the same period in 1996. Interest expense decreased by a net of $14.2 million due to the following; reduction in the average mortgage debt in 1997 compared to 1996, payment of debt from proceeds of vessel sales and proceeds from the public offering of stock in the fourth quarter of 1996, increased capitalized interest on four vessels under construction for twelve months in 1997 compared to two vessels for one month in 1996 and lower average interest rates on debt refinanced in July 1996 and April 1997. Decreases in net other expense were offset in part by decreases in the gain on disposal of assets-net of $10.3 million for the year ended December 31, 1997. This decrease resulted primarily from the gain on sale of $9.7 million for OMI Petrolink Corporation ("Petrolink", now MTL Petrolink Corp.) workboats and $3.6 million gain on the sale of a crude oil carrier in 1996 offset in part by the gain on sale of the LPG carrier of approximately $1.0 in the first quarter of 1997. Equity in income of unconsolidated joint ventures decreased by $1.7 million to $.7 in the year ended 1997 compared to $2.5 million for the same period in 1996. The decrease in equity was primarily attributable to the loss on sale of a vessel owned by Mosaic (a joint venture) of approximately $10.5 million (the Company's portion of the loss was approximately $5.2 million) in the third quarter of 1997 offset in part by the gain on the sale of a vessel of $1.9 million (the Company's portion of the gain was approximately $0.9 million) in the second quarter of 1997. In accordance with the Company's plan to decrease its participation in joint ventures, on December 10, 1997, Mosaic acquired the majority shareholder's interest in the venture for cash of $32.3 million and 50.1 percent of stock in its subsidiary Kanejoy Corporation, with a book value of $3.5 million, and Mosaic became a 100 percent owned subsidiary of the Company. 12 14 On December 30, 1996, the interest in Wilomi owned by a partner was acquired by the venture, and Wilomi became a 100 percent owned subsidiary of the Company with its earnings consolidated in the Company's results. The decrease in equity in operations of joint ventures attributable to Wilomi was $1.3 million for the year ended December 31, 1997. Increases in equity in income of unconsolidated joint ventures offsetting the aforementioned decreases relate to Amazon, a 49 percent owned joint venture which operates one crude oil tanker, the SETTEBELLO. The equity in earnings for Amazon increased by $3.1 million in 1997 as compared to the same period in 1996. The SETTEBELLO was in drydock for 92 days in 1996 which resulted in both a lack of earnings and additional drydock expense. Also, equity increased by $1.7 million from WHITE SEA as a result 66 offhire days in 1996 related to drydocking of the vessel. BENEFIT (PROVISION) FOR INCOME TAXES The income tax benefit of $.2 million (excluding the income tax provision for the cumulative effect of the change in accounting principle) for the year ended December 31, 1997 varied from statutory rates primarily because deferred taxes are not recorded for equity in operations of joint ventures, net of dividends declared, other than Amazon Transport, Inc. ("Amazon") and White Sea Holdings, Ltd. ("White Sea") as management considers such earnings to be invested for an indefinite period. BALANCE SHEET AS OF DECEMBER 31, 1998 MTC's balance sheet as of December 31, 1998 reflects both the Acquisition and the Distribution, whereas the balance sheet as of December 31, 1997 reflects the historical balance sheet of the Company prior to such transactions. LIQUIDITY AND CAPITAL RESOURCES Cash balances of $8.6 million as of December 31, 1998 include cash of $1.8 million drawn from one of the Company's revolving credit lines. Concurrent with the Acquisition and the Distribution the Company: (a) restructured its loan agreement between Marine Transport Lines, Inc. and a commercial bank; and (b) arranged a new loan agreement between MTC and the same commercial bank. At December 31, 1998, the Company had total borrowings under these agreements of $20.5 million, which was $1.2 million less than its total borrowing capacity at that date under the lines of credit provided pursuant to those loan agreements. Other forms of cash available for operations and investment by the Company include $4 million included in the Company's Capital Construction Fund (before applicable income taxes payable on amounts withdrawn from their current use). Cash balances and available credit lines are expected to be sufficient to meet the Company's normal operating requirements, including scheduled payments of long-term debt. OTHER OPERATING MATTERS The Company is in negotiations with the charterer of two chemical/petroleum products vessels for the purchase of the vessels by the Company by assumption of the outstanding mortgage debt on the vessels in the aggregate amount of approximately $22.8 million. PRO FORMA FINANCIAL INFORMATION The unaudited pro forma financial information included in the Notes to the Consolidated Financial Statements for the year ended December 31, 1998 and 1997 present certain historical financial information as if the Acquisition and Distribution occurred on January 1, 1997. Although this unaudited pro forma financial information is based on reasonable assumptions applied to past financial events, management has taken certain actions subsequent to the Acquisition which it expects will improve the future operating results. These actions include: reduction of salary and employment expenses, decrease in office rental commitments and decreases in other administrative expenses which will reduce total general and administrative expenses by approximately 13 15 $8 million on an annualized basis as compared to that amount allocated to the Company's Domestic Business on a historical basis; employment of the laid up vessel Courier on a two year charter at profitable rates, and implementation of plans for other previously laid up vessels to profitably employ these vessels; and expansion of the Company's ship management business. AGREEMENTS As part of the Distribution, the Company is party to certain agreements with New OMI. Certain provisions of these agreements are summarized in the Notes to the Consolidated Financial Statements (see Note 2) included herein. These agreements are included in the Company's Form S-1 dated May 15, 1998. EFFECTS OF INFLATION The Company does not consider inflation to be a significant risk to the cost of doing business in the foreseeable future. Inflation has a moderate impact on operating expenses, drydocking expenditures and corporate overhead. YEAR 2000 MTC's management has identified the following areas of concern relating to the Year 2000 issue and has determined appropriate courses of action as described below. Internally generated funds will be used to fund testing, improvements or replacements where necessary. Navigation of vessels: the potential impact of failure of embedded microprocessor chips on navigational equipment. All critical equipment on each of the Company's vessels has been identified and vendors have been contacted for certification for Year 2000 compliance. Where manufacturers cannot provide certification for critical equipment, non-compliant equipment will be replaced. Management does not anticipate material expenditures for certification or replacement. Communications: the potential failure of computer equipment used for communications ship-to-shore and with other third parties ashore. All equipment used for ship-to-shore communication is being tested for compliance by the Company or an independent third party and will be replaced where necessary; most of this equipment consists of personal computers, off the shelf software and small servers. The cost of testing and replacement is not expected to be significant. Operations: the potential failure of embedded microprocessor chips on power, steering and cargo systems aboard vessels. Critical machinery has been identified and is being surveyed and tested by Company personnel or independent third parties. Most systems have manual backup procedures or systems in the event of failure. Management expects to complete this testing prior to projected impact dates of Year 2000, but at this time is not certain of the costs of remediation of any identified problems. Administration: the impact of Year 2000 problems on the Company's computer systems and those systems of third parties, such as vendors, customers and banks. The Company may replace existing administrative (including accounting) software and hardware used in related applications prior to the projected impact dates of Year 2000. The cost of replacement of these systems is expected to exceed $750,000. This expenditure was planned because of the recent changes in the Company's operation, but implementation may be accelerated as a result of identified Year 2000 problems. Management is not certain of the preparedness of all of its third party relations, and the potential impact of failure of their systems on the Company's results of operations, liquidity and financial condition. Interruption of services provided by the Company's vessels could result from many factors for which the Company relies on third parties, such as delivery of equipment, fuel and personnel, availability of assist vessels to enter and leave ports, availability of cargo to haul and capacity to discharge ashore and availability of repair facilities. Management is aware that most of its important customers (mostly large, multi-national companies), and the Company's banks, are studying Year 2000 issues and implementing changes where appropriate. 14 16 ITEM 7A. MARKET RISKS All of the Company's revenues, and most of its expenses, are in U.S. dollars. As a leveraged company, MTC is subject to interest rate risks. The Company uses interest rate swap agreements to manage interest costs and the risk associated with changing interest rates. At December 31, 1998, the Company had outstanding an interest rate swap, with a notional amount of $19,453,993, which fixed the base LIBOR rate on the Company's term loans at 4.75 percent for a three year period. See Notes to the Consolidated Financial Statements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MARINE TRANSPORT CORPORATION AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS CONTENTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
PAGE ----- Reports of Independent Auditors............................. 16-17 Consolidated Balance Sheets as of December 31, 1998 and 1997...................................................... 18 Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996.......................... 19 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1998, 1997 and 1996...... 20 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996.......................... 21 Notes to Consolidated Financial Statements.................. 22-38
15 17 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Shareholders Marine Transport Corporation We have audited the accompanying consolidated balance sheet of Marine Transport Corporation and subsidiaries as of December 31, 1998 and the related consolidated statements of operations, changes in shareholders' equity, and cash flows for the year then ended. 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 audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Marine Transport Corporation and subsidiaries at December 31, 1998 and the consolidated results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. ERNST & YOUNG, LLP New York, New York February 26, 1999 16 18 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Marine Transport Corporation (formerly OMI Corp.): We have audited the accompanying consolidated balance sheet of Marine Transport Corporation (formerly OMI Corp.) and its subsidiaries as of December 31, 1997 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the two years in the period 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the companies at December 31, 1997 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. As disclosed in Note 3 to the consolidated financial statements, effective January 1, 1997 the Company changed its method of accounting for special survey and drydock expenses from the accrual method to the prepaid method. DELOITTE & TOUCHE, LLP New York, New York March 9, 1998 17 19 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, -------------------- 1998 1997 -------- -------- ASSETS Current assets: Cash and cash equivalents: Unrestricted........................................... $ 7,726 $ 31,737 Restricted............................................. 926 752 Receivables: Trade receivables, net of allowances of $509 in 1998 and $795 in 1997...................................... 10,692 16,167 Other.................................................. 2,932 4,014 Income taxes receivable................................... 643 -- Prepaid expenses and other current assets................. 5,921 16,423 Vessel held for sale...................................... 100 -- -------- -------- Total current assets........................................ 28,940 69,093 -------- -------- Marketable securities and cash held in capital construction fund...................................................... 4,069 10,969 Vessels and other property: Vessels................................................... 104,528 510,312 Construction in progress.................................. -- 56,032 Other property............................................ 1,953 8,397 -------- -------- Total vessels and other property.................. 106,481 574,741 Less: accumulated depreciation............................ 67,703 204,516 -------- -------- 38,778 370,225 -------- -------- Vessel drydocking costs..................................... 7,429 8,514 Investments in and advances to joint ventures............... -- 28,155 Note receivable............................................. 9,000 9,000 Other assets and deferred charges........................... 6,602 10,288 Goodwill.................................................... 11,652 12,343 -------- -------- Total assets................................................ $106,470 $518,587 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 9,604 $ 6,314 Accrued liabilities....................................... 8,092 22,931 Current portion of debt................................... 3,034 16,575 -------- -------- Total current liabilities................................... 20,730 45,820 Advance time charter revenues and other liabilities......... 1,500 3,114 Long-term debt.............................................. 24,111 146,341 Deferred gain on sale of vessels............................ 21,258 36,108 Deferred income taxes....................................... 22,902 64,264 Minority interest in subsidiary............................. -- 1,917 -------- -------- Total liabilities........................................... 90,501 297,564 -------- -------- SHAREHOLDERS' EQUITY Common stock, $0.50 par value; 15,000,000 shares authorized; shares issued and outstanding: 1998 -- 6,555,368; 1997 -- 4,306,668......................................... 3,277 2,154 Capital surplus............................................. 25,461 206,105 Retained earnings (deficit)................................. (11,996) 8,979 Accumulated other comprehensive income (loss)............... (51) 4,890 Unearned compensation -- restricted stock................... -- (1,105) Treasury stock at cost; 350,000 shares...................... (722) -- -------- -------- Total shareholders' equity.................................. 15,969 221,023 -------- -------- Total liabilities and shareholders' equity.................. $106,470 $518,587 ======== ========
See notes to consolidated financial statements. 18 20 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
YEAR ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 -------- -------- -------- Revenues: Voyage revenues.......................................... $173,118 $224,413 $225,578 Other operating revenues................................. 11,660 7,127 7,044 -------- -------- -------- 184,778 231,540 232,622 -------- -------- -------- Operating expenses: Vessel and voyage........................................ 151,930 174,363 167,259 Depreciation and amortization............................ 22,407 28,944 30,448 General and administrative............................... 16,396 23,998 16,438 -------- -------- -------- 190,733 227,305 214,145 -------- -------- -------- Operating income (loss).................................... (5,955) 4,235 18,477 -------- -------- -------- Other income (expense): Net gain on disposal of assets........................... 538 870 11,153 Interest expense......................................... (8,378) (12,249) (26,462) Interest income.......................................... 4,529 3,257 2,810 Equity in income of unconsolidated joint ventures........ 2,353 737 2,482 -------- -------- -------- Net other expenses....................................... (958) (7,385) (10,017) -------- -------- -------- Income (loss) before income taxes, extraordinary item and cumulative effect of change in accounting principle...... (6,913) (3,150) 8,460 Benefit (provision) for income taxes....................... 39,985 180 (2,271) -------- -------- -------- Income (loss) before extraordinary item and cumulative effect of changes in accounting principle................ 33,072 (2,970) 6,189 Extraordinary loss, net of income tax benefit of $1,493.... -- -- (2,772) Cumulative effect of change in accounting principle, net of income tax expense of $7,429............................. -- 13,797 -- -------- -------- -------- Net income................................................. $ 33,072 $ 10,827 $ 3,417 ======== ======== ======== Basic income per common share: Income (loss) before extraordinary item and cumulative effect of change in accounting principle.............. $ 6.31 $ (0.69) $ 1.85 Extraordinary loss, net of income tax benefit............ -- -- (.83) Cumulative effect of change in accounting principle, net of income tax provision............................... -- 3.21 -- -------- -------- -------- Net income............................................... $ 6.31 $ 2.52 $ 1.02 ======== ======== ======== Diluted income per common share: Income (loss) before extraordinary item and cumulative effect of change in accounting principle.............. $ 6.31 $ (0.69) $ 1.83 Extraordinary loss, net of income tax benefit............ -- -- (.82) Cumulative effect of change in accounting principle, net of income tax provision............................... -- 3.21 -- -------- -------- -------- Net income............................................... $ 6.31 $ 2.52 $ 1.01 ======== ======== ========
See notes to consolidated financial statements. 19 21 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS)
ACCUMULATED ------------- COMMON STOCK RETAINED OTHER OTHER ------------------ CAPITAL EARNINGS COMPREHENSIVE COMPREHENSIVE RESTRICTED TREASURY SHARES(1) AMOUNT SURPLUS (DEFICIT) INCOME INCOME STOCK STOCK --------- ------ --------- --------- ------------- ------------- ---------- -------- Balance as of January 1, 1996....................... 3,104 $1,552 $ 145,591 $ (5,265) $ 4,941 $(1,404) -- Comprehensive income: Net income................. 3,417 $ 3,417 Net unrealized gain (loss) on securities, net of tax benefit of $39........... (73) (73) ------- Comprehensive income....... $ 3,344 ------- Shares issued in common stock offering................... 1,150 575 75,157 Retirement of partner's equity interest in joint venture.................... (18,072) Exercise of stock option and stock appreciation rights..................... 15 8 786 Amortization of unearned compensation............... 365 ----- ------ --------- -------- ------- ------- ----- Balance at December 31, 1996....................... 4,269 $2,135 $ 203,462 $ (1,848) $ 4,868 $(1,039) -- Comprehensive income: Net income................. 10,827 $10,827 Net unrealized gain (loss) on securities, net of tax benefit of $(12)......... 22 22 ------- Comprehensive income....... $10,849 ------- Retirement of partner's equity interest in joint venture.................... 777 Retirement of minority stockholders' equity interest in subsidiary..... (549) Exercise of stock option and stock appreciation rights..................... 33 17 1,979 Issuance of restricted stock awards..................... 5 2 436 (438) Amortization of unearned compensation............... 372 ----- ------ --------- -------- ------- ------- ----- Balance at December 31, 1997....................... 4,307 $2,154 $ 206,105 $ 8,979 $ 4,890 $(1,105) $ -- Comprehensive income: Net income................. 33,072 $33,072 Net unrealized gain (loss) on securities, net of tax benefit of $16........... (29) (29) ------- Comprehensive income....... $33,043 ------- Exercise of stock options.... 5 2 210 Retirement of minority stockholders' equity interest in subsidiary..... (681) Amortization of unearned compensation............... 1,105 Issuance of common stock..... 2,243 1,121 10,779 Spin-off of foreign subsidiaries............... (190,952) (54,047) (4,912) Purchase of treasury stock... (722) ----- ------ --------- -------- ------- ------- ----- Balance at December 31, 1998....................... 6,555 $3,277 $ 25,461 $(11,996) $ (51) $ -- $(722) ===== ====== ========= ======== ======= ======= ===== TOTAL --------- Balance as of January 1, 1996....................... $ 145,415 Comprehensive income: Net income................. 3,417 Net unrealized gain (loss) on securities, net of tax benefit of $39........... (73) Comprehensive income....... Shares issued in common stock offering................... 75,732 Retirement of partner's equity interest in joint venture.................... (18,072) Exercise of stock option and stock appreciation rights..................... 794 Amortization of unearned compensation............... 365 --------- Balance at December 31, 1996....................... $ 207,578 Comprehensive income: Net income................. 10,827 Net unrealized gain (loss) on securities, net of tax benefit of $(12)......... 22 Comprehensive income....... Retirement of partner's equity interest in joint venture.................... 777 Retirement of minority stockholders' equity interest in subsidiary..... (549) Exercise of stock option and stock appreciation rights..................... 1,996 Issuance of restricted stock awards..................... -- Amortization of unearned compensation............... 372 --------- Balance at December 31, 1997....................... $ 221,023 Comprehensive income: Net income................. 33,072 Net unrealized gain (loss) on securities, net of tax benefit of $16........... (29) Comprehensive income....... Exercise of stock options.... 212 Retirement of minority stockholders' equity interest in subsidiary..... (681) Amortization of unearned compensation............... 1,105 Issuance of common stock..... 11,900 Spin-off of foreign subsidiaries............... (249,911) Purchase of treasury stock... (722) --------- Balance at December 31, 1998....................... $ 15,969 =========
20 22 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 -------- -------- -------- CASH FLOW PROVIDED (USED) BY OPERATING ACTIVITIES: Net income.................................................. $ 33,072 $ 10,827 $ 3,417 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Cumulative effect of change in method of accounting, net of income tax provision................................. -- (13,797) -- Extraordinary loss, net of income tax benefit............. -- -- 2,772 Depreciation and amortization............................. 34,976 28,944 30,448 Amortization of unearned compensation..................... 1,052 372 365 (Decrease) in doubtful accounts........................... (286) (152) (1,313) Deferred income taxes..................................... (39,625) (6,984) 2,258 (Gain) loss on sale or disposal of vessels and other property................................................ 522 (870) (11,153) Amortization of deferred gain on sale of vessels.......... (1,426) (4,377) -- Equity in income of unconsolidated joint ventures in excess of dividends received............................ (1,783) (2) (2,114) Changes in assets and liabilities: Decrease (increase) in accounts receivable.............. (3,695) (5,596) 6,181 Decrease (increase) in prepaid expenses and other current assets........................................ (957) (1,624) (416) Increase (decrease) in advance time charter revenues and other liabilities..................................... (2,442) (1,311) 1,223 Other assets and liabilities -- net..................... 114 222 406 (Decrease) increase in accounts payable................. (4,355) 2,777 (30,436) (Decrease) increase in accrued expenses................. (3,684) -- -- (Decrease) increase in income taxes payable............. 4,046 -- -- Advances (from) to joint ventures -- net................ -- (150) (7,359) -------- -------- -------- Net cash provided (used) by operating activities............ 15,529 8,279 (5,721) -------- -------- -------- CASH FLOW PROVIDED (USED) BY INVESTING ACTIVITIES: Additions to vessels and other property..................... (68,976) (58,470) (50,770) Proceeds and interest received and reinvested in capital construction fund......................................... (352) (661) (717) Proceeds from sale of securities............................ -- -- 1,080 Net proceeds from sale of vessels........................... 850 78,972 76,808 Purchase of treasury stock.................................. (722) -- -- Cash distributed to UBC..................................... (12,601) -- -- Cash acquired in retirement of partner's equity interests in joint ventures............................................ 4,855 32,301 4,813 Cash acquired with acquisition of MTL....................... 8,091 -- -- Payments for the retirement of minority stockholder's interest.................................................. (2,600) (2,456) -- Other....................................................... -- (343) 775 -------- -------- -------- Net cash provided (used ) by investing activities........... (71,455) 49,343 31,989 -------- -------- -------- CASH FLOW PROVIDED (USED) BY FINANCING ACTIVITIES: Proceeds from issuance of long-term debt.................... 83,007 114,090 173,923 Payment of debt............................................. (45,775) (188,322) (259,556) Payments for debt issue costs............................... -- (774) (1,853) Vessel lease payments....................................... (5,869) -- -- Proceeds from the issuance of common stock.................. -- 1,996 76,526 Decrease in other assets.................................... 726 -- -- Increase in restricted cash................................. (174) (752) -- -------- -------- -------- Net cash provided (used) by financing activities............ 31,915 (73,762) (10,960) -------- -------- -------- (Decrease) increase in unrestricted cash and cash equivalents............................................... (24,011) (16,140) 15,308 Unrestricted cash and cash equivalents at beginning of year...................................................... 31,737 47,877 32,569 -------- -------- -------- Unrestricted cash and cash equivalents at end of year....... $ 7,726 $ 31,737 $ 47,877 ======== ======== ========
See notes to consolidated financial statements. 21 23 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS Marine Transport Corporation ("MTC" or the "Company"), formerly OMI Corp., is a U.S.-based company that owns and charters a fleet of ocean-going vessels which it operates in domestic and international markets. The Company also manages vessels for other shipowners. On June 17, 1998 the Company distributed to its shareholders, in a tax-free distribution (the "Distribution"), all of the shares of its wholly-owned subsidiary Universal Bulk Carriers, Inc. ("UBC"). UBC operated the Company's former foreign-flagged shipping businesses, and continues to operate those businesses as OMI Corporation ("New OMI") under the Company's previous management. A condensed summary of UBC's unaudited results of operations for the years ended December 31, 1997 and 1996, and for the period from January 1, 1998 through June 17, 1998 and a condensed summary of the assets and liabilities of UBC at June 17, 1998 and December 31, 1997 are as follows:
FOR THE PERIOD FROM FOR THE YEARS ENDED JANUARY 1, DECEMBER 31, 1998 THROUGH -------------------- JUNE 17, 1998 1997 1996 ------------------- -------- -------- (IN THOUSANDS) Results of Operations: Revenues............................. $71,506 $141,985 $111,292 Operating income..................... 5,816 20,178 14,699 Net income........................... 44,333 16,922 3,693
JUNE 17, DECEMBER 31, 1998 1997 -------- ------------ Net Assets Current assets..................................... $ 27,287 $ 49,520 Vessels and other property -- net.................. 393,155 343,028 Investments in and advances to joint ventures...... 29,876 27,810 Other non-current assets........................... 11,122 8,587 Goodwill........................................... 16,966 11,763 -------- -------- Total assets....................................... 478,406 440,708 Less: Current liabilities................................ 77,001 21,062 Long-term debt..................................... 143,879 48,424 Other non-current liabilities...................... 2,992 87,664 -------- -------- Total liabilities.................................... 223,872 157,150 -------- -------- Shareholder's equity................................. $254,534 $283,558 ======== ========
Prior to the Distribution, the Company acquired all of the outstanding common stock of Marine Transport Lines, Inc. ("MTL"), a U.S.-based company that owns, operates and manages U.S. and foreign flag vessels, in exchange for the consideration described in Note 2 (the "Acquisition"). The Company is currently managed by certain former officers and directors of MTL and additional new directors. The Company trades under the symbol "MTLX" and is listed on the NASDAQ National Market. Unless otherwise indicated, amounts reflected in the accompanying consolidated financial statements include the results of UBC through June 17, 1998, and the results of MTL subsequent to June 17, 1998. Immediately following the Acquisition and the Distribution, the Company completed a one-for-ten reverse stock split. All share and per share amounts have been retroactively restated to reflect the reverse stock split. 22 24 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. ACQUISITION AND DISTRIBUTION As consideration for the Acquisition: (a) the Company issued common stock of OMI Corp. with a market value of $5,000,000 to the shareholders of MTL; (b) the Company issued a certain number of shares of newly-issued common stock to the shareholders of MTL; and (c) shareholders of MTL became entitled to additional shares of the Company's newly-issued common stock, to be determined by the outcome of certain post-transaction calculations. The Acquisition was valued at approximately $11,886,000 representing the Company's estimate of the fair value of MTL at the date the transaction was completed plus the fair value of additional shares issued as a purchase price adjustment for working capital amounts in excess of pre-established levels per the Acquisition Agreement. The Acquisition has been accounted for as a purchase. The unaudited pro forma results of operations for the years ended December 31, 1998 and 1997, assuming consummation of the Acquisition and Distribution as of January 1, 1997 are as follows (in thousands, except per share amounts):
YEAR ENDED DECEMBER 31, ------------------------ 1998 1997 ---------- ---------- Revenues............................................... $126,942 $119,862 Vessel and voyage expense.............................. 120,528 119,502 General and administrative expense..................... 16,073 18,136 Loss before other income (expense), income taxes, and cumulative effect of change in accounting principle............................................ (9,659) (17,776) Loss before cumulative effect of change in accounting principle............................................ (8,564) (13,172) Net loss............................................... $ (8,564) $ (9,437)
YEAR ENDED DECEMBER 31, 1998 1997 ---------- ------------ Basic and diluted loss per common share: Loss before cumulative effect of change in accounting principle.............................. $(1.63) $(3.07) Net loss............................................ $(1.63) $(2.20)
As part of the Distribution, MTC is party to certain agreements with New OMI, including the following: Distribution Agreement -- The Distribution Agreement provides for, with certain exceptions, assumptions of liabilities and cross-indemnities designed principally to place financial responsibility for the domestic-related assets and liabilities of OMI Corp. with MTC and the foreign-related assets and liabilities with New OMI. New OMI, however, assumed the obligations of the Company with respect to the outstanding 10.25 percent senior notes due November 1, 2003 in exchange for a note in the amount of $6.4 million, which is equivalent in value to the principal amount of the senior notes outstanding. The Distribution Agreement also provides that each of MTC and New OMI will indemnify the other in the event of certain liabilities arising under the Federal securities laws. Each of MTC and New OMI will have sole responsibility for claims arising out of their respective activities after the Distribution. The Distribution Agreement also provides that, except as otherwise set forth therein or in any other agreement, all costs or expenses incurred on or prior to the date of the Distribution in connection with the Distribution will be charged to and paid by the party incurring such costs or expenses. Except as set forth in the Distribution Agreement or any related agreement, each party shall bear its own costs and expenses incurred after the date of the Distribution. As part of the Distribution Agreement, New OMI has, subject to certain exceptions, provided indemnity to MTC for all taxes attributable to the Distribution and to certain corporate restructuring transactions preceding the Distribution. 23 25 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Tax Cooperation Agreement -- Prior to the Distribution, MTC and New OMI entered into a Tax Cooperation Agreement which sets forth each party's rights and obligations with respect to federal, state, local and foreign taxes for periods prior to and after the Distribution and related matters such as filing of tax returns and procedures for responding to tax audits and other matters. In general, the Tax Cooperation Agreement provides that New OMI will be liable for taxes and be entitled to refunds for each period covered by any such return which are attributable to New OMI and its subsidiaries. The Tax Cooperation Agreement, though valid between the parties thereto, is not binding on the IRS and does not alter either party's tax liability to the IRS. Acquisition Agreement -- The Acquisition Agreement provides for an adjustment in the purchase price of MTL based on working capital amounts, as defined, as of the date of the closing as compared to certain pre-established levels. In December 1998, MTC issued approximately 312,000 additional shares of its common stock to former MTL shareholders pursuant to this provision. On March 9, 1998, the Company paid $2,600,000 to acquire the remaining 9.29 percent interest in MTL Petrolink Corp. ("Petrolink", formerly OMI Petrolink Corporation) to make it a wholly-owned subsidiary. 3. ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Marine Transport Corporation and its majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated. Investments in subsidiaries and partnerships for which the Company owns more than 20% but less than a majority interest are accounted for using the equity method. RECLASSIFICATIONS OF PRIOR YEAR FINANCIAL STATEMENTS Certain prior year balances have been reclassified to conform to the current year presentation. CASH EQUIVALENTS The Company considers all highly-liquid financial instruments with a maturity of three months or less when purchased to be cash equivalents. Restricted cash represents cash advanced to the Company by certain customers under agreements which restrict the use of such cash. MARKETABLE SECURITIES AND CASH HELD IN CAPITAL CONSTRUCTION FUND Marketable securities and cash held in capital construction fund are restricted to provide for the replacement of vessels, additional vessels, or improvement of vessels within strict guidelines established by the U.S. Maritime Administration for use of these funds. Any withdrawals of funds for purposes other than those permitted will result in a taxable event, equivalent to the statutory tax rate (see Note 9). VESSELS Vessels are recorded at cost and depreciated on the straight-line method over their estimated remaining useful lives to their estimated salvage values. Expenditures for maintenance, and repairs are expensed. Major expenditures, which are expected to extend useful lives or reduce future operating expenses, are capitalized. Salvage value is based upon a vessel's lightweight tonnage multiplied by an estimated scrap value per ton. Interest costs incurred during the construction of vessels (until the vessel is substantially complete and ready for its intended use) are capitalized. Interest capitalized was $1,721,000 in 1998, $2,207,000 in 1997 and $71,000 in 1996. 24 26 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CHANGE IN METHOD OF ACCOUNTING FOR DRYDOCKING Drydocking inspections are required every two to three years for insurance and regulatory purposes to demonstrate that a vessel meets standards established by the U.S. Coast Guard and the American Bureau of Shipping. Effective January 1, 1997 the Company changed its method of accounting for special survey and drydock expenses from the accrual method to the deferral method. Special survey and drydock expenses had been accrued and charged to operating expenses over the vessel's survey cycle, which is generally a two to three year period. Under the deferral method, survey and drydock expenses are capitalized and amortized over the period until the next survey cycle. Management believes the deferral method better matches costs with revenues, and minimizes any significant changes in estimates associated with the accrual method. The cumulative effect of this accounting change as of January 1, 1997 is shown separately in the 1997 consolidated statement of operations and resulted in income of $13,797,000 (net of income tax expense of $7,429,000), or $3.21 per share. The cumulative effect of this change in accounting principle as of January 1, 1997 on the Company's balance sheet was to increase total assets by $11,318,000, decrease total liabilities by $2,479,000 and increase total shareholder's equity by $13,797,000. Assuming the deferral method had been applied retroactively, pro forma income before extraordinary loss and net loss for the year ended December 31, 1996 would have been $224,000, or $0.10 per basic and diluted share, and $(2,548,000), or $(0.80) per basic and diluted share, respectively. COMPUTERS, FURNITURE, AND LEASEHOLD IMPROVEMENTS Computers and furniture are recorded at cost and depreciated on the straight-line method over their estimated useful lives. Leasehold improvements are recorded at cost and are amortized on the straight-line method over the shorter of their estimated useful lives or lease term. GOODWILL Goodwill recognized in the Acquisition is being amortized over 20 years using the straight-line method. At December 31, 1998, goodwill is net of accumulated amortization of $321,000. Included in goodwill at December 31, 1997, was $16,966,000 net of accumulated amortization of $5,203,000, which was distributed with UBC. ASSET IMPAIRMENT In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"), which requires impairment losses to be recorded on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. The Company adopted SFAS 121 effective January 1, 1995. REVENUE AND EXPENSE RECOGNITION Voyage and charter revenues and expenses are recognized ratably over the duration of the voyages and the lives of the charters. Estimated losses are provided at the time such losses become evident. STOCK-BASED COMPENSATION As permitted by Statement of Financial Accounting Standard No. 123 ("SFAS 123"), "Accounting for Stock Based Compensation", the Company has chosen to continue to account for stock-based compensation 25 27 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) arrangements using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". EARNINGS (LOSS) PER COMMON SHARE In 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share", which the Company adopted for both interim and annual reports. SFAS 128 specifies the computation, presentation, and disclosure requirements for earnings per share ("EPS"). It replaces the presentation of primary and fully diluted EPS with basic and diluted EPS. Basic EPS excludes the dilutive effect of stock options. It is based upon the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. Basic income (loss) per common share is based on 5,241,000, 4,291,000, and 3,344,000 weighted average number of common shares outstanding during 1998, 1997 and 1996, respectively. Diluted income (loss) per share, which gives effect to the assumed exercise of dilutive stock options using the treasury stock method, is based on 5,241,000, 4,291,000, and 3,389,000 weighted average number of shares during 1998, 1997, and 1996, respectively. Options have not been included in the computation of diluted income (loss) per share except in 1996 since their effect thereon would be anti-dilutive. INTEREST RATE SWAP AGREEMENTS Amounts receivable or payable under interest rate swaps (designated as hedges against increases in interest rates associated with certain existing debt obligations) are accrued and reflected as adjustments of interest expense. Any gain or loss realized upon the early termination of an interest rate swap is recognized as an adjustment of interest expense over the remaining term of the hedged debt. ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. NEWLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). The Company expects to adopt SFAS 133 effective January 1, 2000. SFAS 133 will require the Company to recognize all derivatives on the balance sheet at fair value. The Company does not believe that the adoption of SFAS 133 will have a significant effect on its results of operations or financial position. 4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES Prior to the Distribution (see Note 1), the Company had investments in certain shipping joint ventures with ownership interests ranging from 25 percent to 50 percent. A condensed summary of the results of operations of these joint ventures for the years ended December 31, 1997 and 1996, and for the period from 26 28 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) January 1, 1998 through the date of the Distribution, and a condensed summary of the combined assets and liabilities at December 31, 1997, is as follows (in thousands):
FOR THE PERIOD FROM FOR THE YEARS ENDED JANUARY 1, DECEMBER 31, 1998 THROUGH -------------------- JUNE 17, 1998 1997 1996 ------------------- -------- -------- (IN THOUSANDS) Results of Operations: Revenues....................................... $28,893 $41,804 $94,938 Operating income............................... 4,878 10,762 13,446 (Loss) gain on disposal of assets -- net....... -- (8,765) (254) Cumulative effect of change in accounting principle.................................... -- 1,196 -- Net income..................................... 3,940 2,502 6,187
DECEMBER 31, 1997 ----------------- Net Assets Current assets............................................ $ 21,757 Vessels and other property -- net......................... 75,382 Other assets.............................................. 3,091 -------- Total assets................................................ 100,230 Less: Current liabilities....................................... 9,184 Long-term debt............................................ 37,159 Other liabilities......................................... 191 -------- Total liabilities........................................... 46,534 ======== Shareholder's and partners equity........................... $ 53,696 ========
During 1996, an unrelated party's interest in one of the joint ventures was reacquired by the venture for net assets with a book value of $46,449,000 consisting of one vessel, a vessel under construction, cash and other assets, long-term debt of $27,340,000, and certain other liabilities. As a result, the affiliate became a 100 percent owned subsidiary of the Company. The excess of the carrying value of net assets transferred to the third party over the book value of its equity interest in the venture was charged to capital surplus in 1996 and 1997. In September 1997, one of the joint ventures sold a vessel to one of its joint venture partners (the majority shareholder) at a loss, of which the Company's proportionate share was $5,244,000. On December 10, 1997, the joint venture acquired that shareholder's interest in the venture for cash of $32,332,000 and 50.1 percent of the stock in one of its subsidiaries, with a book value of $3,501,535, and the joint venture became a 100 percent owned subsidiary of the Company. From January 1, 1996 to August 14, 1996, the Company chartered three vessels to one of its joint ventures for $15,814,000. This amount is included in revenues of the Company as the operations of the joint venture were not consolidated. During 1997 and 1996, the Company received dividends from one of its joint ventures of $735,000 and $368,000, respectively. At the time of the Acquisition, MTL held a 50 percent interest in Marine Car Carriers, Inc. (M.I.), ("MCCMI") which MTL accounted for under the equity method through November 12, 1998, at which time MCCMI redeemed the common stock from the other 50 percent owners 27 29 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) for its respective book value (approximately $8,109,000). Equity in the net income of MCCMI from June 18, 1998 through November 12, 1998 (the date at which MCCMI became a wholly owned subsidiary of the Company) were approximately $519,000. 5. DEBT Long-term debt consists of the following:
DECEMBER 31, ------------------- 1998 1997 ------- -------- (IN THOUSANDS) Term loan............................................... $18,740 $ -- Mortgage notes.......................................... -- 53,999 Revolving credit facility............................... 1,800 -- Loans under bank credit agreements...................... -- 99,090 10.25% unsecured senior notes due 2003.................. -- 6,827 Subordinated debt due to New OMI........................ 6,268 -- 7% convertible note due 2004............................ -- 3,000 Promissory note due to New OMI.......................... 337 -- ------- -------- Total debt.............................................. 27,145 162,916 Less current portion.................................... 3,034 16,575 ------- -------- Long-term portion....................................... $24,111 $146,341 ======= ========
All debt at December 31, 1998 was created or amended concurrently with the Acquisition. The term loan and revolving credit facilities of the Company accrue interest at a floating rate based on LIBOR plus a margin determined by certain financial ratios (spreads at December 31, 1998 ranged from 1.25% to 2.25%). The Company pays a commitment fee each quarter on the unused and available portion of the revolving credit facilities. At December 31, 1998, the available revolving credit facility totaled $3 million, of which $1.2 million was unused. The subordinated debt bears interest at a fixed dollar amount payable semi-annually over the term of the note resulting in an average annual interest rate of 12.71 percent per annum. The principal is payable in semi-annual installments of $175,000 through May 1, 2003 and a final installment of $4,693,000 on November 1, 2003. The promissory note bears interest at 8 percent per annum and is payable in semi-annual installments of principal and interest equal to approximately $37,000 through May 1, 2003. The Company uses interest rate swap agreements to manage interest costs and the risk associated with changing interest rates. At December 31, 1998, the Company had outstanding an interest rate swap, with a notional amount of $19,453,993, which fixed the interest rate on the Company's term loans at 4.75 percent for a three-year period. At December 31, 1997, the Company had outstanding interest rate swap agreements, covering notional amounts of $32,700,000, which converted its exposure on floating rate loans to a fixed rate of 8.475 percent. The term loan is payable in eighteen quarterly installments through June 18, 2003; the first and second installments total $522,605 and $424,564, respectively; the next fifteen installments total $830,814 each; and the final installment totals $5,330,805. The revolving credit facility reduces to $2,000,000 on June 18, 2001 and expires completely on June 18, 2003. The Company's debt obligations restrict the Company's ability to pay or declare dividends and require the Company to maintain certain financial ratios, minimum cash balances, minimum asset values, and to use 28 30 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) proceeds of vessel sales to reduce debt. In addition, the Company's vessels are pledged as collateral to secure the borrowings under the term loan and revolving credit facility agreements. In January 1996, the Company repurchased $14,050,000 of its outstanding notes. On July 12, 1996, the Company completed its cash tender offer for the purchase, at par, of its outstanding notes. Of the $136,950,000 outstanding aggregate amount of its notes, $130,123,000 were tendered for payment pursuant to the offer and $6,827,000 remained outstanding. An extraordinary loss of $2,772,000 (net of an income tax benefit of $1,493,000) or $.90 per share was recorded for the early extinguishment of debt. At December 31, 1998, scheduled debt maturities are as follows (in thousands): 1999..................................................... $ 3,034 2000..................................................... 3,748 2001..................................................... 3,748 2002..................................................... 4,548 2003..................................................... 12,067 ------- Total.................................................... $27,145 =======
During the years ended December 31, 1998, 1997 and 1996, the Company paid interest of approximately $8,478,000, $16,423,000 and $23,791,000, respectively. At December 31, 1998 and 1997 accrued interest of $153,000 and $1,528,000, respectively is included in accrued liabilities. In connection with the 1997 sale and leaseback of the vessel MARINE COLUMBIA, the Company has unconditionally guaranteed the charter payments as primary obligor. Minimum charter payments to be made subsequent to December 31, 1998 are: 1999.................................................. $ 9,408,994 2000.................................................. 9,400,005 2001.................................................. 6,400,377 2002.................................................. 11,179,708 ----------- $36,389,084 ===========
6. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair values of the Company's financial instruments are as follows (in thousands):
DECEMBER 31, ---------------------------------------------- 1998 1997 -------------------- ---------------------- CARRYING FAIR CARRYING FAIR VALUES VALUES VALUES VALUES -------- -------- --------- --------- Financial assets (liabilities): Cash and cash equivalents..................... $ 8,652 $ 8,652 $ 32,489 $ 32,489 Capital construction fund..................... $ 4,069 $ 4,069 $ 10,969 $ 10,969 Debt obligations.............................. $(27,145) $(26,790) $(162,916) $(163,903) Unrecognized financial instruments: Interest rate swaps........................... -- -- -- $ (1,058)
The fair value of long-term debt obligations is estimated based on the current rates offered to the Company for similar debt of the same remaining maturities. The fair value of interest rate swaps (used for purposes other than trading) is the estimated amount the Company would receive or pay to terminate swap agreements at the reporting date, taking into account current interest rates and the current credit-worthiness of 29 31 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the swap counterparties. Because of the recent issuance of the interest-rate swap, management estimates that the Company could terminate the instrument without cost. Securities available-for-sale included in marketable securities and cash held in capital construction fund consist of the following components (in thousands):
DECEMBER 31, ------------------------------------------------ 1998 1997 ---------------------- ---------------------- CARRYING UNREALIZED CARRYING UNREALIZED VALUE LOSS VALUE LOSS -------- ---------- -------- ---------- Capital construction fund: Cash equivalents................................ $3,118 $ 299 Preferred stocks................................ 951 $(69) 3,070 $(33) Time deposit.................................... -- 7,600 ------ ---- ------- ---- Total............................................. $4,069 (69) $10,969 (33) ====== ======= Deferred income taxes............................. 18 11 ---- ---- Unrealized loss on security -- net................ $(51) $(22) ==== ====
7. DEFERRED GAIN ON SALE AND LEASEBACK On January 31, 1997, the Company sold the vessel MARINE COLUMBIA for $40,000,000 in cash and a note receivable of $9,000,000 that bears interest at 8.172 percent and leased it back under a time charter agreement terminating December 31, 2002. The Company has the option to purchase the vessel for $9,500,000 at or before the expiration of the lease. The gain on the sale of $24,700,000 has been deferred and is being credited to income as an adjustment to operating lease expense over the term of the lease. On June 4, 1997, Marine Car Carriers, Inc. (M.I.) ("MCCMI"), then a fifty percent owned subsidiary of MTL, sold its only vessel, the MARINE RELIANCE, for $18,900,000. Under the terms of the sale agreement, MCCMI had the option to lease back the vessel for a four year period. MCCMI exercised the option on June 21, 1997. The Company has deferred the gain ($2,690,000) on the sale transaction and it is being credited to income over four years. 8. LEASES OPERATING LEASES Certain vessels are chartered out according to non-cancelable agreements accounted for as operating leases. The future minimum revenues to be received subsequent to December 31, 1998 on the chartered-out vessels are as follows (in thousands): 1999..................................................... $25,919 2000..................................................... 26,546 2001..................................................... 23,936 2002..................................................... 21,377 ------- $97,778 =======
Certain vessels are chartered in according to non-cancelable agreements accounted for as operating leases. In addition, the Company leases office facilities under long-term agreements. The future minimum 30 32 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) payments to be made subsequent to December 31, 1998 on the chartered-in vessels and office leases are as follows (in thousands): 1999..................................................... $38,343 2000..................................................... 25,393 2001..................................................... 10,892 2002..................................................... 11,626 2003..................................................... 38 ------- $86,292 =======
The office lease also requires the Company to make additional payments based on various escalation clauses relating to increases in maintenance costs or changes in the consumer price index. Charter and rental expense amounted to approximately $49,793,000, $58,927,000 and $39,899,000 for the years ended December 31, 1998, 1997 and 1996, respectively. 9. INCOME TAXES A summary of the components of the benefit (provision) for income taxes on income excluding the cumulative effect in accounting principle and the extraordinary loss is as follows (in thousands):
FOR THE YEARS ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 -------- -------- -------- Current (provision)................................... $(5,550) $(6,804) $ (13) Deferred tax benefit (provision)...................... 45,535 6,984 (2,258) ------- ------- ------- Benefit (provision) for income taxes.................. $39,985 $ 180 $(2,271) ======= ======= =======
The benefit (provision) for income taxes varies from the statutory rates due to the following (in thousands):
FOR THE YEARS ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 -------- -------- -------- Benefit (provision) at statutory rate................. $ 2,420 $ 1,103 $(2,961) Minority interest in (income) loss of subsidiary...... -- (61) (679) Equity in (loss) income of unconsolidated joint ventures net of dividends declared.................. 823 (1,114) 1,148 Decrease (increase) in valuation allowance............ -- -- 525 Net deferred tax liability no longer required as a result of the Distribution.......................... 38,857 -- -- Non-qualified capital construction fund withdrawal.... (1,851) -- -- Other................................................. (264) 252 (304) ------- ------- ------- Benefit (provision) for income taxes.................. $39,985 $ 180 $(2,271) ======= ======= =======
31 33 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of deferred income taxes relate to the tax effects of temporary differences as follows (in thousands):
FOR THE YEARS ENDED DECEMBER 31, -------------------- 1998 1997 -------- -------- Deferred tax liabilities: Difference between book and tax basis in assets........... $17,767 $50,843 Marketable securities and cash held in capital construction fund...................................... 1,424 3,839 Previously excluded foreign income........................ 1,614 8,105 Vessel drydocking costs................................... 2,600 2,980 ------- ------- Total deferred tax liability................................ 23,405 65,767 ------- ------- Deferred tax assets: Unrealized losses on investments.......................... -- (1,673) Deferred foreign deficits................................. -- (117) Difference between book and tax basis of investments in certain unconsolidated joint ventures.................. -- 488 Other..................................................... (503) (201) ------- ------- Total deferred tax assets................................... (503) (1,503) ------- ------- Deferred income taxes....................................... $22,902 $64,264 ======= =======
The Distribution resulted in payment of Federal income taxes of approximately $3,000,000 on previously excluded foreign ("Subpart F") income and on the distribution of shares to non-U.S. shareholders. The remaining balance of deferred income taxes applicable to foreign operations of approximately $41,000,000 was credited to income. 10. SHAREHOLDERS' EQUITY The Company has reserved the right to issue up to 650,000 shares of its common stock for the establishment of stock option, stock appreciation rights and restricted stock plans for employees. Accumulated other comprehensive (loss) at December 31, 1998 is $(51,000), which is comprised of a December 31, 1996 opening balance of $4,868,000, a 1998 and 1997 unrealized loss (gain) on marketable securities of $(29,000) and $22,000, respectively, and a cumulative foreign currency translation adjustment of $4,912,000. 11. PENSION PLANS Prior to the Acquisition and the Distribution, the Company maintained the OMI Corp. Savings Plan (the "OMI Plan") for salaried employees as a defined contribution plan. The OMI Plan permitted employees to contribute a specified percentage of their salary under Section 401(k) of the Internal Revenue Code. In 1997 and 1996, the Company allowed employees to make contributions of up to ten percent of their annual salaries with the Company matching up to the first six percent in 1997 and three percent in 1996. From January 1, 1998 to June 18, 1998, the Company allowed employees to make contributions of up to ten percent of their annual salaries with the Company matching up to the first six percent. After the Acquisition and Distribution, the Company chose not to adopt the OMI Plan and made its employees eligible to participate in the Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan (the "MTL Plan"). Under the MTL Plan, the Company's minimum annual contribution expense after June 17, 1998 was equal to 3 percent of all individual gross wages not exceeding $160,000. All salaried employees were eligible for the contribution. The Company's expense for the years ended December 31, 1998, 1997 and 1996 was $411,000, $528,000, and $511,000, respectively. 32 34 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Pursuant to collective bargaining agreements with labor unions representing seagoing personnel, contributions are also made to various defined benefit and defined contribution pension and welfare plans, including some multi-employer plans, in accordance with their terms. Pension expense for all plans covered by collective bargaining agreements for the years ended December 31, 1998, 1997 and 1996 was approximately $77,961, $200,000 and $531,000, respectively. The Company also administers, for the benefit of certain seagoing personnel: a) a defined contribution individual account plan which permits employees to contribute a specified percentage of their salary under Section 401(k) of the Internal Revenue Code; and b) a money purchase plan. The Company makes no contributions to the 401(k) plan and contributes to the money purchase plan in accordance with a contribution formula. 12. STOCK OPTION AND RESTRICTED STOCK PLANS Prior to June 17, 1998, the Company had five option plans: the 1995 Equity Incentive Plan (the "1995 Plan"), the 1995 Stock Option Plan for Non-Employee Directors (the "Directors Plan"), the 1990 Equity Incentive Plan (the "1990 Plan"), the 1986 Non-Qualified Option Plan, and the 1984 Incentive Stock Option Plan. The plans were terminated upon the Acquisition and Distribution. The total number of shares that could have been optioned or awarded under the 1995 Plan was 100,000 shares. No further options could be granted under the 1990 Plan; 43,200 shares were reserved with respect to options granted under this plan. The 1986 Non-Qualified Stock Option Plan provided for the granting of up to 50,000 shares. No options could be granted under this plan after April 3, 1996. Under the 1995 Plan, the Company could grant incentive and non-qualified stock options, stock appreciation rights ("SARs") and restricted shares. SARs entitled a recipient the alternative of electing to cancel the related stock option and to instead receive an amount in cash, stock or a combination of cash and stock equal to the difference between the option price and the market price of the Company's stock on the date on which the SARs are exercised. Under all plans, the option price per share could not be less than the fair market value of a share at the date of grant. In 1997 and for the period from January 1, 1998 through June 17, 1998, no options were awarded. During 1996, the Company awarded options to acquire an aggregate of 1,000 shares. The options granted were non-qualified stock options and vested equally over a three-year period from the date of grant. No SARs were issued in 1996, 1997, or for the period from January 1, 1998 through June 17, 1998. In September 1997, in anticipation of the Acquisition and Distribution, the Board of Directors amended the 1995 plan to provide immediate vesting of all outstanding options. During 1997, the Company awarded 5,000 restricted shares under the 1995 Plan. The restrictions on these shares awarded lapse equally over a five year period. The total number of shares that could be optioned under the Directors Plan was 30,000 shares. Prior to 1996, the Company awarded options to acquire an aggregate of 15,000 shares under this Plan. Each option permitted the non-employee director, for a period of up to ten years from the date of grant, to purchase from the Company 3,000 shares. Options were exercisable equally over a three year period. The initial option exercise price could not be less than the fair market value at the date of grant. The option exercise price with respect to the shares which were exercisable on the second and third anniversary of the date of grant increased by 15% and 30% respectively, over the initial option exercise price. Proceeds received from the exercise of the options are credited to the capital accounts. Compensation expense relating to SARs is recorded with respect to the rights based upon the quoted market value of the shares and exercise provisions. Benefits to net income relating to SARs and/or options for the years ended December 31, 1996 was $43,000. There was no effect on net income in 1998 or 1997. Following the Acquisition and the Distribution, the OMI Board of Directors, at the request of the Compensation Committee of MTC's Board of Directors adopted the 1998 Stock Option Plan for Non- 33 35 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Employee Directors (the "1998 Directors Plan"). The 1998 Directors Plan authorizes the Company to grant options to purchase 7,500 shares of MTC common stock automatically to each eligible non-employee director of MTC. Up to 100,000 shares of MTC common stock have been reserved for issuance pursuant to the 1998 Directors Plan. Following the Acquisition and the Distribution, the OMI Board of Directors, at the request of the Compensation Committee of MTC's Board of Directors adopted the 1998 Incentive Equity Plan. (the "1998 Incentive Plan"). The 1998 Incentive Plan authorizes the Company to grant to its employees qualified stock options, stock appreciation rights in tandem with such options, and restricted stock or bonuses payable in stock for up to 550,000 shares of MTC common stock. Effective June 18, 1998, the Company awarded options to acquire a total of 52,500 shares under the 1998 Directors Plan at a strike price of $4.61, equal to the average closing price of the Company's common stock for the 10-day trading period commencing on June 18, 1998. Each option permits the non-employee director to purchase shares of the Company's common stock for a period of up to ten years from the date of grant. On June 29, 1998, the Company awarded options to employees to acquire total of 282,500 shares under the 1998 Incentive Plan at a strike price of $4.61, equal to the average closing price of the Company's common stock for the 10-day trading period commencing on June 18, 1998. On December 1, 1998 the strike price for such options was reduced to $2.50 for all options except for certain options awarded to management executives. Each option permits employees to purchase shares of the Company's common stock for a period of up to ten years from the date of grant. A summary of the changes in shares under option for all plans is as follows (retroactively restated to reflect the one-for-ten reverse stock split):
WEIGHTED AVERAGE NUMBER OF RANGE OF OPTION OPTIONS OPTIONS PRICES PRICE --------- ----------------- -------- Outstanding at December 31, 1995............. 136,200 $ 42.50 to $98.75 $60.40 Granted.................................... 1,000 75.00 75.00 Exercised.................................. (15,000) 42.50 to 63.10 51.60 Forfeited.................................. (4,600) 63.10 to 98.75 66.40 ------- Outstanding at December 31, 1996............. 117,600 45.00 to 98.75 62.30 Exercised.................................. (32,500) 45.00 to 98.75 61.50 Forfeited.................................. (4,000) 63.10 to 98.75 83.00 ------- Outstanding at December 31, 1997............. 81,100 45.00 to 98.75 61.60 Granted.................................... 335,000 2.50 to 4.613 2.83 Exercised.................................. (5,000) 45.00 to 98.75 48.60 Terminated................................. (76,100) 45.00 to 98.75 61.60 ------- Outstanding at December 31, 1998............. 335,000 $ 2.50 to $ 4.613 $ 2.83 =======
The Company applies Accounting Principles Board Opinion No. 25 and related Interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for its stock option plans. Had compensation cost for the Company's stock option plans have been determined based on the fair value at the grant dates for awards under those plans consistent with the methods recommended by 34 36 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SFAS 123, the Company's net income and net income per share for the years ended December 31, 1998, 1997 and 1996 would have been stated at the pro forma amounts indicated below:
1998 1997 1996 ------- ------- ------ Net income As reported.......................................... $33,072 $10,827 $3,417 Pro forma............................................ $32,951 $10,547 $2,942 Basic and diluted income per common share: As reported.......................................... $ 6.31 $ 2.52 $ 1.01 Pro forma............................................ $ 6.29 $ 2.46 $ 0.88
The fair value of these options was estimated at the date of grant using the using the Black-Scholes model with the following assumptions:
1998 1997 1996 ---- ---- ---- Expected dividend yield..................................... 0 0 0 Expected stock price volatility............................. 100% 36% 36% Risk-free interest rate..................................... 5.5% n/a 5.5% Expected life of options in years........................... 4 5 5
13. COMMITMENTS AND CONTINGENCIES The Company is a party to a number of litigation and arbitration proceedings arising from its operations. Such actions are covered by insurance or, in the opinion of management are of such a nature that the ultimate liability, if any, would not have a material adverse effect on the operations or financial position of the Company. In February 1999, the Company paid $1 million in full settlement of an income tax indemnity claim by a subsidiary of The Fuji Bank and Trust Company (the "Bank") in connection with an earlier transaction between a subsidiary of the Company and the Bank. The settlement amount has been reflected in the accompanying consolidated financial statements as an adjustment of the purchase price of MTL, and is included in accrued liabilities at December 31, 1998. 14. FINANCIAL INFORMATION RELATING TO SEGMENTS The Company has three operating segments: Ship Management ("Management") -- Technical management of vessels owned by others, including vessels of the U.S. Maritime Administration ("MARAD"). Transportation Services for Energy and Chemicals ("Energy and Chemicals") -- Owned and chartered-in U.S.-based vessels operating under time and voyage charters with customers which are primarily chemical and oil-production companies. 35 37 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Foreign owned and chartered-in vessels in foreign trades operating short-term and long-term shipping services for third parties. The foreign segment was distributed to shareholders in June 1998 (see Note 1).
ENERGY AND MANAGEMENT CHEMICALS FOREIGN TOTAL ---------- ---------- -------- --------- 1998 Total revenues............................... $12,722 $100,552 $ 71,504 $ 184,778 Vessel and voyage expenses................... (8,729) (89,110) (54,091) (151,930) Depreciation expense......................... (1,315) (10,466) (10,626) (22,407) ------- -------- -------- --------- Segment profit............................... $ 2,678 $ 976 $ 6,787 10,441 ======= ======== ======== General and administrative expenses.......... (16,396) Interest expense, net........................ (3,849) Other income................................. 538 Equity in income of unconsolidated joint ventures................................... 2,353 --------- Consolidated loss before income taxes........ $ (6,913) ========= Total assets................................. $ 1,888 $ 84,512 $ -- $ 86,400 ======= ======== ======== ========= Expenditures on long-lived assets............ $ -- $ 644 $ -- $ 644 ======= ======== ======== ========= 1997 Total revenues............................... $ 6,568 $ 82,986 $141,986 $ 231,540 Vessel and voyage expenses................... (3,735) (84,281) (86,347) (174,363) Depreciation expense......................... (987) (5,282) (22,675) (28,944) ------- -------- -------- --------- Segment profit............................... $ 1,846 $ (6,577) $ 33,078 28,233 ======= ======== ======== General and administrative expenses.......... (23,998) Interest expense, net........................ (8,992) Other income................................. 870 Equity in income of unconsolidated joint ventures................................... 737 --------- Consolidated loss before income taxes and cumulative effect of change in accounting principle.................... $ (3,150) ========= Total assets................................. $ -- $ 94,944 $412,674 $ 507,618 ======= ======== ======== ========= Investments in equity investees.............. $ -- $ 345 $ 27,810 $ 28,155 ======= ======== ======== ========= Expenditures on long-lived assets............ $ -- $ 3,185 $ 55,285 $ 58,470 ======= ======== ======== =========
36 38 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ENERGY AND MANAGEMENT CHEMICALS FOREIGN TOTAL ---------- ---------- -------- --------- 1996 Total revenues............................... $ 6,386 $118,126 $108,110 $ 232,622 Vessel and voyage expenses................... (4,767) (92,336) (70,156) (167,259) Depreciation expense......................... -- (13,004) (17,444) (30,448) ------- -------- -------- --------- Segment profit............................... $ 1,619 $ 12,786 $ 20,510 34,915 ======= ======== ======== General and administrative expenses.......... (16,438) Interest expense, net........................ (23,652) Other income................................. 11,153 Equity in income of unconsolidated joint ventures................................... 2,482 --------- Consolidated income before income taxes and extraordinary item......................... $ 8,460 ========= Total assets................................. $ -- $104,138 $437,861 $ 541,999 ======= ======== ======== ========= Investment in equity investees............... $ -- $ (85) $ 59,407 $ 59,322 ======= ======== ======== ========= Expenditures on long-lived assets............ $ -- $ 38,168 $ 12,602 $ 50,770 ======= ======== ======== =========
Reconciliations of total assets of the segments to amounts included in the consolidated balance sheets follows:
DECEMBER 31, -------------------------------- 1998 1997 1996 -------- -------- -------- Total assets of all segments....................... $ 86,400 $507,618 $541,999 Marketable securities and cash held in capital construction fund................................ 4,069 10,969 10,283 Other unallocated assets........................... 16,001 -- -- -------- -------- -------- Consolidated total assets.......................... $106,470 $518,587 $552,282 ======== ======== ========
In 1997, revenues from one customer accounted for approximately 11 percent of voyage revenues. There were no charterers that were considered to be major customers in the year ending December 31, 1998 or 1996. 15. SUBSEQUENT EVENTS On January 7, 1999, the Company entered into an agreement to terminate its time charter with Hydro Agri Ammonia, Inc ("Hydro") for the vessel Amelina. Upon termination of the charter agreement, rights to the vessel were transferred to Hydro in exchange for a deemed residual interest in the vessel with an assigned value of $100,000. There will be no gain or loss on the transaction. 37 39 MARINE TRANSPORT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUPPLEMENTARY DATA QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1998 QUARTER ENDED 1997 QUARTER ENDED -------------------------------------- -------------------------------------- MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 ------- ------- -------- ------- ------- ------- -------- ------- Revenues.......................... $62,537 $54,381 $30,428 $37,432 $59,156 $55,610 $54,618 $62,156 Operating income (loss)........... 3,212 (6,027) (4,099) 959 3,438 2,738 878 (2,819) Cumulative effect of change in accounting principle, net of income tax provision............ -- -- -- -- 13,797 -- -- -- Net income (loss)................. $ 2,245 $33,016 $(2,787) $ 598 $15,337 $ 2,410 $(4,931) $(1,989) ======= ======= ======= ======= ======= ======= ======= ======= Basic earnings (loss) per common share: Net income (loss) before extraordinary loss and cumulative effect of change in accounting principle.......... $ 0.52 $ 7.20 $ (0.46) $ 0.10 $ 0.36 $ 0.56 $ (1.15) $ (0.46) Cumulative effect of change in accounting principle, net of income tax provision.......... -- -- -- -- 3.23 -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- Net income (loss) per common share(1)........................ $ 0.52 $ 7.20 $ (0.46) $ 0.10 $ 3.59 $ 0.56 $ (1.15) $ (0.46) ======= ======= ======= ======= ======= ======= ======= ======= Weighted average number of shares of common stock outstanding -- basic............ 4,307 4,583 6,049 5,995 4,278 4,286 4,296 4,306 ======= ======= ======= ======= ======= ======= ======= ======= Diluted earnings (loss) per common share: Net income (loss) before extraordinary loss and cumulative effect of change in accounting principle(1)....... $ 0.52 $ 7.20 $ (0.46) $ 0.10 $ 0.35 $ 0.55 $ (1.15) $ (0.46) Cumulative effect of change in accounting principle, net of income tax provision.......... -- -- -- -- 3.17 -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- Net income (loss) per common share(1)........................ $ 0.52 $ 7.20 $ (0.46) $ 0.10 $ 3.53 $ 0.55 $ (1.15) $ (0.46) ======= ======= ======= ======= ======= ======= ======= ======= Weighted average number of shares of common stock outstanding -- diluted......................... 4,307 4,583 6,049 5,995 4,347 4,349 4,296 4,307 ======= ======= ======= ======= ======= ======= ======= =======
- --------------- (1) Earnings per share are based on stand-alone quarters. 38 40 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE At the annual shareholders meeting held on June 15, 1998, the Company's shareholders voted to appoint Ernst & Young as the independent accountants of the Company. The Company's previous accountants, Deloitte & Touche, resigned in connection with the Distribution of the Company's international businesses and Deloitte & Touche became the independent accountants for the separate international business, OMI Corporation. In the past two years there were no disagreements with either auditors on accounting and financial disclosure, and there have been no reports from auditors which have been qualified or modified as to uncertainty, audit scope, or accounting principles, nor has there been an adverse opinion or a disclaimer of opinion. PART III ITEM 10. MANAGEMENT Pursuant to General Instruction G(3) the information called for by this item is hereby incorporated by reference from Marine Transport Corporation's 1999 Proxy Statement to be filed with the Securities and Exchange Commission. Information with respect to the Company's executive officers as of March 15, 1999 follows:
YEAR APPOINTED NAME AGE POSITION TO OFFICE - ---- --- -------- --------- Richard T. du Moulin.......... 52 Chief Executive Officer and June 1998 President Mark L. Filanowski............ 44 Senior Vice President, Chief June 1998 Financial Officer and Treasurer Peter N. Popov................ 47 Vice President, General Counsel June 1998 and Secretary Jeffrey M. Miller............. 44 Vice President Marketing June 1998
Richard T. du Moulin became Chief Executive Officer and President of the Company in June 1998. Mr. du Moulin was Chief Executive Officer of Marine Transport Lines, Inc., from 1989 until it was purchased by the Company in June 1998. Mark L. Filanowski became Senior Vice President, Chief Financial Officer and Treasurer in June 1998. From 1989 to June 1998 Mr. Filanowski held similar positions at Marine Transport Lines, Inc. Peter N. Popov became Vice President, General Counsel and Secretary in June 1998. From 1989 to June 1998 Mr. Popov was General Counsel at Marine Transport Lines, Inc. Jeffrey M. Miller became Vice President Marketing in June 1998. From 1994 to June 1998 Mr. Miller was employed by Marine Transport Lines, Inc. in a similar capacity. There is no family relationship by blood, marriage or adoption between any of the above individuals and any executive officer or MTC director. The term of office of each of the above individuals is determined by contractual relationship between the Company and the individuals. The contracts have one year terms. There is no other arrangement or understanding between the above individuals and any other person pursuant to which they have been or will be selected as a director or nominee. ITEM 11. EXECUTIVE COMPENSATION Pursuant to General Instruction G(3) the information called for by this item is hereby incorporated by reference from Marine Transport Corporation's 1999 Proxy Statement to be filed with the Securities and Exchange Commission. 39 41 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Pursuant to General Instruction G(3) the information called for by this item is hereby incorporated by reference from Marine Transport Corporation's 1999 Proxy Statement to be filed with the Securities and Exchange Commission. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pursuant to General Instruction G(3) the information called for by this item is hereby incorporated by reference from Marine Transport Corporation's 1999 Proxy Statement to be filed with the Securities and Exchange Commission. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) and (2) Financial Statements and Schedules are presented in Item 8 of this report. (a)(3) List of Exhibits (separate page) (b) There were no reports on Form 8-K filed during the fourth quarter of 1998. (c) Exhibits are filed as a separate section of this report. (d) Financial Statement Schedules are presented in Item 8 of this report. 40 42 EXHIBITS
NUMBER INCORPORATED BY REFERENCE TO DESCRIPTION OF EXHIBIT - ------ ---------------------------- ---------------------- 3.1 Exhibit 3.1 to 1990 Form 10-K Report of Certificate of Incorporation as amended the Company and Exhibit A to the and restated Company's Proxy Statement dated May 15, 1998 3.2 Exhibit 3.2 to 1990 Form 10-K Report of By-laws as amended the Company 4.1 Exhibit 4.1 to 1989 Form 10-K Report of Form of Common Stock Certificate the Company (Domestic) 4.2 Exhibit 4.2 to 1989 Form 10-K Report of Form of Common Stock Certificate the Company (Foreign) 4.3 Promissory Note dated June 17, 1998 made by the Company and payable to the order of OMI Corporation 4.4 Promissory Note dated June 16, 1998 made by the Company and payable to the order of OMI Corporation 10.1 Exhibit B to the Company's Proxy 1998 Stock Option Plan for Non-Employee Statement dated May 15, 1998 Directors 10.2 Exhibit C to the Company's Proxy 1998 Incentive Equity Plan Statement dated May 15, 1998 10.3 Employment Agreement dated as of June 18, 1998 between the Company and Richard du Moulin 10.4 Employment Agreement dated as of June 18, 1998 between the Company and Mark Filanowski 10.5 Employment Agreement dated as of June 18, 1998 between the Company and Peter Popov 10.6 Employment Agreement dated as of June 18, 1998 between the Company and Jeffrey Miller 10.7 Exhibit 10.8 to the Company's 10-Q Report Consulting Agreement dated as of June 18, for the Quarter Ended June 30, 1998 1998 between the Company and Paul Gridley 10.8 Employment Agreement dated as of January 1, 1998 between the Company and Anthony Naccarato 10.9 Employment Agreement dated as of September 1, 1997 between the Company and William Hogg 10.10 Exhibit 10.7 to the Company's 10-Q Report Form of Employment Agreement for for the Quarter Ended June 30, 1998 Executive Officers 10.11 Amended and Restated Term Loan and Revolving Credit Facility Agreement dated as of June 17, 1998 among Marine Transport Lines, Inc., the financial institutions listed on Schedule 1 thereto and Den norske Bank ASA 10.12 Term Loan and Revolving Credit Facility Agreement dated as of June 17, 1998 among the Company, the financial institutions listed on Schedule 1 thereto and Den norske Bank ASA 10.13 Exhibit G to the Company's Proxy Acquisition Agreement dated as of Statement dated May 15, 1998 September 15, 1997 by and among OMI Corp., Universal Bulk Carriers, Inc., Marine Transport Lines, Inc. and the persons set forth on Exhibit A thereof
41 43
NUMBER INCORPORATED BY REFERENCE TO DESCRIPTION OF EXHIBIT - ------ ---------------------------- ---------------------- 10.14 Exhibit 10.2 to the Company's Form 8-K Amendment No. 1 to Acquisition Agreement Report filed July 6, 1998 10.15 Exhibit 10.4 to the Company's Form 8-K Tax Cooperation Agreement dated as of Report filed July 6, 1998 June 15, 1998 between OMI Corp. and OMI Corporation 10.16 Exhibit 10.3 to the Company's Form 8-K Distribution Agreement dated as of June Report filed July 6, 1998 15, 1998 between OMI Corp. and OMI Corporation 10.17 Salaried Employees Retirement Income Plan 21 Subsidiaries of the Company 27.1 Financial Data Schedule
42 44 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. MARINE TRANSPORT CORPORATION By /s/ RICHARD T. DU MOULIN ------------------------------------ Richard T. du Moulin Chairman of the Board of Directors, Chief Executive Officer and President March 30, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ RICHARD T. DU MOULIN Chairman of the Board of March 30, 1999 - --------------------------------------------------- Directors, Chief Executive Richard T. du Moulin Officer and President /s/ MARK L. FILANOWSKI Senior Vice President, Chief March 30, 1999 - --------------------------------------------------- Financial Officer, Treasurer Mark L. Filanowski and Director /s/ JONATHAN BLANK Director March 30, 1999 - --------------------------------------------------- Jonathan Blank /s/ ELAINE L. CHAO Director March 30, 1999 - --------------------------------------------------- Elaine L. Chao /s/ PAUL B. GRIDLEY Director March 30, 1999 - --------------------------------------------------- Paul B. Gridley /s/ WILLIAM M. KEARNS, JR. Director March 30, 1999 - --------------------------------------------------- William M. Kearns, Jr. /s/ MICHAEL KLEBANOFF Director March 30, 1999 - --------------------------------------------------- Michael Klebanoff /s/ STANLEY B. RICH Director March 30, 1999 - --------------------------------------------------- Stanley B. Rich /s/ JEROME SHELBY Director March 30, 1999 - --------------------------------------------------- Jerome Shelby
43 EX-3.1 2 CERTIFICATE OF INCORPORATION 1 Exhibit 3.1 CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF OMI CORP. ------------------------------------------------- Pursuant to Section 242 of the General Corporation law of the State of Delaware ------------------------------------------------- OMI Corp., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The Restated Certificate of Incorporation of the Corporation was filed in the office of the Secretary of State of Delaware on December 12, 1983 and amendments to the Certificate of Incorporation were subsequently duly filed and recorded (the Restated Certificate of Incorporation together with such amendments shall be hereinafter referred to as the "Restated Certificate of Incorporation"). 2. The following amendments are to become effective as of June 18, 1998 at 8:00 a.m. 3. ARTICLE FIRST of the Restated Certificate of Incorporation is amended to read in full as follows: "FIRST: The name of the corporation is Marine Transport Corporation." 2 4. The first paragraph of ARTICLE FOURTH of the Restated Certificate of Incorporation is amended to read in full as follows: FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is fifteen million seven hundred fifty thousand (15,750,000) of which stock seven hundred fifty thousand (750,000) shares of the par value of one dollar ($1.00) each, amounting in the aggregate to seven hundred fifty thousand dollars ($750,000), shall be Preferred Stock, and of which fifteen million (15,000,000) shares of the par value of fifty cents ($.50) each, amounting in the aggregate to seven million five hundred thousand dollars ($7,500,000), shall be Common Stock. 5. Upon the effectiveness of the foregoing amendment to Article FOURTH of the Restated Certificate of Incorporation, each share of Common Stock of the Corporation, having a par value of fifty cents ($.50) per share, issued and outstanding, or held in the treasury of the Corporation, immediately prior to the effectiveness of such amendment, shall be changed into and become 0.10 fully paid and nonassessable shares of Common Stock having a par value of fifty cents ($.50) per share. No fractional interests resulting from such conversion shall be issued, but in lieu thereof, the Corporation will pay cash for each currently issued and outstanding share of Common Stock, par value one cent ($.0l) per share, representing such fractional interest. 6. The aforesaid amendments were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. -2- 3 IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed hereto and this certificate to be signed by its President and attested by its Secretary this 16th day of June, 1998. OMI CORP. By: /s/ Craig H. Stevenson ------------------------------------ Craig H. Stevenson, Jr. President [Corporate Seal] Attest: By: /s/ Fredric S. London ------------------------------------ Fredric S. London Secretary -3- EX-4.3 3 PROMISSORY NOTE 1 Exhibit 4.3 PROMISSORY NOTE $6,443,000 New York, New York June 17, 1998 FOR VALUE RECEIVED, the undersigned, OMI Corp., a Delaware Corporation ("Marine"), hereby promises to pay to the order of OMI Corporation ("OMI"), at its office at One Station Place, Stamford, CT 06902 (or such other place as OMI may direct from time to time), in lawful money of the United States and in immediately available funds, the principal amount of six million four hundred forty three thousand Dollars ($6,443,000) plus, interest on said principal amount, from the date hereof, payment of such amount to be secured by first priority mortgages on three work boats owned by OMI Petrolink Corp. and its subsidiaries and any net proceeds from the sale thereof (the "Collateral") pursuant to three First Preferred Mortgage Agreements executed by OMI Petrolink Corp. Nuelink Corp. and Harlink Corp, respectively (collectively, the "Mortgage Agreements"). Payments of principal and interest shall be made in the amounts and on the dates set forth on the attached Annex A. Upon payment of a premium equal to $384,000 (which amount shall be added to the principal of this Note), Marine may prepay the outstanding principal of this Note, in whole, but not in part, upon 10 days' prior written notice to the holder of this Note. Prepayment hereunder shall be accompanied by payment of accrued interest calculated from the date of the immediately prior installment payment to the date of the next scheduled payment adjusted, pro rata, to the date of prepayment. Upon the completion of a debt (excluding bank borrowings) or equity offering by Marine, the proceeds of such offering (net of transaction costs) shall be used to repay this Note in full, and if such repayment constitutes a prepayment of this Note, such repayment shall be subject to the terms of the immediately preceding paragraph. Marine shall pay on demand interest on the outstanding unpaid principal amount of this Note that is not paid within 5 business days of when due and on the unpaid amount of all interest fees and other amounts then due and payable hereunder that is not paid within 5 business days of when due from the due date thereof to the date paid, at a rate per annum equal to 3% per annum above the rate of interest per annum borne by this Note. Marine is a duly organized and validly existing corporation, and is in good standing under the laws of Delaware and has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Note and has taken all necessary corporate action to authorize the execution, delivery and performance of this Note. This Note constitutes the legal, valid and binding obligation of Marine enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 2 Neither the execution, delivery or performance by Marine of this Note, nor compliance by it with the terms and provisions hereof, (i) will contravene any applicable provision of any law, statute, rule or regulation, or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of Marine pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument to which Marine is a party or by which it or any of its property or assets are bound or to which it may be subject or (iii) will violate any provision of the certificate or articles of incorporation or by-laws (or equivalent organizational documents), as the case may be, of Marine. Upon the occurrence of any of the following specified events (each an "Event of Default"): 1. Marine shall fail to pay any of the principal of this Note on the date when due or fail to pay any of the interest on this Note within 5 business days of the date when due; or 2. The Mortgage Agreements or any provision thereof shall cease to be in full force and effect, or shall cease to give OMI first priority mortgages on the Collateral, and other rights, powers and privileges purported to be created thereby, or Marine shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the Mortgage Agreements. 3. Marine shall (i) default in any payment of principal of or interest on any indebtedness or contingent obligation (other than its obligation under this Note) or (ii) default in the observance or performance of any agreement or condition relating to any indebtedness or contingent obligation (other than this Note) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur, the effect of which is to permit such indebtedness or contingent obligation to be declared due and payable or such indebtedness or contingent obligation shall otherwise become due or required to be prepaid prior to its stated maturity (determined without regard to whether any notice is required); provided, that is shall not constitute an Event of Default pursuant to clause (i) or (ii) above unless the aggregate principal amount of all such indebtedness or contingent obligations as described in clauses (i) and (ii), inclusive, exceeds $100,000 at any one time; or 4. (a) Marine shall (i) commence any case, proceeding or other action under any existing or fixture law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition, or other relief with respect to it or its debts, or (ii) com- -2- 3 mence any case, proceeding, or other action seeking appointment of a receiver, trustee, custodian, or other similar official for it or for all or any substantial part of its assets, or (iii) make a general assignment for the benefit of its creditors; (b) there shall be commenced against Marine any case, proceeding or other action of a nature referred to in clause (a) above that (i) results in the entry of an order for relief or any such adjudication or appointment, or (ii) remains undismissed, undischarged, or unbonded for a period of sixty (60) days; (c) there shall be commenced against Marine any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint, or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; (d) Marine shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (a), (b), or (c) previously; or (e) Marine shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or 5. One or more final judgments or decrees shall be entered against Marine involving a liability not paid or fully covered by insurance in excess of $100,000 for all such judgments and decrees and all such judgments or decrees shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof. THEN, the holder hereof may declare the outstanding principal balance hereof immediately due and payable and Marine shall immediately pay to the holder all such amounts, with interest accrued but unpaid thereon to the date of payment in full at the applicable rate provided herein. Marine, for itself, its successors and assigns, hereby waives diligence, presentment, protest, and demand and notice of protest, demand, dishonor, and nonpayment of this Note. Neither acceptance by the holder hereof of partial or delinquent payment nor any failure on the part of the holder to exercise, or any delay in exercising, any right under this Note shall operate as a waiver of any obligation of Marine or any right of the holder, and no single or partial exercise of any right under this Note shall preclude any other or farther exercise thereof or the exercise of any other right. No waiver, amendment, alteration or other modification of any provision of this Note shall in any event be effective unless the same shall be in writing and signed by the holder. The remedies provided in this Note are cumulative and not exclusive of any remedies provided by law. All of the covenants, provisions, and conditions herein contained are made on behalf of, and shall apply to and bind the respective distributees, personal representatives, successors, and assigns of Marine, jointly and severally. Marine agrees to pay all collection expenses, court costs, and reasonable attorney fees and disbursements (whether or not litigation is commenced) that may be incurred in connection with the collection or enforcement of this Note. -3- 4 This Note shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of laws or principles thereof. OMI CORP. a Delaware Corporation By /s/ V. de Sostca ------------------------------------- Name: Vincent de Sostca Title: S.V.P. -4- 5 ANNEX A
Total Payment Outstanding Principal Due (Interest Payment Date Principal Payment Interest Payment Plus Principal) - ------------ --------- ------- ---------------- --------------- 16 June 1998 6,443,000 0 01 November 1998 6,443,000 175,000 268,333 443,333 01 May 1999 6,268,000 175,000 350,000 525,000 01 November 1999 6,093,000 175,000 350,000 525,000 01 May 2000 5,918,000 175,000 350,000 525,000 01 November 2000 5,743,000 175,000 350,000 525,000 01 May 2001 5,568,000 175,000 350,000 525,000 01 November 2001 5,393,000 175,000 350,000 525,000 01 May 2002 5,218,000 175,000 350,000 525,000 01 November 2002 5,043,000 175,000 350,000 525,000 01 May 2003 4,868,000 175,000 350,000 525,000 01 November 2003 4,693,000 4,693,000 350,000 5,043,000 --------- --------- ---------- Total: 6,443,000 3,768,333 10,211,333
EX-4.4 4 PROMISSORY NOTE 1 Exhibit 4.4 PROMISSORY NOTE $373,845.00 New York, New York June 16, 1998 FOR VALUE RECEIVED, the undersigned, OMI Corp., a Delaware Corporation ("Marine"), hereby promises to pay to the order of OMI Corporation ("OMI"), at its office at One Station Place, Stamford, CT 06902 (or such other place as OMI may direct from time to time), in lawful money of the United States and in immediately available funds, the principal amount of three hundred seventy three thousand eight hundred forty five Dollars ($373,845.00) plus, interest on said principal amount, from the date hereof. Payments of principal and interest shall be made in the amounts and on the dates set forth on the attached Annex A. Marine may prepay the outstanding principal of this Note, in whole, but not in part, upon 10 days' prior written notice to the holder of this Note. Prepayment hereunder shall be accompanied by payment of accrued interest calculated from the date of the immediately prior installment payment to the date of the next scheduled payment adjusted, pro rata, to the date of prepayment. Marine shall pay on demand interest on the outstanding unpaid principal amount of this Note that is not paid within 5 business days of when due and on the unpaid amount of all interest fees and other amounts then due and payable hereunder that is not paid within 5 business days of when due from the due date thereof to the date paid, at a rate per annum equal to 3% per annum above the rate of interest per annum borne by this Note. Marine is a duly organized and validly existing corporation, and is in good standing under the laws of Delaware and has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Note and has taken all necessary corporate action to authorize the execution, delivery and performance of this Note. This Note constitutes the legal, valid and binding obligation of Marine enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). Neither the execution, delivery or performance by Marine of this Note, nor compliance by it with the terms and provisions hereof, (i) will contravene any applicable provision of any law, statute, rule or regulation, or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of Marine pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contact or instrument to which Marine is a party or by which it or any of its property or assets are bound or to which it may be subject or 2 (iii) will violate any provision of the certificate or articles of incorporation or by-laws (or equivalent organizational documents), as the case may be, of Marine. Upon the occurrence of any of the following specified events (each an "Event of Default"): 1. Marine shall fail to pay any of the principal of this Note on the date when due or fail to pay any of the interest on this Note within 5 business days of the date when due; or 2. Marine shall (i) default in any payment of principal of or interest on any indebtedness or contingent obligation (other than its obligation under this Note) or (ii) default in the observance or performance of any agreement or condition relating to any indebtedness or contingent obligation (other than this Note) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur, the effect of which is to permit such indebtedness or contingent obligation to be declared due and payable or such indebtedness or contingent obligation shall otherwise become due or required to be prepaid prior to its stated maturity (determined without regard to whether any notice is required); provided, that is shall not constitute an Event of Default pursuant to clause (i) or (ii) above unless the aggregate principal amount of all such indebtedness or contingent obligations as described in clauses (i) and (ii), inclusive, exceeds $100,000 at any one time; or 3. (a) Marine shall (i) commence any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition, or other relief with respect to it or its debts, or (ii) commence any case, proceeding, or other action seeking appointment of a receiver, trustee, custodian, or other similar official for it or for all or any substantial part of its assets, or (iii) make a general assignment for the benefit of its creditors; (b) there shall be commenced against Marine any case, proceeding or other action of a nature referred to in clause (a) above that (i) results in the entry of an order for relief or any such adjudication or appointment, or (ii) remains undismissed, undischarged, or unbonded for a period of sixty (60) days; (c) there shall be commenced against Marine any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint, or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; (d) Marine shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (a), (b), or (c) previously; or (e) Marine shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or -2- 3 4. One or more final judgments or decrees shall be entered against Marine involving a liability not paid or fully covered by insurance in excess of $100,000 for all such judgments and decrees and all such judgments or decrees shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof. THEN, the holder hereof may declare the outstanding principal balance hereof immediately due and payable and Marine shall immediately pay to the holder all such amounts, with interest accrued but unpaid thereon to the date of payment in full at the applicable rate provided herein. Marine, for itself, its successors and assigns, hereby waives diligence, presentment, protest, and demand and notice of protest, demand, dishonor, and nonpayment of this Note. Neither acceptance by the holder hereof of partial or delinquent payment nor any failure on the part of the holder to exercise, or any delay in exercising, any right under this Note shall operate as a waiver of any obligation of Marine or any right of the holder, and no single or partial exercise of any right under this Note shall preclude any other or further exercise thereof or the exercise of any other right. No waiver, amendment, alteration or other modification of any provision of this Note shall in any event be effective unless the same shall be in writing and signed by the holder. The remedies provided in this Note are cumulative and not exclusive of any remedies provided by law. All of the covenants, provisions, and conditions herein contained are made on behalf of, and shall apply to and bind the respective distributees, personal representatives, successors, and assigns of Marine, jointly and severally. Marine agrees to pay all collection expenses, court costs, and reasonable attorney fees and disbursements (whether or not litigation is commenced) that may be incurred in connection with the collection or enforcement of this Note. This Note shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of laws or principles thereof. OMI CORP. a Delaware Corporation By: /s/ V. de Sostca ------------------------------------- Name: Vincent de Sostca Title: S.V.P. -3- 4 ANNEX A
Total Payment Outstanding Principal Due (Interest Payment Date Principal Payment Interest Payment Plus Principal) - ------------ --------- ------- ---------------- --------------- l6 June 1998 373,845.00 0 01 November 1998 373,845.00 37,384.50 14,954.00 52,338.50 01 May 1999 336,460.50 37,384.50 13,458.00 50,842.50 01 November 1999 299,076.00 37,384.50 11,963.00 49,347.50 01 May 2000 261,691.50 37,384.50 10,468.00 47,852.50 01 November 2000 224,307.00 37,384.50 8,972.00 46,356.50 01 May 2001 186,922.50 37,384.50 7,477.00 44,861.50 01 November 2001 149,538.00 37,384.50 5,982.00 43,366.50 01 May 2002 112,153.50 37,384.50 4,486.00 41,870.50 01 November 2002 74,769.00 37,384.50 2,991.00 40,375.50 01 May 2003 37,384.50 37,384.50 1,495.00 38,879.50 ----------- ----------- -------- ----------- Total: $373,845.00 $82,246.00 $456,091.00
EX-10.3 5 EMPLOYMENT AGREEMENT 1 Exhibit 10.3 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of June 18, 1998, is by and between Marine Transport Corporation, a Delaware corporation (the "Company") and Richard T. du Moulin ("Executive"). W I T N E S S E T H WHEREAS, the Company desires to employ the Executive; and WHEREAS, the Executive is willing to be employed by the Company, as President and Chief Executive Officer of the Company, for the period and upon the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the mutual covenants and conditions contained herein, the Company and the Executive hereby agree as follows: 1. Employment. The Company shall employ the Executive, and the Executive accepts employment by the Company, as President and Chief Executive Officer of the Company upon the terms and conditions herein, for the period commencing as of June 17, 1998, and ending on June 16, 1999, subject to termination as hereinafter provided (the period from June 17, 1998 through June 16, 1999, as such period may be extended as described in this paragraph, being herein referred to as the "Employment Period"). The initial term of employment shall be automatically extended for an additional period of one year unless 90 days written notice of termination is given by either party, and for additional periods of one year thereafter unless 90 days written notice of termination is given by either party. 2. Duties. (a) Throughout the Employment Period, the Executive shall be President and Chief Executive Officer of the Company and shall report to the Board of Directors (the "Board") of the Company. The Executive shall at all times comply with Company policies and guidelines as in effect from time to time and with the lawful and responsible instructions of the Board. (b) During the Employment Period, the Executive shall devote his full-time working hours to his duties hereunder, except during vacation time, any periods of illness and authorized leaves of absence. The Executive shall have such responsibilities and authorities consistent with the status, title and reporting requirements set forth herein as are appropriate to said position, subject to change (other than diminution in position, authority, duties or responsibilities) from time to time by the Board. (c) Throughout the Employment Period, the Executive shall faithfully and diligently perform his duties under this Agreement and shall use his best efforts to promote the interests of the Company. 2 3. Compensation. During the Employment Period, as full compensation to the Executive for his performance of the services hereunder and for his acceptance of the responsibilities described herein, the Company agrees to pay the Executive, and the Executive agrees to accept, the following salary and other benefits: (a) Salary The Company shall pay the Executive a salary (the "Base Salary") at the annual rate of $295,000. The Compensation Committee of the Board shall review such Base Salary on an annual basis and may increase it, from time to time, in its sole discretion. The Base Salary due the Executive hereunder shall be payable in equal monthly installments less any amounts required to be withheld by the Company from such Base Salary pursuant to the benefit plans of Section 3(d) and applicable laws and regulations described under Section 10(e). (b) Bonus The Executive shall be eligible to receive bonuses (each a "Bonus") at the discretion of, and in the amounts and at the times determined by, the Compensation Committee of the Board. (c) Long Term Incentives The Executive shall be entitled to receive grants of restricted stock, stock options and other stock awards and/or other stock and cash awards granted pursuant to any other long term incentive plans implemented by the Company for the benefit of senior executives of the Company at the discretion of, and in the amounts and at the times determined by, the Compensation Committee of the Board. (d) Other Benefit Plans Subject to all eligibility requirements, and to the extent permitted by law, the Executive shall be entitled to participate in any and all employee benefit plans (including, but not limited to, retirement, life insurance, medical, dental, disability, and savings plans) established or maintained by the Company from time to time for the benefit of its employees (or its executives) in general. (e) Further Benefits The Executive shall be entitled to a minimum of four weeks per annum paid vacation. (f) Deferred Compensation Notwithstanding any other provision of the Agreement, the Executive shall have the right to request any lawful means (including, without limitation, any deferred compensation arrangement requested by the Executive) by which he wishes to receive any portion of his Base Salary, Bonus, or other payments, and the Company shall reasonably cooperate with the -2- 3 Executive to grant such request, provided that the granting of such request does not represent inequitable treatment as concerns other senior employees or executives (in the Company's sole judgment), and does not impose additional costs on the Company other than insignificant administrative costs. 4. Reasonable Expenses. The Company will reimburse the Executive for all reasonable business expenses, including travel and lodging, which are properly incurred by him in the performance of his duties hereunder, upon presentation of proper vouchers therefor and in accordance with written policies established from time to time by the Company for such reimbursements. 5. Executive Covenants. The Executive acknowledges that as a result of the services to be rendered to the Company hereunder, the Executive will be brought into close contact with many confidential affairs of the Company, its subsidiaries and affiliates, not readily available to the public. The Executive further acknowledges that the services to be performed under this Agreement are of a special, unique, unusual, extraordinary and intellectual character; that the business of the Company is international in scope; that its services are marketed throughout the world; and that the Company competes with other organizations that are or could be located in nearly any part of the United States or elsewhere. In recognition of the foregoing: (a) Except with the consent of or as directed by the Company, or except if compelled by judicial or legal authorities, the Executive will keep confidential and not divulge to any other person, during the Employment Period or thereafter, any Confidential Information and Trade Secrets regarding the Company, its subsidiaries and affiliates, except for information which is or becomes publicly available other than as a result of disclosure by the Executive. For the purposes of this Agreement "Confidential Information and Trade Secrets" means information which is confidential and secret to the Company, its subsidiaries and affiliates. It may include, but is not limited to, information relating to new and future concepts and business of the Company, its subsidiaries and affiliates, in the form of memoranda, reports, computer software and data banks, customer lists, employee lists, books, records, financial statements, manuals, papers, contracts and strategic plans. As a guide, the Executive is to consider information originated, owned, controlled or possessed by the Company, its subsidiaries or affiliates which is not disclosed in printed publications stated to be available for distribution outside the Company, its subsidiaries and affiliates as being secret and confidential. In instances where doubt does or should reasonably be understood to exist in the Executive's mind as to whether information is secret and confidential to the Company, its subsidiaries and affiliates, the Executive agrees to request an opinion, in writing, from the Company. (b) All papers, books and records of every kind and description relating to the business and affairs of the Company, its subsidiaries and affiliates, whether or not prepared by the Executive, and all property owned by the Company, its subsidiaries and affiliates shall be the sole and exclusive property of the Company, and the Executive shall surrender them to the Company, at any time upon request, during or after the Employment Period. -3- 4 (c) During the Employment Period and for one year following termination of this Agreement pursuant to Sections~6(a) or 6(c), the Executive will not, without the prior written consent of the Company, compete, directly or indirectly, with the Company, its subsidiaries and affiliates or participate as a director, officer, employee, agent, representative, stockholder or partner, or have any direct or indirect financial interest, in any business which directly or indirectly competes with the Company, its subsidiaries and affiliates; provided, however, that this paragraph (c) shall not restrict the Executive from holding up to 5% of the publicly traded securities of any entity. (d) During the Employment Period and for one year following termination of this Agreement pursuant to Sections 6(a) or 6(c), the Executive shall not either for his or her own account or for any person, firm or company (i) solicit any customers of the Company, its subsidiaries and affiliates or (ii) solicit or endeavor to cause any employee of the Company, its subsidiaries and affiliates to leave his employment or induce or attempt to induce any such employee to breach any employment agreement with the Company, its subsidiaries and affiliates, or otherwise interfere with the employment of any employee by the Company, its subsidiaries and affiliates. (e) Without limiting any other provision of this Agreement, the Executive hereby agrees to be bound by and to comply with any obligations known to the Executive and imposed on the Company, its subsidiaries and affiliates, by law, rule, regulation, ordinance, order, decree, instrument, agreement, understanding or other restriction of any kind. (f) The Executive hereby agrees to provide reasonable cooperation to the Company, its subsidiaries and affiliates during the Employment Period and thereafter in any litigation between the Company, its subsidiaries and affiliates, and third parties. (g) The parties agree that the Company shall, in addition to other remedies provided by law, have the right and remedy to have the provisions of this Section 5 specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any breach or threatened breach of the provisions of this Section 5 will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from the Executive. (i) Although the restrictions contained in Sections 5(a), (b), (c) and (d) above are considered by the parties hereto to be fair and reasonable in the circumstances, it is recognized that restrictions of such nature may fail for technical reasons, and accordingly it is hereby agreed that if any of such restrictions shall be adjudged to be void or unenforceable for whatever reason, but would be valid if part of the wording thereof were deleted, or the period thereof reduced or the area dealt with thereby reduced in scope, the restrictions contained in Sections 5(a), (b), (c) and (d) shall be enforced to the maximum extent permitted by law, and the parties consent and agree that such scope or wording may be accordingly judicially modified in any proceeding brought to enforce such restrictions. -4- 5 (ii) Notwithstanding that the Executive's employment hereunder may expire or be terminated as provided in Section 1 or Section 6 hereof, this Agreement shall continue in full force and effect insofar as is necessary to enforce the covenants and agreements of the Executive contained in this Section 5. 6. Termination of Employment Period and Severance. (a) Termination by the Company without Cause. If for any reason other than the provisions of Section 6(d) hereof, the Company wishes to terminate the Employment Period and the Executive's employment hereunder or fails to extend the Employment Period for additional one year periods as provided in Section 1, the Company shall give a written notice to the Executive of such termination upon termination and shall pay to Executive an amount equal to 150% of the Base Salary then in effect. Upon receipt of such notice by the Executive or upon expiration of the employment period that is not extended, the Employment Period shall terminate (and the Executive shall have no further duties under Section 2 hereof). The Executive agrees that the payment described in this Section 6(a) shall be full and adequate compensation to the Executive for all damages the Executive may suffer as a result of the termination of his employment pursuant to this Section 6(a), and hereby waives and releases the Company from any and all obligations or liabilities to the Executive arising from or in connection with the Executive's employment with the Company or the termination and claims the Executive may have under federal, state or local statutes, regulations or ordinances or under any common law principles or breach of contract or the covenant of good faith and fair dealing, defamation, wrongful discharge, intentional infliction of emotional distress or promissory estoppel; provided, however, that any rights and benefits the Executive may have under the employee benefit plans and programs of the Company in which the Executive is a participant, shall be determined in accordance with the terms and provisions of such plans and programs. (b) Death. If the Executive dies during the Employment Period, the Employment Period shall automatically terminate and the obligations of the parties shall terminate effective the date of death. (c) Disability. If the Executive becomes Disabled (as hereinafter defined) during the Employment Period, the Company shall be entitled to terminate his or her employment and the Employment Period upon written notice to the Executive from the Company. In the event of such termination, the Executive shall be released from any duties hereunder and the Company shall pay to Executive an amount equal to 150% of the Base Salary then in effect. For purposes of this Agreement, "Disabled" shall mean mental or physical impairment or incapacity rendering the Executive substantially unable to perform his duties under this Agreement for a period of longer than 90 days out of any 360-day period during the Employment Period. A determination of whether the Executive is Disabled shall be made by the Company in its sole discretion upon its own initiative or upon request of the Executive or a person acting on his behalf. -5- 6 (d) Termination by the Company for Cause. The Company by written notice to the Executive, shall have the right to terminate the Employment Period in the event of any of the following (which shall constitute "Cause"): (i) The Executive's breach in respect of his duties under this Agreement, such breach continuing unremedied for 10 days after written notice thereof from the Company to the Executive specifying the acts constituting the breach and requesting that they be remedied; (ii) Any misconduct, dishonesty, breach of fiduciary duty, insubordination or other act by the Executive which other act is materially detrimental to the assets, business or goodwill of the Company, or materially damaging to the Company's, its subsidiaries' and/or affiliates' relationships with their customers or employees, including, without limitation, the Executive having been indicted for or convicted of (including entry of a no contest plea) in respect of a felony or of any crime involving moral turpitude or fraud during the Employment Period, provided such indictment or conviction has resulted or is likely to result in substantial detriment to the Company, its subsidiaries and/or affiliates; (iii) misappropriation (or attempted misappropriation) of any of the Company's funds or property or of a business opportunity of the Company, including attempting to secure or securing any personal profit in connection with any transaction entered into on behalf of the Company; (iv) Executive's gross negligence in connection with the performance of Executive's obligations hereunder; or (v) Executive's excessive alcohol abuse or abuse of any controlled substance. Any termination under this Section 6(d) shall be without damages or liability to the Company for compensation and other benefits which would have accrued to the Executive hereunder after termination, but all compensation, benefits and reimbursements accrued through the date of termination shall be paid to the Executive at the times normally paid by the Company. In this event, there shall be no severance period. (e) Voluntary Termination by the Executive. In the event of voluntary termination of employment by the Executive, the terms of the last paragraph of Section 6(d) shall apply, except in the event that Executive terminates for Good Reason. Good Reason shall -6- 7 mean voluntary termination by Executive that occurs within ninety days of (i) a relocation of the Company's offices (or the location of the performance of work by the Executive) beyond a fifty mile radius of New York City, (ii) a material diminution of the Executive's position, authority, duties or responsibilities as provided in Section 2, including, without limitation, termination of his position as Chairman of the Board, President and Chief Executive Officer of the Company or (iii) a reduction in Base Salary. If Executive terminates for Good Reason, the provisions of Section 6(a) shall apply and Executive will be bound by the provisions of Section 5, including, without limitation, Sections 5(c) and 5(d). (f) Termination Following a Change in Control. (i) Subject to Section 6(f)(ii), should the Executive's employment hereunder be terminated by the Company without Cause (other than for reason of the Executive becoming Disabled) or by Executive for Good Reason within two years of a Change in Control (as defined below), the Company shall pay and the Executive shall receive in cash an amount equal to 300% of (A) Executive's then current Base Salary plus (B) the average of the last three annual bonuses received by Executive, and any options held by Executive to purchase Company securities shall immediately vest, notwithstanding anything to the contrary in any other agreement between Executive and the Company. Upon termination under this paragraph (f), the Executive shall no longer be bound by the provisions of Section 5 of this Agreement. (ii) In the event that any payment received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control or any person affiliated with the Company or such person (together with the payment pursuant to Section 6(f)(i), the "Total Payments")) would not be deductible by the Company (in whole or in part) as a result of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the payment pursuant to Section 6(f)(i) shall be reduced until no portion of the Total Payments are not deductible as a result of Section 280G of the Code, or the payment pursuant to Section 6(f)(i) is reduced to zero. For purposes of this limitation (A) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date of payment of the payment pursuant to Section 6(f)(i) shall be taken into account, (B) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel selected by the Company's independent auditors and acceptable to the Executive, does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, and (C) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined or benefit included in the Total Payments shall be determined by the Company's independent auditors servicing the Company immediately prior to the time of a Change in Control in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. (iii) For purposes of this Section 6(f) the following definitions shall apply: "Change in Control" shall mean a change in control with respect to the Company that would be required to be reported in response to Item 1(a) of the Current Report -7- 8 on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without limitation, such a Change in Control shall be deemed to have occurred at such time as any Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of 35% or more of the outstanding securities of the Company ordinarily having the right to vote at an election of directors. A change in control shall be deemed to have occurred if individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Board. Notwithstanding anything aforesaid to the contrary, a Change in Control shall not be deemed to have occurred if prior to the time the Change in Control would have otherwise occurred, the Board shall have approved the event or transaction that would otherwise result in a Change in Control for purposes of this Agreement. "Incumbent Board" shall mean those individuals who constitute the Board on the date hereof, or any successor or additional individual who becomes a member of the Board and whose election, or nomination for election, by the members of the Board was approved by a vote of at least two-thirds of the members of the Board comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such individual was named as nominee for member of the Board without objection to such nomination). "Person" shall mean and include any individual, corporation, partnership, group, association or other "person", as such term is used in Section 14(d) of the Exchange Act, other than the Company or any subsidiary or any employee benefit plan sponsored by the Company or any subsidiary. 7. Conflicting Agreements. The Executive hereby represents and warrants to the Company that his entering into this Agreement, and the obligations and duties undertaken by him hereunder, will not conflict with, constitute a breach of, or otherwise violate the terms of any other employment of other agreement to which he is a party. 8. Assignment. (a) By the Executive. This Agreement, any part thereof and any rights (including compensation) or obligation hereunder shall not be assigned, pledged, alienated, sold, attached, charged, encumbered or transferred in any way by the Executive and any attempt to do so shall be void except that (i) the Executive may designate any of his beneficiaries to receive (and such beneficiaries shall receive) any compensation, payments or other benefits payable hereunder upon his death, (ii) any assignment by will or by laws of descent and distribution or following the occurrence of the Executive's legal incompetence is permitted and (iii) the Executive's executors, administrators or other legal representatives may assign any rights hereunder to the person or persons entitled thereto. (b) By the Company. Provided the substance of the Executive's duties set forth in Section 2 shall not change, and provided that the Executive's compensation as set forth -8- 9 in Section 3 shall not be adversely affected, the Company may assign or otherwise transfer this Agreement to any succeeding entity without limitation, which entity shall assume all rights and obligations hereunder. 9. Notices. All notices, requests, demands and other communications hereunder must be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first class, registered mail, return receipt requested, or sent by overnight mail, such as Federal Express, postage and registry fees prepaid, to the applicable party and addressed as follows: If to the Company: Board of Directors Marine Transport Corporation 1200 Harbor Boulevard Weehawken, NJ 07087 With a copy (which will constitute notice to the Company) to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Louis J. Bevilacqua, Esq. If to Executive: Richard T. du Moulin Marine Transport Corporation 1200 Harbor Boulevard Weehawken, NJ 07087 Addresses may be changed by notice in writing signed by the addressee. 10. Miscellaneous. (a) If any provision or portion of this Agreement shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid or unenforceable, such judgment shall not affect, impair or invalidate the remainder of this Agreement but shall be confined in its operation to the jurisdiction in which made and to the provisions of this Agreement directly involved in the controversy in which such judgment shall have been rendered. (b) No course of dealing and no delay on the part of any party hereto in exercising any right, power or remedy under or relating to this Agreement shall operate as a waiver thereof or otherwise prejudice such party's rights, powers and remedies. No single or partial exercise of any rights, powers or remedies under or relating to this Agreement shall -9- 10 preclude any other or further exercise thereof or the exercise of any other right, power or remedy. (c) This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument, and all signatures need not appear on any one counterpart. (d) (i) Any other agreement, rule or regulation to the contrary, notwithstanding, the parties hereby agree that any action or proceeding relating to this Agreement or its subject matter shall be brought in a state or federal court situated in the County of New York, State of New York and such court shall have exclusive jurisdiction thereof; provided, however, any court with jurisdiction over the parties may, at the election of Company, have jurisdiction over any action brought with regard to or any action brought to enforce any violation or claimed violation of Section 5. The parties each hereby specifically submit to the jurisdiction of such court and further agree that service of process may be made within or without the State of New York by giving notice in the manner provided in Section 9. Each party further agrees to waive and hereby waives any right to a trial by jury, and to any objection it or he may have in any such action, based on lack of personal jurisdiction or venue, or inconvenient forum. (ii) In any such action or proceeding, the prevailing party shall be entitled to recover from the other party reasonable costs, including attorneys' fees and expenses. In any action or proceeding before a court or other tribunal relating to this Agreement with respect to which damages are an adequate remedy, the parties agree that no damages other than compensatory damages shall be sought or claimed by either party and each party waives any claim, right or entitlement to punitive, exemplary or consequential damages, or any statutory damages, or any other damages of any kind or nature in excess of compensatory damages, and any court or arbitration tribunal is specifically divested of any power to award any damages in the nature of punitive, exemplary, or consequential damages, or any statutory damages, or any other damages of any kind or nature in excess of compensatory damages. (e) All payments required to be made by the Company hereunder to the Executive or his beneficiaries, including his estate, shall be subject to withholding and deductions as the Company may reasonably determine it should withhold or deduct pursuant to any applicable law or regulation. In lieu of withholding or deducting such amounts in whole or in part, the Company may, in its sole discretion, accept other provision for payment as permitted by law, provided it is satisfied in its sole discretion that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. (f) This Agreement embodies the entire understanding, and supersedes all other oral or written agreements or understandings, between the parties regarding the subject matter hereof. No change, alteration or modification hereof may be made except in writing signed by both parties hereto. The headings in this Agreement are for convenience of reference only and shall not be considered part of this Agreement or limit or otherwise affect -10- 11 the meaning hereof. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of New York (disregarding any choice of law rules which might look to the laws of any other jurisdiction). (g) The Executive acknowledges that the terms of this Agreement have been fully explained to him, that the Executive understands the nature and extent of the rights and obligations provided under this Agreement, and that the Executive has been given the opportunity to be represented by legal counsel in the negotiation and preparation of this Agreement. (h) Nothing herein contained shall be construed to prevent or limit any acquisition, consolidation or merger of the Company. [SIGNATURE PAGE FOLLOWS] -11- 12 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. MARINE TRANSPORT CORPORATION By: ------------------------------------- Name: Title: ------------------------------------- Richard T. du Moulin -12- EX-10.4 6 EMPLOYMENT AGREEMENT 1 Exhibit 10.4 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of June 18, 1998, is by and between Marine Transport Corporation, a Delaware corporation (the "Company") and Mark L. Filanowski ("Executive"). W I T N E S S E T H WHEREAS, the Company desires to employ the Executive; and WHEREAS, the Executive is willing to be employed by the Company, as Senior Vice President and Chief Financial Officer of the Company, for the period and upon the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the mutual covenants and conditions contained herein, the Company and the Executive hereby agree as follows: 1. Employment. The Company shall employ the Executive, and the Executive accepts employment by the Company, as Senior Vice President and Chief Financial Officer of the Company upon the terms and conditions herein, for the period commencing as of June 17, 1998, and ending on June 16, 1999, subject to termination as hereinafter provided (the period from June 17, 1998 through June 16, 1999, as such period may be extended as described in this paragraph, being herein referred to as the "Employment Period"). The initial term of employment shall be automatically extended for an additional period of one year unless 90 days written notice of termination is given by either party, and for additional periods of one year thereafter unless 90 days written notice of termination is given by either party. 2. Duties. (a) Throughout the Employment Period, the Executive shall be Senior Vice President and Chief Financial Officer of the Company and shall report to the Chief Executive Officer (the "CEO") of the Company. The Executive shall at all times comply with Company policies and guidelines as in effect from time to time and with the lawful and responsible instructions of the CEO. (b) During the Employment Period, the Executive shall devote his full-time working hours to his duties hereunder, except during vacation time, any periods of illness and authorized leaves of absence. The Executive shall have such responsibilities and authorities consistent with the status, title and reporting requirements set forth herein as are appropriate to said position, subject to change (other than diminution in position, authority, duties or responsibilities) from time to time by the CEO. (c) Throughout the Employment Period, the Executive shall faithfully and diligently perform his duties under this Agreement and shall use his best efforts to promote the interests of the Company. 2 3. Compensation. During the Employment Period, as full compensation to the Executive for his performance of the services hereunder and for his acceptance of the responsibilities described herein, the Company agrees to pay the Executive, and the Executive agrees to accept, the following salary and other benefits: (a) Salary The Company shall pay the Executive a salary (the "Base Salary") at the annual rate of $225,000. The Compensation Committee of the Board of Directors of the Company (the "Compensation Committee") shall review such Base Salary on an annual basis and may increase it, from time to time, in its sole discretion. The Base Salary due the Executive hereunder shall be payable in equal monthly installments less any amounts required to be withheld by the Company from such Base Salary pursuant to the benefit plans of Section~3(d) and applicable laws and regulations described under Section 10(e). (b) Bonus The Executive shall be eligible to receive bonuses (each a "Bonus") at the discretion of, and in the amounts and at the times determined by, the Compensation Committee. (c) Long Term Incentives The Executive shall be entitled to receive grants of restricted stock, stock options and other stock awards and/or other stock and cash awards granted pursuant to any other long term incentive plans implemented by the Company for the benefit of senior executives of the Company at the discretion of, and in the amounts and at the times determined by, the Compensation Committee. (d) Other Benefit Plans Subject to all eligibility requirements, and to the extent permitted by law, the Executive shall be entitled to participate in any and all employee benefit plans (including, but not limited to, retirement, life insurance, medical, dental, disability, and savings plans) established or maintained by the Company from time to time for the benefit of its employees (or its executives) in general. (e) Further Benefits The Executive shall be entitled to a minimum of four weeks per annum paid vacation. (f) Deferred Compensation Notwithstanding any other provision of the Agreement, the Executive shall have the right to request any lawful means (including, without limitation, any deferred compensation arrangement requested by the Executive) by which he wishes to receive any portion of his Base -2- 3 Salary, Bonus, or other payments, and the Company shall reasonably cooperate with the Executive to grant such request, provided that the granting of such request does not represent inequitable treatment as concerns other senior employees or executives (in the Company's sole judgment), and does not impose additional costs on the Company other than insignificant administrative costs. 4. Reasonable Expenses. The Company will reimburse the Executive for all reasonable business expenses, including travel and lodging, which are properly incurred by him in the performance of his duties hereunder, upon presentation of proper vouchers therefor and in accordance with written policies established from time to time by the Company for such reimbursements. 5. Executive Covenants. The Executive acknowledges that as a result of the services to be rendered to the Company hereunder, the Executive will be brought into close contact with many confidential affairs of the Company, its subsidiaries and affiliates, not readily available to the public. The Executive further acknowledges that the services to be performed under this Agreement are of a special, unique, unusual, extraordinary and intellectual character; that the business of the Company is international in scope; that its services are marketed throughout the world; and that the Company competes with other organizations that are or could be located in nearly any part of the United States or elsewhere. In recognition of the foregoing: (a) Except with the consent of or as directed by the Company, or except if compelled by judicial or legal authorities, the Executive will keep confidential and not divulge to any other person, during the Employment Period or thereafter, any Confidential Information and Trade Secrets regarding the Company, its subsidiaries and affiliates, except for information which is or becomes publicly available other than as a result of disclosure by the Executive. For the purposes of this Agreement "Confidential Information and Trade Secrets" means information which is confidential and secret to the Company, its subsidiaries and affiliates. It may include, but is not limited to, information relating to new and future concepts and business of the Company, its subsidiaries and affiliates, in the form of memoranda, reports, computer software and data banks, customer lists, employee lists, books, records, financial statements, manuals, papers, contracts and strategic plans. As a guide, the Executive is to consider information originated, owned, controlled or possessed by the Company, its subsidiaries or affiliates which is not disclosed in printed publications stated to be available for distribution outside the Company, its subsidiaries and affiliates as being secret and confidential. In instances where doubt does or should reasonably be understood to exist in the Executive's mind as to whether information is secret and confidential to the Company, its subsidiaries and affiliates, the Executive agrees to request an opinion, in writing, from the Company. (b) All papers, books and records of every kind and description relating to the business and affairs of the Company, its subsidiaries and affiliates, whether or not prepared by the Executive, and all property owned by the Company, its subsidiaries and affiliates shall -3- 4 be the sole and exclusive property of the Company, and the Executive shall surrender them to the Company, at any time upon request, during or after the Employment Period. (c) During the Employment Period and for one year following termination of this Agreement pursuant to Sections 6(a) or 6(c), the Executive will not, without the prior written consent of the Company, compete, directly or indirectly, with the Company, its subsidiaries and affiliates or participate as a director, officer, employee, agent, representative, stockholder or partner, or have any direct or indirect financial interest, in any business which directly or indirectly competes with the Company, its subsidiaries and affiliates; provided, however, that this paragraph (c) shall not restrict the Executive from holding up to 5% of the publicly traded securities of any entity. (d) During the Employment Period and for one year following termination of this Agreement pursuant to Sections 6(a) or 6(c), the Executive shall not either for his or her own account or for any person, firm or company (i) solicit any customers of the Company, its subsidiaries and affiliates or (ii) solicit or endeavor to cause any employee of the Company, its subsidiaries and affiliates to leave his employment or induce or attempt to induce any such employee to breach any employment agreement with the Company, its subsidiaries and affiliates, or otherwise interfere with the employment of any employee by the Company, its subsidiaries and affiliates. (e) Without limiting any other provision of this Agreement, the Executive hereby agrees to be bound by and to comply with any obligations known to the Executive and imposed on the Company, its subsidiaries and affiliates, by law, rule, regulation, ordinance, order, decree, instrument, agreement, understanding or other restriction of any kind. (f) The Executive hereby agrees to provide reasonable cooperation to the Company, its subsidiaries and affiliates during the Employment Period and thereafter in any litigation between the Company, its subsidiaries and affiliates, and third parties. (g) The parties agree that the Company shall, in addition to other remedies provided by law, have the right and remedy to have the provisions of this Section 5 specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any breach or threatened breach of the provisions of this Section 5 will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from the Executive. (i) Although the restrictions contained in Sections 5(a), (b), (c) and (d) above are considered by the parties hereto to be fair and reasonable in the circumstances, it is recognized that restrictions of such nature may fail for technical reasons, and accordingly it is hereby agreed that if any of such restrictions shall be adjudged to be void or unenforceable for whatever reason, but would be valid if part of the wording thereof were deleted, or the period thereof reduced or the area dealt with thereby reduced in scope, the restrictions contained in Sections 5(a), (b), (c) and (d) shall be enforced to the maximum extent permitted by law, and -4- 5 the parties consent and agree that such scope or wording may be accordingly judicially modified in any proceeding brought to enforce such restrictions. (ii) Notwithstanding that the Executive's employment hereunder may expire or be terminated as provided in Section 1 or Section 6 hereof, this Agreement shall continue in full force and effect insofar as is necessary to enforce the covenants and agreements of the Executive contained in this Section 5. 6. Termination of Employment Period and Severance. (a) Termination by the Company without Cause. If for any reason other than the provisions of Section 6(d) hereof, the Company wishes to terminate the Employment Period and the Executive's employment hereunder or fails to extend the Employment Period for additional one year periods as provided in Section 1, the Company shall give a written notice to the Executive of such termination upon termination and shall pay to Executive an amount equal to 150% of the Base Salary then in effect. Upon receipt of such notice by the Executive or upon expiration of the employment period that is not extended, the Employment Period shall terminate (and the Executive shall have no further duties under Section 2 hereof). The Executive agrees that the payment described in this Section 6(a) shall be full and adequate compensation to the Executive for all damages the Executive may suffer as a result of the termination of his employment pursuant to this Section 6(a), and hereby waives and releases the Company from any and all obligations or liabilities to the Executive arising from or in connection with the Executive's employment with the Company or the termination and claims the Executive may have under federal, state or local statutes, regulations or ordinances or under any common law principles or breach of contract or the covenant of good faith and fair dealing, defamation, wrongful discharge, intentional infliction of emotional distress or promissory estoppel; provided, however, that any rights and benefits the Executive may have under the employee benefit plans and programs of the Company in which the Executive is a participant, shall be determined in accordance with the terms and provisions of such plans and programs. (b) Death. If the Executive dies during the Employment Period, the Employment Period shall automatically terminate and the obligations of the parties shall terminate effective the date of death. (c) Disability. If the Executive becomes Disabled (as hereinafter defined) during the Employment Period, the Company shall be entitled to terminate his or her employment and the Employment Period upon written notice to the Executive from the Company. In the event of such termination, the Executive shall be released from any duties hereunder and the Company shall pay to Executive an amount equal to 150% of the Base Salary then in effect. For purposes of this Agreement, "Disabled" shall mean mental or physical impairment or incapacity rendering the Executive substantially unable to perform his duties under this Agreement for a period of longer than 90 days out of any 360-day period during the Employment Period. A determination of whether the Executive is Disabled -5- 6 shall be made by the Company in its sole discretion upon its own initiative or upon request of the Executive or a person acting on his behalf. (d) Termination by the Company for Cause. The Company by written notice to the Executive, shall have the right to terminate the Employment Period in the event of any of the following (which shall constitute "Cause"): (i) The Executive's breach in respect of his duties under this Agreement, such breach continuing unremedied for 10 days after written notice thereof from the Company to the Executive specifying the acts constituting the breach and requesting that they be remedied; (ii) Any misconduct, dishonesty, breach of fiduciary duty, insubordination or other act by the Executive which other act is materially detrimental to the assets, business or goodwill of the Company, or materially damaging to the Company's, its subsidiaries' and/or affiliates' relationships with their customers or employees, including, without limitation, the Executive having been indicted for or convicted of (including entry of a no contest plea) in respect of a felony or of any crime involving moral turpitude or fraud during the Employment Period, provided such indictment or conviction has resulted or is likely to result in substantial detriment to the Company, its subsidiaries and/or affiliates; (iii) misappropriation (or attempted misappropriation) of any of the Company's funds or property or of a business opportunity of the Company, including attempting to secure or securing any personal profit in connection with any transaction entered into on behalf of the Company; (iv) Executive's gross negligence in connection with the performance of Executive's obligations hereunder; or (v) Executive's excessive alcohol abuse or abuse of any controlled substance. Any termination under this Section 6(d) shall be without damages or liability to the Company for compensation and other benefits which would have accrued to the Executive hereunder after termination, but all compensation, benefits and reimbursements accrued through the date of termination shall be paid to the Executive at the times normally paid by the Company. In this event, there shall be no severance period. -6- 7 (e) Voluntary Termination by the Executive. In the event of voluntary termination of employment by the Executive, the terms of the last paragraph of Section 6(d) shall apply, except in the event that Executive terminates for Good Reason. Good Reason shall mean voluntary termination by Executive that occurs within ninety days of (i) a relocation of the Company's offices (or the location of the performance of work by the Executive) beyond a fifty mile radius of New York City, (ii) a material diminution of the Executive's position, authority, duties or responsibilities as provided in Section 2, including, without limitation, termination of his position as a Director, Senior Vice President and Chief Financial Officer of the Company or (iii) a reduction in Base Salary in which cases the provisions of Section 6(a) shall apply and Executive will be bound by the provisions of Section 5, including, without limitation, Sections 5(c) and 5(d). (f) Termination Following a Change in Control. (i) Subject to Section 6(f)(ii), should the Executive's employment hereunder be terminated by the Company without Cause (other than for reason of the Executive becoming Disabled) or by Executive for Good Reason within two years of a Change in Control (as defined below), the Company shall pay and the Executive shall receive in cash an amount equal to 300% of (A) Executive's then current Base Salary plus (B) the average of the last three annual bonuses received by Executive, and any options held by Executive to purchase Company securities shall immediately vest, notwithstanding anything to the contrary in any other agreement between Executive and the Company. Upon termination under this paragraph (f), the Executive shall no longer be bound by the provisions of Section 5 of this Agreement. (ii) In the event that any payment received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control or any person affiliated with the Company or such person (together with the payment pursuant to Section 6(f)(i), the "Total Payments")) would not be deductible by the Company (in whole or in part) as a result of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the payment pursuant to Section 6(f)(i) shall be reduced until no portion of the Total Payments are not deductible as a result of Section 280G of the Code, or the payment pursuant to Section 6(f)(i) is reduced to zero. For purposes of this limitation (A) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date of payment of the payment pursuant to Section 6(f)(i) shall be taken into account, (B) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel selected by the Company's independent auditors and acceptable to the Executive, does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, and (C) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined or benefit included in the Total Payments shall be determined by the Company's independent auditors servicing the Company immediately prior to the time of a Change in Control in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. (iii) For purposes of this Section 6(f) the following definitions shall apply: -7- 8 "Change in Control" shall mean a change in control with respect to the Company that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without limitation, such a Change in Control shall be deemed to have occurred at such time as any Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of 35% or more of the outstanding securities of the Company ordinarily having the right to vote at an election of directors. A change in control shall be deemed to have occurred if individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Board of Directors of the Company (the "Board"). Notwithstanding anything aforesaid to the contrary, a Change in Control shall not be deemed to have occurred if prior to the time the Change in Control would have otherwise occurred, the Board shall have approved the event or transaction that would otherwise result in a Change in Control for purposes of this Agreement. "Incumbent Board" shall mean those individuals who constitute the Board on the date hereof, or any successor or additional individual who becomes a member of the Board and whose election, or nomination for election, by the members of the Board was approved by a vote of at least two-thirds of the members of the Board comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such individual was named as nominee for member of the Board without objection to such nomination). "Person" shall mean and include any individual, corporation, partnership, group, association or other "person", as such term is used in Section 14(d) of the Exchange Act, other than the Company or any subsidiary or any employee benefit plan sponsored by the Company or any subsidiary. 7. Conflicting Agreements. The Executive hereby represents and warrants to the Company that his entering into this Agreement, and the obligations and duties undertaken by him hereunder, will not conflict with, constitute a breach of, or otherwise violate the terms of any other employment of other agreement to which he is a party. 8. Assignment. (a) By the Executive. This Agreement, any part thereof and any rights (including compensation) or obligation hereunder shall not be assigned, pledged, alienated, sold, attached, charged, encumbered or transferred in any way by the Executive and any attempt to do so shall be void except that (i) the Executive may designate any of his beneficiaries to receive (and such beneficiaries shall receive) any compensation, payments or other benefits payable hereunder upon his death, (ii) any assignment by will or by laws of descent and distribution or following the occurrence of the Executive's legal incompetence is permitted and (iii) the Executive's executors, administrators or other legal representatives may assign any rights hereunder to the person or persons entitled thereto. -8- 9 (b) By the Company. Provided the substance of the Executive's duties set forth in Section 2 shall not change, and provided that the Executive's compensation as set forth in Section 3 shall not be adversely affected, the Company may assign or otherwise transfer this Agreement to any succeeding entity without limitation, which entity shall assume all rights and obligations hereunder. 9. Notices. All notices, requests, demands and other communications hereunder must be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first class, registered mail, return receipt requested, or sent by overnight mail, such as Federal Express, postage and registry fees prepaid, to the applicable party and addressed as follows: If to the Company: Board of Directors Marine Transport Corporation 1200 Harbor Boulevard Weehawken, NJ 07087 With a copy (which will constitute notice to the Company) to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Louis J. Bevilacqua, Esq. If to Executive: Mark L. Filanowski Marine Transport Corporation 1200 Harbor Boulevard Weehawken, NJ 07087 Addresses may be changed by notice in writing signed by the addressee. 10. Miscellaneous. (a) If any provision or portion of this Agreement shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid or unenforceable, such judgment shall not affect, impair or invalidate the remainder of this Agreement but shall be confined in its operation to the jurisdiction in which made and to the provisions of this Agreement directly involved in the controversy in which such judgment shall have been rendered. (b) No course of dealing and no delay on the part of any party hereto in exercising any right, power or remedy under or relating to this Agreement shall operate as a -9- 10 waiver thereof or otherwise prejudice such party's rights, powers and remedies. No single or partial exercise of any rights, powers or remedies under or relating to this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. (c) This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument, and all signatures need not appear on any one counterpart. (d) (i) Any other agreement, rule or regulation to the contrary, notwithstanding, the parties hereby agree that any action or proceeding relating to this Agreement or its subject matter shall be brought in a state or federal court situated in the County of New York, State of New York and such court shall have exclusive jurisdiction thereof; provided, however, any court with jurisdiction over the parties may, at the election of Company, have jurisdiction over any action brought with regard to or any action brought to enforce any violation or claimed violation of Section 5. The parties each hereby specifically submit to the jurisdiction of such court and further agree that service of process may be made within or without the State of New York by giving notice in the manner provided in Section 9. Each party further agrees to waive and hereby waives any right to a trial by jury, and to any objection it or he may have in any such action, based on lack of personal jurisdiction or venue, or inconvenient forum. (ii) In any such action or proceeding, the prevailing party shall be entitled to recover from the other party reasonable costs, including attorneys' fees and expenses. In any action or proceeding before a court or other tribunal relating to this Agreement with respect to which damages are an adequate remedy, the parties agree that no damages other than compensatory damages shall be sought or claimed by either party and each party waives any claim, right or entitlement to punitive, exemplary or consequential damages, or any statutory damages, or any other damages of any kind or nature in excess of compensatory damages, and any court or arbitration tribunal is specifically divested of any power to award any damages in the nature of punitive, exemplary, or consequential damages, or any statutory damages, or any other damages of any kind or nature in excess of compensatory damages. (e) All payments required to be made by the Company hereunder to the Executive or his beneficiaries, including his estate, shall be subject to withholding and deductions as the Company may reasonably determine it should withhold or deduct pursuant to any applicable law or regulation. In lieu of withholding or deducting such amounts in whole or in part, the Company may, in its sole discretion, accept other provision for payment as permitted by law, provided it is satisfied in its sole discretion that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. (f) This Agreement embodies the entire understanding, and supersedes all other oral or written agreements or understandings, between the parties regarding the subject matter hereof. No change, alteration or modification hereof may be made except in writing -10- 11 signed by both parties hereto. The headings in this Agreement are for convenience of reference only and shall not be considered part of this Agreement or limit or otherwise affect the meaning hereof. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of New York (disregarding any choice of law rules which might look to the laws of any other jurisdiction). (g) The Executive acknowledges that the terms of this Agreement have been fully explained to him, that the Executive understands the nature and extent of the rights and obligations provided under this Agreement, and that the Executive has been given the opportunity to be represented by legal counsel in the negotiation and preparation of this Agreement. (h) Nothing herein contained shall be construed to prevent or limit any acquisition, consolidation or merger of the Company. [SIGNATURE PAGE FOLLOWS] -11- 12 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. MARINE TRANSPORT CORPORATION By: ------------------------------------- Name: Title: ------------------------------------- Mark L. Filanowski -12- EX-10.5 7 EMPLOYMENT AGREEMENT 1 Exhibit 10.5 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of June 18, 1998, is by and between Marine Transport Corporation, a Delaware corporation (the "Company") and Peter N. Popov ("Executive"). W I T N E S S E T H WHEREAS, the Company desires to employ the Executive; and WHEREAS, the Executive is willing to be employed by the Company, as Vice President, Secretary and General Counsel of the Company, for the period and upon the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the mutual covenants and conditions contained herein, the Company and the Executive hereby agree as follows: 1. Employment. The Company shall employ the Executive, and the Executive accepts employment by the Company, as Vice President, Secretary and General Counsel of the Company upon the terms and conditions herein, for the period commencing as of June 17, 1998, and ending on June 16, 1999, subject to termination as hereinafter provided (the period from June 17, 1998 through June 16, 1999, as such period may be extended as described in this paragraph, being herein referred to as the "Employment Period"). The initial term of employment shall be automatically extended for an additional period of one year unless 90 days written notice of termination is given by either party, and for additional periods of one year thereafter unless 90 days written notice of termination is given by either party. 2. Duties. (a) Throughout the Employment Period, the Executive shall be Vice President, Secretary and General Counsel of the Company and shall report to the Chief Executive Officer (the "CEO") of the Company, or other senior officer of the Company as the CEO may direct. The Executive shall at all times comply with Company policies and guidelines as in effect from time to time and with the lawful and responsible instructions of the CEO. (b) During the Employment Period, the Executive shall devote his full-time working hours to his duties hereunder, except during vacation time, any periods of illness and authorized leaves of absence. The Executive shall have such responsibilities and authorities consistent with the status, title and reporting requirements set forth herein as are appropriate to said position, subject to change (other than diminution in position, authority, duties or responsibilities) from time to time by the CEO. (c) Throughout the Employment Period, the Executive shall faithfully and diligently perform his duties under this Agreement and shall use his best efforts to promote the interests of the Company. 2 3. Compensation. During the Employment Period, as full compensation to the Executive for his performance of the services hereunder and for his acceptance of the responsibilities described herein, the Company agrees to pay the Executive, and the Executive agrees to accept, the following salary and other benefits: (a) Salary The Company shall pay the Executive a salary (the "Base Salary") at the annual rate of $175,000. The Compensation Committee of the Board of Directors of the Company (the "Compensation Committee") shall review such Base Salary on an annual basis and may increase it, from time to time, in its sole discretion. The Base Salary due the Executive hereunder shall be payable in equal monthly installments less any amounts required to be withheld by the Company from such Base Salary pursuant to the benefit plans of Section 3(d) and applicable laws and regulations described under Section 10(e). (b) Bonus The Executive shall be eligible to receive bonuses (each a "Bonus") at the discretion of, and in the amounts and at the times determined by, the Compensation Committee. (c) Long Term Incentives The Executive shall be entitled to receive grants of restricted stock, stock options and other stock awards and/or other stock and cash awards granted pursuant to any other long term incentive plans implemented by the Company for the benefit of senior executives of the Company at the discretion of, and in the amounts and at the times determined by, the Compensation Committee. (d) Other Benefit Plans Subject to all eligibility requirements, and to the extent permitted by law, the Executive shall be entitled to participate in any and all employee benefit plans (including, but not limited to, retirement, life insurance, medical, dental, disability, and savings plans) established or maintained by the Company from time to time for the benefit of its employees (or its executives) in general. (e) Further Benefits The Executive shall be entitled to a minimum of four weeks per annum paid vacation. (f) Deferred Compensation Notwithstanding any other provision of the Agreement, the Executive shall have the right to request any lawful means (including, without limitation, any deferred compensation arrangement requested by the Executive) by which he wishes to receive any portion of his Base -2- 3 Salary, Bonus, or other payments, and the Company shall reasonably cooperate with the Executive to grant such request, provided that the granting of such request does not represent inequitable treatment as concerns other senior employees or executives (in the Company's sole judgment), and does not impose additional costs on the Company other than insignificant administrative costs. 4. Reasonable Expenses. The Company will reimburse the Executive for all reasonable business expenses, including travel and lodging, which are properly incurred by him in the performance of his duties hereunder, upon presentation of proper vouchers therefor and in accordance with written policies established from time to time by the Company for such reimbursements. 5. Executive Covenants. The Executive acknowledges that as a result of the services to be rendered to the Company hereunder, the Executive will be brought into close contact with many confidential affairs of the Company, its subsidiaries and affiliates, not readily available to the public. The Executive further acknowledges that the services to be performed under this Agreement are of a special, unique, unusual, extraordinary and intellectual character; that the business of the Company is international in scope; that its services are marketed throughout the world; and that the Company competes with other organizations that are or could be located in nearly any part of the United States or elsewhere. In recognition of the foregoing: (a) Except with the consent of or as directed by the Company, or except if compelled by judicial or legal authorities, the Executive will keep confidential and not divulge to any other person, during the Employment Period or thereafter, any Confidential Information and Trade Secrets regarding the Company, its subsidiaries and affiliates, except for information which is or becomes publicly available other than as a result of disclosure by the Executive. For the purposes of this Agreement "Confidential Information and Trade Secrets" means information which is confidential and secret to the Company, its subsidiaries and affiliates. It may include, but is not limited to, information relating to new and future concepts and business of the Company, its subsidiaries and affiliates, in the form of memoranda, reports, computer software and data banks, customer lists, employee lists, books, records, financial statements, manuals, papers, contracts and strategic plans. As a guide, the Executive is to consider information originated, owned, controlled or possessed by the Company, its subsidiaries or affiliates which is not disclosed in printed publications stated to be available for distribution outside the Company, its subsidiaries and affiliates as being secret and confidential. In instances where doubt does or should reasonably be understood to exist in the Executive's mind as to whether information is secret and confidential to the Company, its subsidiaries and affiliates, the Executive agrees to request an opinion, in writing, from the Company. (b) All papers, books and records of every kind and description relating to the business and affairs of the Company, its subsidiaries and affiliates, whether or not prepared by the Executive, and all property owned by the Company, its subsidiaries and affiliates shall -3- 4 be the sole and exclusive property of the Company, and the Executive shall surrender them to the Company, at any time upon request, during or after the Employment Period. (c) During the Employment Period and for one year following termination of this Agreement pursuant to Sections 6(a) or 6(c), the Executive will not, without the prior written consent of the Company, compete, directly or indirectly, with the Company, its subsidiaries and affiliates or participate as a director, officer, employee, agent, representative, stockholder or partner, or have any direct or indirect financial interest, in any business which directly or indirectly competes with the Company, its subsidiaries and affiliates; provided, however, that this paragraph (c) shall not restrict the Executive from holding up to 5% of the publicly traded securities of any entity. (d) During the Employment Period and for one year following termination of this Agreement pursuant to Sections 6(a) or 6(c), the Executive shall not either for his or her own account or for any person, firm or company (i) solicit any customers of the Company, its subsidiaries and affiliates or (ii) solicit or endeavor to cause any employee of the Company, its subsidiaries and affiliates to leave his employment or induce or attempt to induce any such employee to breach any employment agreement with the Company, its subsidiaries and affiliates, or otherwise interfere with the employment of any employee by the Company, its subsidiaries and affiliates. (e) Without limiting any other provision of this Agreement, the Executive hereby agrees to be bound by and to comply with any obligations known to the Executive and imposed on the Company, its subsidiaries and affiliates, by law, rule, regulation, ordinance, order, decree, instrument, agreement, understanding or other restriction of any kind. (f) The Executive hereby agrees to provide reasonable cooperation to the Company, its subsidiaries and affiliates during the Employment Period and thereafter in any litigation between the Company, its subsidiaries and affiliates, and third parties. (g) The parties agree that the Company shall, in addition to other remedies provided by law, have the right and remedy to have the provisions of this Section 5 specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any breach or threatened breach of the provisions of this Section 5 will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from the Executive. (i) Although the restrictions contained in Sections 5(a), (b), (c) and (d) above are considered by the parties hereto to be fair and reasonable in the circumstances, it is recognized that restrictions of such nature may fail for technical reasons, and accordingly it is hereby agreed that if any of such restrictions shall be adjudged to be void or unenforceable for whatever reason, but would be valid if part of the wording thereof were deleted, or the period thereof reduced or the area dealt with thereby reduced in scope, the restrictions contained in Sections 5(a), (b), (c) and (d) shall be enforced to the maximum extent permitted by law, and -4- 5 the parties consent and agree that such scope or wording may be accordingly judicially modified in any proceeding brought to enforce such restrictions. (ii) Notwithstanding that the Executive's employment hereunder may expire or be terminated as provided in Section 1 or Section 6 hereof, this Agreement shall continue in full force and effect insofar as is necessary to enforce the covenants and agreements of the Executive contained in this Section 5. 6. Termination of Employment Period and Severance. (a) Termination by the Company without Cause. If for any reason other than the provisions of Section 6(d) hereof, the Company wishes to terminate the Employment Period and the Executive's employment hereunder or fails to extend the Employment Period for additional one year periods as provided in Section 1, the Company shall give a written notice to the Executive of such termination upon termination and shall pay to Executive an amount equal to the Base Salary then in effect. Upon receipt of such notice by the Executive or upon expiration of the employment period that is not extended, the Employment Period shall terminate (and the Executive shall have no further duties under Section 2 hereof). The Executive agrees that the payment described in this Section 6(a) shall be full and adequate compensation to the Executive for all damages the Executive may suffer as a result of the termination of his employment pursuant to this Section 6(a), and hereby waives and releases the Company from any and all obligations or liabilities to the Executive arising from or in connection with the Executive's employment with the Company or the termination and claims the Executive may have under federal, state or local statutes, regulations or ordinances or under any common law principles or breach of contract or the covenant of good faith and fair dealing, defamation, wrongful discharge, intentional infliction of emotional distress or promissory estoppel; provided, however, that any rights and benefits the Executive may have under the employee benefit plans and programs of the Company in which the Executive is a participant, shall be determined in accordance with the terms and provisions of such plans and programs. (b) Death. If the Executive dies during the Employment Period, the Employment Period shall automatically terminate and the obligations of the parties shall terminate effective the date of death. (c) Disability. If the Executive becomes Disabled (as hereinafter defined) during the Employment Period, the Company shall be entitled to terminate his or her employment and the Employment Period upon written notice to the Executive from the Company. In the event of such termination, the Executive shall be released from any duties hereunder and the Company shall pay to Executive an amount equal to the Base Salary then in effect. For purposes of this Agreement, "Disabled" shall mean mental or physical impairment or incapacity rendering the Executive substantially unable to perform his duties under this Agreement for a period of longer than 90 days out of any 360-day period during the Employment Period. A determination of whether the Executive is Disabled shall be made by -5- 6 the Company in its sole discretion upon its own initiative or upon request of the Executive or a person acting on his behalf. (d) Termination by the Company for Cause. The Company by written notice to the Executive, shall have the right to terminate the Employment Period in the event of any of the following (which shall constitute "Cause"): (i) The Executive's breach in respect of his duties under this Agreement, such breach continuing unremedied for 10 days after written notice thereof from the Company to the Executive specifying the acts constituting the breach and requesting that they be remedied; (ii) Any misconduct, dishonesty, breach of fiduciary duty, insubordination or other act by the Executive which other act is materially detrimental to the assets, business or goodwill of the Company, or materially damaging to the Company's, its subsidiaries' and/or affiliates' relationships with their customers or employees, including, without limitation, the Executive having been indicted for or convicted of (including entry of a no contest plea) in respect of a felony or of any crime involving moral turpitude or fraud during the Employment Period, provided such indictment or conviction has resulted or is likely to result in substantial detriment to the Company, its subsidiaries and/or affiliates; (iii) misappropriation (or attempted misappropriation) of any of the Company's funds or property or of a business opportunity of the Company, including attempting to secure or securing any personal profit in connection with any transaction entered into on behalf of the Company; (iv) Executive's gross negligence in connection with the performance of Executive's obligations hereunder; or (v) Executive's excessive alcohol abuse or abuse of any controlled substance. Any termination under this Section 6(d) shall be without damages or liability to the Company for compensation and other benefits which would have accrued to the Executive hereunder after termination, but all compensation, benefits and reimbursements accrued through the date of termination shall be paid to the Executive at the times normally paid by the Company. In this event, there shall be no severance period. -6- 7 (e) Voluntary Termination by the Executive. In the event of voluntary termination of employment by the Executive, the terms of the last paragraph of Section 6(d) shall apply, except in the event that Executive terminates for Good Reason. Good Reason shall mean voluntary termination by Executive that occurs within ninety days of (i) a relocation of the Company's offices (or the location of the performance of work by the Executive) beyond a fifty mile radius of New York City, (ii) a material diminution of the Executive's position, authority, duties or responsibilities as provided in Section 2, including, without limitation, termination of his position as Vice President, Secretary and General Counsel of the Company or (iii) a reduction in Base Salary. If Executive terminates for Good Reason, the provisions of Section 6(a) shall apply and Executive will be bound by the provisions of Section 5, including, without limitation, Sections 5(c) and 5(d). (f) Termination Following a Change in Control. (i) Subject to Section 6(f)(ii), should the Executive's employment hereunder be terminated by the Company without Cause (other than for reason of the Executive becoming Disabled) or by Executive for Good Reason within two years of a Change in Control (as defined below), the Company shall pay and the Executive shall receive in cash an amount equal to 300% of (A) Executive's then current Base Salary plus (B) the average of the last three annual bonuses received by Executive, and any options held by Executive to purchase Company securities shall immediately vest, notwithstanding anything to the contrary in any other agreement between Executive and the Company. Upon termination under this paragraph (f), the Executive shall no longer be bound by the provisions of Section 5 of this Agreement. (ii) In the event that any payment received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control or any person affiliated with the Company or such person (together with the payment pursuant to Section 6(f)(i), the "Total Payments")) would not be deductible by the Company (in whole or in part) as a result of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the payment pursuant to Section 6(f)(i) shall be reduced until no portion of the Total Payments are not deductible as a result of Section 280G of the Code, or the payment pursuant to Section 6(f)(i) is reduced to zero. For purposes of this limitation (A) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date of payment of the payment pursuant to Section 6(f)(i) shall be taken into account, (B) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel selected by the Company's independent auditors and acceptable to the Executive, does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, and (C) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined or benefit included in the Total Payments shall be determined by the Company's independent auditors servicing the Company immediately prior to the time of a Change in Control in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. (iii) For purposes of this Section 6(f) the following definitions shall apply: -7- 8 "Change in Control" shall mean a change in control with respect to the Company that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without limitation, such a Change in Control shall be deemed to have occurred at such time as any Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of 35% or more of the outstanding securities of the Company ordinarily having the right to vote at an election of directors. A change in control shall be deemed to have occurred if individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Board of Directors of the Company (the "Board"). Notwithstanding anything aforesaid to the contrary, a Change in Control shall not be deemed to have occurred if prior to the time the Change in Control would have otherwise occurred, the Board shall have approved the event or transaction that would otherwise result in a Change in Control for purposes of this Agreement. "Incumbent Board" shall mean those individuals who constitute the Board on the date hereof, or any successor or additional individual who becomes a member of the Board and whose election, or nomination for election, by the members of the Board was approved by a vote of at least two-thirds of the members of the Board comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such individual was named as nominee for member of the Board without objection to such nomination). "Person" shall mean and include any individual, corporation, partnership, group, association or other "person", as such term is used in Section 14(d) of the Exchange Act, other than the Company or any subsidiary or any employee benefit plan sponsored by the Company or any subsidiary. 7. Conflicting Agreements. The Executive hereby represents and warrants to the Company that his entering into this Agreement, and the obligations and duties undertaken by him hereunder, will not conflict with, constitute a breach of, or otherwise violate the terms of any other employment of other agreement to which he is a party. 8. Assignment. (a) By the Executive. This Agreement, any part thereof and any rights (including compensation) or obligation hereunder shall not be assigned, pledged, alienated, sold, attached, charged, encumbered or transferred in any way by the Executive and any attempt to do so shall be void except that (i) the Executive may designate any of his beneficiaries to receive (and such beneficiaries shall receive) any compensation, payments or other benefits payable hereunder upon his death, (ii) any assignment by will or by laws of descent and distribution or following the occurrence of the Executive's legal incompetence is permitted and (iii) the Executive's executors, administrators or other legal representatives may assign any rights hereunder to the person or persons entitled thereto. -8- 9 (b) By the Company. Provided the substance of the Executive's duties set forth in Section 2 shall not change, and provided that the Executive's compensation as set forth in Section 3 shall not be adversely affected, the Company may assign or otherwise transfer this Agreement to any succeeding entity without limitation, which entity shall assume all rights and obligations hereunder. 9. Notices. All notices, requests, demands and other communications hereunder must be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first class, registered mail, return receipt requested, or sent by overnight mail, such as Federal Express, postage and registry fees prepaid, to the applicable party and addressed as follows: If to the Company: Board of Directors Marine Transport Corporation 1200 Harbor Boulevard Weehawken, NJ 07087 With a copy (which will constitute notice to the Company) to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Louis J. Bevilacqua, Esq. If to Executive: Peter N. Popov Marine Transport Corporation 1200 Harbor Boulevard Weehawken, NJ 07087 Addresses may be changed by notice in writing signed by the addressee. 10. Miscellaneous. (a) If any provision or portion of this Agreement shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid or unenforceable, such judgment shall not affect, impair or invalidate the remainder of this Agreement but shall be confined in its operation to the jurisdiction in which made and to the provisions of this Agreement directly involved in the controversy in which such judgment shall have been rendered. (b) No course of dealing and no delay on the part of any party hereto in exercising any right, power or remedy under or relating to this Agreement shall operate as a -9- 10 waiver thereof or otherwise prejudice such party's rights, powers and remedies. No single or partial exercise of any rights, powers or remedies under or relating to this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. (c) This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument, and all signatures need not appear on any one counterpart. (d) (i) Any other agreement, rule or regulation to the contrary, notwithstanding, the parties hereby agree that any action or proceeding relating to this Agreement or its subject matter shall be brought in a state or federal court situated in the County of New York, State of New York and such court shall have exclusive jurisdiction thereof; provided, however, any court with jurisdiction over the parties may, at the election of Company, have jurisdiction over any action brought with regard to or any action brought to enforce any violation or claimed violation of Section 5. The parties each hereby specifically submit to the jurisdiction of such court and further agree that service of process may be made within or without the State of New York by giving notice in the manner provided in Section 9. Each party further agrees to waive and hereby waives any right to a trial by jury, and to any objection it or he may have in any such action, based on lack of personal jurisdiction or venue, or inconvenient forum. (ii) In any such action or proceeding, the prevailing party shall be entitled to recover from the other party reasonable costs, including attorneys' fees and expenses. In any action or proceeding before a court or other tribunal relating to this Agreement with respect to which damages are an adequate remedy, the parties agree that no damages other than compensatory damages shall be sought or claimed by either party and each party waives any claim, right or entitlement to punitive, exemplary or consequential damages, or any statutory damages, or any other damages of any kind or nature in excess of compensatory damages, and any court or arbitration tribunal is specifically divested of any power to award any damages in the nature of punitive, exemplary, or consequential damages, or any statutory damages, or any other damages of any kind or nature in excess of compensatory damages. (e) All payments required to be made by the Company hereunder to the Executive or his beneficiaries, including his estate, shall be subject to withholding and deductions as the Company may reasonably determine it should withhold or deduct pursuant to any applicable law or regulation. In lieu of withholding or deducting such amounts in whole or in part, the Company may, in its sole discretion, accept other provision for payment as permitted by law, provided it is satisfied in its sole discretion that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. (f) This Agreement embodies the entire understanding, and supersedes all other oral or written agreements or understandings, between the parties regarding the subject matter hereof. No change, alteration or modification hereof may be made except in writing -10- 11 signed by both parties hereto. The headings in this Agreement are for convenience of reference only and shall not be considered part of this Agreement or limit or otherwise affect the meaning hereof. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of New York (disregarding any choice of law rules which might look to the laws of any other jurisdiction). (g) The Executive acknowledges that the terms of this Agreement have been fully explained to him, that the Executive understands the nature and extent of the rights and obligations provided under this Agreement, and that the Executive has been given the opportunity to be represented by legal counsel in the negotiation and preparation of this Agreement. (h) Nothing herein contained shall be construed to prevent or limit any acquisition, consolidation or merger of the Company. [SIGNATURE PAGE FOLLOWS] -11- 12 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. MARINE TRANSPORT CORPORATION By: ------------------------------------- Name: Title: ------------------------------------- Peter N. Popov -12- EX-10.6 8 EMPLOYMENT AGREEMENT 1 Exhibit 10.6 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of June 18, 1998, is by and between Marine Transport Corporation, a Delaware corporation (the "Company") and Jeffrey M. Miller ("Executive"). W I T N E S S E T H WHEREAS, the Company desires to employ the Executive; and WHEREAS, the Executive is willing to be employed by the Company, as Vice President, Marketing of the Company, for the period and upon the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the mutual covenants and conditions contained herein, the Company and the Executive hereby agree as follows: 1. Employment. The Company shall employ the Executive, and the Executive accepts employment by the Company, as Vice President, Marketing of the Company upon the terms and conditions herein, for the period commencing as of June 17, 1998, and ending on June 16, 1999, subject to termination as hereinafter provided (the period from June 17, 1998 through June 16, 1999, as such period may be extended as described in this paragraph, being herein referred to as the "Employment Period"). The initial term of employment shall be automatically extended for an additional period of one year unless 90 days written notice of termination is given by either party, and for additional periods of one year thereafter unless 90 days written notice of termination is given by either party. 2. Duties. (a) Throughout the Employment Period, the Executive shall be Vice President, Marketing of the Company and shall report to the Chief Executive Officer (the "CEO") of the Company, or other senior officer of the Company as the CEO may direct. The Executive shall at all times comply with Company policies and guidelines as in effect from time to time and with the lawful and responsible instructions of the CEO. (b) During the Employment Period, the Executive shall devote his full-time working hours to his duties hereunder, except during vacation time, any periods of illness and authorized leaves of absence. The Executive shall have such responsibilities and authorities consistent with the status, title and reporting requirements set forth herein as are appropriate to said position, subject to change (other than diminution in position, authority, duties or responsibilities) from time to time by the CEO. (c) Throughout the Employment Period, the Executive shall faithfully and diligently perform his duties under this Agreement and shall use his best efforts to promote the interests of the Company. 2 3. Compensation. During the Employment Period, as full compensation to the Executive for his performance of the services hereunder and for his acceptance of the responsibilities described herein, the Company agrees to pay the Executive, and the Executive agrees to accept, the following salary and other benefits: (a) Salary The Company shall pay the Executive a salary (the "Base Salary") at the annual rate of $135,000. The Compensation Committee of the Board of Directors of the Company (the "Compensation Committee") shall review such Base Salary on an annual basis and may increase it, from time to time, in its sole discretion. The Base Salary due the Executive hereunder shall be payable in equal monthly installments less any amounts required to be withheld by the Company from such Base Salary pursuant to the benefit plans of Section 3(d) and applicable laws and regulations described under Section 10(e). (b) Bonus The Executive shall be eligible to receive bonuses (each a "Bonus") at the discretion of, and in the amounts and at the times determined by, the Compensation Committee. (c) Long Term Incentives The Executive shall be entitled to receive grants of restricted stock, stock options and other stock awards and/or other stock and cash awards granted pursuant to any other long term incentive plans implemented by the Company for the benefit of senior executives of the Company at the discretion of, and in the amounts and at the times determined by, the Compensation Committee. (d) Other Benefit Plans Subject to all eligibility requirements, and to the extent permitted by law, the Executive shall be entitled to participate in any and all employee benefit plans (including, but not limited to, retirement, life insurance, medical, dental, disability, and savings plans) established or maintained by the Company from time to time for the benefit of its employees (or its executives) in general. (e) Further Benefits The Executive shall be entitled to a minimum of four weeks per annum paid vacation. (f) Deferred Compensation Notwithstanding any other provision of the Agreement, the Executive shall have the right to request any lawful means (including, without limitation, any deferred compensation arrangement requested by the Executive) by which he wishes to receive any portion of his Base -2- 3 Salary, Bonus, or other payments, and the Company shall reasonably cooperate with the Executive to grant such request, provided that the granting of such request does not represent inequitable treatment as concerns other senior employees or executives (in the Company's sole judgment), and does not impose additional costs on the Company other than insignificant administrative costs. 4. Reasonable Expenses. The Company will reimburse the Executive for all reasonable business expenses, including travel and lodging, which are properly incurred by him in the performance of his duties hereunder, upon presentation of proper vouchers therefor and in accordance with written policies established from time to time by the Company for such reimbursements. 5. Executive Covenants. The Executive acknowledges that as a result of the services to be rendered to the Company hereunder, the Executive will be brought into close contact with many confidential affairs of the Company, its subsidiaries and affiliates, not readily available to the public. The Executive further acknowledges that the services to be performed under this Agreement are of a special, unique, unusual, extraordinary and intellectual character; that the business of the Company is international in scope; that its services are marketed throughout the world; and that the Company competes with other organizations that are or could be located in nearly any part of the United States or elsewhere. In recognition of the foregoing: (a) Except with the consent of or as directed by the Company, or except if compelled by judicial or legal authorities, the Executive will keep confidential and not divulge to any other person, during the Employment Period or thereafter, any Confidential Information and Trade Secrets regarding the Company, its subsidiaries and affiliates, except for information which is or becomes publicly available other than as a result of disclosure by the Executive. For the purposes of this Agreement "Confidential Information and Trade Secrets" means information which is confidential and secret to the Company, its subsidiaries and affiliates. It may include, but is not limited to, information relating to new and future concepts and business of the Company, its subsidiaries and affiliates, in the form of memoranda, reports, computer software and data banks, customer lists, employee lists, books, records, financial statements, manuals, papers, contracts and strategic plans. As a guide, the Executive is to consider information originated, owned, controlled or possessed by the Company, its subsidiaries or affiliates which is not disclosed in printed publications stated to be available for distribution outside the Company, its subsidiaries and affiliates as being secret and confidential. In instances where doubt does or should reasonably be understood to exist in the Executive's mind as to whether information is secret and confidential to the Company, its subsidiaries and affiliates, the Executive agrees to request an opinion, in writing, from the Company. (b) All papers, books and records of every kind and description relating to the business and affairs of the Company, its subsidiaries and affiliates, whether or not prepared by the Executive, and all property owned by the Company, its subsidiaries and affiliates shall -3- 4 be the sole and exclusive property of the Company, and the Executive shall surrender them to the Company, at any time upon request, during or after the Employment Period. (c) During the Employment Period and for one year following termination of this Agreement pursuant to Sections 6(a) or 6(c), the Executive will not, without the prior written consent of the Company, compete, directly or indirectly, with the Company, its subsidiaries and affiliates or participate as a director, officer, employee, agent, representative, stockholder or partner, or have any direct or indirect financial interest, in any business which directly or indirectly competes with the Company, its subsidiaries and affiliates; provided, however, that this paragraph (c) shall not restrict the Executive from holding up to 5% of the publicly traded securities of any entity. (d) During the Employment Period and for one year following termination of this Agreement pursuant to Sections 6(a) or 6(c), the Executive shall not either for his or her own account or for any person, firm or company (i) solicit any customers of the Company, its subsidiaries and affiliates or (ii) solicit or endeavor to cause any employee of the Company, its subsidiaries and affiliates to leave his employment or induce or attempt to induce any such employee to breach any employment agreement with the Company, its subsidiaries and affiliates, or otherwise interfere with the employment of any employee by the Company, its subsidiaries and affiliates. (e) Without limiting any other provision of this Agreement, the Executive hereby agrees to be bound by and to comply with any obligations known to the Executive and imposed on the Company, its subsidiaries and affiliates, by law, rule, regulation, ordinance, order, decree, instrument, agreement, understanding or other restriction of any kind. (f) The Executive hereby agrees to provide reasonable cooperation to the Company, its subsidiaries and affiliates during the Employment Period and thereafter in any litigation between the Company, its subsidiaries and affiliates, and third parties. (g) The parties agree that the Company shall, in addition to other remedies provided by law, have the right and remedy to have the provisions of this Section 5 specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any breach or threatened breach of the provisions of this Section 5 will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from the Executive. (i) Although the restrictions contained in Sections 5(a), (b), (c) and (d) above are considered by the parties hereto to be fair and reasonable in the circumstances, it is recognized that restrictions of such nature may fail for technical reasons, and accordingly it is hereby agreed that if any of such restrictions shall be adjudged to be void or unenforceable for whatever reason, but would be valid if part of the wording thereof were deleted, or the period thereof reduced or the area dealt with thereby reduced in scope, the restrictions contained in Sections 5(a), (b), (c) and (d) shall be enforced to the maximum extent permitted by law, and -4- 5 the parties consent and agree that such scope or wording may be accordingly judicially modified in any proceeding brought to enforce such restrictions. (ii) Notwithstanding that the Executive's employment hereunder may expire or be terminated as provided in Section 1 or Section 6 hereof, this Agreement shall continue in full force and effect insofar as is necessary to enforce the covenants and agreements of the Executive contained in this Section 5. 6. Termination of Employment Period and Severance. (a) Termination by the Company without Cause. If for any reason other than the provisions of Section 6(d) hereof, the Company wishes to terminate the Employment Period and the Executive's employment hereunder or fails to extend the Employment Period for additional one year periods as provided in Section 1, the Company shall give a written notice to the Executive of such termination upon termination and shall pay to Executive an amount equal to 50% of the Base Salary then in effect. Upon receipt of such notice by the Executive or upon expiration of the employment period that is not extended, the Employment Period shall terminate (and the Executive shall have no further duties under Section 2 hereof). The Executive agrees that the payment described in this Section 6(a) shall be full and adequate compensation to the Executive for all damages the Executive may suffer as a result of the termination of his employment pursuant to this Section 6(a), and hereby waives and releases the Company from any and all obligations or liabilities to the Executive arising from or in connection with the Executive's employment with the Company or the termination and claims the Executive may have under federal, state or local statutes, regulations or ordinances or under any common law principles or breach of contract or the covenant of good faith and fair dealing, defamation, wrongful discharge, intentional infliction of emotional distress or promissory estoppel; provided, however, that any rights and benefits the Executive may have under the employee benefit plans and programs of the Company in which the Executive is a participant, shall be determined in accordance with the terms and provisions of such plans and programs. (b) Death. If the Executive dies during the Employment Period, the Employment Period shall automatically terminate and the obligations of the parties shall terminate effective the date of death. (c) Disability. If the Executive becomes Disabled (as hereinafter defined) during the Employment Period, the Company shall be entitled to terminate his or her employment and the Employment Period upon written notice to the Executive from the Company. In the event of such termination, the Executive shall be released from any duties hereunder and the Company shall pay to Executive an amount equal to 50% of the Base Salary then in effect. For purposes of this Agreement, "Disabled" shall mean mental or physical impairment or incapacity rendering the Executive substantially unable to perform his duties under this Agreement for a period of longer than 90 days out of any 360-day period during the Employment Period. A determination of whether the Executive is Disabled shall be made by -5- 6 the Company in its sole discretion upon its own initiative or upon request of the Executive or a person acting on his behalf. (d) Termination by the Company for Cause. The Company by written notice to the Executive, shall have the right to terminate the Employment Period in the event of any of the following (which shall constitute "Cause"): (i) The Executive's breach in respect of his duties under this Agreement, such breach continuing unremedied for 10 days after written notice thereof from the Company to the Executive specifying the acts constituting the breach and requesting that they be remedied; (ii) Any misconduct, dishonesty, breach of fiduciary duty, insubordination or other act by the Executive which other act is materially detrimental to the assets, business or goodwill of the Company, or materially damaging to the Company's, its subsidiaries' and/or affiliates' relationships with their customers or employees, including, without limitation, the Executive having been indicted for or convicted of (including entry of a no contest plea) in respect of a felony or of any crime involving moral turpitude or fraud during the Employment Period, provided such indictment or conviction has resulted or is likely to result in substantial detriment to the Company, its subsidiaries and/or affiliates; (iii) misappropriation (or attempted misappropriation) of any of the Company's funds or property or of a business opportunity of the Company, including attempting to secure or securing any personal profit in connection with any transaction entered into on behalf of the Company; (iv) Executive's gross negligence in connection with the performance of Executive's obligations hereunder; or (v) Executive's excessive alcohol abuse or abuse of any controlled substance. Any termination under this Section 6(d) shall be without damages or liability to the Company for compensation and other benefits which would have accrued to the Executive hereunder after termination, but all compensation, benefits and reimbursements accrued through the date of termination shall be paid to the Executive at the times normally paid by the Company. In this event, there shall be no severance period. -6- 7 (e) Voluntary Termination by the Executive. In the event of voluntary termination of employment by the Executive, the terms of the last paragraph of Section 6(d) shall apply, except in the event that Executive terminates for Good Reason. Good Reason shall mean voluntary termination by Executive that occurs within ninety days of (i) a relocation of the Company's offices (or the location of the performance of work by the Executive) beyond a fifty mile radius of New York City, (ii) a material diminution of the Executive's position, authority, duties or responsibilities as provided in Section 2 or (iii) a reduction in Base Salary in which cases the provisions of Section 6(a) shall apply and Executive will be bound by the provisions of Section 5, including, without limitation, Sections 5(c) and 5(d). (f) Termination Following a Change in Control. (i) Subject to Section 6(f)(ii), should the Executive's employment hereunder be terminated by the Company without Cause (other than for reason of the Executive becoming Disabled) or by Executive for Good Reason within two years of a Change in Control (as defined below), the Company shall pay and the Executive shall receive in cash an amount equal to 300 % of (A) Executive's then current Base Salary plus (B) the average of the last three annual bonuses received by Executive, and any options held by Executive to purchase Company securities shall immediately vest, notwithstanding anything to the contrary in any other agreement between Executive and the Company. Upon termination under this paragraph (f), the Executive shall no longer be bound by the provisions of Section 5 of this Agreement. (ii) In the event that any payment received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether payable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control or any person affiliated with the Company or such person (together with the payment pursuant to Section 6(f)(i), the "Total Payments")) would not be deductible by the Company (in whole or in part) as a result of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the payment pursuant to Section 6(f)(i) shall be reduced until no portion of the Total Payments are not deductible as a result of Section 280G of the Code, or the payment pursuant to Section 6(f)(i) is reduced to zero. For purposes of this limitation (A) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date of payment of the payment pursuant to Section 6(f)(i) shall be taken into account, (B) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel selected by the Company's independent auditors and acceptable to the Executive, does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code, and (C) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined or benefit included in the Total Payments shall be determined by the Company's independent auditors servicing the Company immediately prior to the time of a Change in Control in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. (iii) For purposes of this Section 6(f) the following definitions shall apply: -7- 8 "Change in Control" shall mean a change in control with respect to the Company that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without limitation, such a Change in Control shall be deemed to have occurred at such time as any Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of 35% or more of the outstanding securities of the Company ordinarily having the right to vote at an election of directors. A change in control shall be deemed to have occurred if individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Board of Directors of the Company (the "Board"). Notwithstanding anything aforesaid to the contrary, a Change in Control shall not be deemed to have occurred if prior to the time the Change in Control would have otherwise occurred, the Board shall have approved the event or transaction that would otherwise result in a Change in Control for purposes of this Agreement. "Incumbent Board" shall mean those individuals who constitute the Board on the date hereof, or any successor or additional individual who becomes a member of the Board and whose election, or nomination for election, by the members of the Board was approved by a vote of at least two-thirds of the members of the Board comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such individual was named as nominee for member of the Board without objection to such nomination). "Person" shall mean and include any individual, corporation, partnership, group, association or other "person", as such term is used in Section 14(d) of the Exchange Act, other than the Company or any subsidiary or any employee benefit plan sponsored by the Company or any subsidiary. 7. Conflicting Agreements. The Executive hereby represents and warrants to the Company that his entering into this Agreement, and the obligations and duties undertaken by him hereunder, will not conflict with, constitute a breach of, or otherwise violate the terms of any other employment of other agreement to which he is a party. 8. Assignment. (a) By the Executive. This Agreement, any part thereof and any rights (including compensation) or obligation hereunder shall not be assigned, pledged, alienated, sold, attached, charged, encumbered or transferred in any way by the Executive and any attempt to do so shall be void except that (i) the Executive may designate any of his beneficiaries to receive (and such beneficiaries shall receive) any compensation, payments or other benefits payable hereunder upon his death, (ii) any assignment by will or by laws of descent and distribution or following the occurrence of the Executive's legal incompetence is permitted and (iii) the Executive's executors, administrators or other legal representatives may assign any rights hereunder to the person or persons entitled thereto. -8- 9 (b) By the Company. Provided the substance of the Executive's duties set forth in Section 2 shall not change, and provided that the Executive's compensation as set forth in Section 3 shall not be adversely affected, the Company may assign or otherwise transfer this Agreement to any succeeding entity without limitation, which entity shall assume all rights and obligations hereunder. 9. Notices. All notices, requests, demands and other communications hereunder must be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first class, registered mail, return receipt requested, or sent by overnight mail, such as Federal Express, postage and registry fees prepaid, to the applicable party and addressed as follows: If to the Company: Board of Directors Marine Transport Corporation 1200 Harbor Boulevard Weehawken, NJ 07087 With a copy (which will constitute notice to the Company) to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Louis J. Bevilacqua, Esq. If to Executive: Jeffrey M. Miller Marine Transport Corporation 1200 Harbor Boulevard Weehawken, NJ 07087 Addresses may be changed by notice in writing signed by the addressee. 10. Miscellaneous. (a) If any provision or portion of this Agreement shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid or unenforceable, such judgment shall not affect, impair or invalidate the remainder of this Agreement but shall be confined in its operation to the jurisdiction in which made and to the provisions of this Agreement directly involved in the controversy in which such judgment shall have been rendered. (b) No course of dealing and no delay on the part of any party hereto in exercising any right, power or remedy under or relating to this Agreement shall operate as a -9- 10 waiver thereof or otherwise prejudice such party's rights, powers and remedies. No single or partial exercise of any rights, powers or remedies under or relating to this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. (c) This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument, and all signatures need not appear on any one counterpart. (d) (i) Any other agreement, rule or regulation to the contrary, notwithstanding, the parties hereby agree that any action or proceeding relating to this Agreement or its subject matter shall be brought in a state or federal court situated in the County of New York, State of New York and such court shall have exclusive jurisdiction thereof; provided, however, any court with jurisdiction over the parties may, at the election of Company, have jurisdiction over any action brought with regard to or any action brought to enforce any violation or claimed violation of Section 5. The parties each hereby specifically submit to the jurisdiction of such court and further agree that service of process may be made within or without the State of New York by giving notice in the manner provided in Section 9. Each party further agrees to waive and hereby waives any right to a trial by jury, and to any objection it or he may have in any such action, based on lack of personal jurisdiction or venue, or inconvenient forum. (ii) In any such action or proceeding, the prevailing party shall be entitled to recover from the other party reasonable costs, including attorneys' fees and expenses. In any action or proceeding before a court or other tribunal relating to this Agreement with respect to which damages are an adequate remedy, the parties agree that no damages other than compensatory damages shall be sought or claimed by either party and each party waives any claim, right or entitlement to punitive, exemplary or consequential damages, or any statutory damages, or any other damages of any kind or nature in excess of compensatory damages, and any court or arbitration tribunal is specifically divested of any power to award any damages in the nature of punitive, exemplary, or consequential damages, or any statutory damages, or any other damages of any kind or nature in excess of compensatory damages. (e) All payments required to be made by the Company hereunder to the Executive or his beneficiaries, including his estate, shall be subject to withholding and deductions as the Company may reasonably determine it should withhold or deduct pursuant to any applicable law or regulation. In lieu of withholding or deducting such amounts in whole or in part, the Company may, in its sole discretion, accept other provision for payment as permitted by law, provided it is satisfied in its sole discretion that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. (f) This Agreement embodies the entire understanding, and supersedes all other oral or written agreements or understandings, between the parties regarding the subject matter hereof. No change, alteration or modification hereof may be made except in writing -10- 11 signed by both parties hereto. The headings in this Agreement are for convenience of reference only and shall not be considered part of this Agreement or limit or otherwise affect the meaning hereof. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of New York (disregarding any choice of law rules which might look to the laws of any other jurisdiction). (g) The Executive acknowledges that the terms of this Agreement have been fully explained to him, that the Executive understands the nature and extent of the rights and obligations provided under this Agreement, and that the Executive has been given the opportunity to be represented by legal counsel in the negotiation and preparation of this Agreement. (h) Nothing herein contained shall be construed to prevent or limit any acquisition, consolidation or merger of the Company. [SIGNATURE PAGE FOLLOWS] -11- 12 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. MARINE TRANSPORT CORPORATION By: ------------------------------------- Name: Title: ------------------------------------- Jeffrey Miller -12- EX-10.8 9 EMPLOYMENT/CONSULTANT AGREEMENT 1 CONSULTING AGREEMENT This CONSULTING AGREEMENT (the "AGREEMENT") is made and entered into by and between F. ANTHONY NACCARATO ("CONSULTANT"), and OMI CORP., a corporation organized and existing under the laws of the State of Delaware and having its principal place of business at 90 Park Avenue, New York, New York 10016 ("OMI"). W I T N E S S E T H WHEREAS, CONSULTANT was employed by OMI for nearly 30 years; and WHEREAS, OMI is willing to retain CONSULTANT as an independent consultant to provide certain labor relations services to OMI upon the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and mutual promises herein contained, it is agreed as follows: 1. OMI hereby engages CONSULTANT, and CONSULTANT hereby agrees to serve, as a consultant to OMI to provide such labor relations services as OMI may request of CONSULTANT, provided, however, that CONSULTANT may not be required to perform services at OMI's offices more than 60 days per year. As used in this AGREEMENT, "labor relations services" shall mean, but not be limited to, consultation and advice on wages, hours and terms and conditions of employment, 1 2 negotiation of union contracts and agreements, meetings with union officials, business agents, port agents, personnel and members and administration of the grievance procedures. 2. The term of this AGREEMENT shall commence as of January 1, 1998 and shall expire on December 31, 2000 unless otherwise terminated prior to the expiration of its term pursuant to Paragraph 11 of this AGREEMENT. However, OMI may call upon CONSULTANT to perform labor relations services prior to such commencement date and CONSULTANT will perform such services at no additional charge to OMI. Upon the expiration of the term of this AGREEMENT, this AGREEMENT may be renewed only upon the written consent and agreement of both parties. 3. During the term of this AGREEMENT, OMI agrees to pay CONSULTANT as compensation for his services the sum of $92,500 per annum, payable in equal monthly installments. OMI agrees that it will continue to make the payments due hereunder in the event CONSULTANT dies or becomes disabled. 4. In addition, OMI shall reimburse CONSULTANT for all reasonable and necessary travel (except commutation to and from OMI's office), entertainment, telephone and postage expenses incurred on behalf of OMI, provided, however, (i) such expenses are incurred in accordance with OMI's expense policy and (ii) CONSULTANT submits such receipts and other documentation as may be required by OMI. In the event that this AGREEMENT is terminated pursuant to Paragraph 11 2 3 hereof, OMI shall reimburse CONSULTANT for all reasonable and necessary expenses incurred by him up to the date of termination as specified in this Paragraph. 5. This AGREEMENT does not constitute an employment contract, end OMI shall have no obligation to provide CONSULTANT with medical insurance, life, accident, health, disability or workman's compensation insurance or other employee benefits of any kind. OMI will provide CONSULTANT with general business support at OMI's office location, including office and support space, furniture, telephone, secretarial, word processing and photocopying services and such other support services as the parties may agree upon to enable CONSULTANT to complete the agreed upon assignments pursuant to this AGREEMENT. 6. OMI shall not be responsible for any payroll related taxes and Federal, state or local deductions. CONSULTANT certifies that he is an independent contractor and, as such, will prepare and file all tax information, forms and returns with the appropriate Federal, state and local government agencies or authorities as required by law. 7. (a) CONSULTANT represents and warrants that he is not under any obligation, contractual or otherwise, to any person or entity which would prohibit or impede him from performing the services and that he is free to enter into and perform the terms of this AGREEMENT. CONSULTANT hereby represents and warrants that he has full power to perform his obligations hereunder, and that this AGREEMENT constitutes a legal, valid and binding obligation of CONSULTANT, enforceable against CONSULTANT in accordance with his terms, except as 3 4 enforcement may be limited by bankruptcy, insolvency moratorium or other laws affecting the enforcement of creditors' rights generally. (b) OMI represents and warrants that it is not under any obligation, contractual or otherwise, to any person or entity which would prohibit or impede CONSULTANT from performing the services contemplated under this AGREEMENT. OMI hereby represents and warrants that it has full power, authority and capacity to execute and deliver this AGREEMENT and perform its obligations hereunder, and that this AGREEMENT constitutes a legal, valid and binding obligation of OMI, enforceable against OMI in accordance with his terms, except as enforcement may be limited by bankruptcy, insolvency moratorium or other laws affecting the enforcement of creditors' rights generally. 8. (a) OMI agrees to indemnify and hold harmless CONSULTANT from and against any losses, claims, damages or liabilities (including the costs, expenses and legal fees) related to or arising out of activities performed or services furnished by CONSULTANT pursuant to this AGREEMENT other than any loss, claim, damage or liability (or action or proceeding in respect thereof) determined by a final judgment of a court of competent jurisdiction to have been caused, in whole or in part, by the willful misconduct, bad faith or gross negligence of CONSULTANT. (b) CONSULTANT agrees to indemnify and hold harmless OMI and OMI's affiliates, directors, officers, agents and employees from and against any losses, claims, damages or liabilities (including costs, expenses and legal fees) which are determined by a final judgment of a court of competent jurisdiction to have resulted 4 5 solely from wilful misconduct, bad-faith or gross negligence of CONSULTANT. Notwithstanding the foregoing, CONSULTANT shall indemnify OMI only to the extent of the aggregate amount of Consulting Fees received by CONSULTANT. 9. CONSULTANT shall not disclose, duplicate, copy, or use for any purpose other than the performance of this AGREEMENT and shall treat as confidential and as proprietary to OMI all information which relates to OMI's client information, systems, trade secrets or business affairs; and which CONSULTANT has obtained from OMI under this AGREEMENT provided, however, the obligation to treat as proprietary and confidential shall not apply to information which shall be publicly available or shall be obtained rightfully from third parties. 10. This AGREEMENT may be terminated at any time for "cause" by either party. The term "cause" shall mean (i) any material breach by either party or any provision of this AGREEMENT and (ii) any disloyal or dishonest act or conduct by either party to the other. 11. Any activities performed by CONSULTANT pursuant to this AGREEMENT will be done as an independent contractor and CONSULTANT will at no time make any representation or statement, verbal or in writing, that he is employed by OMI. Nothing contained herein shall be construed to constitute a principal-agent relationship between CONSULTANT and OMI, nor shall this AGREEMENT be deemed to confer upon CONSULTANT any authority, express or implied, to bind OMI or represent to anyone that it is acting either as a representative of, or in any other capacity for OMI except as set forth in this AGREEMENT. 5 6 12. This AGREEMENT shall inure to the benefit of OMI's successors and assigns. This AGREEMENT may not be assigned by CONSULTANT without the prior written consent of OMI. 13. The validity, interpretation, construction and performance of this AGREEMENT shall be governed by the laws of the State of New York. 14. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed duly given when delivered, either by hand, by facsimile or by overnight courier or by certified mail, return receipt requested as follows: if to OMI, to: Fredric S. London, Esq. OMI Corp. 90 Park Avenue New York, New York 10016 if to CONSULTANT, to: F. Anthony Naccarato 7 Lawrence Court Syosset, New York 11791-2632 or to such other address as either party shall have designated by like notice to the other party hereto. 15. No provision of this AGREEMENT may be modified, altered, waived or discharged unless such modification, waiver, discharge or alteration is agreed to in writing and signed by OMI and CONSULTANT. No waiver by either party hereto of or compliance with any condition or provision of this AGREEMENT to be performed by such other party shall be deemed a waiver of similar of dissimilar provisions or 6 7 conditions at the same or at any prior or subsequent time. 16. This AGREEMENT sets forth the entire agreement between the parties with respect to the matters contained herein. There are no other agreements or understandings with respect to the subject matter of this AGREEMENT. Any and all prior discussions, agreements or understandings, whether oral or written, are merged into and subsumed by this AGREEMENT. IN WITNESS WHEREOF, the parties have executed this AGREEMENT on August ___, 1997. WITNESS: /s/ F. Anthony Naccarato - ------------------------------- ----------------------------------------- F. ANTHONY NACCARATO WITNESS: OMI CORP. /s/ [ILLEGIBLE] By: /s/ Frederic S. London - ------------------------------- ------------------------------------- FREDERIC S. LONDON STATE OF NEW YORK ) ) ss.: COUNTY OF NASSAU ) On Sept. 11, 1997 F. ANTHONY NACCARATO personally came to me known, and known to me to be the individual described in, and who executed the foregoing Agreement and duly acknowledged to me that she executed the same. /s/ Robert Sereno ----------------------------------------- NOTARY PUBLIC ROBERT SERENO Notary Public, State of New York No. 01SE065092 Qualified in Nassau County Commission Expires September 3, 1998 7 8 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On August 12, 1997, FREDRIC S. LONDON, ESQ., Senior Vice-President and General Counsel of OMI Corp., personally came to me known, and known to me to be the individual described in, and who executed the foregoing Agreement in behalf of OMI Corp., and duly acknowledged to me that he had authority to and that he executed the same. /s/ Monique Henderson ----------------------------------------- NOTARY PUBLIC MONIQUE HENDERSON Notary Public, State at New York No. 01HE5076668 Qualified in New York County Commission Expires April 28, 1999 8 EX-10.9 10 EMPLOYMENT AGREEMENT 1 Exhibit 10.9 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of September 1, 1997 between OMI Corp., a Delaware corporation (the "Company") and William A.G. Hogg (the "Executive"). W I T N E S S E T H WHEREAS, the Company desires to continue to employ the Executive; and WHEREAS, the Executive is willing to continue to be employed by the Company, as a senior executive of the Company, for the period and upon the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the mutual covenants and conditions contained herein, the Company and the Executive hereby agree as follows: 1. Employment The Company shall employ the Executive, and the Executive accepts employment by the Company, at the discretion of the Company, as President or Senior Vice President of OMI Ship Management, Inc. ("OSM"), or any successor thereof upon the terms and conditions herein, for the period commencing on the date the Company acquires Marine Transport Lines, Inc. (the "Commencement Date") and terminating on the third anniversary of the Commencement Date subject to termination as hereinafter provided (such period, as such period may be extended as described in this paragraph, being herein referred to as the "Employment Period"). The Executive term of employment shall be automatically extended for an additional period of one year unless written notice of termination is given by either party no later than the second anniversary of the Commencement Date. If, upon expiration of this Agreement, the Company desires to continue to employ the Executive and the Executive desires to continue in the employ of the Company, such employment shall be continued on terms and conditions which the Company and the Executive find mutually satisfactory and which are consistent with the employment policies of the Company. 2. Duties (a) Throughout the Employment Period, the Executive shall be President or Senior Vice President of OSM and shall report to the person or position designated by the Chief Executive Officer of the Company. The Executive shall at all times comply with Company policies as established by the Chief Executive Officer. (b) During the Employment Period, the Executive shall devote his full-time working hours to his duties hereunder, except during vacation time, any periods of illness and authorized leaves of absence. The Executive shall have such responsibilities and authorities consistent with the status, title and reporting requirements set forth herein as are appropriate to said position, 2 subject to change (other than diminution in position, authority, duties or responsibilities) from time to time by the Chief Executive Officer. (c) Throughout the Employment Period, the Executive shall faithfully and diligently perform his duties under this Agreement and shall use his best efforts to promote the interests of the Company. 3. Compensation During the Employment Period, as full compensation to the Executive for his performance of the services hereunder and for his acceptance of the responsibilities described herein, the Company agrees to pay the Executive, and the Executive agrees to accept, the following salary and other benefits: (a) Salary The Company shall pay the Executive a salary (the "Base Salary") for the annual periods following the Commencement date (a) Year 1: $110,000; (b) Year 2: $115,000; (c) Year 3: $120,000 and (d) Additional Year: $125,000. The Base Salary due the Executive hereunder shall be payable in equal installments at the times other executives are paid less any amounts required to be withheld by the Company from such Base Salary pursuant to the benefit plans of Section 3(d) and applicable laws and regulations described under Section 9(e). (b) Bonus The Executive shall be eligible to receive bonuses (each a "Bonus") at the discretion, in the amount and at the times determined by the Board of Directors of the Company (the "Board"). (c) Long Term Incentives The Executive shall be entitled to receive grants of restricted stock, stock options and other stock awards at the discretion of the Compensation Committee of the Board of Directors of the Company and/or other stock and cash awards granted pursuant to any other long term incentive plans implemented by the Company for the benefit of senior executives of the Company. (d) Other Benefit Plans Subject to all eligibility requirements, and to the extent permitted by law, the Executive shall be entitled to participate in any and all employee welfare and benefit plans (including, but not limited to, retirement security, life insurance, medical, dental, disability, and savings plans) established by the Company from time to time for the general and overall benefit of executives of the Company. -2- 3 (e) Further Benefits The Executive shall be entitled to a minimum of four weeks per annum paid vacation. (f) Deferred Compensation Notwithstanding any other provision of the Agreement, the Executive shall have the right to request any lawful means (including, without limitation, any deferred compensation arrangement requested by the Executive) by which he wishes to receive any portion of his or her Base Salary, Bonus, or other payments, and the Company shall reasonably cooperate with the Executive to grant such request, provided that the granting of such request does not represent inequitable treatment as concerns other senior employees or executives (in the Company's sole judgment), and does not impose additional costs on the Company other than insignificant administrative costs. In the event the Company (but not the Executive) (i) gives the notice of termination described in Section 1 above or (ii) terminates the employment of the Executive at any time after the Employment Period (as the same may be extended), the Company shall pay to the Executive promptly upon the termination of employment an amount equal to 50% of the Executive's then applicable Base Salary, less the amounts required to be withheld as described in Section 3(a). No amount shall be payable in the event the Executive terminates employment hereunder. 4. Reasonable Expenses The Company will reimburse the Executive for all reasonable business expenses, including travel and lodging, which are properly incurred by him in the performance of his duties hereunder, upon presentation of proper vouchers therefor and in accordance with written policies established from time to time by the Company for such reimbursements. 5. Executive Covenants The Executive acknowledges that as a result of the services to be rendered to the Company hereunder, the Executive will be brought into close contact with many confidential affairs of the Company, its subsidiaries and affiliates, not readily available to the public. The Executive further acknowledges that the services to be performed under this Agreement are of a special, unique, unusual, extraordinary and intellectual character; that the business of the Company is international in scope; that its goods and services are marketed throughout the world; and that the Company competes with other organizations that are or could be located in nearly any part of the United States or elsewhere. In recognition of the foregoing: (a) Except with the consent of or as directed by the Company, or except if compelled by judicial or legal authorities, the Executive will keep confidential and not divulge to any other person, during the Employment Period or thereafter, any Confidential Information and Trade Secrets regarding the Company, its subsidiaries and affiliates, except for information which is or -3- 4 becomes publicly available other than as a result of disclosure by the Executive. For the purposes of this Agreement "Confidential Information and Trade Secrets" means information which is secret to the Company, its subsidiaries and affiliates. It may include, but is not limited to, information relating to new and future concepts and business of the Company, its subsidiaries and affiliates, in the form of memoranda, reports, computer software and data banks, customer lists, employee lists, books, records, financial statements, manuals, papers, contracts and strategic plans. As a guide, the Executive is to consider information originated, owned, controlled or possessed by the Company, its subsidiaries or affiliates which is not disclosed in printed publications stated to be available for distribution outside the Company, its subsidiaries and affiliates as being secret and confidential. In instances where doubt does or should reasonably be understood to exist in the Executive's mind as to whether information is secret and confidential to the Company, its subsidiaries and affiliates, the Executive agrees to request an opinion, in writing, from the Company. (b) All papers, books and records of every kind and description relating to the business and affairs of the Company, its subsidiaries and affiliates, whether or not prepared by the Executive, and all property owned by the Company, its subsidiaries and affiliates shall be the sole and exclusive property of the Company, and the Executive shall surrender them to the Company, at any time upon request, during or after the Employment Period. (c) During the Employment Period and during any Severance Period (as hereinafter defined), the Executive will not, without the prior written consent of the Company, compete, directly or indirectly, with the Company, its subsidiaries and affiliates or participate as a director, officer, employee, agent, representative, stockholder, or partner, or have any direct or indirect financial interest as a creditor, in any business which directly or indirectly competes with the Company its subsidiaries and affiliates; provided, however, that this paragraph (c) shall not restrict the Executive from holding up to 5% of the publicly traded securities of any entity. (d) During the Employment Period and during any Severance Period (as hereinafter defined), the Executive shall not either for his own account or for any person, firm or company (i) solicit any customers of the Company, its subsidiaries and affiliates or (ii) solicit or endeavor to cause any employee of the Company, its subsidiaries and affiliates to leave his employment or induce or attempt to induce any such employee to breach any employment agreement with the Company, its subsidiaries and affiliates, or otherwise interfere with the employment of any employee by the Company, its subsidiaries and affiliates. (e) Without limiting any other provision of this Agreement, the Executive hereby agrees to be bound by and to comply with any obligations known to the Executive and imposed on the Company, its subsidiaries and affiliates, by law, rule, regulation, ordinance, order, decree, instrument, agreement, understanding or other restriction of any kind. -4- 5 (f) The Executive hereby agrees to provide reasonable cooperation to the Company, its subsidiaries and affiliates during the Employment Period and any Severance Period (as hereinafter defined) in any litigation between the Company, its subsidiaries and affiliates, and third parties. (g) The parties agree that the Company shall, in addition to other remedies provided by law, have the right and remedy to have the provisions of this Section 5 specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any breach or threatened breach of the provisions of this Section 5 will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from the Executive. (i) although the restrictions contained in Sections 5(a), (b), (c) and (d) above are considered by the parties hereto to be fair and reasonable in the circumstances, it is recognized that restrictions of such nature may fail for technical reasons, and accordingly it is hereby agreed that if any of such restrictions shall be adjudged to be void or unenforceable for whatever reason, but would be valid if part of the wording thereof were deleted, or the period thereof reduced or the area dealt with thereby reduced in scope, the restrictions contained in Sections 5(a), (b), (c) and (d) shall be enforced to the maximum extent permitted by law, and the parties consent and agree that such scope or wording may be accordingly judicially modified in any proceeding brought to enforce such restrictions. (ii) Notwithstanding that the Executive's employment hereunder may expire or be terminated as provided in Section 1 or Section 6 hereof, this Agreement shall continue in full force and effect insofar as is necessary to enforce the covenants and agreements of the Executive contained in this Section 5. 6. Termination of Employment Period and Severance (a) Termination by the Company without Cause. If for any reason other than the provisions of Section 6(d) hereof, the Company wishes to terminate the Employment Period and the Executive's employment hereunder, the Company shall give a written notice to the Executive of such termination stating that a severance period (the "Severance Period") will commence upon receipt of such notice by the Executive. The Severance Period shall be for the balance of the then current term of this Agreement or, unless the Executive shall have given the notice described in Section 1, twelve months, whichever is greater. Upon receipt of such notice by the Executive, the Employment Period shall terminate (and the Executive shall have no further duties under Section 2 hereof). During the entire Severance Period, the Executive shall continue to receive all salary, compensation, payments and benefits under Sections 3(a) and 3(d) of this Agreement (including, to the extent allowable under applicable law, the accrual of additional service credits or Company contributions under pension and thrift plans, and any benefits under the Company's -5- 6 long term disability and life insurance plans) available upon the date of the commencement of the Severance Period as if the Employment Period continued throughout the Severance Period. The Executive agrees that the payments described in this Section 6(a) shall be full and adequate compensation to the Executive for all damages the Executive may suffer as a result of the termination of his employment pursuant to this Section 6(a), and hereby waives and releases the Company from any and all obligations or liabilities to the Executive arising from or in connection with the Executive's employment with the Company or the termination and claims the Executive may have under federal, state or local statutes, regulations or ordinances or under any common law principles or breach of contract or the covenant of good faith and fair dealing, defamation, wrongful discharge, intentional infliction of emotional distress or promissory estoppel; provided, however, that any rights and benefits the Executive may have under the employee benefit plans and programs of the Company in which the Executive is a participant, shall be determined in accordance with the terms and provisions of such plans and programs. (b) Death. If the Executive dies during the Employment Period, the Severance Period or during the period when payments are being made pursuant to Section 6(c), the Employment Period shall automatically terminate and the obligations of the parties shall terminate effective the date of death. (c) Disability. If the Executive becomes Disabled (as hereinafter defined) during the Employment Period, the Company shall be entitled to terminate his employment and the Employment Period upon written notice to the Executive from the Company. In the event of such termination, the Executive shall be released from any duties hereunder, and the Severance Period described in Section 6(a) hereof shall immediately commence. The duties, rights, benefits and other matters during the Severance Period shall be as set forth in Section 6(a), and the Executive (and his or her heirs, beneficiaries and estate) shall be entitled to all compensation, payments and benefits during the Severance Period without any offset or reduction except by such amounts, if any, as are paid to the Executive in lieu of compensation for services under any applicable insurance policies of the Company (or by the Company under any self insurance plan). For purposes of this Agreement, "Disabled" shall mean mental or physical impairment or incapacity rendering the Executive substantially unable to perform his duties under this Agreement for a period of longer than 180 days out of any 360-day period during the Employment Period. A determination of whether the Executive is Disabled shall be made by the Company in its sole discretion upon its own initiative or upon request of the Executive or a person acting on his behalf. If the Executive becomes Disabled during a Severance Period, he shall continue to receive the compensation, payments and benefits of this Agreement during the entire Severance Period without any offset or reduction, except by such amounts, if any, as are paid to the Executive in lieu of compensation for services under any applicable insurance policies of the Company (or by the Company under any self insurance plan). (d) Termination by the Company for Cause. The Company by written notice to the Executive, shall have the right to terminate the Employment Period in the event of any of the following (which shall constitute "Cause"): -6- 7 (i) The Executive's breach in respect of his duties under this Agreement, such breach continuing unremedied for thirty days after written notice thereof from the Company to the Executive specifying the acts constituting the breach and requesting that they be remedied; or (ii) Any misconduct, dishonesty, insubordination or other act by the Executive materially detrimental to the goodwill of the Company, or materially damaging to the Company's, its subsidiaries' and/or affiliates' relationships with their customers or employees, including without limitation, the Executive having been convicted of a felony during the Employment Period, provided such conviction has resulted or is likely to result in substantial detriment to the Company, its subsidiaries and/or affiliates. Any termination under this Section 6(d) shall be without damages or liability to the Company for compensation and other benefits which would have accrued to the Executive hereunder after termination, but all compensation, benefits and reimbursements accrued through the date of termination shall be paid to the Executive at the times normally paid by the Company. In this event, there shall be no Severance Period. (e) Voluntary Termination by the Executive. In the event of voluntary termination of employment by the Executive, the terms of the last paragraph of Section 6(d) shall apply, except in the event that such voluntary termination occurs within ninety days of (i) a relocation of the OSM's offices (or the location of the performance of work by the Executive) beyond a fifty mile radius of New York City, (ii) a material diminution of the Executive's duties and responsibilities as provided in Section 2, or (iii) a reduction in Base Salary in which cases the provisions of Section 6(a) shall apply. 7. Conflicting Agreements The Executive hereby represents and warrants to the Company that he is entering into this Agreement, and the obligations and duties undertaken by him hereunder, will not conflict with, constitute a breach of, or otherwise violate the terms of any other employment of other agreement to which he is a party. 8. Assignment (a) By the Executive. This Agreement, any part thereof and any rights (including compensation) or obligation hereunder shall not be assigned, pledged, alienated, sold, attached, charged, encumbered or transferred in any way by the Executive and any attempt to do so shall be void except that (i) the Executive may designate any of his beneficiaries to receive (and such beneficiaries shall receive) any compensation, payments or other benefits payable hereunder upon his death, (ii) any assignment by will or by laws of descent and distribution or following the -7- 8 occurrence of the Executive's legal incompetence is permitted and (iii) the Executive's executors, administrators or other legal representatives may assign any rights hereunder to the person or persons entitled thereto. (b) By the Company. Provided the substance of the Executive's duties set forth in Section 2 shall not change, and provided that the Executive's compensation as set forth in Section 3 shall not be adversely affected, the Company may assign or otherwise transfer this Agreement to any succeeding entity without limitation, which entity shall assume all rights and obligations hereunder. 9. Notices All notices, requests, demands and other communications hereunder must be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first class, registered mail, return receipt requested, or sent by overnight mail, such as Federal Express, postage and registry fees prepaid, to the applicable party and addressed as follows: (a) if to the Company: President Marine Transport Lines, Inc. 1200 Harbor Boulevard Weehawken, NJ 07087 (b) if to the Executive: 67-11 166th Street Flushing, NY 11365 Addresses may be changed by notice in writing signed by the addressee. 10. Miscellaneous (a) If any provision or portion of this Agreement shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid or unenforceable, such judgment shall not affect, impair or invalidate the remainder of this Agreement but shall be confined in its operation to the jurisdiction in which made and to the provisions of this Agreement directly involved in the controversy in which such judgment shall have been rendered. (b) No course of dealing and no delay on the part of any parry hereto in exercising any right, power or remedy under or relating to this Agreement shall operate as a waiver thereof or otherwise prejudice such party's rights, powers and remedies. No single or partial exercise of any -8- 9 rights, powers or remedies under or relating to this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. (c) This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument, and all signatures need not appear on any one counterpart. (d) (i) Any other agreement, rule or regulation to the contrary, notwithstanding, the parties hereby agree that any action or proceeding relating to this Agreement or its subject matter shall be brought in a state or federal court situated in the County of New York, State of New York and such court shall have exclusive jurisdiction thereof; provided, however, any court with jurisdiction over the parties may, at the election of Company, have jurisdiction over any action brought with regard to or any action brought to enforce any violation or claimed violation of Section 5. The parties each hereby specifically submit to the jurisdiction of such court and further agree that service of process may be made within or without the State of New York by giving notice in the manner provided in Section 9. Each party further agrees to waive and hereby waives any right to a trial by jury, and to any objection it or he may have in any such action, based on lack of personal jurisdiction or venue, or inconvenient forum. (ii) In any such action or proceeding, the prevailing party shall be entitled to recover from the other party reasonable costs, including attorney's fees and expenses. In any action or proceeding before a court or other tribunal relating to this Agreement with respect to which damages are an adequate remedy, the parties agree that no damages other than compensatory damages shall be sought or claimed by either party and each party waives any claim, right or entitlement to punitive, exemplary, or consequential damages, or any statutory damages, or any other damages of any kind or nature in excess of compensatory damages, and any court or arbitration tribunal is specifically divested of any power to award any damages in the nature of punitive, exemplary, or consequential damages, or any statutory damages, or any other damages of any kind or nature in excess of compensatory damages. (e) All payments required to be made by the Company hereunder to the Executive or his beneficiaries, including his estate, shall be subject to withholding and deductions as the Company may reasonably determine it should withhold or deduct pursuant to any applicable law or regulation. In lieu of withholding or deducting such amounts in whole or in part, the Company may, in its sole discretion, accept other provision for payment as permitted by law, provided it is satisfied in its sole discretion that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied. (f) This Agreement embodies the entire understanding, and supersedes all other oral or written agreements or understandings, between the parties regarding the subject matter hereof. No change, alteration or modification hereof may be made except in writing signed by both parties hereto. The headings in this Agreement are for convenience of reference only and shall not be considered part of this Agreement or limit or otherwise affect the meaning hereof. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance -9- 10 with and governed by the laws of the State of New York (disregarding any choice of law rules which might look to the laws of any other jurisdiction). (g) The Executive acknowledges that the terms of this Agreement have been fully explained to him, that the Executive understands the nature and extent of the rights and obligations provided under this Agreement, and that the Executive has been given the opportunity to be represented by legal counsel in the negotiation and preparation of this Agreement. (h) Nothing herein contained shall be construed to prevent or limit any acquisition, consolidation or merger of the Company. 11. Condition Precedent In the event that the Company does not acquire Marine Transport Lines, Inc. on or before December 31, 1998, this Agreement shall be null and void and neither party shall have any rights hereunder. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. By ------------------------------------- William A.G. Hogg OMI CORP. By ------------------------------------- -10- EX-10.11 11 A/R TERM LOAN AND REVOLVING CREDIT FACILITY AGREE. 1 Exhibit 10.11 AMENDED AND RESTATED TERM LOAN AND REVOLVING CREDIT FACILITY AGREEMENT - -------------------------------------------------------------------------------- MARINE TRANSPORT LINES, INC. Borrower The Financial Institutions Listed on Schedule 1, Lenders and DEN NORSKE BANK ASA, Agent - -------------------------------------------------------------------------------- as of June 17, 1998 2 INDEX PAGE ---- SECTION 1 DEFINITIONS...................................................... 1 1.1 Defined Terms........................................ 1 1.2 Construction......................................... 23 1.3 Accounting Terms..................................... 23 SECTION 2 REPRESENTATIONS AND WARRANTIES................................... 23 2.1(a) Due Organization and Power........................... 23 2.1(b) Authorization and Consents........................... 23 2.1(c) Binding Obligations.................................. 24 2.1(d) No Violation......................................... 24 2.1(e) Litigation........................................... 24 2.1(f) No Default........................................... 24 2.1(g) Vessels.............................................. 24 2.1(h) Insurance............................................ 25 2.1(i) Citizenship and Qualification as Owner.......................................... 25 2.1(j) Financial Information................................ 25 2.1(k) Tax Returns.......................................... 26 2.1(l) ERISA................................................ 26 2.1(m) Chief Executive Office............................... 26 2.1(n) Foreign Trade Control Regulations.................... 26 2.1(o) Equity Ownership..................................... 27 2.1(p) Environmental Matters................................ 27 2.1(q) Pending, Threatened or Potential Environmental Claims.............................. 28 2.1(r) Compliance with ISM Code............................. 28 2.1(s) Threatened Withdrawal of DOC or SMC.................. 28 2.1(t) Year 2000 Issue...................................... 28 SECTION 3 ADVANCES......................................................... 28 3.1 Purposes............................................. 28 3.2 Term Loan Advances................................... 29 3.3 Revolving Credit Facility Advances................... 29 3.4 Drawdown Notice...................................... 29 3.5 Effect of Drawdown Notices........................... 29 3.6 Notation of Advances................................. 30 i 3 SECTION 4 CONDITIONS....................................................... 30 4.1 Conditions to Restructure the Term Loan and Revolving Credit Facility..................... 30 4.2 Further Conditions Precedent......................... 35 4.3 Satisfaction After Drawdown.......................... 36 4.4 Breakfunding Costs................................... 36 SECTION 5 REPAYMENT, PREPAYMENT AND REDUCTION OF FACILITY............................. 36 5.1 Repayment of Term Loan............................... 36 5.2 Revolving Credit Facility............................ 36 5.3 Voluntary Prepayment of Term Loan.................... 37 5.4 Mandatory Prepayment of Term Loan.................... 37 5.5 Prepay Term Loans Pro Rata........................... 37 5.6 Application of Prepayments........................... 37 5.7 Voluntary Reduction of Revolving Credit Facility................................... 37 SECTION 6 INTEREST AND RATE................................................ 38 6.1 Term Loan Applicable Rate and Default Rate.................................. 38 6.2 Revolving Credit Facility Applicable Rate and Default Rate............................. 38 6.3 Determination of Applicable Margin................... 38 6.4 Determination of LIBOR............................... 38 6.5 Interest Periods..................................... 39 6.6 Interest Payments.................................... 39 6.7 Payment on Banking Day............................... 39 6.8 Calculation of Interest.............................. 39 SECTION 7 PAYMENTS......................................................... 39 7.1 Place of Payments, No Set Off........................ 39 7.2 Tax Credits.......................................... 40 SECTION 8 EVENTS OF DEFAULT................................................ 40 8.1(a) Non-Payment of Principal............................. 40 8.1(b) Non-Payment of Interest or Other Amounts..................................... 40 8.1(c) Representations...................................... 40 8.1(d) Covenants............................................ 40 8.1(e) Indebtedness......................................... 41 ii 4 8.1(f) Change of Control; Ownership or Management of Other Security Parties.............. 41 8.1(g) U.S. Citizenship..................................... 41 8.1(h) Bankruptcy........................................... 41 8.1(i) Termination of Operations; Sale of Assets.................................... 42 8.1(j) Judgments............................................ 42 8.1(k) Inability to Pay Debts............................... 42 8.1(l) Change in Financial Position......................... 42 8.1(m) Relevant Contracts................................... 42 8.1(n) Key Management Agreements............................ 42 8.1(o) Related Credit Agreement; OMI COLUMBIA Loan Documents and Mortgage Securing OMI Debt............. 42 8.2 Indemnification...................................... 43 8.3 Application of Moneys................................ 43 SECTION 9 COVENANTS........................................................ 44 9.1(A)(i) Performance of Agreements............................ 44 9.1(A)(ii) Notice of Default; Litigation and Adverse Change................................ 44 9.1(A)(iii) Obtain Consents...................................... 45 9.1(A)(iv) Financial Information................................ 45 9.1(A)(v) U.S. Citizenship; Qualification to Own Foreign Flag Vessels....................... 46 9.1(A)(vi) Corporate Existence.................................. 46 9.1(A)(vii) Books and Records.................................... 46 9.1(A)(viii) Taxes and Assessments................................ 46 9.1(A)(ix) Inspection........................................... 46 9.1(A)(x) Compliance with Statutes, etc........................ 46 9.1(A)(xi) Environmental Matters................................ 47 9.1(A)(xii) ERISA................................................ 47 9.1(A)(xiii) Vessel Management.................................... 47 9.1(A)(xiv) Cash................................................. 47 9.1(A)(xv) Working Capital...................................... 48 9.1(A)(xvi) Debt Service Coverage Ratio.......................... 48 9.1(A)(xvii) Total Debt to EBITDA................................. 48 9.1(A)(xviii) Brokerage Commissions, etc........................... 48 9.1(A)(xix) Deposit Accounts; Assignment......................... 48 9.1(A)(xx) Proceeds of Marine Car Carriers (MI)................. 49 9.1(A)(xxi) Year 2000 Issue...................................... 49 9.1(A)(xxii) ISM Code Matter...................................... 49 9.1(A)(xxiii) OMI COLUMBIA......................................... 49 9.1(B)(i) Liens................................................ 50 9.1(B)(ii) Loans, Advances and Investments...................... 51 9.1(B)(iii) Indebtedness ........................................ 51 iii 5 9.1(B)(iv) Permitted Third Party Debt........................... 51 9.1(B)(v) Guarantees, etc...................................... 52 9.1(B)(vi) Changes in Business.................................. 52 9.1(B)(vii) Use of Corporate Funds............................... 52 9.1(B)(viii) Issuance of Shares................................... 52 9.1(B)(ix) Sale of Shares....................................... 52 9.1(B)(x) Sale of Assets....................................... 52 9.1(B)(xi) Capital Expenditures................................. 52 9.1(B)(xii) Changes in Offices or Names.......................... 52 9.1(B)(xiii) Changes in Management................................ 53 9.1(B)(xiv) Consolidation and Merger............................. 53 9.1(B)(xv) Chartering-in of Vessels............................. 53 9.1(B)(xvi) Dividends ........................................ 53 9.1(B)(xvii) Loan From Marine Car Carriers (MI)................... 53 9.2 Vessel Valuations........................................... 53 9.3 Asset Maintenance........................................... 53 9.4 Inspection and Survey Reports............................... 54 SECTION 10 ASSIGNMENT...................................................... 54 SECTION 11 ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC............................... 55 11.1 Illegality ........................................ 55 11.2 Increased Cost....................................... 55 11.3 Nonavailability of Funds............................. 56 11.4 Agent's Certificate Conclusive....................... 56 11.5 Compensation for Losses.............................. 56 SECTION 12 CURRENCY INDEMNITY.............................................. 58 12.1 Currency Conversion.................................. 58 12.2 Change in Exchange Rate.............................. 58 12.3 Additional Debt Due.................................. 58 12.4 Rate of Exchange..................................... 58 SECTION 13 FEES AND EXPENSES............................................... 58 13.1 Commitment Fee....................................... 58 13.2 Facility Fee......................................... 58 13.3 Other Fees........................................... 59 13.4 Expenses............................................. 59 SECTION 14 APPLICABLE LAW, JURISDICTION AND WAIVER......................... 59 14.1 Applicable Law....................................... 59 iv 6 14.2 Jurisdiction ........................................ 59 14.3 Waiver Of Jury Trial................................. 60 SECTION 15 THE AGENT....................................................... 60 15.1(a) Appointment of Agent................................. 60 15.1(b) Appointment of Security Trustee...................... 60 15.2 Distribution of Payments............................. 61 15.3 Holder of Interest in Note........................... 61 15.4 No Duty to Examine, Etc.............................. 61 15.5 Agent as Lender...................................... 61 15.6(a) Obligations of Agent................................. 61 15.6(b) No Duty to Investigate............................... 61 15.7(a) Discretion of Agent.................................. 61 15.7(b) Instructions of Majority Lenders..................... 61 15.8 Assumption re Event of Default....................... 62 15.9 No Liability of Agent or Lenders..................... 62 15.10 Indemnification of Agent............................. 62 15.11 Consultation with Counsel............................ 63 15.12 Resignation ........................................ 63 15.13 Representations of Lenders........................... 63 15.14 Notification of Event of Default..................... 63 SECTION 16 NOTICES AND DEMANDS............................................. 63 16.1 Notices in Writing................................... 63 16.2 Addresses for Notice................................. 64 16.3 Notices Deemed Received.............................. 64 SECTION 17 MISCELLANEOUS................................................... 64 17.1 Time of Essence...................................... 64 17.2 Unenforceable, etc., Provisions - Effect............................................ 64 17.3 Indemnification...................................... 65 17.4 References........................................... 65 17.5 Further Assurances................................... 65 17.6 Prior Agreements, Merger............................. 65 17.7 Entire Agreement, Amendments......................... 66 17.8 Headings............................................. 66 CONSENT AND AGREEMENT AND ACCOUNT ASSIGNMENT................................ 67 v 7 SCHEDULES 1 LENDERS 2 GUARANTORS 3 OTHER SUBSIDIARIES 4 MORTGAGED VESSELS 5 OTHER VESSELS 6 MANAGEMENT AGREEMENTS 7 LITIGATION, SUITS, PROCEEDINGS AND ENVIRONMENTAL CLAIMS EXHIBITS 1 AMENDED AND RESTATED TERM LOAN NOTE 2 AMENDED AND RESTATED REVOLVING CREDIT FACILITY NOTE 3 AMENDED AND RESTATED GUARANTY 4 U.S. MORTGAGE 5 U.S. MORTGAGE AMENDMENT 6 LIBERIAN MORTGAGE 7 LIBERIAN MORTGAGE AMENDMENT 8 EARNINGS ASSIGNMENTS 9 INSURANCES ASSIGNMENTS 10 GENERAL SECURITY AGREEMENT 11 ASSIGNMENT OF VESSEL MANAGEMENT RECEIVABLES 12 ASSIGNMENT OF JOINT VENTURE PROCEEDS 13 ASSIGNMENT OF GOVERNMENT RECEIVABLES vi 8 14 NEGATIVE PLEDGE 15 DRAWDOWN NOTICE 16 COMPLIANCE CERTIFICATE 17 ASSIGNMENT AND ASSUMPTION AGREEMENT 18 WESTHAMPTON INDENTURE vii 9 AMENDED AND RESTATED TERM LOAN AND REVOLVING CREDIT FACILITY AGREEMENT THIS AMENDED AND RESTATED TERM LOAN AND REVOLVING CREDIT FACILITY AGREEMENT (this "Agreement") is made as of the day of June, 1998, by and between (1) MARINE TRANSPORT LINES, INC., a corporation incorporated under the laws of the State of Delaware with offices at 1200 Harbour Boulevard, 9th Floor, Weehawken, New Jersey (the "Borrower"), (2) the financial institutions listed on Schedule 1 hereto (together with their respective successors and assigns hereinafter called the "Lenders") and (3) DEN NORSKE BANK ASA, acting through its New York branch, with offices at 200 Park Avenue, New York, New York 10166 (the "Agent") and amends and restates that certain term loan and revolving credit facility agreement, dated as of July 23, 1996 (the "Original Credit Agreement"), among the parties. WITNESSETH THAT: WHEREAS: A. Pursuant to the terms and conditions of the Original Credit Agreement, the Lenders made (1) the Term Loan to the Borrower in respect of which, as of the date hereof, the principal amount of Twelve Million One Hundred Thirteen Thousand Dollars ($12,113,000) remains outstanding and (2) the Revolving Credit Facility available to the Borrower; and B. The Borrower has requested and the Lender, subject to the terms and conditions hereof, has agreed to restructure the Term Loan and the Revolving Credit Facility NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, the receipt and adequacy whereof are hereby acknowledged, the parties agree as follows: 1. DEFINITIONS 1.1 Defined Terms. The words and expressions specified in this Agreement shall, except where the context otherwise requires, have the meanings attributed to them below: "Acceptable Accounting Firm" Ernst & Young, or such other recognized international accounting firm as shall be approved by the Agent, such approval not to be unreasonably withheld; "Acquisition Agreement" that certain acquisition agreement, dated as of September 15, 1997, among OMI Corp., 10 Universal Bulk Carriers, Inc., the Borrower and the persons set forth on Exhibit A attached thereto, together with any and all amendments, modifications or waivers of provisions thereof and supplements thereto; "Advance" each Term Loan Advance and each Revolving Credit Facility Advance; "Affiliate" as to any Person, any other Person that, directly or indirectly, controls or is controlled by or is under common control with such Person. (For purposes of this definition, the term "control", including the terms "controlling", "controlled by" and "under common control with", of a Person means the possession, direct or indirect, of the power to vote 5% or more of the securities having ordinary voting power for the election of directors of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise); "AMELINA" that certain 10,922 dwt Liberian flag ammonia tanker named AMELINA, Official No. 2015 documented under the laws and flag of the Republic of Liberia in the name of Oswego Chemical Carriers Corporation; "Argosy" Argosy Ventures Ltd., a Delaware not-for-profit corporation "Assignment and Assumption the Assignment and Assumption Agreement(s)" Agreement(s) executed pursuant to Section 10 substantially in the form of Exhibit 17; "Assignment Notices" notices for the (a) Earnings Assignments substantially in the form set out in Exhibit 1 thereto or in such other form as the Agent may agree; 2 11 (b) Insurances Assignments substantially in the form set out in Exhibit 3 thereto or in such other form as the Agent may agree; (c) Assignments of Vessel Management Receivables substantially in the form set out in Exhibit 1 thereto or in such other form as the Agent may agree; (d) Assignment of Joint Venture Proceeds substantially in the form set out in Exhibit 1 thereto or in such other form as the Agent may agree; and (e) Assignments of Government Receivables substantially in the forms set out in Exhibits 1 and 2 thereto or in such other form as the Agent may agree; "Assignment of Government the assignments of receivables Receivables" payable to the Borrower or Intrepid Ship Management, Inc., as the case may be, for their respective contracts with MARAD executed or to be executed by the Borrower in favor of the Agent pursuant to, in the case of the Borrower, the Original Credit Agreement and, in the case of Intrepid Ship Management, Inc., Section 4.1 of this Agreement, substantially in the form of Exhibit 13 or in such other form as the Agent may agree; "Assignment of Joint Venture the assignment of those proceeds to Proceeds" which Marine Car Carriers (Del) is entitled based upon its shares in Marine Car Carriers (MI) to be executed by Marine Car Carriers (Del) in favor of the Agent pursuant to Section 4.1 of this Agreement in the form set out in Exhibit 12 or in such other form as the Agent may agree; "Assignment of Vessel the assignments executed or to be Management Receivables" executed by Marine Transport Management and Intrepid Ship Management, Inc. in favor of the Agent of 3 12 all right, title and interest of such Guarantors in their respective receivables pursuant to, in the case of Marine Transport Management, the Original Credit Agreement and, in the case of Intrepid Ship Management, Inc., Section 4.1 of this Agreement, substantially in the form set out in Exhibit 11 or in such other form as the Agent may require; "Assignments" the Earnings Assignments, the Insurances Assignments, the Assignments of Government Receivables, the General Security Agreements, the Assignments of Vessel Management Receivables and the Assignment of Joint Venture Proceeds; "Banking Day(s)" day(s) on which banks are open for the transaction of business of the nature required by this Agreement or any other documents executed in connection herewith in London, England and New York, New York; "CALINA" that certain 15,661 dwt Liberian flag ammonia tanker named CALINA, Official No. 2774 documented under the laws and flag of the Republic of Liberia in the name of Oswego Chemical Carriers Corporation; "Cash Equivalents" (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than ninety (90) days from the date of acquisition, (ii) time deposits and certificates of deposit, denominated in Dollars, of the Agent, of any Lender or of any commercial bank of recognized standing organized under the laws of any country which is a member of the Organization of Economic Cooperation and Development or any governmental subdivision or taxing authority of any such 4 13 country having capital and surplus in excess of Five Hundred Million Dollars ($500,000,000) or its equivalent in such country's currency, (any such commercial bank, a "Qualified Bank"), (iii) repurchase obligations with a term of not more than seven (7) days for underlying securities of the types described in (i) above entered into with the Agent, any Lender or any Qualified Bank, and (iv) commercial paper, denominated in Dollars, issued by the Agent, any Lender or by the parent corporation of any Qualified Bank, and commercial paper rated at least A-1 or the equivalent thereof by Standard & Poor's Corporation or at least P-1 or the equivalent thereof by Moody's Investor Services, Inc., and in each case maturing within ninety (90) days after the date of acquisition; "Code" the Internal Revenue Code of 1986, as amended, and any successor statute and regulations promulgated thereunder; "Collateral Vessel Value" the aggregate, as calculated from time to time in the manner provided in Sections 9.2 and 9.3, of (a) the FMVs of each of the Vessels then mortgaged to secure obligations owed to the Lenders under or in connection with either this Agreement or the Related Credit Agreement and (b) the value of the OMI COLUMBIA; "Commitment(s)" that portion of the Term Loan and the Revolving Credit Facility set out opposite a Lender's name in Schedule 1 hereto or, as the case may be, in any relevant Assignment and Assumption Agreement, as reduced from time to time pursuant to the terms of this Agreement; "Compliance Certificate" a certificate of the Chief Financial Officer of Marine Transport Corporation certifying the compliance with all of the covenants of the Borrower and Marine Transport 5 14 Corporation contained herein, delivered to the Agent from time to time pursuant to Section 9.1(A)(iv) hereof in the form set out in Exhibit 16, or in such other form as the Agent may require; "Consents and Agreements" such third party consents as may be required under any contract to which a Security Party is a party in order for a Security Party to grant a security interest pursuant to any Security Document; "COURIER" that certain 1977 built 35,662 dwt product tanker named COURIER, Official No. 578746, documented under the laws and flag of the United States in the name of Courier Transport, Inc.; "DOC" means a document of compliance issued to an Operator in accordance with rule 13 of the ISM Code; "Dollars" and the sign "$" the legal currency, at any relevant time hereunder, of the United States of America and, for all payments hereunder, in same day funds settled through the New York Clearing House Interbank Payments system (or such other Dollar funds as may be determined by the Agent to be customary for the settlement in New York City of banking transactions of the type herein involved); "Drawdown Date" each Term Loan Drawdown Date and each Revolving Credit Facility Drawdown Date; "Drawdown Notice" the meaning ascribed thereto in Section 3.4; "Earnings Assignments" assignments of the earnings of the Mortgaged Vessels executed or to be executed by the appropriate Shipowning Guarantor or OMI Challenger Transport, in favor of the Agent pursuant to, in the case of Existing Guarantors, the Original Credit Agreement as amended and restated 6 15 hereby and, in the case of New Guarantors, Section 4.1 substantially in the form set out in Exhibit 8 or in such other form as the Agent may require; "EBITDA" means, on a consolidated basis, Marine Transport Corporation's earnings before interest, taxes, depreciation and amortization (calculated in accordance with GAAP) less income from 50% or less, directly or indirectly, owned affiliates, based on the preceding twelve (12) months actual operating income (for purposes of calculating EBITDA for the period commencing from the date hereof and ending on the first anniversary of the date hereof, the results for each quarterly reporting period shall be annualized); "Environmental Affiliate" any person or entity liable for Environmental Claims, which claims any Security Party may have assumed by contract or operation of law; "Environmental Approvals" the meaning ascribed thereto in Section 2.1(p); "Environmental Claim" the meaning ascribed thereto in Section 2.1(p); "Environmental Laws" the meaning ascribed thereto in Section 2.1(p); "ERISA" the Employee Retirement Income Security Act of 1974, as amended; "ERISA Affiliate" a trade or business (whether or not incorporated) which is under common control with, or part of a controlled group of corporations with, any Security Party within the meaning of Sections 414(b), (c), (m) or (o) of the Code; "Events of Default" any of the events set out in Section 8.1; 7 16 "Existing Guarantors" each of the companies listed on Part A of Schedule 2; "Final Payment Date" June ____, 2003, or if such day is not a Banking Day, the next following Banking Day unless such next following Banking Day falls in the following month, in which case the Final Payment Date shall be the immediately preceding Banking Day; "Financing Documents" this Agreement, the Notes, the Guaranty and the Security Documents; "FMV" with respect to a Vessel, fair market value as determined in accordance with Section 9.2 hereof; "FNBM" The First National Bank of Maryland, a bank organized and existing under the laws of the United States of America; "Former Lenders" FNBM, Harrowston and Wolfson; "Former Lenders Indebtedness: the indebtedness of the Borrower and/or its Affiliates formerly owed to the Former Lenders in the aggregate principal amount of Twelve Million Five Hundred Twenty Eight Thousand Dollars ($12,528,000), plus accrued and unpaid interest thereon; "GAAP" the meaning ascribed thereto in Section 1.3; "General Security Agreements" general security agreements to be executed by each of the New Guarantors which does not own a Mortgaged Vessel in favor of the Agent pursuant to Section 4.1 substantially in the form set out in Exhibit 10 or in such other form as the Agent may require; "Guarantor(s)" each of the Existing Guarantors and the New Guarantors; "Guaranty" the amended and restated guaranty of the obligations of the Borrower under this 8 17 Agreement and under the Notes to be executed by each Guarantor in favor of the Agent pursuant to Section 4.l substantially in the form set out in Exhibit 3 or in such other form as the Agent may require; "Harrowston" Harrowston Corporation, a company organized under the laws of Canada; "Indebtedness" for any Person at any date of determination (without duplication), all (i) indebtedness of such Person for borrowed money, (ii) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations of such Person arising from letters of credit or other similar instruments (including reimbursement obligations with respect thereto), (iv) except trade payables, obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six (6) months after the date of placing such property in service or taking delivery thereof or the completion of such services, (v) obligations on account of principal of such Person as lessee under capitalized leases, (vi) indebtedness of other Persons secured by a lien on any asset of such Person, whether or not such indebtedness is assumed by such Person; provided that the amount of such indebtedness shall be the lesser of (a) the fair market value of such asset at such date of determination and (b) the amount of such indebtedness, and (vii) indebtedness of other Persons guaranteed by such Person to the extent such indebtedness is so guaranteed. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, 9 18 provided that the amount outstanding at any time of any indebtedness issued with original issue discount is the face amount of such indebtedness less the remaining unamortized portion of the original issue discount of such indebtedness at such time as determined in conformity with GAAP; and provided further that Indebtedness shall not include any liability for federal, state, local or other taxes; "Insurances Assignments" assignments of the insurances of the Mortgaged Vessels to be executed by the appropriate Shipowning Guarantor in favor of the Agent or the Westhampton Trustee, as the case may be, pursuant to in the case of Existing Guarantors, the Original Credit Agreement as amended and restated hereby and, in the case of the New Guarantors, Section 4.1 substantially in the form set out in Exhibit 9 or in such other form as the Agent may require; "Interest Notice" a notice delivered to the Agent pursuant to Section 6.5 specifying the duration of any relevant Interest Period; "Interest Period(s)" period(s) of one (1), two (2), three (3) or six (6) months selected by the Borrower or such other period(s) as may be agreed between the Borrower and the Lenders; "Intrepid Ship Management, Inc." Intrepid Ship Management, Inc., a corporation organized and existing under the laws of the State of Delaware; "ISM Code" means the International Safety Management Code for the Safe Operating of Ships and for Pollution Prevention constituted pursuant to Resolution A.741(18) of the International Maritime Organization and incorporated into the Safety of Life at Sea Convention including any amendments or extensions thereto and any regulation issued pursuant thereto; 10 19 "Key Management Agreements" a) that certain vessel operating agreement between Marine Transport Management and Union Carbide Corporation, dated as of January 1, 1996, for the United States flag vessel CHEMICAL PIONEER (Official No. 661060) and any renewals or extensions thereof, b) that certain operating agreement, dated December 18, 1979 between Marine Alaska and Marine Transport Management, relating to the United States flag vessel B.T. ALASKA (Official No. 590208) and any renewals or extensions thereof, c) that certain vessel management agreement between .Marine Transport Corporation and OMI Challenger Transport, dated as of January 29, 1997, as amended, for the OMI COLUMBIA and any renewals or extensions thereof , d) that certain contract No. DTMA98-98-C-00004, awarded June 12, 1998, between the Borrower and MARAD relating to the United States flag vessels CAPE COD and CAPE CHALMERS and any renewals or extensions thereof, e) that certain contract No. DTMA98-98-C-00009, awarded June 12, 1998, between the Borrower and MARAD relating to the United States flag vessels CAPE EDMONT and CAPE DUCATO and any renewals or extensions thereof, f) that certain contract No. DTMA98-98-C-00010, awarded June 12, 1998, between the Borrower and MARAD relating to the United States flag vessels CAPE DECISION and CAPE DOUGLAS and any renewals or extensions thereof, 11 20 g) that certain contract No. DTMA98-98-C-00011, awarded June 12, 1998, between the Borrower and MARAD relating to the United States flag vessels CAPE DIAMOND, and CAPE DOMINGO and any renewals or extensions thereof, and h) that certain contract NO: DTMA98-98-C-00033, awarded June 12, 1998, between the Borrower and MARAD relating to the United States flag vessels CAPE BON and NORTHERN LIGHT and any renewals or extensions thereof; "Liberian Mortgages" those first preferred Liberian ship mortgages on the each Mortgaged Vessel registered under the laws and flag of the Republic of Liberia to be executed by the appropriate Shipowning Guarantor in favor of the Agent pursuant to the Original Credit Agreement as amended and restated hereby substantially in the form set out in Exhibit 6 or in such other form as the Agent may require; "LIBOR" the rate (rounded upward to the nearest 1/16th of one percent) for deposits of Dollars for a period equivalent to the relevant Interest Period at or about 11:00 a.m. (London time) on the second London Banking Day before the first day of such period as displayed on Telerate page 3750 (British Bankers' Association Interest Settlement Rates) (or such other page as may replace such page 3750 on such system or on any other system of the information vendor for the time being designated by the British Bankers' Association to calculate the BBA Interest Settlement Rate (as defined in the British Bankers' Association's Recommended Terms and Conditions ("BBAIRS" terms) dated August 1985)), provided that if on such date no such rate is so displayed for the relevant Interest Period, LIBOR for 12 21 such period shall be the rate offered by the Agent for deposits of Dollars in an amount approximately equal to the amount for which LIBOR is to be determined for a period equivalent to the relevant Interest Period to prime banks in the London Interbank Market at or about 11:00 a.m. (London time) on the second Banking Day before the first day of such period; "Majority Lenders" Lenders whose Commitments exceed sixty-seven percent (67%) of the total Commitments; "Management Agreements" the management and/or operating contracts listed on Schedule 6 hereto; "MARAD" the United States Maritime Administration: "Marine Alaska" Marine Alaska, Inc., a Delaware corporation; "Marine Car Carriers (Del) " Marine Car Carriers, Inc., a Delaware corporation; "Marine Car Carriers (MI) " Marine Car Carriers, Inc. (M.I.), a Marshall Islands corporation; "Marine Transport Corporation" Marine Transport Corporation, a corporation incorporated under the laws of the State Delaware and formerly named OMI Corp.; "Marine Transport Management" Marine Transport Management, Inc., a corporation incorporated under the laws of the State of Delaware; "Margin" the meaning ascribed thereto in Section 6.3; "MARINE CHEMIST" that certain 1970 built 36,526 dwt chemical tanker named MARINE CHEMIST, Official No. 529399, documented under the laws and flag of the United States in the name of Marine Chemical Navigation Corporation; 13 22 "MARINE DUVAL" that certain 1970 rebuilt 25,131 dwt molten sulphur carrier named MARINE DUVAL, Official No. 245851, documented under the laws and flag of the United States in the name of Marine Sulphur Shipping Corporation; "Materials of Environmental Concern" the meaning ascribed thereto in Section 2.1(p); "MCCMI Shareholders Agreement" that certain shareholders agreement among the shareholders of Marine Car Carriers (MI) dated as of March 1, 1995; "Mortgage Amendments" those certain amendments to the Mortgages to be executed by each of the Shipowning Guarantors in respect of its Mortgaged Vessel in the forms set out in Exhibits 5 and 7 or in such other form as the Agent may agree; "Mortgaged Vessels" the Vessels identified on Schedule 4; "Mortgages" the U.S. Mortgages and the Liberian Mortgages as amended by the Mortgage Amendments, and the Mortgages over the New Mortgaged Vessels; "Mortgages Securing the those certain first preferred ship OMI Debt" mortgages over the Workboats in favor of the OMI and securing the OMI Debt; "Negative Pledge" the negative pledge by OMI Challenger Transport of any of its interest in the OMI COLUMBIA or any Vessel Agreement relating to such Vessel substantially in the form of Exhibit 16. "New Guarantors" each of the companies listed on Part B of Schedule 2; "New Mortgaged Vessels" the COURIER, PATRIOT, ROVER, OMS MAVERICK and OMS TRAVIS; 14 23 "Notes" the Term Loan Note and the Revolving Credit Facility Note; "OMI" OMI Corporation, a corporation incorporated under the laws of the Marshall Islands; "OMI Challenger Transport" OMI Challenger Transport, Inc., a corporation incorporated under the laws of the State of Delaware; "OMI COLUMBIA" that certain 1974 built 138,698 dwt oil tanker named OMI COLUMBIA, Official No. 663428, documented under the laws and flag of the United States in the name of Argosy; "OMI Debt" Indebtedness of Marine Transport Corporation to OMI in the original principal amount of Six Million Four Hundred Forty-Three Thousand Dollars ($6,443,000); "OMI COLUMBIA Loan Documents" that certain credit agreement dated as of January 29, 1997 among Citicorp North American, Inc., as agent, the Lenders (as defined therein), Argosy, et al, and any documents executed in connection therewith or securing any obligation owing thereunder; "OMS MAVERICK" the United States flag vessel OMS MAVERICK, Official No. 517406, registered in the name of OMI Petrolink Corp.; "OMS TRAVIS" the United States flag vessel OMS TRAVIS, Official No. 587445, registered in the name of OMI Petrolink Corp.; "Operator" means any Person approved by the Agent who is from, time to time during the Security Period, concerned with the operation of a Vessel and falls within the 15 24 definition of "Company" set out in rule 1.1.2 of the ISM Code; "Other Vessels" the vessels identified on Schedule 5; "PATRIOT" that certain 1976 built 35,662 dwt product tanker named PATRIOT, Official No. 571049, documented under the laws and flag of the United States in the name of Patriot Transport, Inc.; "Permitted Indebtedness" collectively, the Indebtedness incurred under this Agreement, the Related Indebtedness, the OMI Indebtedness and Permitted Third Party Debt; "Permitted Liens" the meaning ascribed thereto in Section 9.1(B)(i); "Permitted Third Party Debt" Indebtedness, incurred with recourse to any Security Party or any other party owned directly or indirectly by Marine Transport Corporation and for the purposes of acquiring new assets or supporting MARAD vessel management contracts, not to exceed, in the aggregate, the principal amount of Twenty Million Dollars ($20,000,000) outstanding at any time; "Person" means any individual, sole proprietorship, corporation, partnership (general or limited), business trust, bank, trust company, joint venture, association, joint stock company, trust or other unincorporated organization, whether or not a legal entity, or any government or agency or political subdivision thereof; "Plan" any employee benefit plan covered by Title IV of ERISA; "Related Credit Agreement" that certain term loan and revolving credit agreement of even date herewith among Marine Transport Corporation, as borrower, the Lenders and the Agent, as 16 25 the same may hereafter be amended or supplemented; "Related Indebtedness" the Indebtedness of the Security Parties owed under and in connection with the Related Credit Agreement; "Related Security Documents" the "Security Documents" as defined in the Related Credit Agreement; "Related Term Loan" the "Term Loan" as defined in the Related Credit Agreement; "Relevant Contracts" a) that certain time charter, dated April 31, 1982, of the MARINE DUVAL to Freeport MacMoran Resource Partners, Limited Partnership and any renewals or extensions thereof; b) the contract of affreightment, dated as of January 1, 1996, with Shell Oil Company for the MARINE CHEMIST and any renewals or extensions thereof; c) the contract of affreightment, dated September 24, 1994, with PPG Industries, Inc. for the MARINE CHEMIST and any renewals or extensions thereof; d) the contract of affreightment, dated as of July 1, 1996, with ARCO Products Company for the MARINE CHEMIST and any renewals or extensions thereof; e) that certain bareboat charter dated on or about July 29, 1965, of the CALINA between Oswego Chemical Carriers Corporation, as owner, and Oswego Corporation, as charterer and any renewals or extensions thereof; f) that certain time charter, dated as of March 14, 1978 between Marine Alaska, Inc. and BP Oil Shipping Company, USA, for the United States flag vessel B.T. 17 26 ALASKA (Official No. 590208) and any renewals or extensions thereof; g) that certain time charter, dated as of June 1, 1994 between OMI Challenger Transport and BP Oil Shipping Company, USA for the OMI COLUMBIA, and h) that certain time charter, dated as of January 29, 1997 between Argosy and OMI Challenger Transport in respect of the OMI COLUMBIA and any renewals or extensions thereof; "Revolving Credit Facility" the sums heretofore advanced and still outstanding and hereafter to be advanced by the Lenders to the Borrower in an aggregate amount not to exceed at any one time outstanding One Million Dollars ($1,000,000) pursuant to Section 3.3; "Revolving Credit Facility Advance" any amount advanced to the Borrower under the Revolving Credit Facility on any Revolving Credit Facility Drawdown Date; "Revolving Credit Facility Applicable Rate" any rate of interest on the Revolving Credit Facility Balance from time to time prescribed by Section 6.2; "Revolving Credit Facility Balance" the outstanding Dollar amount of the Revolving Credit Facility Advances at any relevant time; "Revolving Credit Facility Default Rate" has the meaning ascribed thereto in Section 6.2; "Revolving Credit Facility Drawdown Date" each date which is a Banking Day not later than May ____, 2003, upon which the Borrower has requested any Revolving Credit Facility Advance as provided in Section 3.3; "Revolving Credit Facility Note" the amended and restated promissory note, amending and restating the "Revolving Credit Facility Note" (as defined in the 18 27 Original Credit Agreement) to be executed by the Borrower to the order of the Lenders to evidence the Revolving Credit Facility substantially in the form set out in Exhibit 2 or in such other form as the Agent may require; "ROVER" that certain 1977 built 35,662 dwt product tanker named ROVER, Official No. 577241, documented under the laws and flag of the United States in the name of Rover Transport, Inc.; "SAVONETTA" that certain 10,947 dwt Liberian flag ammonia tanker named SAVONETTA, Official No. 2129, documented under the laws and flag of the Republic of Liberia in the name of Oswego Chemical Carriers Corporation; "Security Documents" the Mortgages, the Assignments, the Assignment Notices, the Consents and Agreements, the Negative Pledge and any other documents that may be executed as security for the Term Loan and/or the Revolving Credit Facility and the Borrower's obligations arising therefrom; "Security Parties" the Borrower and each Guarantor; "Security Period" the period from the initial Drawdown Date of the initial Term Loan Advance to the date upon which all amounts owing under the Term Loan and the Revolving Credit Facility and all other amounts due to the Lenders, the Agent and the Westhampton Trustee pursuant to the Financing Documents are prepaid in full or become repayable and are repaid in full and no further Revolving Credit Facility Advances are available; "Shipowning Guarantors" each of the Guarantors which owns a Mortgaged Vessel; 19 28 "SMC" means a safety management certificate issued for a Vessel in accordance with rule 13 of the ISM Code; 7 "Taxes" any present or future income or other taxes, levies, duties, charges, fees, deductions, or withholdings of any nature now or hereafter imposed, levied, collected, withheld or assessed by any taxing authority whatsoever, except for taxes on or measured by the income of the Agent or any Lender imposed by the Agent's or such Lender's jurisdiction of organization, the jurisdiction of the principal place of business of the Agent or such Lender, the United States of America, the State or City of New York or any governmental subdivision or taxing authority of any of them or by any other jurisdiction or taxing authority having jurisdiction over the Agent or such Lender (unless such jurisdiction is asserted by reason of the activities of the Security Parties or any of them); "Term Loan" the sum advanced by the Lenders pursuant to the Original Credit Agreement in the current outstanding principal amount of Twelve Million One Hundred Thirteen Thousand Dollars ($12,113,000); "Term Loan Advance" the amount advanced to the Borrower pursuant to Section 3.2 on a Term Loan Drawdown Date; "Term Loan Applicable Rate" any rate of interest on the Term Loan Balance from time to time applicable pursuant to Section 6.1; "Term Loan Balance" the Dollar amount of the Term Loan at any relevant time as reduced by payments pursuant to the terms of this Agreement; "Term Loan Default Rate" has the meaning ascribed thereto in Section 6.1; 20 29 "Term Loan Drawdown Date" each date, which is a Banking Day not later than August 15, 1996, upon which the Borrower has requested that a Term Loan Advance be made available to the Borrower as provided in Section 3.2; "Term Loan Note" the amended and restated promissory note, amending and restating "Term Loan Note A" (as defined in the Original Credit Agreement) to be executed by the Borrower to the order of the Lenders to evidence the Term Loan substantially in the form set out in Exhibit 1 or in such other form as the Agent may require; "Term Loan Payment Dates" (i) September ____, 1998 and (ii) each of the dates falling at intervals of three (3) months after such date up to and including the Final Payment Date, provided, however, that if any such day is not a Banking Day, the next following Banking Day, unless such next following Banking Day falls in the following calendar month, in which case the relevant Term Loan Payment Date shall be the immediately preceding Banking Day; "Total Debt" the Indebtedness of Marine Transport Corporation on a consolidated basis; "Total Loss" the actual, agreed, arranged or compromised total loss of any Vessel; "Unrestricted Cash and Cash Equivalents" cash or Cash Equivalents (excluding, however, undrawn amounts available under the Revolving Credit Facility or under the Related Credit Agreement) which are free of liens and unencumbered to any party other than the Agent, the Lenders and the Westhampton Trustee in connection herewith; "U.S. Mortgages" the first preferred United States ship mortgages on each Mortgaged Vessel registered under the laws and flag of the 21 30 United States of America to be executed by the appropriate Shipowning Guarantor in favor of the Westhampton Trustee pursuant to, in the case of Existing Guarantors, the Original Credit Agreement as amended and restated and, in the case of New Guarantors, Section 4.1 substantially in the form set out in Exhibit 4 or in such other form as the Agent may require; "Vessel Agreements" a) the Relevant Contracts; b) that certain time charter, dated January 1, 1985 (as amended), of the SAVONETTA to Hydro Agri Ammonia, Inc.; c) that certain time charter, dated September 16, 1987 (as amended), of the CALINA to Hydro Agri Ammonia, Inc.; d) that certain time charter, dated January 1, 1985 (as amended), of the AMELINA to Hydro Agri Ammonia, Inc.; e) the Mortgage(s) securing the OMI Debt; and f) the OMI COLUMBIA Loan Documents. "Vessels" the Mortgaged Vessels and the Other Vessels; "Westhampton Trustee" Fleet National Bank, a national banking association, as trustee pursuant to the Westhampton Indenture; "Westhampton Indenture" the Trust Indenture, dated as of July 23, 1996, between the Lenders and the Westhampton Trustee pursuant to the Original Credit Agreement substantially in the form set out in Exhibit 18 or in such other form as the Agent may require; 22 31 "Wolfson" The Wolfson Descendants' 1983 Trust, a grantor trust established under the laws of New Jersey; and "Work Boats" the United States flag vessels OMS HARRIS (Official No. 650997), OMS NUECES (Official No. 570688), OMS LIBERTY (Official No. 602050) and OMS SHELBY (Official No. 603076) "Year 2000 Issue" the failure of computer software, hardware and firmware systems and equipment containing embedded computer chips properly to receive, transmit or in any other way utilize data and information due to the occurrence of the year 2000 or the inclusion of dates on or after January 1, 2000. 1.2 Construction. Words importing the singular number only shall include the plural and vice versa. Words importing persons shall include companies, firms, corporations, partnerships, unincorporated associations and their respective successors and assigns. 1.3 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles as in effect from time to time in the United States of America consistently applied ("GAAP") and all financial statements submitted pursuant to this Agreement shall be prepared in accordance with, and all historical financial data submitted pursuant hereto shall be derived from financial statements prepared in accordance with, GAAP. 2. REPRESENTATIONS AND WARRANTIES 2.1 In order to induce the Agent and the Lenders to amend and restate the Original Credit Agreement as provided herein and to continue to maintain the Term Loan and the availability of the Revolving Credit Facility, the Borrower hereby represents and warrants to the Agent and the Lenders (which representations and warranties shall survive the execution and delivery of this Agreement and the Notes and the making of such advances) that: (a) Due Organization and Power. Each of the Security Parties is duly formed and is validly existing in good standing under the laws of its jurisdiction of incorporation, has full power to carry on its business as now being conducted and to enter into and perform its obligations under those Financing Documents to which is or is to be a party pursuant to this Agreement, and has complied with all (i) statutory, regulatory and other requirements relative to such business; and (ii) such agreements which if not 23 32 complied with, could reasonably be expected to have a material adverse effect on its business, assets or operations, financial or otherwise; (b) Authorization and Consents. All necessary corporate action has been taken to authorize, and all necessary consents and authorities have been obtained and remain in full force and effect to permit, each Security Party to enter into and perform its obligations under those Financing Documents to which it is or is to be a party pursuant to this Agreement and, in the case of the Borrower, to borrow, service and repay the Term Loan and the Revolving Credit Facility and, as of the date of this Agreement, no further consents or authorities are necessary for the borrowing, service and repayment of the Term Loan and/or the Revolving Credit Facility or any part thereof; (c) Binding Obligations. Each of the Financing Documents constitutes or, when executed will constitute, the legal, valid and binding obligation of each Security Party which is a party thereto enforceable against such Security Party in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting generally the enforcement of creditors' rights; (d) No Violation. The execution and delivery of, and the performance of the provisions of, each Financing Document by each Security Party which is a party thereto do not, and will not during the Security Period, contravene any applicable law or regulation existing at the date hereof or any contractual restriction binding on such Security Party or its certificate of incorporation, by-laws or equivalent documents; (e) Litigation. Except as set forth on Schedule 7 hereto, no action, suit or proceeding is pending or threatened against any Security Party before any court, board of arbitration or administrative agency which (after taking into account the benefits of any applicable insurance which can reasonably be expected to be recovered by the relevant Security Party, as the case may be) could or might result in any material adverse change in the business or condition (financial or otherwise) of any thereof; (f) No Default. No Security Party or Marine Car Carriers (MI) is in default under any material agreement by which it is bound, or is in default in respect of any material financial commitment or obligation; (g) Vessels. As of the date hereof: (i) each of the Mortgaged Vessels is in the sole and absolute ownership of the respective Guarantor, as listed opposite its name in Schedule 4, unencumbered, save and except for, the respective Mortgage recorded thereagainst, the relevant Related Security Documents and the respective Vessel Agreements, and duly registered in the name of such Guarantor under the respective flag as set forth in Schedule 4; 24 33 (ii) each of the Other Vessels is in the sole and absolute ownership of an Affiliate of the Borrower or, in the case of OMI COLUMBIA, Argosy, as listed opposite its name in Schedule 5, unencumbered, save and except for, the respective Vessel Agreements, and duly registered in the name of such Affiliate of the Borrower under the respective flag as set forth in Schedule 5; (iii) each Vessel will be classed in the highest classification and rating for vessels of the same age and type with the respective classification society as set forth in Schedules 4 and 5 without any material outstanding recommendations; (v) each Vessel will be operationally seaworthy and in all material respects fit for its intended service; (v) each of the Mortgaged Vessels will be insured in accordance with the provisions of the governing Mortgage in favor of the Agent or the Westhampton Trustee, as the case may be, and the requirements thereof for such insurances will have been complied with and each of the Other Vessels will be insured against such risks, in such amounts and with such insurance companies as would a reasonably prudent shipowner engaged in the same trades; and (vi) each Vessel subject to a charter or other contract of carriage constituting a Vessel Agreement has been accepted by its respective charterer and is in service under such Vessel Agreement; (h) Insurance. Each of the Security Parties has insured its properties and assets against such risks and in such amounts as are customary for companies engaged in similar businesses; (i) Citizenship and Qualification as Owner. Each Security Party or other Affiliate of the Borrower owning a United States flag Vessel is a United States citizen within the meaning of Section 2 of the United States Shipping Act, 1916, as amended (46 U.S.C. ss.802), qualified to own and operate vessels in the coastwise trade of the United States of America and each Security Party or other Affiliate of the Borrower which is the registered owner of a Vessel registered under a flag other than the United States of America is duly qualified under the laws of such flag to be the registered owner and operator of a vessel registered under such flag; 25 34 (j) Financial Information. Except as otherwise disclosed in writing to the Agent on or prior to the date hereof, all financial statements, information and other data furnished by the Borrower to the Agent are complete and correct, and such financial statements have been prepared in accordance with GAAP and accurately and fairly present the financial condition of the parties covered thereby as of the respective dates thereof and the results of the operations thereof for the period or respective periods covered by such financial statements and since such date or dates, there has been no material adverse change in the financial condition or results of the operations of any of such parties and none thereof has any contingent obligations, liabilities for taxes or other outstanding financial obligations which are material in the aggregate except as disclosed in (a) such statements, information and data or (b) in Schedule 7 prepared pursuant to Section 2.1(e) of this Agreement; (k) Tax Returns. Except as previously advised to the Lender in writing, each Security Party has filed all tax returns required to be filed thereby and has paid all taxes payable thereby which have become due, other than those (a) not yet delinquent or the nonpayment of which would not have a material adverse effect on such Security Party; and (b) being contested in good faith and by appropriate proceedings or other acts and for which adequate reserves have been set aside on its books; (l) ERISA. The execution and delivery of this Agreement and the consummation of the transactions hereunder will not involve any prohibited transaction within the meaning of ERISA or Section 4975 of the Code and no condition exists or event or transaction has occurred in connection with any Plan maintained or contributed to by any Security Party or any ERISA Affiliate (as such term is hereinafter defined) resulting from the failure of any such party to comply with ERISA insofar as ERISA applies thereto which is reasonably likely to result in such Security Party or any ERISA Affiliate incurring any liability, fine or penalty which individually or in the aggregate would have a material adverse effect on such Security Party or ERISA Affiliate. As used herein the term "ERISA Affiliate" means a trade or business (whether or not incorporated) which is under common control with the Security Party in question within the meaning of Sections 414(b), (c), (m) or (o) of the Code. Prior to the date hereof, the Borrower has delivered to the Agent a list of all the employee benefit plans to which each Security Party or any ERISA Affiliate is a "party in interest" (within the meaning of Section 3(14) of ERISA) or a "disqualified person" (within the meaning of Section 4975(e)(2) of the Code); (m) Chief Executive Office. Each Security Party's chief executive office and chief place of business and the office in which the records relating to the earnings and other receivables of such Security Party are kept is, and will continue to be, located at 1200 Harbour Boulevard, 9th Floor, Weehawken, New Jersey or, in the case of OMI Petrolink Corp. and its Subsidiaries, 4606 FM 1960 West Suite 200, Houston, Texas and. in the case of Intrepid Ship Management Inc., 370 Seventh Avenue, 11th Floor, New York, New York; 26 35 (n) Foreign Trade Control Regulations. None of the transactions contemplated herein will violate any of the provisions of the Foreign Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 500, as amended), any of the provisions of the Cuban Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 515, as amended), any of the provisions of the Libyan Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 550, as amended), any of the provisions of the Iraqi Sanctions Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 575, as amended), any of the provisions of the Iranian Transactions Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, part 560, as amended), any of the provisions of the Federal Republic of Yugoslavia (Serbia and Montenegro) Assets Control Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 585 as amended) or any of the provisions of the Regulations of the United States of America Governing Transactions in Foreign Shipping of Merchandise (Title 31, Code of Federal Regulations, Chapter V, Part 505, as amended); (o) Equity Ownership. Each of the Security Parties (other than Marine Transport Corporation) is a direct or indirect wholly-owned subsidiary of the Marine Transport Corporation. As of the date hereof, Marine Transport Corporation will not own any shares of capital stock, partnership interest or any other direct or indirect equity interest in any corporation, partnership or other entity except the Security Parties and the companies listed on Schedule 3; (p) Environmental Matters. Except as heretofore disclosed on Schedule 7, (i) each of the Security Parties and their Environmental Affiliates will, when required, be in full compliance with all applicable United States federal and state, local, foreign and international laws, regulations, conventions and agreements relating to pollution prevention or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, navigable waters, waters of the contiguous zone, ocean waters and international waters), including, without limitation, laws, regulations, conventions and agreements relating to (1) emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous materials, oil, hazardous substances, petroleum and petroleum products and by-products ("Materials of Environmental Concern"), or (2) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern ("Environmental Laws"); (ii) each of the Security Parties and their Environmental Affiliates will, when required, have all permits, licenses, approvals, rulings, variances, exemptions, clearances, consents or other authorizations required under applicable Environmental Laws ("Environmental Approvals") and will, when required, be in full compliance with all Environmental Approvals required to operate their business as then being conducted; (iii) none of the Security Parties or their Environmental Affiliates has received any notice of any claim, action, cause of action, investigation or demand by any person, entity, enterprise or government, or any political subdivision, intergovernmental body or agency, department or instrumentality thereof, alleging potential liability for, or a requirement to incur, 27 36 investigatory costs, cleanup costs, response and/or remedial costs (whether incurred by a governmental entity or otherwise), natural resources damages, property damages, personal injuries, attorneys' fees and expenses, or fines or penalties, in each case arising out of, based on or resulting from (1) the presence, or release or threat of release into the environment, of any Materials of Environmental Concern at any location, whether or not owned by such person, or (2) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law or Environmental Approval ("Environmental Claim") (other than Environmental Claims that have been fully and finally adjudicated or otherwise determined and all fines, penalties and other costs, if any, payable by the Security Parties or any Environmental Affiliate any thereof in respect thereof have been paid in full or are fully covered by insurance (including permitted deductibles)); and (iv) there are no circumstances existing as of the date hereof that may prevent or interfere with such full compliance in the future; (q) Pending, Threatened or Potential Environmental Claims. Except as heretofore disclosed on Schedule 7 there are no (1) Environmental Claims pending or threatened against any Security Party or its Environmental Affiliates and (2) past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge or disposal of any Materials of Environmental Concern, that could form the basis of any Environmental Claim against any Security Party or its Environmental Affiliates; (r) Compliance with ISM Code. Each Vessel and any Operator complies with the requirements of the ISM Code, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto; (s) Threatened Withdrawal of DOC or SMC. There is no threatened or actual withdrawal of any Operator's DOC or the SMC in respect of any Vessel; and (t) Year 2000 Issue. The Borrower and each of the guarantors have reviewed the effect of the Year 2000 Issue on the computer software, hardware and firmware systems and equipment containing embedded microchips owned or operated by or for the Borrower and the Guarantors or used or relied upon in the conduct of their business (including systems and equipment supplied by others or with which such computer systems of the Borrower and the guarantors interface). The costs to the Borrower and the Guarantors of any reprogramming required as a result of the Year 2000 Issue to permit the proper functioning of such systems and equipment and the proper processing of data, and the testing of such reprogramming, and of the reasonably foreseeable consequence of the year 2000 Issue to the Borrower or any of the Guarantors (including reprogramming errors and the failure of systems or equipment supplied by others) are not reasonably expected to result in a Default or Event of Default or to have a material adverse effect on the business, assets, operations, prospects or condition (financial or otherwise) of the Borrower or any of the Guarantors. 28 37 3. ADVANCES 3.1 Purposes. (a) The proceeds of Term Loan shall be applied solely and exclusively for the purpose of refinancing the Former Lenders Indebtedness together with a portion of the indebtedness owed to Harrowston and Wolfson and previously repaid by the Borrower, on a pro rata basis, to Harrowston and Wolfson in the principal amount of approximately One Million Three Hundred Thirty-Five Thousand Dollars ($1,335,000)and (b) the proceeds of Revolving Credit Facility shall be applied solely and exclusively for working capital purposes of the Borrower and the Guarantors. 3.2 Term Loan Advances. Each of the Lenders, relying upon each of the representations and warranties set out in Section 2, hereby agrees with the Borrower that, subject to and upon the terms of this Agreement, it will on the Term Loan Drawdown Dates, make the Term Loan Advances available to the Borrower in an aggregate amount not to exceed, on a pro rata basis, its Commitment for its respective portion of the Term Loan, provided, however, that (a) the Term Loan may only be drawn down in a single Advance and (b) to the extent that any portion of the Term Loan remains undrawn as of 12:00 noon (New York time) on October 31, 1996, each Lender's commitment to advance such undrawn portion of its Commitment thereunder shall expire. 3.3 Revolving Credit Facility Advances. Each of the Lenders, relying upon each of the representations and warranties set out in Section 2, hereby agrees with the Borrower that, subject to the terms of this Agreement, it will on or before 12:00 noon New York time on the Revolving Credit Facility Drawdown Dates make the Revolving Credit Facility Advances available to the Borrower in an aggregate amount not to exceed, on a pro rata basis, its Commitment for its respective portion of the Revolving Credit Facility, provided, however, that (a) each such Advance shall be in the minimum amount of One Hundred Thousand Dollars ($100,000) and (b) the maximum aggregate amount of all Revolving Credit Facility Advances which may be outstanding under this Agreement is One Million Dollars ($1,000,000), as the same may be reduced pursuant to Section 5.7. Within the limits of the Revolving Credit Facility and upon the conditions herein provided, the Borrower may from time to time, and on as many occasions as the Borrower may deem appropriate, borrow pursuant to this Section 3.3, repay pursuant to Section 5.2 and reborrow pursuant to this Section 3.3. 3.4 Drawdown Notice. The Borrower shall not less than three (3) Banking Days before any Drawdown Date serve a notice (a "Drawdown Notice") on the Agent, substantially in the form set out in Exhibit 15 or in such other form as the Agent may agree, which notice shall (a) be in writing addressed to the Agent, (b) be effective upon receipt by the Agent as aforesaid, provided it is received before 11:00 a.m. New York time (otherwise it shall be deemed to have been received on the next Banking Day), (c) specify the Banking Day on which the relevant Advance is to be drawn down, (d) specify the initial Interest Period, (e) specify the disbursement instructions and (f) be irrevocable. 29 38 3.5 Effect of Drawdown Notice. Each Drawdown Notice shall be deemed to constitute a warranty by the Borrower that (a) the representations and warranties stated in Section 2 (updated mutatis mutandis) are true and correct in all material respects on the date of such Drawdown Notice and will be true and correct in all material respects on such drawdown date as if made on such date, and (b) that no Event of Default or any event which with the giving of notice or lapse of time or both would constitute an Event of Default has occurred and is continuing. 3.6 Notation of Advances. Each Revolving Credit Facility Advance made by the Lenders to the Borrower may be evidenced by a notation of the same made by the Agent on the grid attached to the Revolving Credit Facility Note, which notation, absent manifest error, shall be prima facie evidence of the amount of the relevant Advance. 4. CONDITIONS 4.1 Conditions to Restructure the Term Loan and Revolving Credit Facility. The obligation of the Lenders to restructure the Term Loan and the Revolving Credit Facility as provided in this Agreement is expressly subject to the satisfaction of the following conditions precedent: (a) the Agent shall have received the following documents in form and substance satisfactory to the Agent and its legal advisors: (i) copies, certified as true and complete by an officer of each Security Party, of the resolutions of the board of directors and, in the case of the Guarantors (other than Marine Transport Corporation), the shareholders thereof evidencing approval of this Agreement and the other Financing Documents called for hereby to which such Security Party is a party and authorizing an appropriate officer or officers or attorney-in-fact or attorneys-in-fact to execute the same on its behalf; (ii) copies, certified as true and complete by an officer of the Borrower or other party acceptable to the Agent, of all documents evidencing any other necessary action (including actions by such parties thereto other than the Borrower as may be required by the Agent), approvals or consents with respect to the Financing Documents; (iii) copies, certified as true and complete by an officer of the respective Security Party of the certificate of incorporation and by-laws (or equivalent instruments) thereof; (iv) a certificate of the Secretary of the Marine Transport Corporation certifying that it legally and beneficially, 30 39 directly or indirectly, owns all of the issued and outstanding shares of the capital stock of each of the Borrower and the other Guarantors, in each case, free and clear of any liens, claims, pledges or other encumbrances; (v) a certificate of the Secretary of Marine Car Carriers (Del) certifying that it legally and beneficially owns fifty percent (50%) of the issued and outstanding shares of Marine Car Carriers (MI), free and clear of any liens, claims, pledges or other encumbrances whatsoever except for a pledge in favor of the Agent; (vi) certificate of the Secretary of each Security Party (other than Marine Transport Corporation) certifying as to the record ownership of all of its issued and outstanding capital stock; (vii) certificates of the jurisdiction of incorporation of each Security Party as to the good standing of such corporation; (viii) copies of each Vessel Agreement, Management Agreement, the MCCMI Shareholders Agreement, all agreements and other documents evidencing Permitted Indebtedness and Permitted Liens outstanding and existing as of the date hereof and the Acquisition Agreement each certified by an officer of Marine Transport Corporation to be a true and complete copy thereof; (ix) letters, in form and substance satisfactory to the Agent, from counsel representing the Borrower (or its relevant Affiliate) in connection with each action, suit or proceeding listed on Schedule 7 or in connection with any Environmental Claim disclosed to the Agent, regarding details of such action, suit, proceeding or claim including a description of the nature of the claim, and the Borrower's (or its Affiliate's) potential liabilities and an opinion as to the likely outcome of the relevant matter; and (x) a pro forma consolidated balance sheet for Marine Transport Corporation, certified to be true and correct by the chief financial officer of such Guarantor, demonstrating that, as of the date hereof and after giving effect to the transactions contemplated hereby and by the Related Credit Agreement and the Acquisition Agreement, such Guarantor has Unrestricted Cash and Cash Equivalents in an amount at least equal to Two Million Dollars ($2,000,000) (for 31 40 purposes of determining compliance with this condition, Unrestricted Cash or Cash Equivalents held by Marine Car Carriers (MI) for the benefit of Marine Car Carriers (Del) shall be calculated on the basis of the Borrower's share of such sums after deduction of any taxes that would be payable (as of the time of determination) upon the distribution and repatriation of such sums by Marine Car Carriers (MI) to Marine Car Carriers (Del) or any of the Affiliate of the Borrower). (b) the Agent shall have received evidence satisfactory to it and its legal advisors that: (i) each of the Mortgaged Vessels is in the sole and absolute ownership of the respective Guarantors, other Affiliates of the Borrower as set forth in Schedules 4 and 5 or Argosy save and except for, in the case of the Mortgaged Vessels, the respective Mortgage recorded thereagainst and for the respective Vessel Agreements and Related Security Documents, and duly registered in the name of such Guarantor or such Affiliate under the respective flag as set forth in Schedules 4 and 5; (ii) each Vessel is classed in the highest classification and rating for vessels of the same age and type with the respective classification society as set forth in Schedules 4 and 5 without any material outstanding recommendations; (iii) each of the Vessels is operationally seaworthy and in every material respect fit for its intended service; (iv) each of the Mortgaged Vessels will be insured in accordance with the provisions of the Mortgage on her in favor of the Agent or the Westhampton Trustee, as the case may be, and the requirements thereof in respect of such insurances will have been met and each of the Other Vessels will be insured against such risks, in such amounts and with such insurance companies as would be required by a reasonably prudent shipowner engaged in the same trades; (v) each Vessel subject to a charter or other contract of carriage constituting a Vessel Agreement has been accepted by its respective charterer and is in service under such Vessel Agreement; and 32 41 (vi) that, except as provided in the Financing Documents, there are no restrictions or limitations on the Borrower's ability to withdraw or apply any the funds of Marine Car Carriers (MI) held for the benefit of Marine Car Carriers (Del) and payable to the Borrower for such purposes as the Borrower may deem fit. (c) the Borrower shall have duly executed and delivered: (i) this Agreement and (ii) the Notes; (d) each Guarantor shall have executed and delivered: (i) the Guaranty, (ii) the Consent and Agreement and Account Assignment provided at the end of this Agreement, and (iii) Uniform Commercial Code Financing Statements for filing in New Jersey; (e) each Shipowning Guarantor shall have duly executed and delivered: (i) in the case of Existing Guarantors, its Mortgage Amendment; (ii) in the case of New Guarantors: (A) the Mortgage over its Mortgaged Vessel(s), (B) an Insurances Assignment with respect to such Vessel(s), (C) an Earnings Assignment with respect to such Vessel(s), (D) its Assignment Notices, and (E) Uniform Commercial Code Financing Statements for filing in New Jersey and, for Guarantors incorporated in Delaware, Delaware; 33 42 (f) OMI Challenger Transport shall have duly executed and delivered the Negative Pledge: (g) the New Guarantors which do not own a Mortgaged Vessel (other than OMI Challenger Transport) shall have executed and delivered: (i) its General Security Agreement, and (ii) Uniform Commercial Code Financing Statements for filing in New Jersey and in its jurisdiction of incorporation; (h) Intrepid Ship Management, Inc. shall have executed and delivered: (i) its Assignment of Government Receivables, (ii) its Assignment Notices, and (iii) Uniform Commercial Code Financing Statements for filing in New Jersey and in its jurisdiction of incorporation; (i) Marine Transport Corporation shall have executed and delivered: (i) its Assignment of Vessel Management Receivables; (ii) its Assignment Notices and (iii) Uniform Commercial Code Financing Statements for filing in New Jersey and in its jurisdiction of incorporation; (j) the Agent shall have received appraisals, in form and substance satisfactory to the Agent, from two independent shipbrokers acceptable to the Agent evidencing that the Borrower is in compliance with Section 9.3, each of which appraisals shall be dated, and the appraisals contained therein shall be as of a date, no earlier than ninety (90) days prior to the date hereof; (k) the Agent shall have received a certificate of the chief financial officer of each Guarantor (other than Marine Transport Corporation) confirming the representations and warranties with respect to solvency set forth in its Guaranty and containing conclusions as to the solvency of such Guarantor; (l) the Agent shall be satisfied that no Security Party is subject to any Environmental Claim (except as set forth on Schedule 7) which could have a material adverse effect on the business, assets or results of operations of any thereof; 34 43 (m) the Agent shall have received payment in full of all fees and expenses due to the Agent and the Lenders on or prior to the date thereof under Section 13; (n) the Agent shall have received evidence satisfactory to it and to its legal advisors that, save for the liens created by the Mortgages, the Assignments, the Related Security Agreements and the Vessel Agreements there are no liens, charges or encumbrances of any kind whatsoever on any of the Vessels or on their respective earnings except as permitted hereby or by any of the Security Documents; (o) each party which the Agent shall have required to execute a Consent and Agreement shall have executed a Consent and Agreement, in each case, in form and substance satisfactory to the Agent; (p) the Westhampton Trustee shall have duly authorized, executed and delivered any trust receipts in respect of collateral provided by the New Guarantors owning Mortgaged Vessels under the Westhampton Indenture and shall have duly accepted the trust in respect thereof created by the Westhampton Indenture; (q) all conditions precedent to the advancement of the term loan under the Related Credit Agreement shall have been met or waived to the satisfaction of the Lenders; (r) the transactions contemplated by the Acquisition Agreement shall subject only to consummation of this Agreement and the Related Credit Agreement, have been consummated in accordance with the provisions thereof, and the legal status and corporate structure of Marine Transport Corporation shall be satisfactory to the Agent and its legal counsel (s) the terms and conditions of the Permitted Indebtedness and Permitted Liens shall be in form and substance acceptable to the Agent; and (t) the Agent shall have received legal opinions from (i) Peter N. Popov, Esq., in-house counsel for the Security Parties, (ii) Kaye, Scholer, Fierman, Hays & Handler, L.L.P., special counsel to the Security Parties (iii) Shipman & Goodwin, special counsel to the Westhampton Trustee and (iv) Seward & Kissel, special counsel to the Agent and the Lenders, in each case in such form as the Agent may require, as well as such other legal opinions as the Agent shall have required as to all or any matters under the laws of the United States of America, the States of New York, New Jersey and Texas covering the representations and conditions which are the subjects of Sections 2 and 4.1. 4.2 Further Conditions Precedent. The obligation of the Lenders to enter into this Agreement or to make any Advance available to the Borrower shall be expressly and separately from the foregoing conditional upon, as of the date hereof and at each Drawdown Date: 35 44 (a) the Agent having received the Drawdown Notice in accordance with the terms of Section 3.4; (b) the representations stated in Section 2 (updated mutatis mutandis to such date) being true and correct as if made on that date; (c) no Event of Default having occurred and being continuing and no event having occurred and being continuing which, with the giving of notice or lapse of time, or both, would constitute such an Event of Default; (d) the Agent being satisfied that no change in any applicable laws, regulations, rules or in the interpretation thereof shall have occurred which make it unlawful for the Borrower or any other of the parties thereto to make any payment as required under the terms of the Financing Documents or any of them; and (e) there having been no material adverse change in the financial condition of the Security Parties taken as a whole since the date hereof. 4.3 Satisfaction after Drawdown. Without prejudice to any of the terms and conditions of this Agreement, in the event the Lenders, in their sole discretion, makes any Advance prior to the satisfaction of all or any of the conditions precedent set forth in Sections 4.1 and 4.2, the Borrower hereby covenants and undertakes to satisfy or procure the satisfaction of such condition or conditions within fourteen (14) days after the relevant Drawdown Date (or such longer period as the Lenders, in their sole discretion, may agree). 4.4 Breakfunding Costs. In the event that, on any date specified for the making of an Advance in any Drawdown Notice, the Lenders shall not be required under this Agreement to make such advance available under this Agreement, the Borrower shall indemnify and hold the Lenders fully harmless against any losses which the Lenders or any thereof may sustain as a result of borrowing or agreeing to borrow funds to meet the drawdown requirement of the Borrower and the certificate of the relevant Lender(s) shall, absent manifest error, be conclusive and binding on the Borrower as to the extent of any such losses. 5. REPAYMENT, PREPAYMENT AND REDUCTION OF FACILITIES. 5.1 Repayment of Term Loan. The Borrower shall repay the principal of the Term Loan in twenty (20) quarterly installments in Dollars in freely available-same day funds on the Term Loan Payment Dates, the first four (4) installments shall each be in the principal amount of Two Hundred Fifty Thousand Dollars ($250,000), the next fifteen (15) of which shall be in the principal amount of Four Hundred Thirteen Thousand Three Hundred Twelve and 50/100 Dollars ($413,312.50) and twentieth such installment shall be in the amount necessary to repay the Term Loan in full. 36 45 5.2 Revolving Credit Facility. Subject to the provisions of Section 3.3, any outstanding Revolving Credit Facility Advances (a) may be repaid (together with any and all actual costs or expenses incurred by any Lender as the result of any breaking of funding (as certified by the relevant Lender, which certification shall, absent any manifest error, be conclusive and binding on the Borrower) on any Banking Day (in Dollars in freely available-same day funds equal to or exceeding One Hundred Thousand Dollars ($100,000), each such repayment to be in an integral multiple of One Hundred Thousand Dollars ($100,000)) and (b) must be repaid (i) on the last date of then prevailing Interest Period in respect of such Advance and (ii) on or before the Final Payment Date. 5.3 Voluntary Prepayment of Term Loan. The Borrower may prepay any Term Loan Advance on any Banking Day, in whole or in part, without penalty or premium (in Dollars in freely available-same day funds equal to or exceeding One Hundred Thousand Dollars ($100,000), each such repayment to be in an integral multiple of One Hundred Thousand Dollars ($100,000)), on any Banking Day upon giving the Agent not less than five (5) Banking Days prior written notice (which notice shall be irrevocable and shall specify the amount and date of prepayment). 5.4 Mandatory Prepayment of Term Loan. Upon the sale, disposition or Total Loss of any Vessel or any other asset (having a fair market value equal or exceeding One Hundred Thousand Dollars ($100,000) directly or indirectly owned by the Borrower, the Borrower shall prepay the Term Loan, in part and without penalty, in amount equal to the proceeds of the sale, disposition or insurance net of taxes payable as a result of any such sale or disposition. 5.5 Prepay Term Loans Pro Rata. Any prepayment made hereunder (including, without limitation, those made pursuant to Sections 5.3 and 5.4, but excluding a prepayment under Section 9.3) or under the Related Credit Agreement shall be applied against the Term Loan and the Related Term Loan, pro rata. 5.6 Application of Prepayments. Any prepayment of the Term Loan made hereunder (including, without limitation, those made pursuant to Sections 5.3, 5.4 and 9.3), shall be subject to the condition that: (a) any partial prepayment made shall be applied in or towards satisfaction of the repayment installments of the Term Loan in inverse order of maturity; (b) any amounts prepaid shall not be available for re-borrowing; and (c) on the date of prepayment all accrued interest to the date of such prepayment shall be paid in full with respect to the portion of the principal being prepaid, together with any and all actual costs or expenses incurred by any Lender as the result of any breaking of funding (as certified by the relevant Lender, which certification shall, absent any manifest error, be conclusive and binding on the Borrower). 37 46 5.7 Voluntary Reduction of Revolving Credit Facility. The Borrower shall have the right, at any time and from time to time, upon giving to the Agent not less than five (5) Banking Days prior written notice (which notice shall be irrevocable) to terminate in whole, or reduce the available unused portion of, the Revolving Credit Facility; provided, however, that each partial reduction shall be equal to or shall exceed One Hundred Thousand Dollars ($100,000) and shall be an integral multiple of One Hundred Thousand Dollars ($100,000). Upon any reduction of the Revolving Credit Facility as provided in this Section, each Lender's Commitment to make Revolving Credit Facility Advances shall be reduced pro rata. 6. INTEREST AND RATE 6.1 Term Loan Applicable Rate and Default Rate. The Term Loan Balance shall bear interest at the Term Loan Applicable Rate which shall be the rate per annum which is equal to the aggregate of (a) LIBOR for the applicable Interest Period (determined in accordance with Section 6.5) plus (b) the then prevailing Margin. Any principal payment with respect to the Term Loan not paid when due, whether on a Term Loan Payment Date or by acceleration, shall bear interest thereafter at a rate per annum of two percent (2.0%) over the Term Loan Applicable Rate in effect with respect to such payment at the time of such default (the "Term Loan Default Rate"). 6.2 Revolving Credit Facility Applicable Rate and Default Rate. The Revolving Credit Facility Balance shall bear interest at the Revolving Credit Facility Applicable Rate which shall be equal to the aggregate of (a) LIBOR for the applicable Interest Period (determined in accordance with Section 6.5) plus (b) the then prevailing Margin plus (c) one quarter of one percent (0.25%) per annum. Any principal payment with respect to the Revolving Credit Facility not paid when due, whether by acceleration or otherwise, shall bear interest thereafter at a rate per annum of two percent (2.0%) over the Revolving Credit Facility Applicable Rate in effect with respect to such payment at the time of such default (the "Revolving Credit Facility Default Rate"). 6.3 Determination of Applicable Margin. The Margin shall be determined by the Agent two (2) Banking Days prior to the first day of the relevant Interest Period. Prior to the day falling two (2) Banking Days after the date on which Marine Transport Corporation delivers its first quarterly financial report to the Agent in accordance with Section 9.1(A)(iv), the Margin shall be equal to one and three quarters of one percent (1.75%) per annum. Thereafter, the Margin shall be based upon the then prevailing ratio of Marine Transport Corporation's Total Debt to EBITDA, as determined in accordance with Section 9.1(A)(xvii) as follows: 38 47
Applicable Margin Total Debt to EBITDA ----------------- -------------------- 2.25% > 3.0x 2.00% <=3.0x but >2.5x 1.75% <=2.5x but >2.0x 1.50% <=2.0x but >=1.0x 1.25% <1.0x
6.4 Determination of LIBOR. LIBOR shall be determined by the Agent two (2) Banking Days prior to the first day of the relevant Interest Period and together with any and all actual costs or expenses incurred by any Lender as the result of any breaking of funding (as certified by the relevant Lender, which certification shall, absent any manifest error, be conclusive and binding on the Borrower). The Borrower shall be promptly notified in writing of such determination of the Term Loan Applicable Rate and the Revolving Credit Facility Applicable Rate, as the case may be. Absent manifest error, such determination shall be conclusive and binding upon the Borrower. 6.5 Interest Periods. For purposes of funding any Advance, the Borrower may select Interest Periods of one (1), two (2), three (3) or six (6) months (or for such longer periods as the Lenders may, in their sole discretion agree), provided, however, that (a) at all times the Borrower must select an Interest Period for a portion of each Advance so that sufficient deposits shall mature on each Payment Date to cover the principal installments due on such dates and (b) no more than two (2) Interest Periods may be running simultaneously for the entire Term Loan Balance and no more than three (3) Interest Periods may be running at any one time for the entire Revolving Credit Facility Balance. No Interest Period may extend beyond the Final Payment Date. The Borrower shall give the Agent an Interest Notice specifying the Interest Period selected at least three (3) Banking Days prior to the end of any then existing Interest Period. If at the end of any then existing Interest Period the Borrower fails to give an Interest Notice, the relevant Interest Period shall be three (3) months. The Borrower's right to select an Interest Period shall be subject to the restriction that no selection of an Interest Period shall be effective unless the Lenders are satisfied that the necessary funds will be available to the Lenders for such period and that no Event of Default or event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default shall have occurred and be continuing. 6.6 Interest Payments. The Borrower agrees to pay interest on each Advance on the last day of each Interest Period applicable to such Advance and at such other times as interest is required to be paid by each Lender on the deposits acquired thereby to fund the relevant Advance, or any portion thereof, as the case may be, and, in the event any Interest Period shall extend beyond three (3) months, three (3) months after the commencement of such Interest Period and each three (3) month anniversary thereafter until the end of the Interest Period; and 6.7 Payment on Banking Day. If interest would, under Section 6.6, be payable on a day which is not a Banking Day, it shall then be payable on the next following Banking 39 48 Day, unless such next following Banking Day falls in the following month in which case it shall be payable on the Banking Day immediately preceding the day on which such interest would otherwise be payable. 6.8 Calculation of Interest. All interest shall accrue and be calculated on the actual number of days elapsed and on the basis of a three hundred sixty (360) day year. 7. PAYMENTS 7.1 Place of Payments, No Set Off. All payments to be made hereunder by the Borrower shall be made to the Agent, not later than 11 a.m. New York time (any payment received after 11 a.m. New York time shall be deemed to have been paid on the next Banking Day) on the due date of such payment, at its office located at 200 Park Avenue, New York, New York 10166 or to such other office of the Agent as the Agent may direct, without set-off or counterclaim and free from, clear of, and without deduction for, any Taxes, provided, however, that if the Borrower shall at any time be compelled by law to withhold or deduct any Taxes from any amounts payable to the Agent or the Lenders hereunder, then the Borrower shall pay such additional amounts in Dollars as may be necessary in order that the net amounts received after any such withholding or deduction shall equal the amounts which would have been received if such withholding or deduction were not required and, in the event any withholding or deduction is made, whether for Taxes or otherwise, the Borrower shall promptly send to the Agent and the Lenders such documentary evidence for such withholding or deduction as may be required from time to time by the Agent or the relevant Lender, as the case may be. 7.2 Tax Credits. If any Lender obtains the benefit of a credit against the liability thereof for federal income taxes imposed by any taxing authority for all or part of the Taxes as to which the Borrower has paid additional amounts as aforesaid (and such Lender agrees to use its best efforts to obtain the benefit of any such credit which may be available to it, provided it has knowledge that such credit is in fact available to it), then such Lender shall reimburse the Borrower for the amount of the credit so obtained. Each Lender agrees that in the event that Taxes are imposed on account of the situs of its loans hereunder, such Lender, upon acquiring knowledge of such event, shall, if commercially reasonable, shift such loans on its books to another office of such Lender so as to avoid the imposition of such Taxes. 8. EVENTS OF DEFAULT 8.1 In the event that any of the following events shall occur and be continuing: (a) Non-Payment of Principal. Any principal of the Term Loan or the Revolving Credit Facility is not paid on the due date; or (b) Non-Payment of Interest or Other Amounts. Any interest on the Term Loan, the Revolving Credit Facility or any other amount becoming payable to the Agent, the Lenders or the Westhampton Trustee under any Financing Document is not 40 49 paid on the due date or date of demand (as the case may be), and such default continues unremedied for a period of five (5) Banking Days; or (c) Representations. Any representation, warranty or other statement made by any Security Party in any Financing Document or in any other instrument, document or other agreement delivered in connection with any thereof proves to have been untrue or misleading in any material respect as of the date when made or confirmed; or (d) Covenants. Any Security Party defaults in the due and punctual observance or performance of any other term, covenant or agreement contained in any Financing Document or in any other instrument, document or other agreement delivered in connection herewith or therewith, or it becomes impossible or unlawful for any Security Party to fulfill any such term, covenant or agreement or there occurs any other event which constitutes a default under any Financing Document, in each case other than an Event of Default referred to elsewhere in this Section 8.1, and such default, impossibility and/or unlawfulness, in the reasonable opinion of the Majority Lenders, would be likely to have a material adverse effect on the rights of the Lenders, the Agent or the Westhampton Trustee under any Financing Document or on the rights of the Lenders, the Agent or the Westhampton Trustee to enforce any Financing Document, and continues unremedied or unchanged, as the case may be, for a period of thirty (30) days; or (e) Indebtedness. Any Security Party, Marine Car Carriers (MI) or any wholly owned subsidiary of any such party shall default in the payment when due (subject to any applicable grace period) of any Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars ($250,000) or such Indebtedness is, or by reason of such default is subject to being, accelerated or any party becomes entitled to enforce the security for any such Indebtedness and such party takes steps to enforce the same, unless such default or enforcement is being contested in good faith and by appropriate proceedings or other acts and the Security Party, Marine Car Carriers (MI) or subsidiary, as the case may be, shall set side on its books adequate reserves with respect thereto; or (f) Change of Control; Ownership or Management of Other Security Parties. There is a change of control of any Security Party and the Lenders have not prior thereto consented in writing to such change. As used herein, "change of control" means (i) with respect to Marine Transport Corporation, (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 promulgated pursuant to the Exchange Act), directly or indirectly, of more than fifty percent (50%) of the total voting power of the voting stock of Marine Transport Corporation or (B) the Board of Directors of Marine Transport Corporation ceases to consist of a majority of the existing directors or directors elected by the existing directors (as used herein, "existing director" means each of the Directors of Marine Transport Corporation as of the date immediately following consummation of the transactions contemplated by the Acquisition Agreement) or (ii), with respect to any other Security 41 50 Party, any material change in the beneficial stock ownership, voting control or senior management of any of the Security Parties; or (g) US Citizenship. Any Security Party owning a United States flag Vessel ceases to be a United States of America citizen within the meaning of Section 2 of the United States Shipping Act of 1916, as amended, qualified to operate vessels in the coastwise trade; or (h) Bankruptcy. Any Security Party or Marine Car Carriers (MI) commences any proceeding under any reorganization, arrangement or readjustment of debt, dissolution, winding up, adjustment, composition, bankruptcy or liquidation law or statute of any jurisdiction, whether now or hereafter in effect ("Proceeding"), or there is commenced against any thereof any Proceeding and such Proceeding remains undismissed or unstayed for a period of thirty (30) days or any receiver, trustee, liquidator or sequestrator of, or for, any thereof or any substantial portion of the property of any thereof is appointed and is not discharged within a period of thirty (30) days or any thereof by any act indicates consent to or approval of or acquiescence in any Proceeding or the appointment of any receiver, trustee, liquidator or sequestrator of, or for, itself or of, or for, any substantial portion of its property; or (i) Termination of Operations; Sale of Assets. Without the Agent's prior written consent, any Security Party ceases its operations or sells or otherwise disposes of all or substantially all of its assets or all or substantially all of the assets of the any Security Party are seized or otherwise appropriated; or (j) Judgments. Any judgment or order is made which would render ineffective or invalid any Financing Documents; or (k) Inability to Pay Debts. Any Security Party or Marine Car Carriers (MI) is unable to pay or admits its inability to pay its debts as they fall due or a moratorium shall be declared in respect of any material indebtedness of any Security Party or Marine Car Carriers (MI); or (l) Change in Financial Position. Any change in the financial position of the Security Parties (taken as a whole) which, in the reasonable opinion of the Majority Lenders, shall have a material adverse effect on the ability of any Security Parties to perform its respective material obligations under any Financing Document; or (m) Relevant Contracts. Any of the Relevant Contracts or the MCCMI Shareholders Agreement is terminated or is materially amended or modified without the prior written consent of the Majority Lenders, or any party to a Relevant Contract defaults or ceases to perform under such agreement for any reason whatsoever and, with regard to any such termination, default or nonperformance of a Relevant Contract, the relevant Vessel shall not be engaged in an alternative employment, acceptable to the Lenders, under a contract, acceptable to the Lenders, within ninety (90) days of such termination, default or nonperformance; or 42 51 (n) Key Management Agreements. Any of the Key Management Agreements (including any extensions or renewals thereof) is terminated prior to its stated termination date or is materially amended or modified without the prior written consent of the Majority Lenders, or any party to a Key Management Agreement defaults or ceases to perform under such agreement for any reason whatsoever and, as a result of such default or non-performance, the obligor under such agreement ceases to pay or be obligated to pay to the relevant Security Party, as the case may be, amounts payable by such obligor under such agreement; or (o) Related Credit Agreement, OMI COLUMBIA Loan Documents and Mortgage Securing OMI Debt. An "Event of Default" (as defined in any of the Related Credit Agreement, the OMI COLUMBIA Loan Documents or the Mortgage Securing the OMI Debt) shall have occurred and be continuing then the Lenders' obligation to make any Advances available shall cease and the Lenders may, by notice to the Borrower, declare the entire unpaid balance of the Term Loan, accrued interest, the entire Revolving Credit Facility Balance, accrued interest, and any other sums payable by the Borrower hereunder and under any other Financing Document due and payable, whereupon, the same shall forthwith be due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; provided that upon the occurrence of an event specified in subsections (h) or (k) of this Section 8.1, the Notes shall be immediately due and payable without declaration or other notice to the Borrower. In such event, the Lenders may proceed to protect and enforce their rights by action at law, suit in equity or in admiralty or other appropriate proceeding, whether for specific performance of any covenant contained in any Financing Document, or in aid of the exercise of any power granted in any thereof, or the Lenders may proceed to enforce the payment of the Notes or to enforce any other legal or equitable right of the Lenders, or proceed to take any action authorized or permitted under the terms of any of the Security Documents or by applicable law for the collection of all sums due, or so declared due, on the Notes, including, without limitation, the right to appropriate and hold, or apply (directly, by way of set-off or otherwise) to the payment of the obligations of the Borrower to the Lenders, the Agent or the Westhampton Trustee under any Financing Document (whether or not then due) all moneys and other amounts of the Borrower then or thereafter in possession of any Lender, the Agent or the Westhampton Trustee, the balance of any deposit account (demand or time, matured or unmatured) of the Borrower then or thereafter with any Lender, the Agent or the Westhampton Trustee and every other claim of the Borrower then or thereafter against any Lender, the Agent or the Westhampton Trustee. 8.2 Indemnification. The Borrower agrees to, and shall, indemnify and hold the Lenders, the Agent and the Westhampton Trustee harmless against any loss (excluding any consequential damages), as well as against any reasonable costs or expenses (including reasonable legal fees and expenses), which the Lenders, the Agent or the Westhampton Trustee sustains or incurs as a consequence of any default in payment of the principal amount of the Term Loan, the Revolving Credit Facility, interest accrued 43 52 thereon or any other amount payable under any Financing Document, including, but not limited to, all actual losses incurred in liquidating or re-employing fixed deposits made by third parties or funds acquired to effect or maintain the Term Loan and/or the Revolving Credit Facility and/or any portion of either thereof. The certification of each Lender, the Agent or the Westhampton Trustee of such costs and expenses shall, absent any manifest error, be conclusive and binding on the Borrower. 8.3 Application of Moneys. Except as otherwise provided in any Security Document, all moneys received by the Lenders, the Agent or the Westhampton Trustee under or pursuant to this Agreement, any Notes, any Guaranty or any of the Security Documents after the occurrence and continuation of any Event of Default (unless cured to the satisfaction of the Lenders) shall be applied by the Lenders in the following manner: (a) first, in or towards the payment or reimbursement of any expenses or liabilities incurred by the Lenders, the Agent or the Westhampton Trustee in connection with the ascertainment, protection or enforcement of its rights and remedies under any Financing Documents, (b) second, in or towards payment of any interest owing on the Term Loan and the Revolving Credit Facility, (c) third, in or towards repayment of principal owing in respect of the Term Loan and the Revolving Credit Facility, (d) fourth, in or towards payment of all other sums which may be owing to the Lenders, the Agent or the Westhampton Trustee under any Financing Document, and (e) fifth, the surplus (if any) shall be paid to the Borrower or to whosoever else may be entitled thereto. 9. COVENANTS 9.1 The Borrower and, by their execution of the consent and agreement and assignment of account provided below, each of the Guarantors hereby covenants and undertakes with the Lenders and the Agent that, from the date hereof and so long as any principal, interest or other moneys are owing in respect of the Term Loan, the Revolving Credit Facility or are otherwise owing under any Financing Document: (A) it will, and will procure that each other Security Party will: (i) Performance of Agreements. Duly perform and observe, and procure the observance and performance by all other parties thereto (other than the Lenders, the Agent and the Westhampton Trustee) of, the terms of the Financing Documents; 44 53 (ii) Notice of Default, Litigation and Adverse Change. Promptly upon obtaining knowledge thereof, inform the Lenders of the occurrence of any (a) Event of Default or of any event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, (b) their respective litigation or governmental proceeding pending or threatened against it or against any of the Security Parties or Marine Car Carriers (MI) which could reasonably be expected to have a material adverse effect on the business, assets, operations, property or financial condition of any thereof, and (c) other event or condition which is reasonably likely to have a material adverse effect on its ability, or the ability of the Security Parties as a group, to perform their respective obligations under any Financing Document; (iii) Obtain Consents. Without prejudice to Section 2.1(b) and this Section 9.1, obtain every consent and do all other acts and things which may from time to time be necessary or advisable for the continued due performance of all its and the other Security Parties' respective obligations under the Financing Documents; (iv) Financial Information. At the expense of the Borrower, deliver to the Agent: (a) as soon as available but not later than ninety (90) days after the end of each fiscal year of Marine Transport Corporation, a complete copy of the 10K report of Marine Transport Corporation filed with the United States Securities and Exchange Commission (including audited annual financial statements of Marine Transport Corporation together with a report thereon by an Acceptable Accounting Firm), which shall be prepared by Marine Transport Corporation and certified by the chief financial officer of Marine Transport Corporation together with a Compliance Certificate; (b) as soon as available but not later than forty-five (45) days after the end of each quarter of each fiscal year of Marine Transport Corporation, a copy of the 10Q report of Marine Transport Corporation filed with the United States Securities and Exchange Commission which shall be prepared by Marine Transport Corporation and certified by the chief financial officer of Marine Transport Corporation, together, in each instance, with a Compliance Certificate of such chief financial officer in such form as the Lender may reasonably require; (c) as soon as available, copies of all 8K reports filed by Marine Transport Corporation with the United States Securities and Exchange Commission; 45 54 (d) as soon as available but not later than thirty (30) days after the end of each month of each fiscal year of Marine Transport Corporation, unaudited monthly operating statements showing actual versus budgeted cash flow (itemized for each Vessel, Management Agreement and Vessel Agreement), accounts receivable and accounts payable balances and cash position for Marine Transport Corporation and its Subsidiaries, certified to be true and complete by the Chief Financial Officer of Marine Transport Corporation; and (e) such other statements, lists of assets and accounts, budgets, forecasts, reports and other financial information with respect to its business as the Agent may from time to time reasonably request, certified to be true and complete by the Chief Financial Officer of Marine Transport Corporation; (v) U.S. Citizenship; Qualification to Own Foreign Flag Vessels. Continue to be, and cause each other Security Party or other Affiliate of the Borrower owning a United States flag Vessel to continue to be, a United States citizen within the meaning of Section 2 of the United States Shipping Act, 1916, as amended (46 U.S.C. ss.802), qualified to own and operate vessels in the coastwise trade of the United States of America and to cause each other Security Party or other Affiliate of the Borrower which is the registered owner of a Vessel registered under a flag other than the United States of America to continue to be duly qualified under the laws of such flag to be the registered owner and operator of a Vessel registered under such flag; (vi) Corporate Existence. Do or cause to be done, and procure that each Security Party shall do or cause to be done, all things necessary to preserve and keep in full force and effect its corporate existence, and all licenses, franchises, permits and assets necessary to the conduct of its business; (vii) Books and Records. Keep, and cause each other Security Party to keep, proper books of record and account into which full and correct entries shall be made in accordance with GAAP throughout the Security Period; (viii) Taxes and Assessments. Pay and discharge, and cause each other Security Party to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or property prior to the date upon which penalties attach thereto; provided, however, that it shall not be required to pay and discharge, or cause to be paid and discharged, any such tax, assessment, charge or levy so long as (a) the legality thereof shall be contested in good faith and by appropriate proceedings or other acts and it shall set aside on its books adequate reserves with respect thereto or (b) where such failure to pay or discharge is not reasonably likely to, individually or in the aggregate, have a material adverse effect on the business, prospects 46 55 or financial condition of the Marine Transport Corporation and its Subsidiaries taken as a whole; (ix) Inspection. Allow, and cause each other Security Party to allow, any representative or representatives designated by any Lender, subject to applicable laws and regulations, to visit and inspect any of its properties, and, on request, to examine its books of account, records, reports and other papers and to discuss its affairs, finances and accounts with its officers, all at such reasonable times and as often as any Lender may reasonably request; (x) Compliance with Statutes, etc. Do or cause to be done, and cause each other Security Party to do and cause to be done, all things necessary to comply with all material laws, and the rules and regulations thereunder, applicable to the Borrower or such other Security Party, including, without limitation, those laws, rules and regulations relating to employee benefit plans and environmental matters; (xi) Environmental Matters. Promptly upon the occurrence of any of the following conditions, provide to the Agent a certificate of the chief executive officer thereof, specifying in detail the nature of such condition and its proposed response or the response of its Environmental Affiliate: (a) its receipt or the receipt by any other Security Party or any Environmental Affiliate of the Borrower or any other Security Party of any written communication whatsoever that alleges that such person is not in compliance with any applicable environmental law or environmental approval, if such noncompliance could reasonably be expected to have a material adverse effect on the business, assets, operations, property or financial condition of the Borrower or any other Security Party, (b) knowledge by it, or by any other Security Party or any Environmental Affiliate of the Borrower or any other Security Party that there exists any Environmental Claim pending or threatened against any such person, which could reasonably be expected to have a material adverse effect on the business, assets or operations, property or financial condition of the Borrower or any other Security Party, or (c) any release, emission, discharge or disposal of any material that could form the basis of any Environmental Claim against it, any other Security Party or against any Environmental Affiliate of the Borrower or any other Security Party, if such Environmental Claim could reasonably be expected to have a material adverse effect on the business, assets or operations, property or financial condition of the Borrower or any other Security Party. Upon the written request by the Agent, it will submit to the Agent at reasonable intervals, a report providing an update of the status of any issue or claim identified in any notice or certificate required pursuant to this subsection; (xii) ERISA. Forthwith upon learning of the occurrence of any material liability of the any Security Party or any ERISA Affiliate pursuant to ERISA in connection with the termination of any Plan or withdrawal or partial withdrawal of any multi-employer plan (as defined in ERISA) or of a failure to satisfy the minimum funding standards of Section 412 of the Code or Part 3 of Title I of ERISA by any Plan for which any Security Party or any ERISA Affiliate is plan administrator (as defined in ERISA), furnish or cause to be furnished to the Agent written notice thereof; 47 56 (xiii) Vessel Management. Cause each of the Vessels to be managed by Marine Transport Corporation, by a wholly-owned subsidiary thereof or by third party manager reasonably acceptable to the Agent and procure that no agreements providing or governing the management of such vessels shall be amended or modified without the prior written consent of the Agent unless (in the case of management agreements other than Key Management Agreements) such amendment or modification would not, in the reasonable opinion of the Agent, adversely affect the economic interests of the Borrower or any other Security Party thereunder; (xiv) Cash. Maintain at all times on a consolidated basis, readily available Unrestricted Cash or Cash Equivalents of not less than the greater of (a) Two Million Dollars ($2,000,000) and (b) ten percent (10%) of the Total Debt of Marine Transport Corporation (for purposes of determining compliance with this covenant, Unrestricted Cash or Cash Equivalents held by Marine Car Carriers (MI) for the benefit of Marine Car Carriers (Del) shall be calculated on the basis of the Borrower's share of such sums after deduction of any taxes that would be payable (as of the time of determination) consequent upon the distribution and repatriation of such sums by Marine Car Carriers (MI) to Marine Car Carriers (Del)); (xv) Working Capital. Maintain at all times on a consolidated basis, a positive working capital position (for purposes of determining compliance with this covenant, Unrestricted Cash or Cash Equivalents held by Marine Car Carriers (MI) shall be calculated on the basis of the Borrower's share of such sums after deduction of any taxes that would be payable (as of the time of determination) consequent upon the distribution and repatriation of such sums by Marine Car Carriers (MI) to Marine Car Carriers (Del)); (xvi) Debt Service Coverage Ratio. Maintain on a consolidated basis, a ratio of EBITDA to scheduled payments of principal and interest in respect of consolidated Indebtedness of not less than, during the period commencing from the date hereof and ending on the second anniversary of the date hereof, 1.25 to 1.0, and, thereafter, 1.5 to 1.0, such ratio to be determined quarterly based on the scheduled principal and interest (assuming the then prevailing interest rates shall remain in effect for the next twelve (12) months) payments payable over the next twelve (12) month period; (xvii) Total Debt to EBITDA. Maintain on a consolidated basis, a ratio of Total Debt to EBITDA of not greater than, (x) during the period commencing from the date hereof and ending on the first anniversary of the date hereof, 3.25 to 1.0, (y) during the period commencing from the first anniversary of the date hereof and ending on the second anniversary of the date hereof, 3.0 to 1.0 and (z) thereafter, 2.5 to1.0; (xviii) Brokerage Commissions, etc. Indemnify and hold the Lenders, the Agent and the Westhampton Trustee harmless from any claim for any 48 57 brokerage commission, fee, or compensation from any broker or third party resulting from the transactions contemplated hereby; (xix) Deposit Accounts; Assignment. Throughout the Security Period, maintain, and procure that each Security Party shall maintain its primary collection and revenue accounts with the Agent and shall procure, and shall cause each Security Party to procure that, all earnings of any Vessels shall be paid (without set-off or counterclaim) into such collection accounts. As security for the obligations of the Borrower hereunder, the Borrower hereby pledges, assigns and grants the Agent, on behalf of the Lenders, a security interest in all the Borrowers' right, title and interest in and to the aforesaid collection and disbursement accounts and consents that if an Event of Default shall occur and so long as the same shall be continuing, all moneys held in the said accounts and all moneys thereafter received by the Agent may be applied as provided in Section 8.3; (xx) Proceeds of Marine Car Carriers (MI). Promptly upon the direct or indirect acquisition, in the aggregate, by the Borrower, the Guarantors or any affiliate of any thereof of one hundred percent (100%) of the equity of Marine Car Carriers (MI) or one hundred percent (100%) of the assets thereof, grant, or procure the grant, to the Agent of a security interest in the assets of Marine Car Carriers (MI) in form and substance satisfactory to the Agent, it being hereby agreed by the Agent and the Lenders that, simultaneous with the investment of the assets of Marine Car Carriers (MI) into a new joint venture with a third party not affiliated with the Borrower or the Guarantors, such security interest shall be released and replaced with a negative pledge in form and substance satisfactory to the Agent; (xxi) Year 2000 Issue. The Borrower shall take, and shall cause each of the Guarantors to take, all necessary action to complete in all materials respects by September, 1999, the reprogramming of computer software, hardware and firmware systems and equipment containing embedded microchips owned or operated by or for the Borrower and the guarantors or used or relied upon in the conduct of their business (including systems and equipment supplied by others or with which such systems of the Borrower or any of the Guarantors interface) required as a result of the Year 2000 Issue to permit the proper functioning of such computer systems and other equipment and the testing of such systems and equipment, as so reprogrammed. At the request of the Agent, the Borrower shall provide, and shall cause each of the guarantors to provide, to the Agent reasonable assurance of its compliance with the preceding sentence; and (xxii) ISM Code Matters. (a) Procure that the relevant Operator will, comply with, and ensure that (i) each Vessel will comply with the requirements of the ISM Code by not later than July 1, 1998, and (ii) any newly-acquired Vessel will comply with the requirements of the ISM Code within six (6) months (or such shorter period as may be required by applicable law or regulation) of its acquisition, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto throughout the Security Period; 49 58 (b) Procure that any Operator will, immediately inform the Agent if there is any threatened or actual withdrawal of its, DOC or the SMC in respect of any Vessel; and (c) Procure that the relevant Operator will, promptly inform the Agent upon the issuance (i) to such Operator of a DOC and (ii) to the relevant Vessel of an SMC; and (xxiii) OMI COLUMBIA. Procure that promptly upon the acquisition of ownership of OMI COLUMBIA by OMI Challenger Transport (or any other Affiliate of the Borrower), such Guarantor shall execute and deliver a first preferred mortgage and assignments of earnings and insurances in respect of such Vessel in form and substance satisfactory to the Agent. (B) The Borrower will not, and will procure that no other Security Party will, without the prior written consent of the Agent: (i) Liens. Create, assume or permit to exist, any mortgage, pledge, lien, charge, encumbrance or any security interest whatsoever upon any of such party's property or other assets, real or personal, tangible or intangible, whether now owned or hereafter acquired except: (a) liens for taxes not yet payable for which adequate reserves have been maintained; (b) the Financing Documents and other liens granted in connection herewith in favor of the Lenders, the Agent or the Westhampton Trustee, as the case may be; (c) liens, charges and encumbrances against their respective Vessels except those of the type and amounts permitted to exist under the terms of the Mortgages; (d) pledges of certificates of deposit or other cash collateral securing any Security Party's reimbursement obligations in connection with letters of credit now or hereafter issued for the account of such Security Party in connection with the establishment of the financial responsibility of the Security Parties under 33 C.F.R. Part 130 or 46 C.F.R. Part 540, as the case may be, as the same may be amended or replaced; (e) pledges or deposits to secure obligations under workmen's compensation laws or similar legislation, deposits to secure public or statutory obligations, warehousemen's or other like liens, or deposits to obtain the release of such liens and deposits to secure surety, appeal or customs bonds on 50 59 which any of the Security Parties is the principal, as to all of the foregoing, only to the extent arising and continuing in the ordinary course of business; (f) liens on assets acquired with Permitted Third Party Debt and securing only the Permitted Third Party Debt incurred to acquire such assets; (g) the Mortgages Securing the OMI Debt (and related assignments of marine insurances for the Vessels subject to such mortgages); (h) other liens, charges and encumbrances incidental to the conduct of the business of each such party, the ownership of any such party's property and assets and which do not in the aggregate materially detract from the value of each such party's property or assets or materially impair the use thereof in the operation of its business (items (a) through (h) are hereinafter collectively referred to as "Permitted Liens"); (ii) Loans, Advances and Investments. Make any loans or advances to, or any investments in any Person, firm, corporation, joint venture or other entity (including, without limitation, any loan or advance to any officer, director, stockholder, employee or customer of any company affiliated with any Security Party) except for advances and investments in the ordinary course of its business and loans or advances to any Security Party; (iii) Indebtedness. Incur any Indebtedness except Permitted Indebtedness; (iv) Permitted Third Party Debt. Incur any Permitted Third Party Debt, unless in the case of any such indebtedness other than that supporting MARAD vessel management contracts; (a) the Borrower and the Security Parties are in compliance with their covenants set forth in this Agreement, (b) no Event of Default (or any event or condition which, with the giving of notice or passage of time or both, would constitute an Event of Default) shall have occurred or will occur and be continuing before or after the incurrence of such Permitted Third Party Debt, (c) the Borrower demonstrates to the satisfaction of the Agent, in its sole discretion, that the ratio of (1) projected EBITDA 51 60 to be generated by the particular asset to be acquired with such Permitted Third Party Debt to (2) projected scheduled payments of interest and principal for such Permitted Third Party Debt shall be at least 1.0 to 1.0 over the entire term of such Permitted Third Party Debt and (d) the Borrower demonstrates to the satisfaction of the Agent, in its sole discretion, that following the incurrence of such Permitted Third Party Debt, the Borrower and the Guarantors shall be in compliance with the financial covenants set forth in Sections 9.1(A)(xiv), (xv), (xvi) and (xvii) (for purposes of the calculations required by this clause (z), (1) EBITDA shall include the projected EBITDA to be generated by the particular asset to be acquired with such Permitted Third Party Debt, (2) Total Debt shall include the Permitted Third Party Debt to be incurred and (3) scheduled payments of interest and principal on Total Debt shall include projected scheduled payments of interest and principal for such Permitted Third Party Debt; (v) Guarantees, etc. Assume, guarantee or (other than in the ordinary course of its business) endorse or otherwise become or remain liable, in connection with any obligation of any person, firm, company or other entity except for guarantees, in connection herewith, in favor of the Lenders, the Agent or the Westhampton Trustee or guarantees of Permitted Indebtedness; (vi) Changes in Business. Change the nature of its business or engage in any businesses other than domestic and international marine transportation; (vii) Use of Corporate Funds. Pay out any funds to any company or Person except (a) as contemplated by the Acquisition Agreement (b) in the ordinary course of business in connection with the management of the business of the Security Parties, including the operation and/or repair of the Vessels and other vessels owned, managed or operated by such parties and (c) the servicing of Permitted Indebtedness provided, however, it shall not prepay any such Permitted Indebtedness (excluding the Indebtedness hereunder and under the Related Credit Agreement); (viii) Issuance of Shares. Permit any subsidiaries to issue or dispose of any shares of its own capital stock to any Person; (ix) Sale of Shares. Sell, assign, transfer, pledge or otherwise convey or dispose of any of the shares of the capital stock of any Security Parties or Marine Car Carriers (MI); 52 61 (x) Sale of Assets. Sell, or otherwise dispose of, any Vessel, any shares in any subsidiary corporation or any other asset which represents all or a substantial portion of its assets taken as a whole; or (xi) Capital Expenditures. Make or commit to make any capital expenditures provided, however, that in no event shall this subsection (xi) preclude the Borrower or any other Security Party from undertaking necessary repairs and improvements to any Vessel the cost of which, for accounting purposes, is treated by the Borrower as a capital expenditure; (xii) Changes in Offices or Names. Change the location of the chief executive office of any Security Party, the office of the chief place of business of any such parties, the office of the Security Parties in which the records relating to the earnings or insurances of the Vessels are kept unless the Agent shall have received thirty (30) days prior written notice of such change; (xiii) Changes in Management. Make any material changes in the existing management of any Security Party; (xiv) Consolidation and Merger. Consolidate with, or merge into, any corporation or other entity, or merge any corporation or other entity into it unless, in the case of the relevant Security Party, such company shall be the surviving entity; (xv) Chartering-in of Vessels. Except for the chartering-in of oil tankers by OMI Petrolink Corp., a Delaware corporation, in connection with the operation of its lightering business, charter-in any vessel under a charter having a term (inclusive of all extensions and renewals) of twelve (12) months or more; (xvi) Dividends. (x) Declare or make, and procure that no other Security Party shall declare or make to any party other than another Security Party, any distributions to its shareholders, by dividend or otherwise, or otherwise dispose of any assets to its shareholders in cash or in any other manner or (y) enter into, and procure that no other Security Party shall enter into, any agreement or arrangement (other than this Agreement and the Related Credit Agreement) which restricts or limits it or such other Security Party from making any such distributions to its immediate parent; and (xvii) Loan from Marine Car Carriers (MI). Procure that Marine Car Carriers (MI) shall not make any loans or advances to Marine Transport Corporation or any subsidiary, officer, director, shareholder or Affiliate thereof. 9.2 Vessel Valuations. At least every twelve (12) months commencing on the day falling twelve (12) months from the date hereof and in any event upon the request of the Agent, the Borrower shall obtain, at the Borrower's cost, valuations of the Vessels OMI COLUMBIA, charter-free, in Dollars from two independent shipbrokers satisfactory to the Agent. In the event the Borrower fails or refuses to obtain the valuations requested 53 62 pursuant to this Section 9.2 within ten (10) days of the Agent's request therefor, the Agent shall be authorized to obtain such valuations, at the Borrower's cost, from two independent shipbrokers selected by the Agent, which valuations shall be deemed the equivalent of valuations duly obtained by the Borrower pursuant to this Section 9.2, but the Agent's actions in doing so shall not excuse any default of the Borrower under this Section 9.2. The average of such two (2) valuations shall be the FMV of each Vessel. 9.3 Asset Maintenance. If at any time the Collateral Vessel Value (together with the value of any additional collateral theretofore provided under this Section) falls below one hundred fifty percent (150%) (the "Required Percentage") of an amount (the "Principal Exposure") equal to the aggregate of (a) the Term Loan Balance, (b) any Revolving Credit Facility Advances then outstanding, (c) any undrawn amounts then available under the Revolving Credit Facility, (d) the Related Indebtedness then outstanding and (e) any amounts then available to be drawn down pursuant to the Related Credit Agreement, the Borrower shall, within a period of thirty (30) days following receipt by the Borrower of written notice from the Agent notifying the Borrower of such shortfall and specifying the amount thereof (which amount shall, in the absence of manifest error, be deemed to be conclusive and binding on the Borrower), either (a) deliver to the Lenders, the Agent or the Westhampton Trustee as the case may be, such additional collateral, as may be satisfactory to the Agent in its sole discretion, of sufficient value to restore compliance with the Required Percentage or (b) prepay such part of the Term Loan (together with interest thereon and other moneys payable in respect of such prepayment pursuant to Section 5.6) as shall result in the restoration of compliance with the Required Percentages. Any such prepayment of the Term Loan shall be applied as provided in Section 5.6. For purposes of calculating the Collateral Vessels Value under this Section 9.3, the value of the OMI COLUMBIA shall be deemed to be equal to the product of (1) the lightweight tonnage of such Vessel multiplied by (2)(x) One Hundred Twenty-Five Dollars or (y) if such Vessel is hereafter subject to legal restrictions as to the geographic location where such Vessel may be scrapped, a scrap price, reasonably deemed by the Agent to reflect a conservative average market scrap price for those jurisdictions in which, in the Agent's reasonable opinion, such Vessel may be scrapped in a commercially reasonable manner. 9.4 Inspection and Survey Reports. If the Agent shall so request, the Borrower shall provide the Agent with copies of all internally generated inspection or survey reports on the Vessels. 10. ASSIGNMENT This Agreement shall be binding upon, and inure to the benefit of, the Borrower, the Lenders, the Agent and the Westhampton Trustee and their respective successors and assigns, except that the Borrower may not assign any of its rights or obligations hereunder without the prior written consent of the Majority Lenders. In giving any consent as aforesaid to any assignment by the Borrower, the Lenders shall be entitled to impose such conditions as they shall deem advisable. Each Lender shall be entitled to assign the whole or any part of its rights or obligations under this Agreement or grant 54 63 participation(s) in the Term Loan and the Revolving Credit Facility to any subsidiary, holding company or other affiliate of such Lender, to any subsidiary or other affiliate company of any thereof or to any other bank or financial institution, and such Lender shall forthwith give notice of any such assignment or participation to the Borrower provided, that, the relevant Lender assigns or participates, as the case may be, to its assignee or participant, (a) equal proportionate shares of such Lender's interest in both the Term Loan and the Revolving Credit Facility and (b), simultaneously with its assignment or participation of a share in the Indebtedness provided hereunder, an equal proportionate share in the Related Indebtedness in accordance with the provisions of the Related Credit Agreement and, provided, further, that in the event of any assignment by any Lender, such assignment (but not any participation) is to be made pursuant to an Assignment and Assumption Agreement. The Borrower will take all reasonable actions requested by the Agent, on behalf of such Lender. 11. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC. 11.1 Illegality. In the event that by reason of any change in any applicable law, regulation or regulatory requirement or in the interpretation thereof (any such change or interpretation), a Lender has a good faith reasonable basis to conclude that it has become unlawful for it to maintain or give effect to its obligations as contemplated by this Agreement, such Lender shall inform the Borrower to that effect, whereafter the liability of such Lender to make its portion of the Term Loan and/or the Revolving Credit Facility available shall forthwith cease and the Borrower shall be required either to repay to such Lender that portion of the outstanding balance of the Term Loan and/or the Revolving Credit Facility funded by such Lender immediately or, with respect to the Term Loan, if the relevant Lender so agrees, to repay such portion of the Term Loan to such Lender on the last day of any then current Interest Period in accordance with and subject to the provisions of Section 11.5. In any such event, but without prejudice to the aforesaid obligations of the Borrower to repay the Term Loan and/or the Revolving Credit Facility, the Borrower and the relevant Lender shall negotiate in good faith with a view to agreeing on terms for making such portion of the Term Loan and/or the Revolving Credit Facility available from another jurisdiction or otherwise restructuring such portion of the Term Loan and/or the Revolving Credit Facility on a basis which is not unlawful. 11.2 Increased Costs. If any change in applicable law, regulation or regulatory requirement, or in the interpretation or application thereof by any governmental or other authority, shall: (i) subject the Agent or any Lender to any Taxes with respect to its income from the Term Loan and/or the Revolving Credit Facility, or any part of either thereof, or (ii) change the basis of taxation to the Agent or any Lender of payments of principal or interest or any other payment due or to become due pursuant to this Agreement (other than a change in the basis effected by the jurisdiction of 55 64 organization of the Agent or such Lender, the jurisdiction of the principal place of business of the Agent or such Lender, the United States of America, the State or City of New York or any governmental subdivision or other taxing authority having jurisdiction over the Agent or Lender (unless such jurisdiction is asserted by reason of the activities of any of the Security Parties) or such other jurisdiction where the Term Loan and/or the Revolving Credit Facility may be payable), or (iii) impose, modify or deem applicable any reserve requirements or require the making of any special deposits against or in respect of any assets or liabilities of, deposits with or for the account of, or loans by, the Lender, or (iv) impose on the Agent or any Lender any other condition affecting the Term Loan and/or the Revolving Credit Facility or any part of either thereof, and the result of the foregoing is either to increase the cost to such Lender of making available or maintaining its Commitment or any part of either thereof or to reduce the amount of any payment received by the Agent or such Lender, then and in any such case if such increase or reduction in the opinion of the Agent or such Lender materially affects the interests of the Agent or such Lender under or in connection with this Agreement: (a) the Agent or such Lender, as the case may be, shall notify the Borrower of the occurrence of such event, and (b) the Borrower agrees forthwith upon demand to pay to the Agent or such Lender such amount as the Agent or such Lender certifies to be necessary to compensate the Agent or such Lender for such additional cost or such reduction. 11.3 Nonavailability of Funds. If the Agent shall determine that, by reason of circumstances affecting the London Interbank Market generally, adequate and reasonable means do not or will not exist for ascertaining the LIBOR for any Interest Period, the Agent shall give notice of such determination to the Borrower. The Borrower and the Agent shall then negotiate in good faith in order to agree upon a mutually satisfactory interest rate and/or Interest Period to be substituted for LIBOR which would otherwise have applied under this Agreement. If the Borrower and Agent are unable to agree upon such a substituted interest rate and/or Interest Period within thirty (30) days of the giving of such determination notice, the Agent shall set an interest rate and Interest Period to take effect from the expiration of the Interest Period in effect at the date of determination, which rate shall be equal to the aggregate of (a) the cost to each Lender (as certified by such Lender) of funding the relevant Advance, (b) the then prevailing Margin and (c) in the case of Revolving Credit Facility Advances, one quarter of one percent (0.25%). In 56 65 the event the state of affairs to which this Section 11.3 refers shall extend beyond the end of the Interest Period, the foregoing procedure shall continue to apply until circumstances are such that LIBOR may be determined pursuant to Section 6. 11.4 Agent's Certificate Conclusive. A certificate or determination notice of the Agent or any Lender as to any of the matters referred to in this Section 11 shall, absent manifest error, be conclusive and binding on the Borrower. 11.5 Compensation for Losses. Where the Term Loan and/or the Revolving Credit Facility or a portion of either thereof is to be repaid by the Borrower pursuant to this Section 11, the Borrower agrees simultaneously with such repayment to pay to the relevant Lender all accrued interest to the date of actual payment on the amount repaid and all other sums then payable by the Borrower to the relevant Lender pursuant to this Agreement together with such amounts as may be certified by the relevant Lender to be necessary to compensate the Lender for any actual loss, premium or penalties incurred or to be incurred thereby on account of funds borrowed to make, fund or maintain its Commitment or such portion of either thereof for the remainder (if any) of the then current Interest Period or Periods, if any, but otherwise without penalty or premium. 57 66 12. CURRENCY INDEMNITY 12.1 Currency Conversion. If for the purpose of obtaining or enforcing a judgment in any court in any country it becomes necessary to convert into any other currency (the "Judgment Currency") an amount due in Dollars under any Financing Document then the conversion shall be made, in the discretion of the Agent at the rate of exchange prevailing either on the date of default or on the day before the day on which the judgment is given or the order for enforcement is made, as the case may be (the "Conversion Date"), provided that the Agent shall not be entitled to recover under this clause any amount in the Judgment Currency which exceeds at the Conversion Date the amount in Dollars due under any Financing Document. 12.2 Change in Exchange Rate. If there is a change in the rate of exchange prevailing between the Conversion Date and the date of actual payment of the amount due, the Borrower shall pay such additional amounts (if any, but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency when converted at the rate of exchange prevailing on the date of payment will produce the amount then due under any Financing Document in Dollars; any excess over the amount due received or collected by the Lenders shall be remitted to the Borrower. 12.3 Additional Debt Due. Any amount due from the Borrower under this Section 12 shall be due as a separate debt and shall not be affected by judgment being obtained for any other sums due under or in respect of the Financing Documents. 12.4. Rate of Exchange. The term "rate of exchange" in this Section 12 means the rate at which the Agent in accordance with its normal practices is able on the relevant date to purchase Dollars with the Judgment Currency and includes any premium and costs of exchange payable in connection with such purchase. 13 FEES AND EXPENSES 13.1 Commitment Fee. The Borrower will pay to the Lenders a Commitment Fee at a rate, per annum, equal to forty percent (40%) of the aggregate of (a) the then applicable Margin and (b) one quarter of one percent (0.25%), accruing from the date hereof, payable quarterly in arrears from the date hereof and on the Final Payment Date, on the available but undrawn amount of the Revolving Credit Facility. The Commitment Fee shall accrue from day to day and be calculated on the actual number of days elapsed and a three hundred sixty (360) day year. 13.2 Facilities Fee. A Facilities Fee payable to the Lenders on the earlier of (a) the date on which the Term Loans are repaid or prepaid in full or refinanced and (b) the second anniversary of the date hereof. The Facilities Fee shall be equal to the product of (x) Twenty-Four Million Dollars ($24,000,000) and (y), if such fee is payable on or before the day falling (i) six (6) months after the date hereof, one quarter of one percent (0.25%), (ii) twelve (12) months after the date hereof, one half of one percent (0.50%) or 58 67 (iii) twelve (12) months and one (1) day after the date hereof, three-quarters of one percent (0.75%). 13.3 Other Fees. The Borrower shall pay the fees set forth in the fee letter between the Borrower and the Agent dated the date hereof. 13.4 Expenses. The Borrower agrees, whether or not the transactions hereby contemplated are consummated, on demand to pay, or reimburse the Lenders, the Agent and the Westhampton Trustee for their payment of, the reasonable expenses of the Lenders, the Agent and the Westhampton Trustee incident to said transactions (and in connection with any supplements, amendments, waivers or consents relating thereto or incurred in connection with the enforcement or defense of any of the rights and remedies of any Lender, the Agent or the Westhampton Trustee with respect thereto or in the preservation of the priorities of the Lenders, the Agent or the Westhampton Trustee under the documentation executed and delivered in connection therewith) including, without limitation, all reasonable costs and expenses of preparation, negotiation, execution and administration of this Agreement and the documents referred to herein, the reasonable fees and disbursements of the counsel of the Lenders, the Agent and the Westhampton Trustee in connection therewith, as well as the reasonable fees and expenses of any independent appraisers, surveyors, engineers and other consultants retained by the Lenders, the Agent or the Westhampton Trustee for this transaction, all reasonable costs and expenses, if any, for the enforcement of the Financing Documents and stamp and other similar taxes, if any, incident to the execution and delivery of the documents (including, without limitation, the Notes) herein contemplated and to hold the Lenders, the Agent and the Westhampton Trustee free and harmless in connection with any liability arising from the nonpayment of any such stamp or other similar taxes. Such taxes and, if any, interest and penalties related thereto as may become payable after the date hereof shall be paid immediately by the Borrower to the relevant Lender, the Agent or the Westhampton Trustee, as the case may be, when liability therefor is no longer contested by the Lenders, the Agent or the Westhampton Trustee, as the case may be, or reimbursed immediately by the Borrower to such Lender, the Agent or the Westhampton Trustee, as the case may be. 14. APPLICABLE LAW, JURISDICTION AND WAIVER 14.1 Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without any reference to the conflicts of laws principles of such State. 14.2 Jurisdiction. The Borrower hereby irrevocably submits to the jurisdiction of the courts of the State of New York and of the United States District Court for the Southern District of New York in any action or proceeding brought against it by the Agent, any Lender or the Westhampton Trustee under this Agreement or under any document delivered hereunder and hereby irrevocably agrees that valid service of summons or other legal process on it may be effected by serving a copy of the summons and other legal process in any such action or proceeding on the Borrower by mailing or delivering the 59 68 same by hand to the Borrower at the address indicated for notices in Section 16.2. The service, as herein provided, of such summons or other legal process in any such action or proceeding shall be deemed personal service and accepted by the Borrower as such, and shall be legal and binding upon the Borrower for all the purposes of any such action or proceeding. Final judgment (a certified or exemplified copy of which shall be conclusive evidence of the fact and of the amount of any indebtedness of the Borrower to the Agent, the Lenders or the Westhampton Trustee) against the Borrower in any such legal action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment. The Borrower will advise the Agent promptly of any change of address for the purpose of service of process. Notwithstanding anything herein to the contrary, the Lenders, the Agent or the Westhampton Trustee may bring any legal action or proceeding in any other appropriate jurisdiction. 14.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE BORROWER, THE OTHER SECURITY PARTIES, THE AGENT, THE WESTHAMPTON TRUSTEE AND THE LENDERS THAT EACH OF THEM HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY TO ANY FINANCING DOCUMENT AGAINST ANY OTHER PARTY TO ANY FINANCING DOCUMENT ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH ANY FINANCING DOCUMENT. 15. THE AGENT 15.1 (a) Appointment of Agent. Each of the Lenders hereby irrevocably appoints and authorizes the Agent (which for purposes of this Section 15 shall be deemed to include the Agent acting in its capacity as security trustee pursuant to Section 15.1(b)) to take such action as agent on its behalf and to exercise such powers under the Financing Documents as are delegated to the Agent by the terms hereof and thereof. Neither the Agent nor any of its directors, officers, employees or agents shall be liable for any action taken or omitted to be taken by it or them under the Financing Documents or in connection therewith, except for its or their own gross negligence or willful misconduct. (b) Appointment of Security Trustee. Each of the Lenders irrevocably appoints the Agent as security trustee on their respective behalf with regard to the (i) security, powers, rights, titles, benefits and interests (both present and future) constituted by and conferred on the Lenders or any of them or for the benefit thereof under or pursuant to the Financing Documents (including, without limitation, the benefit of all covenants, undertakings, representations, warranties and obligations given, made or undertaken to any Lender in any Financing Document), (ii) all moneys, property and other assets paid or transferred to or vested in any Lender or any agent of any Lender or received or recovered by any Lender or any agent of any Lender pursuant to, or in connection with, the Financing Documents whether from any Security Party or any other person and (iii) all money, investments, property and other assets at any time representing or deriving from any of the foregoing, including all interest, income and other sums at 60 69 any time received or receivable by any Lender or any agent of any Lender in respect of the same (or any part thereof). The Agent hereby accepts such appointment. 15.2 Distribution of Payments. Whenever any payment is received by the Agent from any Security Party for the account of the Lenders, or any of them, whether of principal or interest on the Notes, commissions, fees under Sections 13.1 or 13.2 and expenses under Section 13.4, or otherwise, it will thereafter cause to be distributed on the same day if received before 11 a.m. New York time, or on the next day if received thereafter, like funds relating to such payment ratably to the Lenders according to their respective Commitments, in each case to be applied according to the terms of this Agreement. 15.3 Holder of Interest in Note. The Agent may treat each Lender as the holder of all of the interest of such Lender in the Note, until, in the case of an assignment, the Agent has received an original Assignment and Assumption Agreement executed by such Lender and its assignee. 15.4 No Duty to Examine, Etc. The Agent shall not be under a duty to examine or pass upon the validity, effectiveness or genuineness of any of the Financing Documents or any instrument, document or communication furnished pursuant to or in connection with any Financing Document, and the Agent shall, in the absence of gross negligence, be entitled to assume that the same are valid, effective and genuine, have been signed or sent by the proper parties and are what they purport to be. 15.5 Agent as Lender. With respect to that portion of the Term Loan and the Revolving Credit Facility made available by it, the Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall include the Agent in its capacity as a Lender. The Agent and its affiliates may accept deposits from, lend money to and generally engage in any kind of business with, the Security Parties as if it were not the Agent. 15.6 (a) Obligations of Agent. The obligations of the Agent under the Financing Documents are only those expressly set forth herein and therein. (b) No Duty to Investigate. The Agent shall not at any time be under any duty to investigate whether an Event of Default, or an event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, has occurred or to investigate the performance of any Financing Document by any Security Party. 15.7 (a) Discretion of Agent. The Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights which may be vested in it by, and with respect to taking or refraining from taking any action or actions which it may be able to take under or in respect of, the Financing Documents, unless the Agent shall have been instructed by the Majority Lenders to exercise such rights or to take or refrain from taking such action; provided, however, that the Agent shall not be required 61 70 to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. (b) Instructions of Majority Lenders. The Agent shall in all cases be fully protected in acting or refraining from acting under any Financing Document in accordance with the instructions of the Majority Lenders, and any action taken or failure to act pursuant to such instructions shall be binding on all of the Lenders. 15.8 Assumption re Event of Default. Unless the Agent has been notified by any Security Party that an Event of Default, or event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, has occurred and is continuing, or has been notified by a Lender that such Lender considers that an Event of Default or such an event (specifying in detail the nature thereof) has occurred and is continuing, except as otherwise provided in Section 15.14 hereof, the Agent shall be entitled to assume that no Event of Default, or event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, has occurred and is continuing. In the event that the Agent shall have been notified by any Security Party or any Lender in the manner set forth in the preceding sentence of any Event of Default or of an event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, the Agent shall notify the Lenders and shall take action and assert such rights under the Financing Documents as the Majority Lenders shall request in writing. 15.9 No Liability of Agent or Lenders. Neither the Agent nor any of the Lenders shall be under any liability or responsibility whatsoever: (a) to any Security Party or any other person or entity as a consequence of any failure or delay in performance by, or any breach by, any other Lenders or any other person of any of its or their obligations under any Financing Document; (b) to any Lender or Lenders, as a consequence of any failure or delay in performance by, or any breach by, any Security Party of any of its respective obligations under the Financing Documents; or (c) to any Lender or Lenders, for any statements, representations or warranties contained in any Financing Document or any document or instrument delivered in connection with the transaction hereby contemplated; or for the validity, effectiveness, enforceability or sufficiency of any Financing Document or any document or instrument delivered in connection with the transactions hereby contemplated. 15.10 Indemnification of Agent. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Security Parties or any thereof), pro rata according to the respective amounts of their Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including legal fees and expenses incurred in investigating claims and defending itself against such liabilities) which may be imposed on, incurred by or asserted against, the Agent in any way relating to or arising 62 71 out of any Financing Document, any action taken or omitted by the Agent thereunder or the preparation, administration, amendment or enforcement of, or waiver of any provision of, any Financing Document, except that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. 15.11 Consultation with Counsel. The Agent may consult with legal counsel selected by the Agent and shall not be liable for any action taken, permitted or omitted by it in good faith in accordance with the advice or opinion of such counsel. 15.12 Resignation. The Agent may resign at any time by giving sixty (60) days' written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Lenders and shall have accepted such appointment within sixty (60) days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a bank or trust company of recognized standing. The appointment of any successor Agent shall be subject to the prior written consent of the Borrower, such consent not be unreasonably withheld. After any retiring Agent's resignation as Agent hereunder, the provisions of this Section 15 shall continue in effect for its benefit with respect to any actions taken or omitted by it while acting as Agent. 15.13 Representations of Lenders. Each Lender represents and warrants to each other Lender and the Agent that: (i) In making its decision to enter into this Agreement and to make its Commitment available hereunder, it has independently taken whatever steps it considers necessary to evaluate the financial condition and affairs of the Security Parties, that it has made an independent credit judgment and that it has not relied upon any statement, representation or warranty by any other Lender or the Agent; and (ii) So long as any portion of its Commitment remain outstanding, it will continue to make its own independent evaluation of the financial condition and affairs of the Security Parties. 15.14 Notification of Event of Default. The Agent hereby undertakes to notify promptly the Lenders, and the Lenders hereby undertake to notify promptly the Agent and the other Lenders, of the existence of any Event of Default which shall have occurred and be continuing of which the Agent or any Lender has actual knowledge. 16. NOTICES AND DEMANDS 16.1 Notices in Writing. Every notice or demand under this Agreement shall be in writing and may be given or made by facsimile. 63 72 16.2 Addresses for Notice. Every notice or demand shall be sent as follows: If to the Borrower: c/o Marine Transport Corporation 1200 Harbour Boulevard, 9th Floor, Weehawken, New Jersey 07087 Fax No.: 201-330-9645 Attn: General Counsel, P.N. Popov If to the Agent (with copies to the Lenders): 200 Park Avenue New York, New York 10166 Fax No.: 212-681-3900 Attn: Nikolai Nachamkin If to the Lenders, to such Lender's address and fax number as set forth in Schedule 1 (with a copy to the Agent). Any notice sent by facsimile shall be confirmed by letter dispatched as soon as practicable thereafter. 16.3 Notices Deemed Received. Every notice or demand shall, except so far as otherwise expressly provided by this Agreement, be deemed to have been received (provided that it is received prior to 2 p.m. New York time; otherwise it shall be deemed to have been received on the next following Banking Day), in the case of a facsimile at the time of dispatch thereof (provided further that if the date of dispatch is not a Banking Day in the locality of the party to whom such notice or demand is sent it shall be deemed to have been received on the next following Banking Day in such locality) and, in the case of a letter, at the time of receipt thereof. 17. MISCELLANEOUS 17.1 Time of Essence. Time is of the essence of this Agreement but no failure or delay on the part of the Lenders, the Agent or the Westhampton Trustee to exercise any power or right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise by the Lenders, the Agent or the Westhampton Trustee of any power or right hereunder preclude any other or further exercise thereof or the exercise of any other power or right. The remedies provided herein are cumulative and are not exclusive of any remedies provided by law. 17.2 Unenforceable, etc., Provisions - Effect. In case any one or more of the provisions contained in any Financing Document would, if given effect, be invalid, illegal or unenforceable in any respect under any law applicable in any relevant jurisdiction, said provision shall not be enforceable against the relevant Security Party, 64 73 but the validity, legality and enforceability of the remaining provisions herein or therein contained shall not in any way be affected or impaired thereby. 17.3 Indemnification. The Borrower and, by its execution and delivery of the Consent and Agreement set forth below, each of the other Security Parties jointly and severally agree to indemnify the Lenders, the Agent, the Westhampton Trustee, their respective successors and assigns, and their respective officers, directors, employees, representatives and agents (each an "Indemnitee") from, and hold each of them harmless against, any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the fees and disbursements of counsel for such Indemnitee in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may at any time (including, without limitation, at any time following the repayment of the Term Loan and the Revolving Credit Facility Advances) be imposed on, asserted against or incurred by, any Indemnitee as a result of, or arising out of or in any way related to or by reason of, (a) any violation by any Security Party (or any charterer or other operator of any Vessel) of any applicable Environmental Law, (b) any Environmental Claim arising out of the management, use, control, ownership or operation of property or assets by any Security Party (or, after foreclosure, by the Lenders, the Agent, the Westhampton Trustee or their respective successors or assigns after any such foreclosure) and (3) the breach of any representation, warranty or covenant set forth in Sections 2.1 (p) or (q) or 9.1(A)(xi). If and to the extent that the obligations of the Security Parties under this Section are unenforceable for any reason, the Borrower and, by its execution and delivery of the Consent and Agreement set forth below, each of the other Security Parties jointly and severally agree to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. The obligations of the Security Parties under this Section 17.3 shall survive the termination of this Agreement and the repayment to the Lender, the Agent and the Westhampton Trustee of all amounts owing to each thereof under or in connection herewith. 17.4 References. References herein to Sections and Schedules are to be construed as references to sections of, and schedules to, this Agreement. 17.5 Further Assurances. The Borrower agrees that if any Financing Document shall, in the reasonable opinion of the Agent, at any time be deemed by the Agent for any reason insufficient in whole or in part to carry out the true intent and spirit hereof or thereof, it will execute or cause to be executed such other and further assurances and documents as in the opinion of the Agent may be required in order more effectively to accomplish the purposes of such Financing Document. 17.6 Prior Agreements, Merger. Any and all prior understandings and agreements heretofore entered into between the Security Parties on the one part, and the Lenders, the Agent or the Westhampton Trustee, on the other part, whether written or oral, are superseded by and merged into this Agreement and the other agreements (the forms of which are exhibited hereto) to be executed and delivered in connection herewith to which 65 74 any Security Party and/or the Lenders, the Agent or the Westhampton Trustee are parties, which alone fully and completely express the agreements between the Security Parties, the Lenders, the Agent and the Westhampton Trustee. 17.7 Entire Agreement; Amendments. This Agreement constitutes the entire agreement of the parties hereto including all parties added hereto pursuant to an Assignment and Assumption Agreement and cannot be amended other than by written agreement signed by all such parties. 17.8 Headings. In this Agreement, Section headings are inserted for convenience of reference only and shall not be taken into account in the interpretation of this Agreement. IN WITNESS whereof, each party hereto has caused this Agreement to be duly executed by its duly authorized representative on the day and year first above written. MARINE TRANSPORT LINES, INC. By:____________________________ Name: Title: By Special Authority for DEN NORSKE BANK ASA By:____________________________ Theodore S. Jadick Senior Vice President New York Branch By:____________________________ Nikolai Nachamkin Vice President New York Branch 66 75 CONSENT AND AGREEMENT AND ACCOUNT ASSIGNMENT Each of the undersigned, referred to in the foregoing Amended and Restated Term Loan and Revolving Credit Facility Agreement as the "Guarantors", hereby consents and agrees to said Agreement and to the documents contemplated thereby and to the provisions contained therein relating to conditions to be fulfilled and obligations to be performed by the undersigned pursuant to or in connection with said Agreement and particularly agree to be bound by the representations, warranties and covenants relating to the undersigned contained in Sections 2 and 9 of said Agreement to the same extent as if the undersigned were a party to said Agreement. In particular, but without limitation of the foregoing, each of the undersigned hereby covenants and agrees to maintain its primary collection and revenue accounts with the Agent and shall procure that all earnings of any Vessels shall be paid into such collection accounts. As security for its obligations under the Financing Documents, each of the undersigned hereby pledges, assigns and grants the Agent, on behalf of the Lenders, a security interest in all the undersigned's right, title and interest in and to the aforesaid collection and disbursement accounts and consents that if an Event of Default shall occur and so long as the same shall be continuing, all moneys held in the said accounts and all moneys thereafter received by the Agent may be applied as provided in Section 8.3 of the Agreement. Each of the undersigned which are Existing Guarantors, as defined in the Agreement hereby covenants and agrees that each of the Security Documents executed thereby pursuant to the Original Credit Agreement shall be amended to the extent that all references therein to the Credit Agreement, the Notes, the Guaranty, the Mortgages and the other Security Documents shall be deemed to refer to the Agreement, the Notes, the Guaranty and the Security Documents as the same are amended and restated or amended in accordance with the terms of the foregoing Agreement. MARINE TRANSPORT OSWEGO CORPORATION MANAGEMENT, INC. By:_________________________ By:___________________________ Peter N. Popov Peter N. Popov Secretary Secretary OSWEGO CHEMICAL CARRIERS MARINE BARGE COMPANY CORPORATION By:_________________________ By:___________________________ Peter N. Popov Peter N. Popov Secretary Secretary 67 76 MARINE CHEMICAL NAVIGATION MARINE NAVIGATION SULPHUR CORPORATION CARRIERS, INC. By:_________________________ By:___________________________ Peter N. Popov Peter N. Popov Secretary Secretary MARINE SULPHUR SHIPPING MARINE ALASKA, INC. CORPORATION By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary OMI CHALLENGER TRANSPORT, INC. OMI PETROLINK, CORP. By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary COURIER TRANSPORT, INC. INTREPID SHIP MANAGEMENT, INC. By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary PATRIOT TRANSPORT, INC. ROVER TRANSPORT, INC. By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary 68 77 HARLINK CORP. OMIP, INC. By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary NUELINK CORP. OMI OFFSHORE MARINE SERVICES INC. By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary MARINE TRANSPORT CORPORATION MARINE CAR CARRIERS INC., a Delaware corporation By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary 69 EX-10.12 12 TERM LOAN AND REVOLVING CREDIT FACILITY 1 Exhibit 10.12 TERM LOAN AND REVOLVING CREDIT FACILITY AGREEMENT - -------------------------------------------------------------------------------- MARINE TRANSPORT CORPORATION Borrower The Financial Institutions Listed on Schedule 1, Lenders and DEN NORSKE BANK ASA, Agent - -------------------------------------------------------------------------------- as of June 17, 1998 2 INDEX PAGE ---- SECTION 1 DEFINITIONS.................................................... 1 1.1 Defined Terms........................................ 1 1.2 Construction......................................... 21 1.3 Accounting Terms..................................... 22 SECTION 2 REPRESENTATIONS AND WARRANTIES................................. 22 2.1(a) Due Organization and Power........................... 22 2.1(b) Authorization and Consents........................... 22 2.1(c) Binding Obligations.................................. 22 2.1(d) No Violation......................................... 22 2.1(e) Litigation........................................... 23 2.1(f) No Default........................................... 23 2.1(g) Vessels.............................................. 23 2.1(h) Insurance............................................ 24 2.1(i) Citizenship and Qualification as Owner............... 24 2.1(j) Financial Information................................ 24 2.1(k) Tax Returns.......................................... 24 2.1(l) ERISA................................................ 24 2.1(m) Chief Executive Office............................... 25 2.1(n) Foreign Trade Control Regulations.................... 25 2.1(o) Equity Ownership..................................... 25 2.1(p) Environmental Matters................................ 26 2.1(q) Pending, Threatened or Potential Environmental Claims 26 2.1(r) Compliance with ISM Code............................. 27 2.1(s) Threatened Withdrawal of DOC or SMC.................. 27 2.1(t) Year 2000 Issue...................................... 27 SECTION 3 ADVANCES....................................................... 27 3.1 Purposes............................................. 27 3.2 Term Loan Advances................................... 27 3.3 Revolving Credit Facility Advances................... 27 3.4 Drawdown Notice...................................... 28 3.5 Effect of Drawdown Notices........................... 28 3.6 Notation of Advances................................. 28 SECTION 4 CONDITIONS..................................................... 28 4.1 Conditions to Advance of Term Loan and the Initial Revolving Credit Facility Advance................. 28 i 3 4.2 Further Conditions Precedent......................... 34 4.3 Satisfaction After Drawdown.......................... 35 4.4 Breakfunding Costs................................... 35 SECTION 5 REPAYMENT, PREPAYMENT AND REDUCTION OF FACILITY............................................ 35 5.1 Repayment of Term Loan............................... 35 5.2 Revolving Credit Facility............................ 35 5.3 Voluntary Prepayment of Term Loan.................... 35 5.4 Mandatory Prepayment of Term Loan.................... 36 5.5 Prepay Term Loans Pro Rata........................... 36 5.6 Application of Prepayments........................... 36 5.7 Mandatory Reduction of Revolving Credit Facility..... 36 5.8 Voluntary Reduction of Revolving Credit Facility..... 36 SECTION 6 INTEREST AND RATE.............................................. 37 6.1 Term Loan Applicable Rate and Default Rate........... 37 6.2 Revolving Credit Facility Applicable Rate and Default Rate...................................... 37 6.3 Determination of Applicable Margin................... 37 6.4 Determination of LIBOR............................... 37 6.5 Interest Periods..................................... 38 6.6 Interest Payments.................................... 38 6.7 Payment on Banking Day............................... 38 6.8 Calculation of Interest.............................. 38 SECTION 7 PAYMENTS....................................................... 39 7.1 Place of Payments, No Set Off........................ 39 7.2 Tax Credits.......................................... 39 SECTION 8 EVENTS OF DEFAULT.............................................. 39 8.1(a) Non-Payment of Principal............................. 39 8.1(b) Non-Payment of Interest or Other Amounts............. 39 8.1(c) Representations...................................... 39 8.1(d) Covenants............................................ 40 8.1(e) Indebtedness......................................... 40 8.1(f) Change of Control; Ownership or Management of Other Security.................................... 40 8.1(g) U.S. Citizenship..................................... 40 8.1(h) Bankruptcy........................................... 41 8.1(i) Termination of Operations; Sale of Assets............ 41 8.1(j) Judgments............................................ 41 ii 4 8.1(k) Inability to Pay Debts............................... 41 8.1(l) Change in Financial Position......................... 41 8.1(m) Relevant Contracts................................... 41 8.1(n) Key Management Agreements............................ 41 8.1(o) Related Credit Agreement; OMI COLUMBIA Loan Documents and Mortgage Securing OMI Debt.......................................... 42 8.2 Indemnification...................................... 42 8.3 Application of Moneys................................ 42 SECTION 9 COVENANTS...................................................... 43 9.1(A)(i) Performance of Agreements............................ 43 9.1(A)(ii) Notice of Default; Litigation and Adverse Change .... 43 9.1(A)(iii) Obtain Consents...................................... 44 9.1(A)(iv) Financial Information................................ 44 9.1(A)(v) U.S. Citizenship; Qualification to Own Foreign Flag Vessels.............................. 45 9.1(A)(vi) Corporate Existence.................................. 45 9.1(A)(vii) Books and Records.................................... 45 9.1(A)(viii) Taxes and Assessments................................ 45 9.1(A)(ix) Inspection........................................... 45 9.1(A)(x) Compliance with Statutes, etc........................ 45 9.1(A)(xi) Environmental Matters................................ 46 9.1(A)(xii) ERISA................................................ 46 9.1(A)(xiii) Vessel Management.................................... 46 9.1(A)(xiv) Cash................................................. 46 9.1(A)(xv) Working Capital...................................... 47 9.1(A)(xvi) Debt Service Coverage Ratio.......................... 47 9.1(A)(xvii) Total Debt to EBITDA................................. 47 9.1(A)(xviii) Brokerage Commissions, etc........................... 47 9.1(A)(xix) Deposit Accounts; Assignment......................... 47 9.1(A)(xx) MARINE DUVAL, AMELINA, CALINA and SAVONETTA.......... 48 9.1(A)(xxi) Proceeds of Marine Car Carriers (MI).............. 48 9.1(A)(xxi) Year 2000 Issue...................................... 48 9.1(A)(xxii) ISM Code Matter...................................... 48 9.1(A)(xxiii) OMI Columbia......................................... 49 9.1(B)(i) Liens ............................................... 49 9.1(B)(ii) Loans, Advances and Investments...................... 50 9.1(B)(iii) Indebtedness......................................... 50 9.1(B)(iv) Permitted Third Party Debt........................... 50 9.1(B)(v) Guarantees, etc...................................... 51 9.1(B)(vi) Changes in Business.................................. 51 9.1(B)(vii) Use of Corporate Funds............................... 51 9.1(B)(viii) Issuance of Shares................................... 51 iii 5 9.1(B)(ix) Sale of Shares....................................... 51 9.1(B)(x) Sale of Assets....................................... 51 9.1(B)(xi) Capital Expenditures................................. 51 9.1(B)(xii) Changes in Offices or Names.......................... 52 9.1(B)(xiii) Changes in Management................................ 52 9.1(B)(xiv) Consolidation and Merger............................. 52 9.1(B)(xv) Chartering-in of Vessels............................. 52 9.1(B)(xvi) Dividends............................................ 52 9.1(B)(xvii) Loan From Marine Car Carriers (MI)................... 52 9.2 Vessel Valuations.................................... 52 9.3 Asset Maintenance.................................... 53 9.4 Inspection and Survey Reports........................ 53 SECTION 10 ASSIGNMENT.................................................... 53 SECTION 11 ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.................................... 54 11.1 Illegality........................................... 54 11.2 Increased Cost....................................... 54 11.3 Nonavailability of Funds............................. 55 11.4 Agent's Certificate Conclusive....................... 55 11.5 Compensation for Losses.............................. 56 SECTION 12 CURRENCY INDEMNITY............................................ 56 12.1 Currency Conversion.................................. 56 12.2 Change in Exchange Rate.............................. 56 12.3 Additional Debt Due.................................. 56 12.4 Rate of Exchange..................................... 56 SECTION 13 FEES AND EXPENSES............................................. 56 13.1 Commitment Fee....................................... 56 13.2 Facility Fee......................................... 57 13.3 Other Fees........................................... 57 13.4 Expenses............................................. 57 SECTION 14 APPLICABLE LAW, JURISDICTION AND WAIVER....................... 57 14.1 Applicable Law....................................... 57 14.2 Jurisdiction......................................... 58 14.3 Waiver Of Jury Trial................................. 58 iv 6 SECTION 15 THE AGENT..................................................... 58 15.1(a) Appointment of Agent................................. 58 15.1(b) Appointment of Security Trustee...................... 58 15.2 Distribution of Payments............................. 59 15.3 Holder of Interest in Note........................... 59 15.4 No Duty to Examine, Etc.............................. 59 15.5 Agent as Lender...................................... 59 15.6(a) Obligations of Agent................................. 59 15.6(b) No Duty to Investigate............................... 59 15.7(a) Discretion of Agent.................................. 60 15.7(b) Instructions of Majority Lenders..................... 60 15.8 Assumption re Event of Default....................... 60 15.9 No Liability of Agent or Lenders..................... 60 15.10 Indemnification of Agent............................. 61 15.11 Consultation with Counsel............................ 61 15.12 Resignation.......................................... 61 15.13 Representations of Lenders........................... 61 15.14 Notification of Event of Default..................... 61 SECTION 16 NOT ICES AND DEMANDS...................................... 62 16.1 Notices in Writing................................... 62 16.2 Addresses for Notice................................. 62 16.3 Notices Deemed Received.............................. 62 SECTION 17 MISCELLANEOUS................................................. 62 17.1 Time of Essence...................................... 62 17.2 Unenforceable, etc., Provisions - Effect............. 63 17.3 Indemnification...................................... 63 17.4 References........................................... 63 17.5 Further Assurances................................... 63 17.6 Prior Agreements, Merger............................. 64 17.7 Entire Agreement, Amendments......................... 64 17.8 Headings............................................. 64 CONSENT AND AGREEMENT AND ACCOUNT ASSIGNMENT.............................. 65 v 7 SCHEDULES 1 LENDERS 2 GUARANTORS 3 OTHER SUBSIDIARIES 4 MORTGAGED VESSELS 5 OTHER VESSELS 6 MANAGEMENT AGREEMENTS 7 LITIGATION, SUITS, PROCEEDINGS AND ENVIRONMENTAL CLAIMS EXHIBITS 1 TERM LOAN NOTE 2 REVOLVING CREDIT FACILITY NOTE 3 GUARANTY 4 U.S. MORTGAGE 5 LIBERIAN MORTGAGE 6 EARNINGS ASSIGNMENTS 7 INSURANCES ASSIGNMENTS 8 GENERAL SECURITY AGREEMENT 9 ASSIGNMENT OF VESSEL MANAGEMENT RECEIVABLES 10 ASSIGNMENT OF JOINT VENTURE PROCEEDS 11 ASSIGNMENT OF GOVERNMENT RECEIVABLES 12 NEGATIVE PLEDGE 13 DRAWDOWN NOTICE 14 COMPLIANCE CERTIFICATE vi 8 15 ASSIGNMENT AND ASSUMPTION AGREEMENT vii 9 TERM LOAN AND REVOLVING CREDIT FACILITY AGREEMENT THIS TERM LOAN AND REVOLVING CREDIT FACILITY AGREEMENT (this "Agreement") is made as of the day of June, 1998, by and between (1) MARINE TRANSPORT CORPORATION, a corporation incorporated under the laws of the State of Delaware with offices at 1200 Harbour Boulevard, 9th Floor, Weehawken, New Jersey (the "Borrower"), (2) the financial institutions listed on Schedule 1 hereto (together with their respective successors and assigns hereinafter called the "Lenders") and (3) DEN NORSKE BANK ASA, acting through its New York branch, with offices at 200 Park Avenue, New York, New York 10166 (the "Agent"). WITNESSETH THAT: 1. DEFINITIONS 1.1 Defined Terms. The words and expressions specified in this Agreement shall, except where the context otherwise requires, have the meanings attributed to them below: "Acceptable Accounting Firm" Ernst & Young, or such other recognized international accounting firm as shall be approved by the Agent, such approval not to be unreasonably withheld; "Acquisition Agreement" that certain acquisition agreement, dated as of September 15, 1997, among OMI Corp., Universal Bulk Carriers, Inc., Marine Transport Lines and the persons set forth on Exhibit A attached thereto, together with any and all amendments, modifications or waivers of provisions thereof and supplements thereto; "Advance" each Term Loan Advance and each Revolving Credit Facility Advance; "Affiliate" as to any Person, any other Person that, directly or indirectly, controls or is controlled by or is under common control with such Person. (For purposes of this definition, the term "control", including the terms "controlling", "controlled by" and "under common control with", of a Person means the possession, direct or indirect, of the power to vote 5% or more of the securities having ordinary voting power for 10 the election of directors of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise); "AMELINA" that certain 10,922 dwt Liberian flag ammonia tanker named AMELINA, Official No. 2015 documented under the laws and flag of the Republic of Liberia in the name of Oswego Chemical Carriers Corporation; "Argosy" Argosy Ventures Ltd., a Delaware not-for-profit corporation. "Assignment and Assumption the Assignment and Assumption Agreement(s) Agreement(s)" executed pursuant to Section 10 substantially in the form of Exhibit 15; "Assignment Notices" notices for the (a) Earnings Assignments substantially in the form set out in Exhibit 1 thereto or in such other form as the Agent may agree; (b) Insurances Assignments substantially in the form set out in Exhibit 3 thereto or in such other form as the Agent may agree; (c) Assignments of Vessel Management Receivables substantially in the form set out in Exhibit 1 thereto or in such other form as the Agent may agree; (d) Assignment of Joint Venture Proceeds substantially in the form set out in Exhibit 1 thereto or in such other form as the Agent may agree; and (e) Assignments of Government Receivables substantially in the forms set out in Exhibits 1 and 2 thereto or in such other form as the Agent may agree; 2 11 "Assignment of Government the assignments of receivables payable to Receivables" Marine Transport Lines or Intrepid Ship Management, Inc., as the case may be, for their respective contracts with MARAD executed or to be executed by Marine Transport Lines and Intrepid Ship Management, Inc. in favor of the Agent pursuant to Section 4.1 of this Agreement, substantially in the form of Exhibit 11 or in such other form as the Agent may agree; "Assignment of Joint Venture the second assignment of those proceeds to Proceeds" which Marine Car Carriers (Del) is entitled based upon its shares in Marine Car Carriers (MI) such assignment to be executed by Marine Car Carriers (Del) in favor of the Agent pursuant to the Original Credit Agreement in the form set out in Exhibit 12 or in such other form as the Agent may agree; "Assignment of Vessel the assignments executed or to be executed by Management Receivables" Marine Transport Management and Intrepid Ship Management, Inc. in favor of the Agent of all right, title and interest of such Guarantors in its receivables pursuant to Section 4.1 of this Agreement, substantially in the form set out in Exhibit 11 or in such other form as the Agent may require; "Assignments" the Earnings Assignments, the Insurances Assignments, the Assignments of Government Receivables, the General Security Agreements, the Assignments of Vessel Management Receivables and the Assignment of Joint Venture Proceeds; "Banking Day(s)" day(s) on which banks are open for the transaction of business of the nature required by this Agreement or any other documents executed in connection herewith in London, England and New York, New York; 3 12 "CALINA" that certain 15,661 dwt Liberian flag ammonia tanker named CALINA, Official No. 2774 documented under the laws and flag of the Republic of Liberia in the name of Oswego Chemical Carriers Corporation; "Cash Equivalents" (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than ninety (90) days from the date of acquisition, (ii) time deposits and certificates of deposit, denominated in Dollars, of the Agent, of any Lender or of any commercial bank of recognized standing organized under the laws of any country which is a member of the Organization of Economic Cooperation and Development or any governmental subdivision or taxing authority of any such country having capital and surplus in excess of Five Hundred Million Dollars ($500,000,000) or its equivalent in such country's currency, (any such commercial bank, a "Qualified Bank"), (iii) repurchase obligations with a term of not more than seven (7) days for underlying securities of the types described in (i) above entered into with the Agent, any Lender or any Qualified Bank, and (iv) commercial paper, denominated in Dollars, issued by the Agent, any Lender or by the parent corporation of any Qualified Bank, and commercial paper rated at least A-1 or the equivalent thereof by Standard & Poor's Corporation or at least P-1 or the equivalent thereof by Moody's Investor Services, Inc., and in each case maturing within ninety (90) days after the date of acquisition; 4 13 "Code" the Internal Revenue Code of 1986, as amended, and any successor statute and regulations promulgated thereunder; "Collateral Vessel Value" the aggregate, as calculated from time to time in the manner provided in Sections 9.2 and 9.3, of (a) the FMVs of each of the Vessels then mortgaged to secure obligations owed to the Lenders under or in connection with either this Agreement or the Related Credit Agreement and (b) the value of the OMI COLUMBIA; "Commitment(s)" that portion of the Term Loan and the Revolving Credit Facility set out opposite a Lender's name in Schedule 1 hereto or, as the case may be, in any relevant Assignment and Assumption Agreement, as reduced from time to time pursuant to the terms of this Agreement; "Compliance Certificate" a certificate of the Chief Financial Officer of the Borrower certifying the compliance with all of the covenants of the Borrower contained herein, delivered to the Agent from time to time pursuant to Section 9.1(A)(iv) hereof in the form set out in Exhibit 14, or in such other form as the Agent may require; "Consents and Agreements" such third party consents as may be required under any contract to which a Security Party is a party in order for a Security Party to grant a security interest pursuant to any Security Document; "COURIER" that certain 1977 built 35,662 dwt product tanker named COURIER, Official No. 578746, documented under the laws and flag of the United States in the name of Courier Transport, Inc.; "DOC" means a document of compliance issued to an Operator in accordance with rule 13 of the ISM Code; 5 14 "Dollars" and the sign "$" the legal currency, at any relevant time hereunder, of the United States of America and, for all payments hereunder, in same day funds settled through the New York Clearing House Interbank Payments system (or such other Dollar funds as may be determined by the Agent to be customary for the settlement in New York City of banking transactions of the type herein involved); "Drawdown Date" each Term Loan Drawdown Date and each Revolving Credit Facility Drawdown Date; "Drawdown Notice" the meaning ascribed thereto in Section 3.4; "Earnings Assignments" assignments of the earnings of the Mortgaged Vessels executed or to be executed by the appropriate Shipowning Guarantor or OMI Challenger Transport, in favor of the Agent pursuant to Section 4.1 substantially in the form set out in Exhibit 8 or in such other form as the Agent may require; "EBITDA" means, on a consolidated basis, the Borrower's earnings before interest, taxes, depreciation and amortization (calculated in accordance with GAAP) less income from 50% or less, directly or indirectly, owned affiliates, based on the preceding twelve (12) months actual operating income (for purposes of calculating EBITDA for the period commencing from the date hereof and ending on the first anniversary of the date hereof, the results for each quarterly reporting period shall be annualized); "Environmental Affiliate" any person or entity liable for Environmental Claims, which claims any Security Party may have assumed by contract or operation of law; 6 15 "Environmental Approvals" the meaning ascribed thereto in Section 2.1(p); "Environmental Claim" the meaning ascribed thereto in Section 2.1(p); "Environmental Laws" the meaning ascribed thereto in Section 2.1(p); "ERISA" the Employee Retirement Income Security Act of 1974, as amended; "ERISA Affiliate" a trade or business (whether or not incorporated) which is under common control with, or part of a controlled group of corporations with, any Security Party within the meaning of Sections 414(b), (c), (m) or (o) of the Code; "Events of Default" any of the events set out in Section 8.1; "Final Payment Date" June , 2003, or if such day is not a Banking Day, the next following Banking Day unless such next following Banking Day falls in the following month, in which case the Final Payment Date shall be the immediately preceding Banking Day; "Financing Documents" this Agreement, the Notes, the Guaranty and the Security Documents; "FMV" with respect to a Vessel, fair market value as determined in accordance with Section 9.2 hereof; "Former Lenders" Harrowston and Wolfson; "Former Lenders Indebtedness" the indebtedness of the Borrower and/or its Affiliates formerly owed to the Former Lenders in the aggregate principal amount of Two Million Eight Hundred Ninety Thousand] Dollars ($2,890,000), plus accrued and unpaid interest thereon; "GAAP" the meaning ascribed thereto in Section 1.3; 7 16 "General Security Agreements" general security agreements to be executed by each of the Guarantors which does not own a Mortgaged Vessel in favor of the Agent pursuant to Section 4.1 substantially in the form set out in Exhibit 10 or in such other form as the Agent may require; "Guarantor(s)" each of the companies listed on Schedule 2; "Guaranty" the guaranty of the obligations of the Borrower under this Agreement and under the Notes to be executed by each Guarantor in favor of the Agent pursuant to Section 4.l substantially in the form set out in Exhibit 3 or in such other form as the Agent may require; "Harrowston" Harrowston Corporation, a company organized under the laws of Canada; "Indebtedness" for any Person at any date of determination (without duplication), all (i) indebtedness of such Person for borrowed money, (ii) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations of such Person arising from letters of credit or other similar instruments (including reimbursement obligations with respect thereto), (iv) except trade payables, obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six (6) months after the date of placing such property in service or taking delivery thereof or the completion of such services, (v) obligations on account of principal of such Person as lessee under capitalized leases, (vi) indebtedness of other Persons secured by a lien on any asset of such Person, whether or not such indebtedness is assumed by such Person; provided that the amount of such indebtedness shall be the lesser of (a) the 8 17 fair market value of such asset at such date of determination and (b) the amount of such indebtedness, and (vii) indebtedness of other Persons guaranteed by such Person to the extent such indebtedness is so guaranteed. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided that the amount outstanding at any time of any indebtedness issued with original issue discount is the face amount of such indebtedness less the remaining unamortized portion of the original issue discount of such indebtedness at such time as determined in conformity with GAAP; and provided further that Indebtedness shall not include any liability for federal, state, local or other taxes; "Insurances Assignments" assignments of the insurances of the Mortgaged Vessels to be executed by the appropriate Shipowning Guarantor in favor of the Agent, pursuant to Section 4.1 substantially in the form set out in Exhibit 9 or in such other form as the Agent may require; "Interest Notice" a notice delivered to the Agent pursuant to Section 6.5 specifying the duration of any relevant Interest Period; "Interest Period(s)" period(s) of one (1), two (2), three (3) or six (6) months selected by the Borrower or such other period(s) as may be agreed between the Borrower and the Lenders; "Intrepid Ship Management, Intrepid Ship Management, Inc., a corporation Inc." organized and existing under the laws of the State of Delaware; 9 18 "ISM Code" means the International Safety Management Code for the Safe Operating of Ships and for Pollution Prevention constituted pursuant to Resolution A. 741(18) of the International maritime organization and incorporated into the Safety of Life at Sea Convention including any amendments or extensions thereto and any regulation issued pursuant thereto; "Key Management Agreements" a) that certain vessel operating agreement between Marine Transport Management and Union Carbide Corporation, dated as of January 1, 1996, for the United States flag vessel CHEMICAL PIONEER (Official No. 661060) and any renewals or extensions thereof, b) that certain operating agreement, dated December 18, 1979 between Marine Alaska and Marine Transport Management, relating to the United States flag vessel B.T. ALASKA (Official No. 590208) and any renewals or extensions thereof, c) that certain vessel management agreement between the Borrower and OMI Challenger Transport, dated as of January 29, 1997, as amended, for the OMI COLUMBIA and any renewals or extensions thereof, d) that certain contract No. DTMA98-98-C-00004, awarded June 12, 1998, between MTL and MARAD relating to the United States flag vessels CAPE COD and CAPE CHALMERS and any renewals or extensions thereof, e) that certain contract No. DTMA98-98-C-00009, awarded June 12, 1998, between MTL and MARAD relating to the United States flag vessels CAPE EDMONT and CAPE DUCATO and any renewals or extensions thereof, 10 19 f) that certain contract No. DTMA98-98-C-00010, awarded June 12, 1998, between MTL and MARAD relating to the United States flag vessels CAPE DECISION and CAPE DOUGLAS and any renewals or extensions thereof, g) that certain contract No. DTMA98-98-C-00011, awarded June 12, 1998, between MTL and MARAD relating to the United States flag vessels CAPE DIAMOND and CAPE DOMINGO and any renewals or extensions thereof, and h) that certain contract No. DTMA98-98-C-00033, awarded June 12, 1998, between MTL and MARAD relating to the United States vessels CAPE BON and NORTHERN LIGHT and any renewals or extensions thereof; "Liberian Mortgages" those second preferred Liberian ship mortgages on the each Mortgaged Vessel registered under the laws and flag of the Republic of Liberia to be executed by the appropriate Shipowning Guarantor in favor of the Agent pursuant to Section 9.1(A)(xx) substantially in the form set out in Exhibit 6 or in such form as the Agent may require; "LIBOR" the rate (rounded upward to the nearest 1/16th of one percent) for deposits of Dollars for a period equivalent to the relevant Interest Period at or about 11:00 a.m. (London time) on the second London Banking Day before the first day of such period as displayed on Telerate page 3750 (British Bankers' Association Interest Settlement Rates) (or such other page as may replace such page 3750 on such system or on any other system of the information vendor for the time being designated by the British Bankers' Association to calculate the BBA Interest 11 20 Settlement Rate (as defined in the British Bankers' Association's Recommended Terms and Conditions ("BBAIRS" terms) dated August 1985)), provided that if on such date no such rate is so displayed for the relevant Interest Period, LIBOR for such period shall be the rate offered by the Agent for deposits of Dollars in an amount approximately equal to the amount for which LIBOR is to be determined for a period equivalent to the relevant Interest Period to prime banks in the London Interbank Market at or about 11:00 a.m. (London time) on the second Banking Day before the first day of such period; "Majority Lenders" Lenders whose Commitments exceed sixty-seven percent (67%) of the total Commitments; "Management Agreements" the management and/or operating contracts listed on Schedule 6 hereto; "MARAD" the United States Maritime Administration: "Marine Alaska" Marine Alaska, Inc., a Delaware corporation; "Marine Car Carriers (Del)" Marine Car Carriers, Inc., a Delaware corporation; "Marine Car Carriers (MI)" Marine Car Carriers, Inc. (MI), a Marshall Islands corporation; "Marine Transport Lines" Marine Transport Lines, Inc., a corporation incorporated under the laws of the State Delaware; "Marine Transport Management" Marine Transport Management, Inc., a corporation incorporated under the laws of the State of Delaware; "Margin" the meaning ascribed thereto in Section 6.3; 12 21 "MARINE CHEMIST" that certain 1970 built 36,526 dwt chemical tanker named MARINE CHEMIST, Official No. 529399, documented under the laws and flag of the United States in the name of Marine Chemical Navigation Corporation; "MARINE DUVAL" that certain 1970 rebuilt 25,131 dwt molten sulphur carrier named MARINE DUVAL, Official No. 245851, documented under the laws and flag of the United States in the name of Marine Sulphur Shipping Corporation; "Materials of Environmental the meaning ascribed thereto in Section 2.1(p); Concern" "MCCMI Shareholders Agreement" that certain shareholders agreement among the shareholders of Marine Car Carriers (MI) dated as of March 1, 1995; "Mortgaged Vessels" the vessels identified on Schedule 4; "Mortgages" the U.S. Mortgages and the Liberian Mortgages; "Mortgages Securing the those certain first preferred ship mortgages OMI Debt" over the Workboats in favor of and securing the OMI Debt; "Negative Pledge" the negative pledge by OMI Challenger Transport of all of its interest in OMI COLUMBIA or any Vessel Agreement relating to such Vessel, substantially in the form of Exhibit 12. "New Workboats" the United States flag vessels OMS TRAVIS (Official No. 587445) and OMS MAVERICK (Official No. 517406); "Notes" the Term Loan Note and the Revolving Credit Facility Note; "OMI" OMI Corporation, a corporation incorporated under the laws of the Marshall Islands; 13 22 "OMI Challenger Transport" OMI Challenger Transport, Inc., a corporation incorporated under the laws of the State of Delaware; "OMI COLUMBIA" that certain 1974 built 138,698 dwt oil tanker named OMI COLUMBIA, Official No. 663428, documented under the laws and flag of the United States in the name of Argosy; "OMI COLUMBIA Loan Documents" that certain credit agreement, dated as of January 29, 1997, among Citicorp North America Inc., as agent, the Lenders (as defined therein), Argosy, et al., and any documents executed in connection therewith or securing any obligation owing thereunder; "OMI Debt" Indebtedness of the Borrower to OMI in the original principal amount of Six Million Four Hundred Forty-Three Thousand Dollars ($6,443,000); "Operator" means any Person approved by the Agent who is from time to time during the Security Period, concerned with the operation of a Vessel and falls within the definition of "Company" set out in rule 1.1.2 of the ISM Code; "Other Vessels" the vessels identified on Schedule 5; "PATRIOT" that certain 1976 built 35,662 dwt product tanker named PATRIOT, Official No. 571049, documented under the laws and flag of the United States in the name of Patriot Transport, Inc.; "Permitted Indebtedness" collectively, the Indebtedness incurred under this Agreement, the Related Indebtedness, the OMI Indebtedness and Permitted Third Party Debt; "Permitted Liens" the meaning ascribed thereto in Section 9.1(B)(i); 14 23 "Permitted Third Party Debt" Indebtedness, incurred with recourse to any Security Party or any other party owned directly or indirectly by the Borrower and for the purposes of acquiring new assets or supporting MARAD vessel management contracts, not to exceed, in the aggregate, the principal amount of US$20,000,000 outstanding at any time; "Person" means any individual, sole proprietorship, corporation, partnership (general or limited), business trust, bank, trust company, joint venture, association, joint stock company, trust or other unincorporated organization, whether or not a legal entity, or any government or agency or political subdivision thereof; "Plan" any employee benefit plan covered by Title IV of ERISA; "Reduction Date" June , 2001, or if such day is not a Banking Day, the next following Banking Day unless such next following Banking Day falls in the following month, in which case the Revolving Credit Facility Termination Date shall be the immediately preceding Banking Day; "Related Credit Agreement" that certain amended and restated term loan and revolving credit agreement of even date herewith among Marine Transport Lines, as borrower, the Lenders and the Agent, as the same may hereafter be amended or supplemented; "Related Indebtedness" the Indebtedness of the Security Parties owed under and in connection with the Related Credit Agreement; "Related Security Documents" the "Security Documents" as defined in the Related Credit Agreement; "Related Term Loan" the "Term Loan" as defined in the Related Credit Agreement; 15 24 "Relevant Contracts" a) that certain time charter, dated April 31, 1982, of the MARINE DUVAL to Freeport MacMoran Resource Partners, Limited Partnership and any renewals or extensions thereof; b) the contract of affreightment, dated as of January 1, 1996, with Shell Oil Company for the MARINE CHEMIST and any renewals or extensions thereof; c) the contract of affreightment, dated September 24, 1994, with PPG Industries, Inc. for the MARINE CHEMIST and any renewals or extensions thereof; d) the contract of affreightment, dated as of July 1, 1996, with ARCO Products Company for the MARINE CHEMIST and any renewals or extensions thereof; e) that certain bareboat charter dated on or about July 29, 1965, of the CALINA between Oswego Chemical Carriers Corporation, as owner, and Oswego Corporation, as charterer and any renewals or extensions thereof; and f) that certain time charter, dated as of March 14, 1978 between Marine Alaska, Inc. and BP Oil Shipping Company, USA, for the United States flag vessel B.T. ALASKA (Official No. 590208) and any renewals or extensions thereof; g) that certain time charter, dated as of June 1, 1994 between OMI Challenger Transport and BP Oil Shipping Company, USA for the OMI COLUMBIA and any renewals or extensions thereof; and h) that certain time charter, dated as of January 29, 1997, between Argosy and OMI Challenger Transport for the OMI 16 25 COLUMBIA and any renewals or extensions thereof; "Revolving Credit Facility" the sums to be advanced by the Lenders to the Borrower in an aggregate amount not to exceed at any one time outstanding Two Million Dollars ($2,000,000) pursuant to Section 3.3 as the same may be reduced as provided in this Agreement; "Revolving Credit Facility any amount advanced to the Borrower under the Advance" Revolving Credit Facility on any Revolving Credit Facility Drawdown Date; "Revolving Credit Facility Applicable Rate" any rate of interest on the Revolving Credit Facility Balance from time to time prescribed by Section 6.2; "Revolving Credit Facility the outstanding Dollar amount of the Revolving Balance" Credit Facility Advances at any relevant time; "Revolving Credit Facility has the meaning ascribed thereto in Section Default Rate" 6.2; "Revolving Credit Facility each date which is a Banking Day not later Drawdown Date" than May , 2000, upon which the Borrower has requested any Revolving Credit Facility Advance as provided in Section 3.3; "Revolving Credit Facility the promissory note, to be executed by the Note" Borrower to the order of the Lenders to evidence the Revolving Credit Facility substantially in the form set out in Exhibit 2 or in such other form as the Agent may require; "Revolving Credit Facility June , 2002, or if such day is not a Termination Date" Banking Day, the next following Banking Day unless such next following Banking Day falls in the following month, in which case the Revolving Credit Facility Termination Date shall be the immediately preceding Banking Day; 17 26 "ROVER" that certain 1977 built 35,662 dwt product tanker named ROVER, Official No. 577241, documented under the laws and flag of the United States in the name of Rover Transport, Inc.; "SAVONETTA" that certain 10,947 dwt Liberian flag ammonia tanker named SAVONETTA, Official No. 2129, documented under the laws and flag of the Republic of Liberia in the name of Oswego Chemical Carriers Corporation; "Security Documents" the Mortgages, the Assignments, the Assignment Notices, the Subordination Agreement, the Consents and Agreements. the Negative Pledge and any other documents that may be executed as security for the Term Loan and/or the Revolving Credit Facility and the Borrower's obligations arising therefrom; "Security Parties" the Borrower and each Guarantor; "Security Period" the period from the initial Drawdown Date of the initial Term Loan Advance to the date upon which all amounts owing under the Term Loan and the Revolving Credit Facility and all other amounts due to the Lenders and the Agent pursuant to the Financing Documents are prepaid in full or become repayable and are repaid in full and no further Revolving Credit Facility Advances are available; "Shipowning Guarantors" each of the Guarantors which owns a Mortgaged Vessel; `SMC" means a safety management certificate issued for a Vessel in Accordance with rule 13 of the ISM Code; "Taxes" any present or future income or other taxes, levies, duties, charges, fees, deductions, or withholdings of any nature now or hereafter imposed, levied, 18 27 collected, withheld or assessed by any taxing authority whatsoever, except for taxes on or measured by the income of the Agent or any Lender imposed by the Agent's or such Lender's jurisdiction of organization, the jurisdiction of the principal place of business of the Agent or such Lender, the United States of America, the State or City of New York or any governmental subdivision or taxing authority of any of them or by any other jurisdiction or taxing authority having jurisdiction over the Agent or such Lender (unless such jurisdiction is asserted by reason of the activities of the Security Parties or any of them); "Term Loan" the sum advanced by the Lenders pursuant to this Agreement in the principal amount of Eight Million Eight Hundred Eighty-Seven Thousand Dollars ($8,887,000); "Term Loan Advance" the amount advanced to the Borrower pursuant to Section 3.2 on a Term Loan Drawdown Date; "Term Loan Applicable Rate" any rate of interest on the Term Loan Balance from time to time applicable pursuant to Section 6.1; "Term Loan Balance" the Dollar amount of the Term Loan at any relevant time as reduced by payments pursuant to the terms of this Agreement; "Term Loan Default Rate" has the meaning ascribed thereto in Section 6.1; "Term Loan Drawdown Date" each date, which is a Banking Day not later than June 30, 1998, upon which the Borrower has requested that a Term Loan Advance be made available to the Borrower as provided in Section 3.2; "Term Loan Note" the promissory note to be executed by the Borrower to the order of the Lenders to evidence the Term Loan substantially in 19 28 the form set out in Exhibit 1 or in such other form as the Agent may require; "Term Loan Payment Dates" (i) September , 1998 and (ii) each of the dates falling at intervals of three (3) months after such date up to and including the Final Payment Date, provided, however, that if any such day is not a Banking Day, the next following Banking Day, unless such next following Banking Day falls in the following calendar month, in which case the relevant Term Loan Payment Date shall be the immediately preceding Banking Day; "Total Debt" the Indebtedness of the Borrower on a consolidated basis; "Total Loss" the actual, agreed, arranged or compromised total loss of any Vessel; "Unrestricted Cash and Cash Equivalents" cash or Cash Equivalents (excluding, however, undrawn amounts available under the Revolving Credit Facility or under the Related Credit Agreement) which are free of liens and unencumbered to any party other than the Agent and the Lenders in connection herewith; "U.S. Mortgages" the second preferred United States ship mortgages on each Mortgaged Vessel registered under the laws and flag of the United States of America to be executed by the appropriate Shipowning Guarantor in favor of the Agent pursuant to Section 4.1 substantially in the form set out in Exhibit 4 or in such other form as the Agent may require; "Vessel Agreements" a) the Relevant Contracts; b) that certain time charter, dated January 1, 1985 (as amended), of the SAVONETTA to Hydro Agri Ammonia, Inc.; 20 29 c) that certain time charter, dated September 16, 1987 (as amended), of the CALINA to Hydro Agri Ammonia, Inc.; d) that certain time charter, dated January 1, 1985 (as amended), of the AMELINA to Hydro Agri Ammonia, Inc.; e) the Mortgage(s) Securing the OMI Debt; and f) the OMI COLUMBIA Loan Documents. "Vessels" the Mortgaged Vessels and the Other Vessels; "Wolfson" The Wolfson Descendants' 1983 Trust, a grantor trust established under the laws of New Jersey; and "Work Boats" the United States flag vessels OMS HARRIS (Official No. 650997), OMS NUECES (Official No. 570688), OMS LIBERTY (Official No. 602050) and OMS SHELBY (Official No. 603076). "Year 2000 Issue" the failure of computer software, hardware and firmware systems and equipment containing embedded computer chips properly to receive, transmit, process, manipulate, store, retrieve, re-transmit or in any other way utilize data and information due to the occurrence of the year 2000 or the inclusion of dates on or after January1, 2000. 1.2 Construction. Words importing the singular number only shall include the plural and vice versa. Words importing persons shall include companies, firms, corporations, partnerships, unincorporated associations and their respective successors and assigns. 1.3 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles as in effect from time to time in the United States of America consistently applied ("GAAP") and all financial statements submitted pursuant to this Agreement shall be prepared in 21 30 accordance with, and all historical financial data submitted pursuant hereto shall be derived from financial statements prepared in accordance with, GAAP. 2. REPRESENTATIONS AND WARRANTIES 2.1 In order to induce the Agent and the Lenders to enter into this Agreement and to make the Term Loan and Revolving Credit Facility available to the Borrower, the Borrower hereby represents and warrants to the Agent and the Lenders (which representations and warranties shall survive the execution and delivery of this Agreement and the Notes and the making of such advances) that: (a) Due Organization and Power. Each of the Security Parties is duly formed and is validly existing in good standing under the laws of its jurisdiction of incorporation, has full power to carry on its business as now being conducted and to enter into and perform its obligations under those Financing Documents to which it is or is to be a party pursuant to this Agreement, and has complied with all (i) statutory, regulatory and other requirements relative to such business; and (ii) such agreements which if not complied with, could reasonably be expected to have a material adverse effect on its business, assets or operations, financial or otherwise; (b) Authorization and Consents. All necessary corporate action has been taken to authorize, and all necessary consents and authorities have been obtained and remain in full force and effect to permit, each Security Party to enter into and perform its obligations under those Financing Documents to which it is or is to be a party pursuant to this Agreement and, in the case of the Borrower, to borrow, service and repay the Term Loan and the Revolving Credit Facility and, as of the date of this Agreement, no further consents or authorities are necessary for the borrowing, service and repayment of the Term Loan and/or the Revolving Credit Facility or any part thereof; (c) Binding Obligations. Each of the Financing Documents constitutes or, when executed will constitute, the legal, valid and binding obligation of each Security Party which is a party thereto enforceable against such Security Party in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting generally the enforcement of creditors' rights; (d) No Violation. The execution and delivery of, and the performance of the provisions of, each Financing Document by each Security Party which is a party thereto do not, and will not during the Security Period, contravene any applicable law or regulation existing at the date hereof or any contractual restriction binding on such Security Party or its certificate of incorporation, by-laws or equivalent documents; (e) Litigation. Except as set forth on Schedule 7 hereto, no action, suit or proceeding is pending or threatened against any Security Party before any court, board of arbitration or administrative agency which (after taking into account the benefits of any applicable insurance which can reasonably be expected to be recovered by the 22 31 relevant Security Party, as the case may be) could or might result in any material adverse change in the business or condition (financial or otherwise) of any thereof; (f) No Default. No Security Party or Marine Car Carriers (MI) is in default under any material agreement by which it is bound, or is in default in respect of any material financial commitment or obligation; (g) Vessels. As of the date hereof: (i) each of the Mortgaged Vessels is in the sole and absolute ownership of the respective Guarantor, as listed opposite its name in Schedule 4, unencumbered, save and except for, the respective Mortgage recorded thereagainst, the relevant Related Security Documents and the respective Vessel Agreements,] and duly registered in the name of such Guarantor under the respective flag as set forth in Schedule 4; (ii) each of the Other Vessels is in the sole and absolute ownership of an Affiliate of the Borrower or, in the case of OMI COLUMBIA, Argosy, as listed opposite its name in Schedule 5, unencumbered, save and except for, the respective Vessel Agreements and the relevant Related Security Documents, and duly registered in the name of such Affiliate of the Borrower under the respective flag as set forth in Schedule 5; (iii) each Vessel will be classed in the highest classification and rating for vessels of the same age and type with the respective classification society as set forth in Schedules 4 and 5 without any material outstanding recommendations; (v) each Vessel will be operationally seaworthy and in all material respects fit for its intended service; (v) each of the Mortgaged Vessels will be insured in accordance with the provisions of the governing Mortgage and the requirements thereof for such insurances will have been complied with and each of the Other Vessels will be insured against such risks, in such amounts and with such insurance companies as would a reasonably prudent shipowner engaged in the same trades; and 23 32 (vi) each Vessel subject to a charter or other contract of carriage constituting a Vessel Agreement has been accepted by its respective charterer and is in service under such Vessel Agreement; (h) Insurance. Each of the Security Parties has insured its properties and assets against such risks and in such amounts as are customary for companies engaged in similar businesses; (i) Citizenship and Qualification as Owner. Each Security Party or other Affiliate of the Borrower owning a United States flag Vessel is a United States citizen within the meaning of Section 2 of the United States Shipping Act, 1916, as amended (46 U.S.C. ss.802), qualified to own and operate vessels in the coastwise trade of the United States of America and each Security Party or other Affiliate of the Borrower which is the registered owner of a Vessel registered under a flag other than the United States of America is duly qualified under the laws of such flag to be the registered owner and operator of a vessel registered under such flag; (j) Financial Information. Except as otherwise disclosed in writing to the Agent on or prior to the date hereof, all financial statements, information and other data furnished by the Borrower to the Agent are complete and correct, and such financial statements have been prepared in accordance with GAAP and accurately and fairly present the financial condition of the parties covered thereby as of the respective dates thereof and the results of the operations thereof for the period or respective periods covered by such financial statements and since such date or dates, there has been no material adverse change in the financial condition or results of the operations of any of such parties and none thereof has any contingent obligations, liabilities for taxes or other outstanding financial obligations which are material in the aggregate except as disclosed in (a) such statements, information and data or (b) in Schedule 7 prepared pursuant to Section 2.1(e) of this Agreement; (k) Tax Returns. Except as previously advised to the Lender in writing, each Security Party has filed all tax returns required to be filed thereby and has paid all taxes payable thereby which have become due, other than those (a) not yet delinquent or the nonpayment of which would not have a material adverse effect on such Security Party; and (b) being contested in good faith and by appropriate proceedings or other acts and for which adequate reserves have been set aside on its books; (l) ERISA. The execution and delivery of this Agreement and the consummation of the transactions hereunder will not involve any prohibited transaction within the meaning of ERISA or Section 4975 of the Code and no condition exists or event or transaction has occurred in connection with any Plan maintained or contributed to by any Security Party or any ERISA Affiliate (as such term is hereinafter defined) resulting from the failure of any such party to comply with ERISA insofar as ERISA applies thereto which is reasonably likely to result in such Security Party or any ERISA Affiliate incurring any liability, fine or penalty which individually or in the aggregate 24 33 would have a material adverse effect on such Security Party or ERISA Affiliate. As used herein the term "ERISA Affiliate" means a trade or business (whether or not incorporated) which is under common control with the Security Party in question within the meaning of Sections 414(b), (c), (m) or (o) of the Code. Prior to the date hereof, the Borrower has delivered to the Agent a list of all the employee benefit plans to which each Security Party or any ERISA Affiliate is a "party in interest" (within the meaning of Section 3(14) of ERISA) or a "disqualified person" (within the meaning of Section 4975(e)(2) of the Code); (m) Chief Executive Office. Each Security Party's chief executive office and chief place of business and the office in which the records relating to the earnings and other receivables of such Security Party are kept is, and will continue to be, located at 1200 Harbour Boulevard, 9th Floor, Weehawken, New Jersey or, in the case of OMI Petrolink Corp. and its Subsidiaries, 4606 FM 1960 West Suite 200, Houston, Texas and, in the case of Intrepid Ship Management Inc., 370 Seventh Avenue, 11th Floor, New York, New York; (n) Foreign Trade Control Regulations. None of the transactions contemplated herein will violate any of the provisions of the Foreign Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 500, as amended), any of the provisions of the Cuban Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 515, as amended), any of the provisions of the Libyan Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 550, as amended), any of the provisions of the Iraqi Sanctions Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 575, as amended), any of the provisions of the Iranian Transactions Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, part 560, as amended) any of the provisions of the Federal Republic of Yugoslavia (Serbia and Montenegro) Assets Control Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 585 as amended) or any of the provisions of the Regulations of the United States of America Governing Transactions in Foreign Shipping of Merchandise (Title 31, Code of Federal Regulations, Chapter V, Part 505, as amended); (o) Equity Ownership. Each of the Security Parties (other than the Borrower) is a, direct or indirect, wholly-owned subsidiary of the Borrower. As of the date hereof, the Borrower does not own any shares of capital stock, partnership interest or any other direct or indirect equity interest in any corporation, partnership or other entity except the Security Parties and the companies listed on Schedule 3; (p) Environmental Matters. Except as heretofore disclosed on Schedule 7, (i) each of the Security Parties and their Environmental Affiliates will, when required, be in full compliance with all applicable United States federal and state, local, foreign and international laws, regulations, conventions and agreements relating to pollution prevention or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, navigable waters, waters of 25 34 the contiguous zone, ocean waters and international waters), including, without limitation, laws, regulations, conventions and agreements relating to (1) emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous materials, oil, hazardous substances, petroleum and petroleum products and by-products ("Materials of Environmental Concern"), or (2) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern ("Environmental Laws"); (ii) each of the Security Parties and their Environmental Affiliates will, when required, have all permits, licenses, approvals, rulings, variances, exemptions, clearances, consents or other authorizations required under applicable Environmental Laws ("Environmental Approvals") and will, when required, be in full compliance with all Environmental Approvals required to operate their business as then being conducted; (iii) none of the Security Parties or their Environmental Affiliates has received any notice of any claim, action, cause of action, investigation or demand by any person, entity, enterprise or government, or any political subdivision, intergovernmental body or agency, department or instrumentality thereof, alleging potential liability for, or a requirement to incur, investigatory costs, cleanup costs, response and/or remedial costs (whether incurred by a governmental entity or otherwise), natural resources damages, property damages, personal injuries, attorneys' fees and expenses, or fines or penalties, in each case arising out of, based on or resulting from (1) the presence, or release or threat of release into the environment, of any Materials of Environmental Concern at any location, whether or not owned by such person, or (2) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law or Environmental Approval ("Environmental Claim") (other than Environmental Claims that have been fully and finally adjudicated or otherwise determined and all fines, penalties and other costs, if any, payable by the Security Parties or any Environmental Affiliate any thereof in respect thereof have been paid in full or are fully covered by insurance (including permitted deductibles)); and (iv) there are no circumstances existing as of the date hereof that may prevent or interfere with such full compliance in the future; (q) Pending, Threatened or Potential Environmental Claims. Except as heretofore disclosed on Schedule 7 there are no (1) Environmental Claims pending or threatened against any Security Party or its Environmental Affiliates and (2) past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge or disposal of any Materials of Environmental Concern, that could form the basis of any Environmental Claim against any Security Party or its Environmental Affiliates; (r) Compliance with ISM Code. Each Vessel and any Operator complies with the requirement s of the ISM Code, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto; (s) Threatened Withdrawal of DOC or SMC. There is no threatened or actual withdrawal of any Operator's DOC or the SMC in respect of any Vessel; and 26 35 (t) Year 2000 Issue. The Borrower and each of the guarantors have reviewed the effect of the Year 2000 Issue on the computer software, hardware and firmware systems and equipment containing embedded microchips owned or operated by or for the Borrower and the Guarantors or used or relied upon in the conduct of their business (including systems and equipment supplied by others or with which such computer systems of the Borrower and the guarantors interface). The costs to the Borrower and the Guarantors of any reprogramming required as a result of the Year 2000 Issue to permit the proper functioning of such systems and equipment and the proper processing of data, and the testing of such reprogramming, and of the reasonably foreseeable consequences of the Year 2000 Issue to the Borrower or any of the Guarantors (including reprogramming errors and the failure of systems or equipment supplied by others) are not reasonably expected to result in a Default or Event of Default or to have a material adverse effect on the business, assets, operations, prospects or condition (financial or otherwise) of the Borrower or any of the Guarantors. 3. ADVANCES 3.1 Purposes. (a) The proceeds of Term Loan shall be applied solely and exclusively for the purposes of (i) refinancing, in full, the Former Lenders Indebtedness and (ii) to pay transaction expenses, financing fees and other expenses or obligations payable in connection with the transactions contemplated by this Agreement, the Related Credit Agreement and the Acquisition Agreement; and (b) the proceeds of Revolving Credit Facility shall be applied solely and exclusively for working capital purposes of the Borrower and the Guarantors. 3.2 Term Loan Advances. Each of the Lenders, relying upon each of the representations and warranties set out in Section 2, hereby agrees with the Borrower that, subject to and upon the terms of this Agreement, it will on the Term Loan Drawdown Dates, make the Term Loan Advances available to the Borrower in an aggregate amount not to exceed, on a pro rata basis, its Commitment for its respective portion of the Term Loan, provided, however, that (a) the Term Loan may only be drawn down in a single Advance and (b) to the extent that any portion of the Term Loan remains undrawn as of 12:00 noon (New York time) on June 25, 1998, each Lender's commitment to advance such undrawn portion of its Commitment thereunder shall expire. 3.3 Revolving Credit Facility Advances. Each of the Lenders, relying upon each of the representations and warranties set out in Section 2, hereby agrees with the Borrower that, subject to the terms of this Agreement, it will on or before 12:00 noon New York time on the Revolving Credit Facility Drawdown Dates make the Revolving Credit Facility Advances available to the Borrower in an aggregate amount not to exceed, on a pro rata basis, its Commitment for its respective portion of the Revolving Credit Facility, provided, however, that (a) each such Advance shall be in the minimum amount of One Hundred Thousand Dollars ($100,000) and (b) the maximum aggregate amount of all Revolving Credit Facility Advances which may be outstanding under this Agreement is Two Million Dollars ($2,000,000), as the same may be reduced from time to time as 27 36 provided in Sections 5.7 and 5.8. Within the limits of the Revolving Credit Facility and upon the conditions herein provided, the Borrower may from time to time, and on as many occasions as the Borrower may deem appropriate, borrow pursuant to this Section 3.3, repay pursuant to Section 5.2 and reborrow pursuant to this Section 3.3. 3.4 Drawdown Notice. The Borrower shall not less than three (3) Banking Days before any Drawdown Date serve a notice (a "Drawdown Notice") on the Agent, substantially in the form set out in Exhibit 13 or in such other form as the Agent may agree, which notice shall (a) be in writing addressed to the Agent, (b) be effective upon receipt by the Agent as aforesaid, provided it is received before 11:00 a.m. New York time (otherwise it shall be deemed to have been received on the next Banking Day), (c) specify the Banking Day on which the relevant Advance is to be drawn down, (d) specify the initial Interest Period, (e) specify the disbursement instructions and (f) be irrevocable. 3.5 Effect of Drawdown Notice. Each Drawdown Notice shall be deemed to constitute a warranty by the Borrower that (a) the representations and warranties stated in Section 2 (updated mutatis mutandis) are true and correct in all material respects on the date of such Drawdown Notice and will be true and correct in all material respects on such drawdown date as if made on such date, and (b) that no Event of Default or any event which with the giving of notice or lapse of time or both would constitute an Event of Default has occurred and is continuing. 3.6 Notation of Advances. Each Revolving Credit Facility Advance made by the Lenders to the Borrower may be evidenced by a notation of the same made by the Agent on the grid attached to the Revolving Credit Facility Note, which notation, absent manifest error, shall be prima facie evidence of the amount of the relevant Advance. 4. CONDITIONS 4.1 Conditions to Advance of Term Loan and the Initial Revolving Credit Facility Advance. The obligations of the Lenders to advance the Term Loan and the initial Revolving Credit Facility Advance are expressly subject to the satisfaction of the following conditions precedent: (a) the Agent shall have received the following documents in form and substance satisfactory to the Agent and its legal advisors: (i) copies, certified as true and complete by an officer of each Security Party, of the resolutions of the board of directors and, in the case of the Guarantors, the shareholders thereof evidencing approval of this Agreement and the other Financing Documents called for hereby to which such Security Party is a party and authorizing an appropriate officer or officers or attorney-in-fact or attorneys-in-fact to execute the same on its behalf; 28 37 (ii) copies, certified as true and complete by an officer of the Borrower or other party acceptable to the Agent, of all documents evidencing any other necessary action (including actions by such parties thereto other than the Borrower as may be required by the Agent), approvals or consents with respect to the Financing Documents; (iii) copies, certified as true and complete by an officer of the respective Security Party of the certificate of incorporation and by-laws (or equivalent instruments) thereof; (iv) a certificate of the Secretary of the Borrower certifying that it legally and beneficially, directly or indirectly, owns all of the issued and outstanding shares of the capital stock of each of the other Security Parties, in each case, free and clear of any liens, claims, pledges or other encumbrances; (v) a certificate of the Secretary of Marine Car Carriers (Del) certifying that it legally and beneficially owns fifty percent (50%) of the issued and outstanding shares of Marine Car Carriers (MI), free and clear of any liens, claims, pledges or other encumbrances whatsoever except for a pledge in favor of the Agent; (vi) certificate of the Secretary of each Security Party (other than the Borrower) certifying as to the record ownership of all of its issued and outstanding capital stock; (vii) certificates of the jurisdiction of incorporation of each Security Party as to the good standing of such corporation; (viii) copies of each Vessel Agreement, Management Agreement, the MCCMI Shareholders Agreement, all agreements and other documents evidencing Permitted Indebtedness and Permitted Liens outstanding and existing as of the date hereof and the Acquisition Agreement each certified by an officer of the Borrower to be a true and complete copy thereof; (ix) letters, in form and substance satisfactory to the Agent, from counsel representing the Borrower (or its relevant Affiliate) in connection with each action, suit or proceeding listed on Schedule 7 or in connection with any Environmental Claim disclosed to the Agent, regarding details of such action, suit, proceeding or claim including a description of the nature of the claim, and the Borrower's 29 38 (or its Affiliate's) potential liabilities and an opinion as to the likely outcome of the relevant matter; and (x) a pro forma consolidated balance sheet for the Borrower, certified to be true and correct by its chief financial officer, demonstrating that, as of the date hereof and after giving effect to the transactions contemplated hereby and by the Related Credit Agreement and the Acquisition Agreement, the Borrower has Unrestricted Cash and Cash Equivalents in an amount at least equal to Two Million Dollars ($2,000,000) (for purposes of determining compliance with this condition, Unrestricted Cash or Cash Equivalents held by Marine Car Carriers (MI) for the benefit of Marine Car Carriers (Del) shall be calculated on the basis of the Borrower's share of such sums after deduction of any taxes that would be payable (as of the time of determination) upon the distribution and repatriation of such sums by Marine Car Carriers (MI) to Marine Car Carriers (Del) or any other Affiliate of the Borrower). (b) the Agent shall have received evidence satisfactory to it and its legal advisors that: (i) each of the Mortgaged Vessels is in the sole and absolute ownership of the respective Guarantors, other Affiliates of the Borrower as set forth in Schedules 4 and 5 or Argosy save and except for, in the case of the Mortgaged Vessels, the respective Mortgage recorded thereagainst and for the respective Vessel Agreements and Related Security Documents, and duly registered in the name of such Guarantor or such Affiliate under the respective flag as set forth in Schedules 4 and 5; (ii) each Vessel is classed in the highest classification and rating for vessels of the same age and type with the respective classification society as set forth in Schedules 4 and 5 without any material outstanding recommendations; (iii) each of the Vessels is operationally seaworthy and in every material respect fit for its intended service; (iv) each of the Mortgaged Vessels will be insured in accordance with the provisions of the Mortgage on her in favor of the Agent, as the case may be, and the requirements thereof in respect of such insurances will have been met and each of the Other Vessels will be insured 30 39 against such risks, in such amounts and with such insurance companies as would be required by a reasonably prudent shipowner engaged in the same trades; (v) each Vessel subject to a charter or other contract of carriage constituting a Vessel Agreement has been accepted by its respective charterer and is in service under such Vessel Agreement; and (vi) that, except as provided in the Financing Documents, there are no restrictions or limitations on the Borrower's ability to withdraw or apply any funds of Marine Car Carriers (MI) held for the benefit of Marine Car Carriers (Del) and payable to the Borrower for such purposes as the Borrower may deem fit. (c) the Borrower shall have duly executed and delivered: (i) this Agreement and (ii) the Notes; (iii) its Assignment of Vessel Management Receivables; (iv) its Assignment Notices, and (v) Uniform Commercial Code Financing Statements for filing in New Jersey and its jurisdiction of incorporation; (d) each Guarantor shall have executed and delivered: (i) the Guaranty, (ii) the Consent and Agreement and Account Assignment provided at the end of this Agreement, and (iii) Uniform Commercial Code Financing Statements for filing in New Jersey; (e) each Shipowning Guarantor shall have duly executed and delivered: (i) the Mortgage over its Mortgaged Vessel(s), (ii) an Insurances Assignment with respect to such Vessel(s), 31 40 (iii) an Earnings Assignment with respect to such Vessel(s), (iv) its Assignment Notices, and (v) Uniform Commercial Code Financing Statements for filing in New Jersey and its jurisdiction of Incorporation; (f) OMI Challenger Transport shall have duly executed and delivered the Negative Pledge. (g) the Guarantors which do not own a Mortgaged Vessel (other than OMI Challenger Transport) shall have executed and delivered: (i) its General Security Agreement, and, (ii) Uniform Commercial Code Financing Statements for filing in New Jersey and in its jurisdiction of incorporation; (h) Intrepid Ship Management, Inc. shall have executed and delivered: (i) its Assignment of Government Receivables, (ii) its Assignment Notices, and (iv) Uniform Commercial Code Financing Statements for filing in New Jersey and in its jurisdiction of incorporation; (i) Marine Transport Lines shall have executed and delivered: (i) its Assignment of Government Receivables, (ii) its Assignment Notices, and (iii) Uniform Commercial Code Financing Statements for filing in New Jersey and in its jurisdiction of incorporation; (j) Marine Transport Management shall have executed and delivered: (i) its Assignment of Vessel Management Receivables, (ii) its Assignment Notices, and (iii) Uniform Commercial Code Financing Statements for filing in New Jersey and in its jurisdiction of incorporation; (k) Marine Car Carriers (Del) shall have executed and delivered: 32 41 (i) the Assignment of Joint Venture Proceeds, (ii) its Assignment Notices, and] (iiiv) Uniform Commercial Code Financing Statements for filing in New Jersey and in its jurisdiction of incorporation; (l) the Agent shall have received appraisals, in form and substance satisfactory to the Agent, from two independent shipbrokers acceptable to the Agent evidencing that the Borrower is in compliance with Section 9.3, each of which appraisals shall be dated, and the appraisals contained therein shall be as of a date, no earlier than ninety (90) days prior to the date hereof; (m) the Agent shall have received a certificate of the chief financial officer of each Guarantor confirming the representations and warranties with respect to solvency set forth in its Guaranty and containing conclusions as to the solvency of such Guarantor; (n) the Agent shall be satisfied that no Security Party is subject to any Environmental Claim (except as set forth on Schedule 7) which could have a material adverse effect on the business, assets or results of operations of any thereof; (o) the Agent shall have received payment in full of all fees and expenses due to the Agent and the Lenders on or prior to the date thereof under Section 13; (p) the Agent shall have received evidence satisfactory to it and to its legal advisors that, save for the liens created by the Mortgages, the Assignments, the Related Security Agreements and the Vessel Agreements there are no liens, charges or encumbrances of any kind whatsoever on any of the Vessels or on their respective earnings except as permitted hereby or by any of the Security Documents; (q) each party which the Agent shall have required to execute a Consent and Agreement shall have executed a Consent and Agreement, in each case, in form and substance satisfactory to the Agent; (r) all conditions precedent to the advancement of the term loan under the Related Credit Agreement shall have been met or waived to the satisfaction of the Lenders; (s) the transactions contemplated by the Acquisition Agreement shall subject only to consummation of this Agreement and the Related Credit Agreement, have been consummated in accordance with the provisions thereof, and the legal status and corporate structure of the Borrower shall be satisfactory to the Agent and its legal counsel; 33 42 (t) the terms and conditions of the Permitted Indebtedness and Permitted Liens shall be in form and substance acceptable to the Agent; and (u) the Agent shall have received legal opinions from (i) Peter N. Popov, Esq., in-house counsel for the Security Parties, (ii) Kaye, Scholer, Fierman, Hays & Handler, L.L.P., special counsel to the Security Parties and (iii) Seward & Kissel, special counsel to the Agent and the Lenders, in each case in such form as the Agent may require, as well as such other legal opinions as the Agent shall have required as to all or any matters under the laws of the United States of America, the States of New York, New Jersey and Texas covering the representations and conditions which are the subjects of Sections 2 and 4.1. 4.2 Further Conditions Precedent. The obligation of the Lenders to enter into this Agreement or to make any Advance available to the Borrower shall be expressly and separately from the foregoing conditional upon, as of the date hereof and at each Drawdown Date: (a) the Agent having received the Drawdown Notice in accordance with the terms of Section 3.4; (b) the representations stated in Section 2 (updated mutatis mutandis to such date) being true and correct as if made on that date; (c) no Event of Default having occurred and being continuing and no event having occurred and being continuing which, with the giving of notice or lapse of time, or both, would constitute such an Event of Default; (d) the Agent being satisfied that no change in any applicable laws, regulations, rules or in the interpretation thereof shall have occurred which make it unlawful for the Borrower or any other of the parties thereto to make any payment as required under the terms of the Financing Documents or any of them; and (e) there having been no material adverse change in the financial condition of the Security Parties taken as a whole since the date hereof. 4.3 Satisfaction after Drawdown. Without prejudice to any of the terms and conditions of this Agreement, in the event the Lenders, in their sole discretion, makes any Advance prior to the satisfaction of all or any of the conditions precedent set forth in Sections 4.1 and 4.2, the Borrower hereby covenants and undertakes to satisfy or procure the satisfaction of such condition or conditions within fourteen (14) days after the relevant Drawdown Date (or such longer period as the Lenders, in their sole discretion, may agree). 4.4 Breakfunding Costs. In the event that, on any date specified for the making of an Advance in any Drawdown Notice, the Lenders shall not be required under this Agreement to make such advance available under this Agreement, the Borrower shall 34 43 indemnify and hold the Lenders fully harmless against any losses which the Lenders or any thereof may sustain as a result of borrowing or agreeing to borrow funds to meet the drawdown requirement of the Borrower and the certificate of the relevant Lender(s) shall, absent manifest error, be conclusive and binding on the Borrower as to the extent of any such losses. 5. REPAYMENT, PREPAYMENT AND REDUCTION OF FACILITIES. 5.1 Repayment of Term Loan. The Borrower shall repay the principal of the Term Loan in twenty (20) quarterly installments in Dollars in freely available-same day funds on the Term Loan Payment Dates, the first four (4) installments shall each be in the principal amount of Two Hundred Fifty Thousand Dollars ($250,000), the next fifteen (15) of which shall be in the principal amount of Four Hundred Ninety-Two Thousand Nine Hundred Thirty-Seven and 50/100 Dollars ($492,937.50) and twentieth such installment shall be in the amount necessary to repay the Term Loan in full. 5.2 Revolving Credit Facility. Subject to the provisions of Section 3.3, any outstanding Revolving Credit Facility Advances (a) may be repaid (together with any and all actual costs or expenses incurred by any Lender as the result of any breaking of funding (as certified by the relevant Lender, which certification shall, absent any manifest error, be conclusive and binding on the Borrower) on any Banking Day (in Dollars in freely available-same day funds equal to or exceeding One Hundred Thousand Dollars ($100,000), each such repayment to be in an integral multiple of One Hundred Thousand Dollars ($100,000)) and (b) must be repaid (i) on the last date of then prevailing Interest Period in respect of such Advance, (ii) as required pursuant to Section 5.7 on the Reduction Date and (iii) on or before the Revolving Credit Facility Termination Date. 5.3 Voluntary Prepayment of Term Loan. The Borrower may prepay any Term Loan Advance on any Banking Day, in whole or in part, without penalty or premium (in Dollars in freely available-same day funds equal to or exceeding One Hundred Thousand Dollars ($100,000), each such repayment to be in an integral multiple of One Hundred Thousand Dollars ($100,000)), on any Banking Day upon giving the Agent not less than five (5) Banking Days prior written notice (which notice shall be irrevocable and shall specify the amount and date of prepayment). 5.4 Mandatory Prepayment of Term Loan. Upon the sale, disposition or Total Loss of any Vessel or any other asset (having a fair market value equal or exceeding One Hundred Thousand Dollars ($100,000) directly or indirectly owned by the Borrower, the Borrower shall prepay the Term Loan, in part and without penalty, in an amount equal to the proceeds of the sale, disposition or insurance net of taxes payable as a result of any such sale or disposition. 5.5 Prepay Term Loans Pro Rata. Any prepayment made hereunder (including, without limitation, those made pursuant to Sections 5.3 and 5.4, but excluding a prepayment under Sections 5.7 and 9.3) or under the Related Credit Agreement shall be applied against the Term Loan and the Related Term Loan, pro rata. 35 44 5.6 Application of Prepayments. Any prepayment of the Term Loan made hereunder (including, without limitation, those made pursuant to Sections 5.3, 5.4, 5.7 and 9.3), shall be subject to the condition that: (a) in the case of Term Loan Advances, any partial prepayment made shall be applied in or towards satisfaction of the repayment installments of the Term Loan in inverse order of maturity; (b) in the case of Term Loan Advances and an amount prepaid pursuant to Section 5.7, any amounts prepaid shall not be available for re-borrowing; and (c) on the date of prepayment all accrued interest to the date of such prepayment shall be paid in full with respect to the portion of the principal being prepaid, together with any and all actual costs or expenses incurred by any Lender as the result of any breaking of funding (as certified by the relevant Lender, which certification shall, absent any manifest error, be conclusive and binding on the Borrower). 5.7 Mandatory Reduction of Revolving Credit Facility. On the Reduction Date: (a) the maximum principal amount of Advances which may be outstanding shall be reduced to One Million Dollars ($1,000,000); and (b) the Borrower shall immediately repay the Revolving Credit Facility Advances to the extent the aggregate Revolving Credit Facility Advances outstanding on the Reduction Date exceeds One Million Dollars ($1,000,000). Upon the reduction of the Revolving Credit Facility as provided in this Section, each Lender's Commitment to make Revolving Credit Facility Advances shall be reduced pro rata. 5.8 Voluntary Reduction of Revolving Credit Facility. The Borrower shall have the right, at any time and from time to time, upon giving to the Agent not less than five (5) Banking Days prior written notice (which notice shall be irrevocable) to terminate in whole, or reduce the available unused portion of, the Revolving Credit Facility; provided, however, that each partial reduction shall be equal to or shall exceed One Hundred Thousand Dollars ($100,000) and shall be an integral multiple of One Hundred Thousand Dollars ($100,000). Upon any reduction of the Revolving Credit Facility as provided in this Section, each Lender's Commitment to make Revolving Credit Facility Advances shall be reduced pro rata. 6. INTEREST AND RATE 6.1 Term Loan Applicable Rate and Default Rate. The Term Loan Balance shall bear interest at the Term Loan Applicable Rate which shall be the rate per annum which is equal to the aggregate of (a) LIBOR for the applicable Interest Period (determined in accordance with Section 6.5) plus (b) the then prevailing Margin. Any principal payment with respect to the Term Loan not paid when due, whether on a Term Loan Payment Date or by acceleration, shall bear interest thereafter at a rate per annum of two percent (2.0%) 36 45 over the Term Loan Applicable Rate in effect with respect to such payment at the time of such default (the "Term Loan Default Rate"). 6.2 Revolving Credit Facility Applicable Rate and Default Rate. The Revolving Credit Facility Balance shall bear interest at the Revolving Credit Facility Applicable Rate which shall be equal to the aggregate of (a) LIBOR for the applicable Interest Period (determined in accordance with Section 6.5) plus (b) the then prevailing Margin plus (c) one quarter of one percent (0.25%) per annum. Any principal payment with respect to the Revolving Credit Facility not paid when due, whether by acceleration or otherwise, shall bear interest thereafter at a rate per annum of two percent (2.0%) over the Revolving Credit Facility Applicable Rate in effect with respect to such payment at the time of such default (the "Revolving Credit Facility Default Rate"). 6.3 Determination of Applicable Margin. The Margin shall be determined by the Agent two (2) Banking Days prior to the first day of the relevant Interest Period. Prior to the day falling two (2) Banking Days after the date on which the Borrower delivers its first quarterly financial report to the Agent in accordance with Section 9.1(A)(iv), the Margin shall be equal to one and three quarters of one percent (1.75--%) per annum. Thereafter, the Margin shall be based upon the then prevailing ratio of the Borrower's Total Debt to EBITDA, as determined in accordance with Section 9.1(A)(xvii) as follows: Applicable Margin Total Debt to EBITDA 2.25% > 3.0x 2.00% <=3.0x but >2.5x 1.75% <=2.5x but >2.0x 1.50% <=2.0x but >=1.0x 1.25% <1.0x
6.4 Determination of LIBOR. LIBOR shall be determined by the Agent two (2) Banking Days prior to the first day of the relevant Interest Period and together with any and all actual costs or expenses incurred by any Lender as the result of any breaking of funding (as certified by the relevant Lender, which certification shall, absent any manifest error, be conclusive and binding on the Borrower). The Borrower shall be promptly notified in writing of such determination of the Term Loan Applicable Rate and the Revolving Credit Facility Applicable Rate, as the case may be. Absent manifest error, such determination shall be conclusive and binding upon the Borrower. 6.5 Interest Periods. For purposes of funding any Advance, the Borrower may select Interest Periods of one (1), two (2), three (3) or six (6) months (or for such longer periods as the Lenders may, in their sole discretion agree), provided, however, that (a) at all times the Borrower must select an Interest Period for a portion of each Advance so that sufficient deposits shall mature on each Payment Date (and, in the case of Revolving 37 46 Credit Facility Advances, on the Reduction Date so as to comply with the provisions of Section 5.7) to cover the principal installments due on such dates and (b) no more than two (2) Interest Periods may be running simultaneously for the entire Term Loan Balance and no more than three (3) Interest Periods may be running simultaneously for the entire Revolving Credit Facility Balance. No Interest Period may extend beyond, in the case of Revolving Credit Facility Advances, the Revolving Credit Facility Termination Date and, to the extent necessary to comply with Section 5.7, the Reduction Date and, in the case of Term Loan Advances, the Final Payment Date. The Borrower shall give the Agent an Interest Notice specifying the Interest Period selected at least three (3) Banking Days prior to the end of any then existing Interest Period. If at the end of any then existing Interest Period the Borrower fails to give an Interest Notice, the relevant Interest Period shall be three (3) months. The Borrower's right to select an Interest Period shall be subject to the restriction that no selection of an Interest Period shall be effective unless the Lenders are satisfied that the necessary funds will be available to the Lenders for such period and that no Event of Default or event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default shall have occurred and be continuing. 6.6 Interest Payments. The Borrower agrees to pay interest on each Advance on the last day of each Interest Period applicable to such Advance and at such other times as interest is required to be paid by each Lender on the deposits acquired thereby to fund the relevant Advance, or any portion thereof, as the case may be, and, in the event any Interest Period shall extend beyond three (3) months, three (3) months after the commencement of such Interest Period and each three (3) month anniversary thereafter until the end of the Interest Period; and 6.7 Payment on Banking Day. If interest would, under Section 6.6, be payable on a day which is not a Banking Day, it shall then be payable on the next following Banking Day, unless such next following Banking Day falls in the following month in which case it shall be payable on the Banking Day immediately preceding the day on which such interest would otherwise be payable. 6.8 Calculation of Interest. All interest shall accrue and be calculated on the actual number of days elapsed and on the basis of a three hundred sixty (360) day year. 7. PAYMENTS 7.1 Place of Payments, No Set Off. All payments to be made hereunder by the Borrower shall be made to the Agent, not later than 11 a.m. New York time (any payment received after 11 a.m. New York time shall be deemed to have been paid on the next Banking Day) on the due date of such payment, at its office located at 200 Park Avenue, New York, New York 10166 or to such other office of the Agent as the Agent may direct, without set-off or counterclaim and free from, clear of, and without deduction for, any Taxes, provided, however, that if the Borrower shall at any time be compelled by law to withhold or deduct any Taxes from any amounts payable to the Agent or the Lenders hereunder, then the Borrower shall pay such additional amounts in Dollars as may be 38 47 necessary in order that the net amounts received after any such withholding or deduction shall equal the amounts which would have been received if such withholding or deduction were not required and, in the event any withholding or deduction is made, whether for Taxes or otherwise, the Borrower shall promptly send to the Agent and the Lenders such documentary evidence for such withholding or deduction as may be required from time to time by the Agent or the relevant Lender, as the case may be. 7.2 Tax Credits. If any Lender obtains the benefit of a credit against the liability thereof for federal income taxes imposed by any taxing authority for all or part of the Taxes as to which the Borrower has paid additional amounts as aforesaid (and such Lender agrees to use its best efforts to obtain the benefit of any such credit which may be available to it, provided it has knowledge that such credit is in fact available to it), then such Lender shall reimburse the Borrower for the amount of the credit so obtained. Each Lender agrees that in the event that Taxes are imposed on account of the situs of its loans hereunder, such Lender, upon acquiring knowledge of such event, shall, if commercially reasonable, shift such loans on its books to another office of such Lender so as to avoid the imposition of such Taxes. 8. EVENTS OF DEFAULT 8.1 In the event that any of the following events shall occur and be continuing: (a) Non-Payment of Principal. Any principal of the Term Loan or the Revolving Credit Facility is not paid on the due date; or (b) Non-Payment of Interest or Other Amounts. Any interest on the Term Loan, the Revolving Credit Facility or any other amount becoming payable to the Agent or the Lenders under any Financing Document is not paid on the due date or date of demand (as the case may be), and such default continues unremedied for a period of five (5) Banking Days; or (c) Representations. Any representation, warranty or other statement made by any Security Party in any Financing Document or in any other instrument, document or other agreement delivered in connection with any thereof proves to have been untrue or misleading in any material respect as of the date when made or confirmed; or (d) Covenants. Any Security Party defaults in the due and punctual observance or performance of any other term, covenant or agreement contained in any Financing Document or in any other instrument, document or other agreement delivered in connection herewith or therewith, or it becomes impossible or unlawful for any Security Party to fulfill any such term, covenant or agreement or there occurs any other event which constitutes a default under any Financing Document, in each case other than an Event of Default referred to elsewhere in this Section 8.1, and such default, impossibility and/or unlawfulness, in the reasonable opinion of the Majority Lenders, would be likely to have a material adverse effect on the rights of the Lenders or the Agent 39 48 under any Financing Document or on the rights of the Lenders or the Agent to enforce any Financing Document, and continues unremedied or unchanged, as the case may be, for a period of thirty (30) days; or (e) Indebtedness. Any Security Party, Marine Car Carriers (MI) or any wholly owned subsidiary of any such party shall default in the payment when due (subject to any applicable grace period) of any Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars ($250,000) or such Indebtedness is, or by reason of such default is subject to being, accelerated or any party becomes entitled to enforce the security for any such Indebtedness and such party takes steps to enforce the same, unless such default or enforcement is being contested in good faith and by appropriate proceedings or other acts and the Security Party, Marine Car Carriers (MI) or subsidiary, as the case may be, shall set side on its books adequate reserves with respect thereto; or (f) Change of Control; Ownership or Management of Other Security Parties. There is a change of control of any Security Party and the Lenders have not prior thereto consented in writing to such change. As used herein, "change of control" means (i) with respect to the Borrower, (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 promulgated pursuant to the Exchange Act), directly or indirectly, of more than fifty percent (50%) of the total voting power of the voting stock of the Borrower or (B) the Board of Directors of the Borrower ceases to consist of a majority of the existing directors or directors elected by the existing directors (as used herein, "existing director" means each of the Directors of the Borrower as of the date immediately following consummation of the transactions contemplated by the Acquisition Agreement) or (ii), with respect to any other Security Party, any material change in the beneficial stock ownership, voting control or senior management of any of the Security Parties; or (g) US Citizenship. Any Security Party owning a United States flag Vessel ceases to be a United States of America citizen within the meaning of Section 2 of the United States Shipping Act of 1916, as amended, qualified to operate vessels in the coastwise trade; or (h) Bankruptcy. Any Security Party or Marine Car Carriers (MI) commences any proceeding under any reorganization, arrangement or readjustment of debt, dissolution, winding up, adjustment, composition, bankruptcy or liquidation law or statute of any jurisdiction, whether now or hereafter in effect ("Proceeding"), or there is commenced against any thereof any Proceeding and such Proceeding remains undismissed or unstayed for a period of thirty (30) days or any receiver, trustee, liquidator or sequestrator of, or for, any thereof or any substantial portion of the property of any thereof is appointed and is not discharged within a period of thirty (30) days or any thereof by any act indicates consent to or approval of or acquiescence in any Proceeding or the appointment of any receiver, trustee, liquidator or sequestrator of, or for, itself or of, or for, any substantial portion of its property; or 40 49 (i) Termination of Operations; Sale of Assets. Without the Agent's prior written consent, any Security Party ceases its operations or sells or otherwise disposes of all or substantially all of its assets or all or substantially all of the assets of the any Security Party are seized or otherwise appropriated; or (j) Judgments. Any judgment or order is made which would render ineffective or invalid any Financing Documents; or (k) Inability to Pay Debts. Any Security Party or Marine Car Carriers (MI) is unable to pay or admits its inability to pay its debts as they fall due or a moratorium shall be declared in respect of any material indebtedness of any Security Party or Marine Car Carriers (MI); or (l) Change in Financial Position. Any change in the financial position of the Security Parties (taken as a whole) which, in the reasonable opinion of the Majority Lenders, shall have a material adverse effect on the ability of any Security Parties to perform its respective material obligations under any Financing Document; or (m) Relevant Contracts. Any of the Relevant Contracts or the MCCMI Shareholders Agreement is terminated or is materially amended or modified without the prior written consent of the Majority Lenders, or any party to a Relevant Contract defaults or ceases to perform under such agreement for any reason whatsoever and, with regard to any such termination, default or nonperformance of a Relevant Contract, the relevant Vessel shall not be engaged in an alternative employment, acceptable to the Lenders, under a contract, acceptable to the Lenders, within ninety (90) days of such termination, default or nonperformance; or (n) Key Management Agreements. Any of the Key Management Agreements (including any extensions or renewals thereof) is terminated prior to its stated termination date or is materially amended or modified without the prior written consent of the Majority Lenders, or any party to a Key Management Agreement defaults or ceases to perform under such agreement for any reason whatsoever and, as a result of such default or non-performance, the obligor under such agreement ceases to pay or be obligated to pay to the relevant Security Party, as the case may be, amounts payable by such obligor under such agreement; or (o) Related Credit Agreement; OMI COLUMBIA Loan Documents and Mortgage Securing OMI Debt. An "Event of Default" (as defined in any of the Related Credit Agreement, the OMI COLUMBIA Loan Documents or the Mortgage Securing the OMI Debt) shall have occurred and be continuing then the Lenders' obligation to make any Advances available shall cease and the Lenders may, by notice to the Borrower, declare the entire unpaid balance of the Term Loan, accrued interest, the entire Revolving Credit Facility Balance, accrued interest, and any other sums payable by the Borrower hereunder and under any other Financing Document due and payable, whereupon, the same shall forthwith be due and payable without 41 50 presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; provided that upon the occurrence of an event specified in subsections (h) or (k) of this Section 8.1, the Notes shall be immediately due and payable without declaration or other notice to the Borrower. In such event, the Lenders may proceed to protect and enforce their rights by action at law, suit in equity or in admiralty or other appropriate proceeding, whether for specific performance of any covenant contained in any Financing Document, or in aid of the exercise of any power granted in any thereof, or the Lenders may proceed to enforce the payment of the Notes or to enforce any other legal or equitable right of the Lenders, or proceed to take any action authorized or permitted under the terms of any of the Security Documents or by applicable law for the collection of all sums due, or so declared due, on the Notes, including, without limitation, the right to appropriate and hold, or apply (directly, by way of set-off or otherwise) to the payment of the obligations of the Borrower to the Lenders or the Agent under any Financing Document (whether or not then due) all moneys and other amounts of the Borrower then or thereafter in possession of any Lender or the Agent, the balance of any deposit account (demand or time, matured or unmatured) of the Borrower then or thereafter with any Lender or the Agent and every other claim of the Borrower then or thereafter against any Lender or the Agent. 8.2 Indemnification. The Borrower agrees to, and shall, indemnify and hold the Lenders and the Agent harmless against any loss (excluding any consequential damages), as well as against any reasonable costs or expenses (including reasonable legal fees and expenses), which the Lenders or the Agent sustains or incurs as a consequence of any default in payment of the principal amount of the Term Loan, the Revolving Credit Facility, interest accrued thereon or any other amount payable under any Financing Document, including, but not limited to, all actual losses incurred in liquidating or re-employing fixed deposits made by third parties or funds acquired to effect or maintain the Term Loan and/or the Revolving Credit Facility and/or any portion of either thereof. The certification of each Lender or the Agent of such costs and expenses shall, absent any manifest error, be conclusive and binding on the Borrower. 8.3 Application of Moneys. Except as otherwise provided in any Security Document, all moneys received by the Lenders or the Agent under or pursuant to this Agreement, any Notes, any Guaranty or any of the Security Documents after the occurrence and continuation of any Event of Default (unless cured to the satisfaction of the Lenders) shall be applied by the Lenders in the following manner: (a) first, in or towards the payment or reimbursement of any expenses or liabilities incurred by the Lenders or the Agent in connection with the ascertainment, protection or enforcement of its rights and remedies under any Financing Documents, (b) second, in or towards payment of any interest owing on the Term Loan and the Revolving Credit Facility, (c) third, in or towards repayment of principal owing in respect of the Term Loan and the Revolving Credit Facility, 42 51 (d) fourth, in or towards payment of all other sums which may be owing to the Lenders or the Agent under any Financing Document, and (e) fifth, the surplus (if any) shall be paid to the Borrower or to whosoever else may be entitled thereto. 9. COVENANTS 9.1 The Borrower and, by their execution of the consent and agreement and assignment of account provided below, each of the Guarantors hereby covenants and undertakes with the Lenders and the Agent that, from the date hereof and so long as any principal, interest or other moneys are owing in respect of the Term Loan, the Revolving Credit Facility or are otherwise owing under any Financing Document: (A) it will, and will procure that each other Security Party will: (i) Performance of Agreements. Duly perform and observe, and procure the observance and performance by all other parties thereto (other than the Lenders and the Agent) of, the terms of the Financing Documents; (ii) Notice of Default, Litigation and Adverse Change. Promptly upon obtaining knowledge thereof, inform the Lenders of the occurrence of any (a) Event of Default or of any event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, (b) their respective litigation or governmental proceeding pending or threatened against it or against any of the Security Parties or Marine Car Carriers (MI) which could reasonably be expected to have a material adverse effect on the business, assets, operations, property or financial condition of any thereof, and (c) other event or condition which is reasonably likely to have a material adverse effect on its ability, or the ability of the Security Parties as a group, to perform their respective obligations under any Financing Document; (iii) Obtain Consents. Without prejudice to Section 2.1(b) and this Section 9.1, obtain every consent and do all other acts and things which may from time to time be necessary or advisable for the continued due performance of all its and the other Security Parties' respective obligations under the Financing Documents; (iv) Financial Information. At the expense of the Borrower, deliver to the Agent: (a) as soon as available but not later than ninety (90) days after the end of each fiscal year of the Borrower, a complete copy of the 10K report of the Borrower filed with the United States Securities and Exchange Commission (including audited annual financial statements of the Borrower together with a report thereon by an Acceptable 43 52 Accounting Firm), which shall be prepared by the Borrower and certified by the chief financial officer of the Borrower together with a Compliance Certificate; (b) as soon as available but not later than forty-five (45) days after the end of each quarter of each fiscal year of the Borrower, a copy of the 10Q report of the Borrower filed with the United States Securities and Exchange Commission which shall be prepared by the Borrower and certified by the chief financial officer of the Borrower, together, in each instance, with a Compliance Certificate of such chief financial officer in such form as the Lender may reasonably require; (c) as soon as available, copies of all 8K reports filed by the Borrower with the United States Securities and Exchange Commission; (d) as soon as available but not later than thirty (30) days after the end of each month of each fiscal year of the Borrower, unaudited monthly operating statements showing actual versus budgeted cash flow (itemized for each Vessel, Management Agreement and Vessel Agreement), accounts receivable and accounts payable balances and cash position for the Borrower and its Subsidiaries, certified to be true and complete by the Chief Financial Officer of the Borrower; and (e) such other statements, lists of assets and accounts, budgets, forecasts, reports and other financial information with respect to its business as the Agent may from time to time reasonably request, certified to be true and complete by the Chief Financial Officer of the Borrower; (v) U.S. Citizenship; Qualification to Own Foreign Flag Vessels. Continue to be, and cause each other Security Party or other Affiliate of the Borrower owning a United States flag Vessel to continue to be, a United States citizen within the meaning of Section 2 of the United States Shipping Act, 1916, as amended (46 U.S.C. ss.802), qualified to own and operate vessels in the coastwise trade of the United States of America and to cause each other Security Party or other Affiliate of the Borrower which is the registered owner of a Vessel registered under a flag other than the United States of America to continue to be duly qualified under the laws of such flag to be the registered owner and operator of a Vessel registered under such flag; (vi) Corporate Existence. Do or cause to be done, and procure that each Security Party shall do or cause to be done, all things necessary to preserve and 44 53 keep in full force and effect its corporate existence, and all licenses, franchises, permits and assets necessary to the conduct of its business; (vii) Books and Records. Keep, and cause each other Security Party to keep, proper books of record and account into which full and correct entries shall be made in accordance with GAAP throughout the Security Period; (viii) Taxes and Assessments. Pay and discharge, and cause each other Security Party to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or property prior to the date upon which penalties attach thereto; provided, however, that it shall not be required to pay and discharge, or cause to be paid and discharged, any such tax, assessment, charge or levy so long as (a) the legality thereof shall be contested in good faith and by appropriate proceedings or other acts and it shall set aside on its books adequate reserves with respect thereto or (b) where such failure to pay or discharge is not reasonably likely to, individually or in the aggregate, have a material adverse effect on the business, prospects or financial condition of the Borrower and its Subsidiaries taken as a whole; (ix) Inspection. Allow, and cause each other Security Party to allow, any representative or representatives designated by any Lender, subject to applicable laws and regulations, to visit and inspect any of its properties, and, on request, to examine its books of account, records, reports and other papers and to discuss its affairs, finances and accounts with its officers, all at such reasonable times and as often as any Lender may reasonably request; (x) Compliance with Statutes, etc. Do or cause to be done, and cause each other Security Party to do and cause to be done, all things necessary to comply with all material laws, and the rules and regulations thereunder, applicable to the Borrower or such other Security Party, including, without limitation, those laws, rules and regulations relating to employee benefit plans and environmental matters; (xi) Environmental Matters. Promptly upon the occurrence of any of the following conditions, provide to the Agent a certificate of the chief executive officer thereof, specifying in detail the nature of such condition and its proposed response or the response of its Environmental Affiliate: (a) its receipt or the receipt by any other Security Party or any Environmental Affiliate of the Borrower or any other Security Party of any written communication whatsoever that alleges that such person is not in compliance with any applicable environmental law or environmental approval, if such noncompliance could reasonably be expected to have a material adverse effect on the business, assets, operations, property or financial condition of the Borrower or any other Security Party, (b) knowledge by it, or by any other Security Party or any Environmental Affiliate of the Borrower or any other Security Party that there exists any Environmental Claim pending or threatened against any such person, which could reasonably be expected to have a material adverse effect on the business, assets or operations, property or financial condition of the Borrower or any other Security Party, or (c) any release, emission, discharge or disposal of any material that could form the basis of any 45 54 Environmental Claim against it, any other Security Party or against any Environmental Affiliate of the Borrower or any other Security Party, if such Environmental Claim could reasonably be expected to have a material adverse effect on the business, assets or operations, property or financial condition of the Borrower or any other Security Party. Upon the written request by the Agent, it will submit to the Agent at reasonable intervals, a report providing an update of the status of any issue or claim identified in any notice or certificate required pursuant to this subsection; (xii) ERISA. Forthwith upon learning of the occurrence of any material liability of the any Security Party or any ERISA Affiliate pursuant to ERISA in connection with the termination of any Plan or withdrawal or partial withdrawal of any multi-employer plan (as defined in ERISA) or of a failure to satisfy the minimum funding standards of Section 412 of the Code or Part 3 of Title I of ERISA by any Plan for which any Security Party or any ERISA Affiliate is plan administrator (as defined in ERISA), furnish or cause to be furnished to the Agent written notice thereof; (xiii) Vessel Management. Cause each of the Vessels to be managed by the Borrower, by a wholly-owned subsidiary thereof or by third party manager reasonably acceptable to the Agent and procure that no agreements providing or governing the management of such vessels shall be amended or modified without the prior written consent of the Agent unless (in the case of management agreements other than Key Management Agreements) such amendment or modification would not, in the reasonable opinion of the Agent, adversely affect the economic interests of the Borrower or any other Security Party thereunder; (xiv) Cash. Maintain at all times on a consolidated basis, readily available Unrestricted Cash or Cash Equivalents of not less than the greater of (a) Two Million Dollars ($2,000,000) and (b) ten percent (10%) of the Total Debt of the Borrower (for purposes of determining compliance with this covenant, Unrestricted Cash or Cash Equivalents held by Marine Car Carriers (MI) for the benefit of Marine Car Carriers (Del) shall be calculated on the basis of the Borrower's share of such sums after deduction of any taxes that would be payable (as of the time of determination) consequent upon the distribution and repatriation of such sums by Marine Car Carriers (MI) to Marine Car Carriers (Del)); (xv) Working Capital. Maintain at all times on a consolidated basis, a positive working capital position (for purposes of determining compliance with this covenant, Unrestricted Cash or Cash Equivalents held by Marine Car Carriers (MI) shall be calculated on the basis of the Borrower's share of such sums after deduction of any taxes that would be payable (as of the time of determination) consequent upon the distribution and repatriation of such sums by Marine Car Carriers (MI) to Marine Car Carriers (Del)); (xvi) Debt Service Coverage Ratio. Maintain on a consolidated basis, a ratio of EBITDA to scheduled payments of principal and interest in respect of consolidated Indebtedness of not less than, during the period commencing from the date 46 55 hereof and ending on the second anniversary of the date hereof, 1.25 to 1.0, and, thereafter, 1.5 to 1.0, such ratio to be determined quarterly based on the scheduled principal and interest (assuming the then prevailing interest rates shall remain in effect for the next twelve (12) months) payments payable over the next twelve (12) month period; (xvii) Total Debt to EBITDA. Maintain on a consolidated basis, a ratio of Total Debt to EBITDA of not greater than, (x) during the period commencing from the date hereof and ending on the first anniversary of the date hereof, 3.25 to 1.0, (y) during the period commencing from the first anniversary of the date hereof and ending on the second anniversary of the date hereof, 3.0 to 1.0 and (z) thereafter, 2.5 to1.0; (xviii) Brokerage Commissions, etc. Indemnify and hold the Lenders and the Agent harmless from any claim for any brokerage commission, fee, or compensation from any broker or third party resulting from the transactions contemplated hereby; (xix) Deposit Accounts; Assignment. Throughout the Security Period, maintain, and procure that each Security Party shall maintain its primary collection and revenue accounts with the Agent and shall procure, and shall cause each Security Party to procure that, all earnings of any Vessels shall be paid (without set-off or counterclaim) into such collection accounts. As security for the obligations of the Borrower hereunder, the Borrower hereby pledges, assigns and grants the Agent, on behalf of the Lenders, a security interest in all the Borrowers' right, title and interest in and to the aforesaid collection and disbursement accounts and consents that if an Event of Default shall occur and so long as the same shall be continuing, all moneys held in the said accounts and all moneys thereafter received by the Agent may be applied as provided in Section 8.3; (xx) MARINE DUVAL, AMELINA, CALINA and SAVONETTA. Promptly upon termination of the respective charter over the MARINE DUVAL, AMELINA, CALINA or SAVONETTA, procure that the Guarantor owning such Vessel shall, unless otherwise agreed by the Agent in writing, grant a United States or Liberian Mortgage, as the case may be, together with the appropriate Earnings Assignment and Insurances Assignment over such Vessel in favor of the Agent; (xxi) Proceeds of Marine Car Carriers (MI). Promptly upon the direct or indirect acquisition, in the aggregate, by the Borrower, the Guarantors or any affiliate of any thereof of one hundred percent (100%) of the equity of Marine Car Carriers (MI) or one hundred percent (100%) of the assets thereof, grant, or procure the grant, to the Agent of a security interest in the assets of Marine Car Carriers (MI) in form and substance satisfactory to the Agent, it being hereby agreed by the Agent and the Lenders that, simultaneous with the investment of the assets of Marine Car Carriers (MI) into a new joint venture with a third party not affiliated with the Borrower or the 47 56 Guarantors, such security interest shall be released and replaced with a negative pledge in form and substance satisfactory to the Agent]; (xxii) Year 2000 Issue. The Borrower shall take, and shall cause each of the Guarantors to take, all necessary action to complete in all materials respects by September, 1999, the reprogramming of computer software, hardware and firmware systems and equipment containing embedded microchips owned or operated by or for the Borrower and the Guarantors or used or relied upon in the conduct of their business (including systems and equipment supplied by others or with which such systems of the Borrower or any of the Guarantors interface) required as a result of the Year 2000 Issue to permit the proper functioning of such computer systems and other equipment and the testing of such systems and equipment, as so reprogrammed. At the request of the Agent, the Borrower shall provide, and shall cause each of the Guarantors to provide, to the Agent reasonable assurance of its compliance with the preceding sentence; (xxiii) ISM Code Matters. (a) Procure that the relevant Operator will, comply with, and ensure that (i) each Vessel will comply with the requirements of the ISM Code by not later than July 1, 1998, and (ii) any newly-acquired Vessel will comply with the requirements of the ISM Code within three months of its acquisition, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto throughout the Security Period; (b) Procure that any Operator will, immediately inform the agent if there is any threatened or actual withdrawal of its, DOC or the SMC for any Vessel; and (c) Procure that the relevant Operator will, promptly inform the Agent upon the issuance (i) to such Operator of a DOC and (ii) to the relevant Vessel of an SMC; and (xxiv) OMI COLUMBIA. Procure that promptly upon the acquisition of ownership of OMI COLUMBIA by OMI Challenger Transport (or any other Affiliate of the Borrower), such Guarantor shall execute and deliver a second preferred mortgage and assignments of earnings and insurance in respect of such Vessel in form and substance satisfactory to the Agent. (B) The Borrower will not, and will procure that no other Security Party will, without the prior written consent of the Agent: (i) Liens. Create, assume or permit to exist, any mortgage, pledge, lien, charge, encumbrance or any security interest whatsoever upon any of such party's property or other assets, real or personal, tangible or intangible, whether now owned or hereafter acquired except: (a) liens for taxes not yet payable for which adequate reserves have been maintained; 48 57 (b) the Financing Documents and other liens granted in connection herewith in favor of the Lenders or the Agent, as the case may be; (c) liens, charges and encumbrances against their respective Vessels except those of the type and amounts permitted to exist under the terms of the Mortgages; (d) pledges of certificates of deposit or other cash collateral securing any Security Party's reimbursement obligations in connection with letters of credit now or hereafter issued for the account of such Security Party in connection with the establishment of the financial responsibility of the Security Parties under 33 C.F.R. Part 130 or 46 C.F.R. Part 540, as the case may be, as the same may be amended or replaced; (e) pledges or deposits to secure obligations under workmen's compensation laws or similar legislation, deposits to secure public or statutory obligations, warehousemen's or other like liens, or deposits to obtain the release of such liens and deposits to secure surety, appeal or customs bonds on which any of the Security Parties is the principal, as to all of the foregoing, only to the extent arising and continuing in the ordinary course of business; (f) liens on assets acquired with Permitted Third Party Debt and securing only the Permitted Third Party Debt incurred to acquire such assets; (g) the Mortgages securing the OMI Debt (and related assignments of marine insurances for the Vessels subject to such mortgages); (h) other liens, charges and encumbrances incidental to the conduct of the business of each such party, the ownership of any such party's property and assets and which do not in the aggregate materially detract from the value of each such party's property or assets or materially impair the use thereof in the operation of its business (items (a) through (h) are hereinafter collectively referred to as "Permitted Liens"); (ii) Loans, Advances and Investments. Make any loans or advances to, or any investments in any Person, firm, corporation, joint venture or other 49 58 entity (including, without limitation, any loan or advance to any officer, director, stockholder, employee or customer of any company affiliated with any Security Party) except for advances and investments in the ordinary course of its business and loans or advances to any Security Party; (iii) Indebtedness. Incur any Indebtedness except Permitted Indebtedness; (iv) Permitted Third Party Debt. Incur any Permitted Third Party Debt, unless, in the case of any such Indebtedness other than that supporting MARAD vessel management contracts: (a) the Borrower and the Security Parties are in compliance with their covenants set forth in this Agreement, (b) no Event of Default (or any event or condition which, with the giving of notice or passage of time or both, would constitute an Event of Default) shall have occurred or will occur and be continuing before or after the incurrence of such Permitted Third Party Debt, (c) the Borrower demonstrates to the satisfaction of the Agent, in its sole discretion, that the ratio of (1) projected EBITDA to be generated by the particular asset to be acquired with such Permitted Third Party Debt to (2) projected scheduled payments of interest and principal for such Permitted Third Party Debt shall be at least 1.0 to 1.0 over the entire term of such Permitted Third Party Debt and (d) the Borrower demonstrates to the satisfaction of the Agent, in its sole discretion, that following the incurrence of such Permitted Third Party Debt, the Borrower and the Guarantors shall be in compliance with the financial covenants set forth in Sections 9.1(A)(xiv), (xv), (xvi) and (xvii) (for purposes of the calculations required by this clause (z), (1) EBITDA shall include the projected EBITDA to be generated by the particular asset to be acquired with such Permitted Third Party Debt, (2) Total Debt shall include the Permitted Third Party Debt to be incurred and (3) scheduled payments of interest and principal on Total Debt shall include projected scheduled payments of interest and principal in respect of such Permitted Third Party Debt; 50 59 (v) Guarantees, etc. Assume, guarantee or (other than in the ordinary course of its business) endorse or otherwise become or remain liable, in connection with any obligation of any person, firm, company or other entity except for guarantees, in connection herewith, in favor of the Lenders or the Agent or guarantees of Permitted Indebtedness; (vi) Changes in Business. Change the nature of its business or engage in any businesses other than domestic and international marine transportation; (vii) Use of Corporate Funds. Pay out any funds to any company or Person except (a) as contemplated by the Acquisition Agreement; (b) in the ordinary course of business in connection with the management of the business of the Security Parties, including the operation and/or repair of the Vessels and other vessels owned, managed or operated by such parties and (c) the servicing of Permitted Indebtedness provided, however, it shall not prepay any such Permitted Indebtedness (excluding the Indebtedness hereunder and under the Related Credit Agreement); (viii) Issuance of Shares. Permit any subsidiaries to issue or dispose of any shares of its own capital stock to any Person; (ix) Sale of Shares. Sell, assign, transfer, pledge or otherwise convey or dispose of any of the shares of the capital stock of any Security Parties or Marine Car Carriers (MI); (x) Sale of Assets. Sell, or otherwise dispose of, any Vessel, any shares in any subsidiary corporation or any other asset which represents all or a substantial portion of its assets taken as a whole; (xi) Capital Expenditures. Make or commit to make any capital expenditures provided, however, that in no event shall this subsection (xi) preclude the Borrower or any other Security Party from undertaking necessary repairs and improvements to any Vessel the cost of which, for accounting purposes, is treated by the Borrower as a capital expenditure; (xii) Changes in Offices or Names. Change the location of the chief executive office of any Security Party, the office of the chief place of business of any such parties, the office of the Security Parties in which the records relating to the earnings or insurances of the Vessels are kept unless the Agent shall have received thirty (30) days prior written notice of such change; (xiii) Changes in Management. Make any material changes in the existing management of any Security Party; (xiv) Consolidation and Merger. Consolidate with, or merge into, any corporation or other entity, or merge any corporation or other entity into it 51 60 unless, in the case of the relevant Security Party, such company shall be the surviving entity; (xv) Chartering-in of Vessels. Except for the chartering-in of oil tankers by OMI Petrolink Corp., a Delaware corporation, in connection with the operation of its lightering business, charter-in any vessel under a charter having a term (inclusive of all extensions and renewals) of twelve (12) months or more; (xvi) Dividends. (x) Declare or make, and procure that no other Security Party shall declare or make to any party other than another Security Party, any distributions to its shareholders, by dividend or otherwise, or otherwise dispose of any assets to its shareholders- in cash or in any other manner or (y) enter into, and procure that no other Security Party shall enter into, any agreement or arrangement (other than this Agreement and the Related Credit Agreement) which restricts or limits it or such other Security Party from making any such distributions to its immediate parent; and (xvii) Loans From Marine Car Carriers (MI). Procure that Marine Car Carriers (MI) shall not make any loans or advances to the Borrower, or any subsidiary, officer, director, shareholder or Affiliate thereof. 9.2 Vessel Valuations. At least every twelve (12) months commencing on the day falling twelve (12) months from the date hereof and in any event upon the request of the Agent, the Borrower shall obtain, at the Borrower's cost, valuations of the Vessels, charter-free, in Dollars from two independent shipbrokers satisfactory to the Agent. In the event the Borrower fails or refuses to obtain the valuations requested pursuant to this Section 9.2 within ten (10) days of the Agent's request therefor, the Agent shall be authorized to obtain such valuations, at the Borrower's cost, from two independent shipbrokers selected by the Agent, which valuations shall be deemed the equivalent of valuations duly obtained by the Borrower pursuant to this Section 9.2, but the Agent's actions in doing so shall not excuse any default of the Borrower under this Section 9.2. The average of such two (2) valuations shall be the FMV of each Vessel. 9.3 Asset Maintenance. If at any time the Collateral Vessel Value (together with the value of any additional collateral theretofore provided under this Section) falls below one hundred fifty percent (150%) (the "Required Percentage") of an amount (the "Principal Exposure") equal to the aggregate of (a) the Term Loan Balance, (b) any Revolving Credit Facility Advances then outstanding, (c) any undrawn amounts then available under the Revolving Credit Facility, (d) the Related Indebtedness then outstanding and (e) any amounts then available to be drawn down pursuant to the Related Credit Agreement, the Borrower shall, within a period of thirty (30) days following receipt by the Borrower of written notice from the Agent notifying the Borrower of such shortfall and specifying the amount thereof (which amount shall, in the absence of manifest error, be deemed to be conclusive and binding on the Borrower), either (a) deliver to the Lenders or the Agent as the case may be, such additional collateral, as may be satisfactory to the Agent in its sole discretion, of sufficient value to restore compliance with the Required Percentage or (b)(i) prepay such part of the Term Loan (together with interest thereon and other moneys 52 61 payable in respect of such prepayment pursuant to Section 5.6) or (ii) procure the prepayment of such part of the Related Term Loan in accordance with the terms of the Related Credit Agreement as shall result in the restoration of compliance with the Required Percentages. Any such prepayment of the Term Loan shall be applied as provided in Section 5.6. For purposes of calculating the Collateral Vessel Value under this Section 9.3, the value of the OMI COLUMBIA shall be deemed to be equal to the product of (1) the lightweight tonnage of such Vessel multiplied by (2) (x) One Hundred Twenty-Five Dollars ($125) or (y) if such Vessel is hereafter subject to legal restrictions as to the geographic location where such Vessel may be scrapped, a scrap price, reasonably deemed by the Agent to reflect a conservative average market scrap price for those jurisdictions which, in the Agent's reasonable opinion, such Vessel may be scrapped in a commercially reasonable manner. 9.4 Inspection and Survey Reports. If the Agent shall so request, the Borrower shall provide the Agent with copies of all internally generated inspection or survey reports on the Vessels. 10. ASSIGNMENT This Agreement shall be binding upon, and inure to the benefit of, the Borrower, the Lenders and the Agent and their respective successors and assigns, except that the Borrower may not assign any of its rights or obligations hereunder without the prior written consent of the Majority Lenders. In giving any consent as aforesaid to any assignment by the Borrower, the Lenders shall be entitled to impose such conditions as they shall deem advisable. Each Lender shall be entitled to assign the whole or any part of its rights or obligations under this Agreement or grant participation(s) in the Term Loan and the Revolving Credit Facility to any subsidiary, holding company or other affiliate of such Lender, to any subsidiary or other affiliate company of any thereof or to any other bank or financial institution, and such Lender shall forthwith give notice of any such assignment or participation to the Borrower provided, that, the relevant Lender assigns or participates, as the case may be, to its assignee or participant, (a) equal proportionate shares of such Lender's interest in both the Term Loan and the Revolving Credit Facility and (b), simultaneously with its assignment or participation of a share in the Indebtedness provided hereunder, an equal proportionate share in the Related Indebtedness in accordance with the provisions of the Related Credit Agreement and, provided, further, that in the event of any assignment by any Lender, such assignment (but not any participation) is to be made pursuant to an Assignment and Assumption Agreement. The Borrower will take all reasonable actions requested by the Agent, on behalf of such Lender. 11. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC. 11.1 Illegality. In the event that by reason of any change in any applicable law, regulation or regulatory requirement or in the interpretation thereof (any such change or interpretation), a Lender has a good faith reasonable basis to conclude that it has become unlawful for it to maintain or give effect to its obligations as contemplated by this 53 62 Agreement, such Lender shall inform the Borrower to that effect, whereafter the liability of such Lender to make its portion of the Term Loan and/or the Revolving Credit Facility available shall forthwith cease and the Borrower shall be required either to repay to such Lender that portion of the outstanding balance of the Term Loan and/or the Revolving Credit Facility funded by such Lender immediately or, with respect to the Term Loan, if the relevant Lender so agrees, to repay such portion of the Term Loan to such Lender on the last day of any then current Interest Period in accordance with and subject to the provisions of Section 11.5. In any such event, but without prejudice to the aforesaid obligations of the Borrower to repay the Term Loan and/or the Revolving Credit Facility, the Borrower and the relevant Lender shall negotiate in good faith with a view to agreeing on terms for making such portion of the Term Loan and/or the Revolving Credit Facility available from another jurisdiction or otherwise restructuring such portion of the Term Loan and/or the Revolving Credit Facility on a basis which is not unlawful. 11.2 Increased Costs. If any change in applicable law, regulation or regulatory requirement, or in the interpretation or application thereof by any governmental or other authority, shall: (i) subject the Agent or any Lender to any Taxes with respect to its income from the Term Loan and/or the Revolving Credit Facility, or any part of either thereof, or (ii) change the basis of taxation to the Agent or any Lender of payments of principal or interest or any other payment due or to become due pursuant to this Agreement (other than a change in the basis effected by the jurisdiction of organization of the Agent or such Lender, the jurisdiction of the principal place of business of the Agent or such Lender, the United States of America, the State or City of New York or any governmental subdivision or other taxing authority having jurisdiction over the Agent or Lender (unless such jurisdiction is asserted by reason of the activities of any of the Security Parties) or such other jurisdiction where the Term Loan and/or the Revolving Credit Facility may be payable), or (iii) impose, modify or deem applicable any reserve requirements or require the making of any special deposits against or in respect of any assets or liabilities of, deposits with or for the account of, or loans by, the Lender, or (iv) impose on the Agent or any Lender any other condition affecting the Term Loan and/or the Revolving Credit Facility or any part of either thereof, and the result of the foregoing is either to increase the cost to such Lender of making available or maintaining its Commitment or any part of either thereof or to reduce the 54 63 amount of any payment received by the Agent or such Lender, then and in any such case if such increase or reduction in the opinion of the Agent or such Lender materially affects the interests of the Agent or such Lender under or in connection with this Agreement: (a) the Agent or such Lender, as the case may be, shall notify the Borrower of the occurrence of such event, and (b) the Borrower agrees forthwith upon demand to pay to the Agent or such Lender such amount as the Agent or such Lender certifies to be necessary to compensate the Agent or such Lender for such additional cost or such reduction. 11.3 Nonavailability of Funds. If the Agent shall determine that, by reason of circumstances affecting the London Interbank Market generally, adequate and reasonable means do not or will not exist for ascertaining the LIBOR for any Interest Period, the Agent shall give notice of such determination to the Borrower. The Borrower and the Agent shall then negotiate in good faith in order to agree upon a mutually satisfactory interest rate and/or Interest Period to be substituted for LIBOR which would otherwise have applied under this Agreement. If the Borrower and Agent are unable to agree upon such a substituted interest rate and/or Interest Period within thirty (30) days of the giving of such determination notice, the Agent shall set an interest rate and Interest Period to take effect from the expiration of the Interest Period in effect at the date of determination, which rate shall be equal to the aggregate of (a) the cost to each Lender (as certified by such Lender) of funding the relevant Advance, (b) the then prevailing Margin and (c) in the case of Revolving Credit Facility Advances, one quarter of one percent (0.25%). In the event the state of affairs to which this Section 11.3 refers shall extend beyond the end of the Interest Period, the foregoing procedure shall continue to apply until circumstances are such that LIBOR may be determined pursuant to Section 6. 11.4 Agent's Certificate Conclusive. A certificate or determination notice of the Agent or any Lender as to any of the matters referred to in this Section 11 shall, absent manifest error, be conclusive and binding on the Borrower. 11.5 Compensation for Losses. Where the Term Loan and/or the Revolving Credit Facility or a portion of either thereof is to be repaid by the Borrower pursuant to this Section 11, the Borrower agrees simultaneously with such repayment to pay to the relevant Lender all accrued interest to the date of actual payment on the amount repaid and all other sums then payable by the Borrower to the relevant Lender pursuant to this Agreement together with such amounts as may be certified by the relevant Lender to be necessary to compensate the Lender for any actual loss, premium or penalties incurred or to be incurred thereby on account of funds borrowed to make, fund or maintain its Commitment or such portion of either thereof for the remainder (if any) of the then current Interest Period or Periods, if any, but otherwise without penalty or premium. 12. CURRENCY INDEMNITY 55 64 12.1 Currency Conversion. If for the purpose of obtaining or enforcing a judgment in any court in any country it becomes necessary to convert into any other currency (the "Judgment Currency") an amount due in Dollars under any Financing Document then the conversion shall be made, in the discretion of the Agent at the rate of exchange prevailing either on the date of default or on the day before the day on which the judgment is given or the order for enforcement is made, as the case may be (the "Conversion Date"), provided that the Agent shall not be entitled to recover under this clause any amount in the Judgment Currency which exceeds at the Conversion Date the amount in Dollars due under any Financing Document. 12.2 Change in Exchange Rate. If there is a change in the rate of exchange prevailing between the Conversion Date and the date of actual payment of the amount due, the Borrower shall pay such additional amounts (if any, but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency when converted at the rate of exchange prevailing on the date of payment will produce the amount then due under any Financing Document in Dollars; any excess over the amount due received or collected by the Lenders shall be remitted to the Borrower. 12.3 Additional Debt Due. Any amount due from the Borrower under this Section 12 shall be due as a separate debt and shall not be affected by judgment being obtained for any other sums due under or in respect of the Financing Documents. 12.4. Rate of Exchange. The term "rate of exchange" in this Section 12 means the rate at which the Agent in accordance with its normal practices is able on the relevant date to purchase Dollars with the Judgment Currency and includes any premium and costs of exchange payable in connection with such purchase. 13. FEES AND EXPENSES 13.1 Commitment Fee. The Borrower will pay a Commitment Fee at a rate, per annum, equal to forty percent (40%) of the aggregate of (a) the then applicable Margin and (b) one quarter of one percent (0.25%), accruing from the date hereof, payable quarterly in arrears from the date hereof and on the Revolving Credit Facility Termination Date, on the available but undrawn amount of the Revolving Credit Facility. The Commitment Fee shall accrue from day to day and be calculated on the actual number of days elapsed and a three hundred sixty (360) day year. 13.2 Facilities Fee. A Facilities Fee payable to the Lenders on the earlier of (a) the date on which the Term Loans are repaid or prepaid in full or refinanced and (b) the second anniversary of the date hereof. The Facilities Fee shall be equal to the product of (x) Twenty-Four Million Dollars ($24,000,000) and (y), if such fee is payable on or before the day falling (i) six (6) months after the date hereof, one quarter of one percent (0.25%), (ii) twelve (12) months after the date hereof, one half of one percent (0.50%) or (iii) twelve (12) months and one (1) day after the date hereof, three-quarters of one percent (0.75%). 56 65 13.3 Other Fees. The Borrower shall pay the fees set forth in the fee letter between the Borrower and the Agent dated the date hereof. 13.4 Expenses. The Borrower agrees, whether or not the transactions hereby contemplated are consummated, on demand to pay, or reimburse the Lenders and the Agent for their payment of, the reasonable expenses of the Lenders and the Agent incident to said transactions (and in connection with any supplements, amendments, waivers or consents relating thereto or incurred in connection with the enforcement or defense of any of the rights and remedies of any Lender or the Agent with respect thereto or in the preservation of the priorities of the Lenders or the Agent under the documentation executed and delivered in connection therewith) including, without limitation, all reasonable costs and expenses of preparation, negotiation, execution and administration of this Agreement and the documents referred to herein, the reasonable fees and disbursements of the counsel of the Lenders and the Agent in connection therewith, as well as the reasonable fees and expenses of any independent appraisers, surveyors, engineers and other consultants retained by the Lenders or the Agent for this transaction, all reasonable costs and expenses, if any, for the enforcement of the Financing Documents and stamp and other similar taxes, if any, incident to the execution and delivery of the documents (including, without limitation, the Notes) herein contemplated and to hold the Lenders and the Agent free and harmless in connection with any liability arising from the nonpayment of any such stamp or other similar taxes. Such taxes and, if any, interest and penalties related thereto as may become payable after the date hereof shall be paid immediately by the Borrower to the relevant Lender or the Agent, as the case may be, when liability therefor is no longer contested by the Lenders or the Agent, as the case may be, or reimbursed immediately by the Borrower to such Lender or the Agent, as the case may be. 14. APPLICABLE LAW, JURISDICTION AND WAIVER 14.1 Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without any reference to the conflicts of laws principles of such State. 14.2 Jurisdiction. The Borrower hereby irrevocably submits to the jurisdiction of the courts of the State of New York and of the United States District Court for the Southern District of New York in any action or proceeding brought against it by the Agent or any Lender under this Agreement or under any document delivered hereunder and hereby irrevocably agrees that valid service of summons or other legal process on it may be effected by serving a copy of the summons and other legal process in any such action or proceeding on the Borrower by mailing or delivering the same by hand to the Borrower at the address indicated for notices in Section 16.2. The service, as herein provided, of such summons or other legal process in any such action or proceeding shall be deemed personal service and accepted by the Borrower as such, and shall be legal and binding upon the Borrower for all the purposes of any such action or proceeding. Final judgment (a certified or exemplified copy of which shall be conclusive evidence of the fact and of the amount of any indebtedness of the Borrower to the Lenders or the Agent) against the 57 66 Borrower in any such legal action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment. The Borrower will advise the Agent promptly of any change of address for the purpose of service of process. Notwithstanding anything herein to the contrary, the Lenders or the Agent may bring any legal action or proceeding in any other appropriate jurisdiction. 14.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE BORROWER, THE OTHER SECURITY PARTIES, THE AGENT AND THE LENDERS THAT EACH OF THEM HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY TO ANY FINANCING DOCUMENT AGAINST ANY OTHER PARTY TO ANY FINANCING DOCUMENT ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH ANY FINANCING DOCUMENT. 15. THE AGENT 15.1 (a) Appointment of Agent. Each of the Lenders hereby irrevocably appoints and authorizes the Agent (which for purposes of this Section 15 shall be deemed to include the Agent acting in its capacity as security trustee pursuant to Section 15.1(b)) to take such action as agent on its behalf and to exercise such powers under the Financing Documents as are delegated to the Agent by the terms hereof and thereof. Neither the Agent nor any of its directors, officers, employees or agents shall be liable for any action taken or omitted to be taken by it or them under the Financing Documents or in connection therewith, except for its or their own gross negligence or willful misconduct. (b) Appointment of Security Trustee. Each of the Lenders irrevocably appoints the Agent as security trustee on their respective behalf with regard to the (i) security, powers, rights, titles, benefits and interests (both present and future) constituted by and conferred on the Lenders or any of them or for the benefit thereof under or pursuant to the Financing Documents (including, without limitation, the benefit of all covenants, undertakings, representations, warranties and obligations given, made or undertaken to any Lender in any Financing Document), (ii) all moneys, property and other assets paid or transferred to or vested in any Lender or any agent of any Lender or received or recovered by any Lender or any agent of any Lender pursuant to, or in connection with, the Financing Documents whether from any Security Party or any other person and (iii) all money, investments, property and other assets at any time representing or deriving from any of the foregoing, including all interest, income and other sums at any time received or receivable by any Lender or any agent of any Lender in respect of the same (or any part thereof). The Agent hereby accepts such appointment. 15.2 Distribution of Payments. Whenever any payment is received by the Agent from any Security Party for the account of the Lenders, or any of them, whether of principal or interest on the Notes, commissions, fees under Sections 13.1 or 13.2and expenses under Section 13.4, or otherwise, it will thereafter cause to be distributed on the same day if received before 11 a.m. New York time, or on the next day if received thereafter, like 58 67 funds relating to such payment ratably to the Lenders according to their respective Commitments, in each case to be applied according to the terms of this Agreement. 15.3 Holder of Interest in Note. The Agent may treat each Lender as the holder of all of the interest of such Lender in the Note, until, in the case of an assignment, the Agent has received an original Assignment and Assumption Agreement executed by such Lender and its assignee. 15.4 No Duty to Examine, Etc. The Agent shall not be under a duty to examine or pass upon the validity, effectiveness or genuineness of any of the Financing Documents or any instrument, document or communication furnished pursuant to or in connection with any Financing Document, and the Agent shall, in the absence of gross negligence, be entitled to assume that the same are valid, effective and genuine, have been signed or sent by the proper parties and are what they purport to be. 15.5 Agent as Lender. With respect to that portion of the Term Loan and the Revolving Credit Facility made available by it, the Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not the Agent, and the term "Lender" or "Lenders" shall include the Agent in its capacity as a Lender. The Agent and its affiliates may accept deposits from, lend money to and generally engage in any kind of business with, the Security Parties as if it were not the Agent. 15.6 (a) Obligations of Agent. The obligations of the Agent under the Financing Documents are only those expressly set forth herein and therein. (b) No Duty to Investigate. The Agent shall not at any time be under any duty to investigate whether an Event of Default, or an event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, has occurred or to investigate the performance of any Financing Document by any Security Party. 15.7 (a) Discretion of Agent. The Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights which may be vested in it by, and with respect to taking or refraining from taking any action or actions which it may be able to take under or in respect of, the Financing Documents, unless the Agent shall have been instructed by the Majority Lenders to exercise such rights or to take or refrain from taking such action; provided, however, that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. (b) Instructions of Majority Lenders. The Agent shall in all cases be fully protected in acting or refraining from acting under any Financing Document in accordance with the instructions of the Majority Lenders, and any action taken or failure to act pursuant to such instructions shall be binding on all of the Lenders. 59 68 15.8 Assumption re Event of Default. Unless the Agent has been notified by any Security Party that an Event of Default, or event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, has occurred and is continuing, or has been notified by a Lender that such Lender considers that an Event of Default or such an event (specifying in detail the nature thereof) has occurred and is continuing, except as otherwise provided in Section 15.14 hereof, the Agent shall be entitled to assume that no Event of Default, or event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, has occurred and is continuing. In the event that the Agent shall have been notified by any Security Party or any Lender in the manner set forth in the preceding sentence of any Event of Default or of an event which with the giving of notice or lapse of time, or both, would constitute an Event of Default, the Agent shall notify the Lenders and shall take action and assert such rights under the Financing Documents as the Majority Lenders shall request in writing. 15.9 No Liability of Agent or Lenders. Neither the Agent nor any of the Lenders shall be under any liability or responsibility whatsoever: (a) to any Security Party or any other person or entity as a consequence of any failure or delay in performance by, or any breach by, any other Lenders or any other person of any of its or their obligations under any Financing Document; (b) to any Lender or Lenders, as a consequence of any failure or delay in performance by, or any breach by, any Security Party of any of its respective obligations under the Financing Documents; or (c) to any Lender or Lenders, for any statements, representations or warranties contained in any Financing Document or any document or instrument delivered in connection with the transaction hereby contemplated; or for the validity, effectiveness, enforceability or sufficiency of any Financing Document or any document or instrument delivered in connection with the transactions hereby contemplated. 15.10 Indemnification of Agent. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Security Parties or any thereof), pro rata according to the respective amounts of their Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including legal fees and expenses incurred in investigating claims and defending itself against such liabilities) which may be imposed on, incurred by or asserted against, the Agent in any way relating to or arising out of any Financing Document, any action taken or omitted by the Agent thereunder or the preparation, administration, amendment or enforcement of, or waiver of any provision of, any Financing Document, except that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. 60 69 15.11 Consultation with Counsel. The Agent may consult with legal counsel selected by the Agent and shall not be liable for any action taken, permitted or omitted by it in good faith in accordance with the advice or opinion of such counsel. 15.12 Resignation. The Agent may resign at any time by giving sixty (60) days' written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Lenders and shall have accepted such appointment within sixty (60) days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a bank or trust company of recognized standing. The appointment of any successor Agent shall be subject to the prior written consent of the Borrower, such consent not be unreasonably withheld. After any retiring Agent's resignation as Agent hereunder, the provisions of this Section 15 shall continue in effect for its benefit with respect to any actions taken or omitted by it while acting as Agent. 15.13 Representations of Lenders. Each Lender represents and warrants to each other Lender and the Agent that: (i) In making its decision to enter into this Agreement and to make its Commitment available hereunder, it has independently taken whatever steps it considers necessary to evaluate the financial condition and affairs of the Security Parties, that it has made an independent credit judgment and that it has not relied upon any statement, representation or warranty by any other Lender or the Agent; and (ii) So long as any portion of its Commitment remain outstanding, it will continue to make its own independent evaluation of the financial condition and affairs of the Security Parties. 15.14 Notification of Event of Default. The Agent hereby undertakes to notify promptly the Lenders, and the Lenders hereby undertake to notify promptly the Agent and the other Lenders, of the existence of any Event of Default which shall have occurred and be continuing of which the Agent or any Lender has actual knowledge. 16. NOTICES AND DEMANDS 16.1 Notices in Writing. Every notice or demand under this Agreement shall be in writing and may be given or made by facsimile. 16.2 Addresses for Notice. Every notice or demand shall be sent as follows: If to the Borrower: 1200 Harbour Boulevard, 9th Floor, Weehawken, New Jersey 07087 Fax No.: 201-330-9645 61 70 Attn: General Counsel, P.N. Popov If to the Agent (with copies to the Lenders): 200 Park Avenue New York, New York 10166 Fax No.: 212-681-3900 Attn: Nikolai Nachamkin If to the Lenders, to such Lender's address and fax number as set forth in Schedule 1 (with a copy to the Agent). Any notice sent by facsimile shall be confirmed by letter dispatched as soon as practicable thereafter. 16.3 Notices Deemed Received. Every notice or demand shall, except so far as otherwise expressly provided by this Agreement, be deemed to have been received (provided that it is received prior to 2 p.m. New York time; otherwise it shall be deemed to have been received on the next following Banking Day), in the case of a facsimile at the time of dispatch thereof (provided further that if the date of dispatch is not a Banking Day in the locality of the party to whom such notice or demand is sent it shall be deemed to have been received on the next following Banking Day in such locality) and, in the case of a letter, at the time of receipt thereof. 17. MISCELLANEOUS 17.1 Time of Essence. Time is of the essence of this Agreement but no failure or delay on the part of the Lenders or the Agent to exercise any power or right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise by the Lenders or the Agent of any power or right hereunder preclude any other or further exercise thereof or the exercise of any other power or right. The remedies provided herein are cumulative and are not exclusive of any remedies provided by law. 17.2 Unenforceable, etc., Provisions - Effect. In case any one or more of the provisions contained in any Financing Document would, if given effect, be invalid, illegal or unenforceable in any respect under any law applicable in any relevant jurisdiction, said provision shall not be enforceable against the relevant Security Party, but the validity, legality and enforceability of the remaining provisions herein or therein contained shall not in any way be affected or impaired thereby. 17.3 Indemnification. The Borrower and, by its execution and delivery of the Consent and Agreement set forth below, each of the other Security Parties jointly and severally agree to indemnify the Lenders, the Agent, their respective successors and assigns, and their respective officers, directors, employees, representatives and agents (each an "Indemnitee") from, and hold each of them harmless against, any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, 62 71 costs or disbursements of any kind or nature whatsoever (including, without limitation, the fees and disbursements of counsel for such Indemnitee in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may at any time (including, without limitation, at any time following the repayment of the Term Loan and the Revolving Credit Facility Advances) be imposed on, asserted against or incurred by, any Indemnitee as a result of, or arising out of or in any way related to or by reason of, (a) any violation by any Security Party (or any charterer or other operator of any Vessel) of any applicable Environmental Law, (b) any Environmental Claim arising out of the management, use, control, ownership or operation of property or assets by any Security Party (or, after foreclosure, by the Lenders, the Agent or their respective successors or assigns after any such foreclosure) and (3) the breach of any representation, warranty or covenant set forth in Sections 2.1 (p) or (q) or 9.1(A)(xi). If and to the extent that the obligations of the Security Parties under this Section are unenforceable for any reason, the Borrower and, by its execution and delivery of the Consent and Agreement set forth below, each of the other Security Parties jointly and severally agree to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. The obligations of the Security Parties under this Section 17.3 shall survive the termination of this Agreement and the repayment to the Lender and the Agent of all amounts owing to each thereof under or in connection herewith. 17.4 References. References herein to Sections and Schedules are to be construed as references to sections of, and schedules to, this Agreement. 17.5 Further Assurances. The Borrower agrees that if any Financing Document shall, in the reasonable opinion of the Agent, at any time be deemed by the Agent for any reason insufficient in whole or in part to carry out the true intent and spirit hereof or thereof, it will execute or cause to be executed such other and further assurances and documents as in the opinion of the Agent may be required in order more effectively to accomplish the purposes of such Financing Document. 17.6 Prior Agreements, Merger. Any and all prior understandings and agreements heretofore entered into between the Security Parties on the one part, and the Lenders or the Agent, on the other part, whether written or oral, are superseded by and merged into this Agreement and the other agreements (the forms of which are exhibited hereto) to be executed and delivered in connection herewith to which any Security Party and/or the Lenders or the Agent are parties, which alone fully and completely express the agreements between the Security Parties, the Lenders and the Agent. 17.7 Entire Agreement; Amendments. This Agreement constitutes the entire agreement of the parties hereto including all parties added hereto pursuant to an Assignment and Assumption Agreement and cannot be amended other than by written agreement signed by all such parties. 63 72 17.8 Headings. In this Agreement, Section headings are inserted for convenience of reference only and shall not be taken into account in the interpretation of this Agreement. IN WITNESS whereof, each party hereto has caused this Agreement to be duly executed by its duly authorized representative on the day and year first above written. MARINE TRANSPORT CORPORATION By:____________________________ Name: Title: By Special Authority for DEN NORSKE BANK ASA By:____________________________ Theodore S. Jadick Senior Vice President New York Branch By:____________________________ Nikolai Nachamkin Vice President New York Branch 64 73 CONSENT AND AGREEMENT AND ACCOUNT ASSIGNMENT Each of the undersigned, referred to in the foregoing Term Loan and Revolving Credit Facility Agreement as the "Guarantors", hereby consents and agrees to said Agreement and to the documents contemplated thereby and to the provisions contained therein relating to conditions to be fulfilled and obligations to be performed by the undersigned pursuant to or in connection with said Agreement and particularly agree to be bound by the representations, warranties and covenants relating to the undersigned contained in Sections 2 and 9 of said Agreement to the same extent as if the undersigned were a party to said Agreement. In particular, but without limitation of the foregoing, each of the undersigned hereby covenants and agrees to maintain its primary collection and revenue accounts with the Agent and shall procure that all earnings of any Vessels shall be paid into such collection accounts. As security for its obligations under the Financing Documents, each of the undersigned hereby pledges, assigns and grants the Agent, on behalf of the Lenders, a security interest in all the undersigned's right, title and interest in and to the aforesaid collection and disbursement accounts and consents that if an Event of Default shall occur and so long as the same shall be continuing, all moneys held in the said accounts and all moneys thereafter received by the Agent may be applied as provided in Section 8.3 of the Agreement. MARINE TRANSPORT OSWEGO CORPORATION MANAGEMENT, INC. By:_________________________ By:___________________________ Peter N. Popov Peter N. Popov Secretary Secretary OSWEGO CHEMICAL CARRIERS MARINE BARGE COMPANY CORPORATION By:_________________________ By:___________________________ Peter N. Popov Peter N. Popov Secretary Secretary MARINE CHEMICAL NAVIGATION MARINE NAVIGATION SULPHUR CORPORATION CARRIERS, INC. By:_________________________ By:___________________________ Peter N. Popov Peter N. Popov Secretary Secretary 65 74 MARINE SULPHUR SHIPPING MARINE ALASKA, INC. CORPORATION By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary OMI CHALLENGER TRANSPORT, INC. OMI PETROLINK, CORP. By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary COURIER TRANSPORT, INC. INTREPID SHIP MANAGEMENT INC. By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary PATRIOT TRANSPORT, INC. ROVER TRANSPORT, INC. By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary HARLINK CORP. OMIP, INC. By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary 66 75 NUELINK CORP. OMI OFFSHORE MARINE SERVICES INC. By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary MARINE TRANSPORT LINES, INC. MARINE CAR CARRIERS, INC. a Delaware corporation By:_________________________ By:_________________________ Peter N. Popov Peter N. Popov Secretary Secretary EX-10.17 13 SALARIED EMPLOYEES RETIREMENT INCOME PLAN 1 Exhibit 10.17 THE CORPORATEplan for RETIREMENT(SM) (PROFIT SHARING/401(K) PLAN) A FIDELITY PROTOTYPE PLAN Non-Standardized Adoption Agreement 002 Basic Plan No. 07 2 ADOPTION AGREEMENT ARTICLE 1 NON-STANDARDIZED PROFIT SHARING PLAN 1.01 PLAN INFORMATION (a) Name of Plan: This is the Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan (the "Plan"). (b) Type of Plan: (1) |X| 401(k) and Profit Sharing (2) |_| Profit Sharing Only (3) |_| 401(k) Only (c) Name of Plan Administrator, if not the Employer: Name: -------------------------------------------- Address: ---------------------------------------- Phone Number: ------------------------------------ The Plan Administrator is the agent for service of legal process for the Plan. (d) Limitation Year (check one): (1) |X| Calendar Year (2) |_| Plan Year (3) |_| Other: (e) Three Digit Plan Number: 001 (f) Plan Year End (month/day): December 31 (g) Plan Status (check one): (1) |_| Effective Date of new Plan: ______________ (2) |X| Amendment Effective Date: 10/1/94 . This is (check one): (A) |_| an amendment of The CORPORATEplan for Retirement(SM) Adoption Agreement previously executed by the Employer; or (B) |X| conversion from another plan document into The CORPORATEplan for Retirement(SM). The original effective date of the Plan: 1/1/83 2 3 The substantive provisions of the Plan shall apply prior to the Effective Date to the extent required by the Tax Reform Act of 1986 or other applicable laws. 1.02 EMPLOYER (a) The Employer is: Marine Transport Lines, Inc. Address: 1200 Harbor Boulevard Weehawken, NJ 07087 Contact's Name: Mr. Peter N. Popov Telephone Number: (201) 330-0200 (1) Employer's Tax Identification Number: 51-0115513 (2) Business form of Employer (check one): (A) |X| Corporation (B) |_| Sole proprietor or (C) |_| Subchapter S (D) |_| Governmental (E) |_| Tax exempt partnership organization (F) |_| Rural Electric Corporation Cooperative (3) Employer's fiscal year end: 12/31 (4) Date business commenced: January 1, 1941 3 4 (b) The term "Employer" includes the following Related Employer(s) (as defined in Section 2.01(a)(26)): 1.03 COVERAGE (a) All Employees who meet the conditions specified below will be eligible to participate in the Plan: (1) Service requirement (check one): (A) |X| no service requirement. (B) |_| three consecutive months of service (no minimum number Hours of Service can be required). (C) |_| six consecutive months of service (no minimum number Hours of Service can be required). (D) |_| one Year of Service (1,000 Hours of Service is required during the Eligibility Computation Period.) (2) Age requirement (check one): (A) |X| no age requirement. (B) |_| must have attained age ____ (not to exceed 21). 4 5 (3) The class of Employees eligible to participate in the Plan (check one): (A) |X| includes all Employees of the Employer. (B) |_| includes all Employees of the Employer except for (check the appropriate box(es)): (i) |_| Employees covered by a collective bargaining agreement. (ii) |_| Highly Compensated Employees as defined in Code Section 414(q). (iii) |_| Leased Employees as defined in Section 2.01(a)(18). (iv) |_| Nonresident aliens who do not receive any earned income from the Employer which constitutes United States source income. (v) |_| Other Note: No exclusion in this section may create a discriminatory class of employees. An Employer's Plan must still pass the Internal Revenue Code coverage and participation requirements if one or more of the above groups of Employees have been excluded from the Plan. (b) The Entry Date(s) shall be (check one): (1) |_| the first day of each Plan Year (do not select if Section 1.03 (a)(1)(D) is elected or if there is an age requirement of greater than 20 1/2 in Section 1.03(a)(2)(B)). (2) |_| the first day of each Plan Year and the date six months later. (3) |_| the first day of each Plan Year and the first day of the fourth, seventh, and tenth months. (4) |X| the first day of each month. 5 6 (c) Date of Initial Participation - An Employee will become a Participant unless excluded by Section 1.03(a)(3) above on the Entry Date immediately following the date the Employee completes the service and age requirement(s) in Section 1.03(a), if any, except (check one): (1) |_| No exceptions. (2) |X| Employees employed on the Effective Date in Section 1.01(g) will become Participants on that date. (3) |_| Employees who meet the age and service requirement(s) of Section 1.03(a) on the Effective Date in Section 1.01(g) will become Participants on that date. 1.04 COMPENSATION (a) For purposes of determining contributions under the Plan, Compensation shall be as defined in Section 2.01(a)(7), but excluding (check the appropriate box(es)): (1) |_| Overtime Pay. (2) |_| Bonuses. (3) |_| Commissions. (4) |_| The value of a qualified or a non-qualified stock option granted to an Employee by the Employer to the extent such value is includable in the Employee's taxable income. Note: These exclusions shall not apply for purposes of the "Top Heavy" requirements in Section 9.03 or for allocating Discretionary Employer Contributions if an Integrated Formula is elected in Section 1.05(a)(2). (5) |X| No exclusions. 6 7 (b) Compensation for the First Year of Participation Contributions for the Plan Year in which an Employee first becomes a Participant shall be determined based on the Employee's Compensation (check one): (1) |X| For the entire Plan Year. (2) |_| For the portion of the Plan Year in which the Employee is eligible to participate in the Plan. 1.05 CONTRIBUTIONS (a) |X| Employer Contributions : (1) |X| Fixed Formula - Nonintegrated Formula (check (A) or (B)): (A) |X| Fixed Percentage Employer Contribution: For each Plan Year, the Employer will contribute for each eligible Participant an amount equal to 3% (not to exceed 15%) of such Participant's Compensation. (B) |_| Fixed Flat Dollar Employer Contribution: For each Plan Year, the Employer will contribute for each eligible Participant an amount equal to $ ____ . (2) |X| Discretionary Formula The Employer may decide each Plan Year whether to make a discretionary Employer contribution on behalf of eligible Participants in accordance with Section 4.06. Such contributions shall be allocated to eligible Participants based upon the following (check (A) or (B)): (A) |X| Nonintegrated Allocation Formula: In the ratio that each eligible Participant's Compensation bears to the total Compensation paid to all eligible Participants for the Plan Year. (B) |_| Integrated Allocation Formula: In accordance with Section 4.06. Note: An Employer who maintains any other plan that provides for Social Security Integration (permitted disparity) may not elect (2)(B). 7 8 (3) Eligibility Requirement(s) A Participant shall be entitled to Employer Contributions for a Plan Year under this Subsection (a) if the Participant satisfies the following requirement(s) (Check the appropriate box(es) - Options (B) and (C) may not be elected together): (A) |X| is employed by the Employer on the last day of the Plan Year. (B) |_| earns at least 500 Hours of Service during the Plan Year. (C) |_| earns at least 1,000 Hours of Service during the Plan Year. (D) |_| no requirements. Note: If option (A), (B) or (C) above is selected then Employer contributions can only be funded by the Employer after Plan Year end. Employer contributions funded during the Plan Year shall not be subject to the eligibility requirements of this Section 1.05(a)(3). (b) |X| Deferral Contributions (1) Regular Contributions The Employer shall make a Deferral Contribution in accordance with Section 4.01 on behalf of each Participant who has an executed salary reduction agreement in effect with the Employer for the payroll period in question, not to exceed 15% (no more than 15%) of Compensation for that period. (A) A Participant may increase or decrease, on a prospective basis, his salary reduction agreement percentage (check one): (i) |_| As of the beginning of each payroll period. (ii) |X| As of the first day of each month. (iii) |_| As of the next Entry Date. (iv) |_| (Specify, but must be at least once per Plan Year) (B) A Participant may revoke, on a prospective basis, a salary reduction agreement at any time upon proper notice to the Administrator but in such case may not file a new salary reduction agreement until (check one): (i) |_| The first day of the next Plan Year. (ii) |_| Any subsequent Plan Entry Date. (iii) |X| (Specify, but must be at least once per Plan Year) January 1 and July 1 8 9 (2) |X| Catch-Up Contributions The Employer may allow Participants upon proper notice and approval to enter into a special salary reduction agreement to make additional Deferral Contributions in an amount up to 100% of their Compensation for the payroll period(s) in the final month of the Plan Year. (3) |X| Bonus Contributions The Employer may allow Participants upon proper notice and approval to enter into a special salary reduction agreement to make Deferral Contributions in an amount up to 100% of any Employer paid cash bonuses made for such Participants during the Plan Year. The Compensation definition elected by the Employer in Section 1.04(a) must include bonuses if bonus contributions are permitted. Note: A Participant's contributions under (2) and/or (3) may not cause the Participant to exceed the percentage limit specified by the Employer in (1) after the Plan Year. The Employer has the right to restrict a Participant's right to make Deferral Contributions if they will adversely affect the Plan's ability to pass the actual deferral percentage and/or the actual contribution percentage test. (4) |X| Qualified Discretionary Contributions The Employer may contribute an amount which it designates as a Qualified Discretionary Contribution to be included in the actual deferral percentage or actual contribution percentage test. Qualified Discretionary Contributions shall be allocated to Non-highly Compensated Employees (check one): (A) |X| in the ratio which each such Participant's Compensation for the Plan Year bears to the total of all such Participants' Compensation for the Plan Year. (B) |_| as a flat dollar amount for each such Participant for the Plan Year. 9 10 (c) |X| Matching Contributions (only if Section 1.05(b) is checked) ** (1) The Employer shall make a Matching Contribution on behalf of each Participant in an amount equal to the following percentage of a Participant's Deferral Contributions during the Plan Year (check one): (A) |_| 50% (B) |X| 100% ** (C) |_| % (D) |_| (Tiered Match) ____ % of the first_________________% of the Participant's Compensation contributed to the Plan, ____ % of the first_________________% of the Participant's Compensation contributed to the Plan, ____ % of the first_________________% of the Participant's Compensation contributed to the Plan. Note: The percentages specified above for Matching Contributions may not increase as the percentage of Compensation contributed increases. (E) |_| The percentage declared for the year, if any, by a Board of Directors' Resolution (or by a Letter of Intent for a Sole Proprietor or Partnership). (2) |_| The Employer may at Plan Year end make an additional Matching Contribution equal to a percentage declared by the Employer, through a Board of Directors' Resolution (or by a Letter of Intent for a Sole Proprietor or Partnership), of the Deferral Contributions made by each Participant during the Plan Year (only if an option is checked under Section 1.05(c)(1)). (3) |X| Matching Contribution Limits (check the appropriate box): (A) |X| Deferral Contributions in excess of 3% of the Participant's Compensation for the ** period in question shall not be considered for Matching Contributions. Note: If the Employer elects a percentage limit in (A) above and requests the Trustee to account separately for matched and unmatched Deferral Contributions, the Matching Contributions allocated to each Participant must be computed, and the percentage limit applied, based upon each payroll period. (B) |_| Matching Contributions for each Participant for each Plan Year shall be limited to $_______________ . (4) Eligibility Requirement(s) A Participant who makes Deferral Contributions during the Plan Year under Section 1.05(b) shall be entitled to Matching Contributions for that Plan Year if the Participant satisfies the following requirement(s) (Check the appropriate box(es). Options (B) and (C) may not be elected together): (A) |_| Is employed by the Employer on the last day of the Plan Year. (B) |_| Earns at least 500 Hours of Service during the Plan Year. ** Effective January 1, 1999, signed by Peter N. Popov, Secretary. 10 11 (C) |_| Earns at least 1,000 Hours of Service during the Plan Year. (D) |_| Is not a Highly Compensated Employee for the Plan Year. (E) |_| Is not a Partner of the Employer, if the Employer is a Partnership. (F) |X| No requirements. ** Note: If option (A), (B) or (C) above is selected then Matching Contributions can only be funded by the Employer after the Plan Year ends. Any Matching Contribution funded before Plan Year end shall not be subject to the eligibility requirements of this Section 1.05(c)(4)). If option (A), (B), or (C) is adopted during a Plan Year, such option shall not become effective until the first day of the next Plan Year. (d) |X| Employee After-Tax Contributions (check one): (1) |X| Future Contributions Participants may make voluntary non-deductible Employee Contributions pursuant to Section 4.09 of the Plan. This option may only be elected if the Employer has elected to permit Deferral Contributions under Section 1.05(b). Matching Contributions by the Employer are not allowed on any voluntary non-deductible Employee Contributions. Withdrawals are limited to one per year unless Employee Contributions were allowed under a previous plan document which authorized more frequent withdrawals. (2) |_| Frozen Contributions Participants may not make voluntary non-deductible Employee Contributions, but the Employer does maintain frozen Participant voluntary non-deductible Employee Contribution Accounts. ** Effective January 1, 1999, signed by Peter N. Popv, Secretary. 11 12 1.06 RETIREMENT AGE(S) (a) The Normal Retirement Age under the Plan is (check one): (1) |X| age 65. (2) |_| age _____ (specify between 55 and 64). (3) |_| later of the age _____ (can not exceed 65) or the fifth anniversary of the Participant's Employment Commencement Date. (b) |X| The Early Retirement Age is the first day of the month after the Participant attains age 55 (specify 55 or greater) and completes 0 Years of Service for Vesting. (c) |_| A Participant is eligible for Disability Retirement if he/she (check the appropriate box(es)): (1) |_| satisfies the requirements for benefits under the Employer's Long-Term Disability Plan. (2) |_| satisfies the requirements for Social Security disability benefits. (3) |_| is determined to be disabled by a physician approved by the Employer. 12 13 1.07 VESTING SCHEDULE (a) The Participant's vested percentage in Employer contributions (Fixed or Discretionary) elected in Section 1.05(a) and/or Matching Contributions elected in Section 1.05(c) shall be based upon the schedule(s) selected below, except with respect to any Plan Year during which the Plan is Top-Heavy. The schedule elected in Section 1.12(d) shall automatically apply for a Top-Heavy Plan Year and all Plan Years thereafter unless the Employer has already elected a more favorable vesting schedule below. (1) Employer Contributions (check one): (A) |_| N/A - No Employer Contributions (B) |X| 100% Vesting immediately (C) |_| 3 year cliff (see C below) (D) |_| 5 year cliff (see D below) (E) |_| 6 year graduated (see E below) (F) |_| 7 year graduated (see F below) (G) |_| Other vesting (complete G1 below) (2) Matching Contributions (check one): (A) |_| N/A - No Matching Contributions (B) |X| 100% Vesting immediately ** (C) |_| 3 year cliff (see C below) (D) |_| 5 year cliff (see D below) (E) |_| 6 year graduated (see E below) (F) |_| 7 year graduated (see E below) (G) |_| Other vesting (complete G2 below)
Years of Vesting Schedule Service for Vesting C D E F G1 G2 ------- - - - - -- -- 0 0% 0% 0% 0% ___% ___% 1 0% 0% 0% 0% ___% ___% 2 0% 0% 20% 0% ___% ___% 3 100% 0% 40% 20% ___% ___% 4 100% 0% 60% 40% ___% ___% 5 100% 100% 80% 60% ___% ___% 6 100% 100% 100% 80% ___% ___% 7 100% 100% 100% 100% 100% 100%
Note: A schedule elected under G1 or G2 above must be at least as favorable as one of the schedules in C, D, E or F above. (b) |_| Years of Service for Vesting shall exclude: (1) |_| for new plans, service prior to the Effective Date as defined in Section 1.01(g)(1). (2) |_| for existing plans converting from another plan document, service prior to the original Effective Date as defined in Section 1.01(g)(2). ** Effective January 1, 1999, signed by Peter N. Popov, Secretary. 13 14 1.08 PREDECESSOR EMPLOYER SERVICE |_| Service for purposes of eligibility in Section 1.03(a)(1) and vesting in Section 1.07(a) of this Plan shall include service with the following employer(s): 1.09 PARTICIPANT LOANS Participant loans (check (a) or (b)): (a) |_| will be allowed in accordance with Section 7.09, subject to a $1,000 minimum amount and will be granted (check (1) or (2)): (1) |_| for any purpose. (2) |_| for hardship withdrawal (as defined in Section 7.10) purposes only. (b) |X| will not be allowed. 1.10 HARDSHIP WITHDRAWALS Participant withdrawals for hardship prior to termination of employment (check one): (a) |X| will be allowed in accordance with Section 7.10, subject to a $1,000 minimum amount. (b) |_| will not be allowed. 14 15 1.11 DISTRIBUTIONS (a) Subject to Articles 7 and 8 and (b) below, distributions under the Plan will be paid (check the appropriate box(es)): (1) |X| as a lump sum. (2) |X| under a systematic withdrawal plan (installments). (b) |X| Check if a Participant will be entitled to receive a distribution of all or any portion of the following Accounts without terminating employment upon attainment of age 59 1/2 (check one): (1) |X| Deferral Contribution Account (2) |_| All Accounts (c) |X| Check if the Plan was converted (by plan amendment) from another defined contribution plan, and the benefits were payable as (check the appropriate box(es)): (1) |X| a form of single or joint and survivor life annuity. (2) |_| an in-service withdrawal of vested Employer Contributions maintained in a Participant's Account (check (A) and/or (B)): (A) |_| for at least ______ (24 or more) months. (B) |_| after the Participant has at least 60 months of participation. (3) |X| another distribution option that is a "protected benefit" under Section 411(d)(6) of the Internal Revenue Code. Please attach a separate page identifying the distribution option(s). These additional forms of benefit may be provided for such plans under Articles 7 or 8. Note: Under Federal Law, distributions to Participants must generally begin no later than April 1 following the year in which the Participant attains age 70 1/2. 15 16 1.12 TOP HEAVY STATUS (a) The Plan shall be subject to the Top-Heavy Plan requirements of Article 9 (check one): (1) |_| for each Plan Year. (2) |X| for each Plan Year, if any, for which the Plan is Top-Heavy as defined in Section 9.02. (3) |_| Not applicable. (This option is available for plans covering only employees subject to a collective bargaining agreement and there are no Employer or Matching Contributions elected in Section 1.05.) (b) In determining Top-Heavy status, if necessary, for an employer with at least one defined benefit plan, the following assumptions shall apply: (1) Interest rate: ________% per annum (2) Mortality table: _______________ (3) |X| Not Applicable. (c) In the event that the Plan is treated as Top-Heavy for a Plan Year, each non-key Employee shall receive an Employer Contribution of at least 3 (3, 4, 5, or 7 1/2) % of Compensation for the Plan Year in accordance with Section 9.03 (check one): (1) |X| under this Plan in any event. (2) |_| under this Plan only if the Participant is not entitled to such contribution under another qualified plan of the Employer. (3) |_| Not applicable. (This option is available for plans covering only employees subject to a collective bargaining agreement and there are no Employer or Matching Contributions elected in Section 1.05.) Note: Such minimum Employer contribution may be less than the percentage indicated in (c) above to the extent provided in Section 9.03(a). 16 17 (d) In the event that the Plan is treated as Top-Heavy for a Plan Year, the following vesting schedule shall apply instead of the schedule(s) elected in Section 1.07(a) for such Plan Year and each Plan Year thereafter (check one): (1) |X| 100% vested after 1 (not in excess of 3) years of service for vesting. (2) |_| Years of Service for Vesting Vesting Percentage Must be at Least 0 ______________ 0% 1 ______________ 0% 2 ______________ 20% 3 ______________ 40% 4 ______________ 60% 5 ______________ 80% 6 ______________ 100% Note: If the schedule(s) elected in Section 1.07(a) is(are) more favorable in all cases than the schedule elected in (d) above, then the schedule(s) in Section 1.07(a) will continue to apply even in Plan Years in which the Plan is Top-Heavy. 1.13 TWO OR MORE PLANS - Code Section 415 limitation on annual additions If the Employer maintains or ever maintained another qualified plan in which any Participant in this Plan is (or was) a participant or could become a participant, the Employer must complete this section. The Employer must also complete this section if it maintains a welfare benefit fund, as defined in Section 419(e) of the Code, or an individual medical account, as defined in Section 415(l)(2) of the Code, under which amounts are treated as annual additions with respect to any Participant in this Plan. (a) If the Employer maintains, or maintained, any other defined contribution plan which is not a Master or Prototype Plan, Annual Additions for any Limitation Year to this Plan will be limited (check one): (1) |X| in accordance with Section 5.03 of this Plan. (2) |_| in accordance with another method set forth on an attached separate sheet. (3) |_| Not Applicable. 17 18 (b) If the Employer maintains, or maintained, any defined benefit plan(s), the sum of the Defined Contribution Fraction and Defined Benefit Fraction for a Limitation Year may not exceed the limitation specified in Code Section 415(e), modified by section 416(h)(1) of the Code. This combined plan limit will be met as follows (check one): (1) |_| Annual Additions to this Plan are limited so that the sum of the Defined Contribution Fraction and the Defined Benefit Fraction does not exceed 1.0. (2) |_| another method of limiting Annual Additions or reducing projected annual benefits is set forth on an attached schedule. (3) |X| Not Applicable. 1.14 ESTABLISHMENT OF TRUST AND INVESTMENT DECISIONS (a) Investment Directions Participant Accounts will be invested (check one): (1) |_| in accordance with investment directions provided to the Trustee by the Employer for allocating all Participant Accounts among the options listed in (b) below. (2) |X| in accordance with investment directions provided to the Trustee by each Participant for allocating his entire Account among the options listed in (b) below. (3) |_| in accordance with investment directions provided to the Trustee by each Participant for all contribution sources in a Participant's Account except the following sources shall be invested as directed by the Employer (check (A) and/or (B)): (A) |_| Fixed or Discretionary Employer Contributions (B) |_| Employer Matching Contributions The Employer must direct the applicable sources among the same investment options made available for Participant directed sources listed in (b) below. 18 19 (b) Plan Investment Options The Employer hereby establishes a Trust under the Plan in accordance with the provisions of Article 14, and the Trustee signifies acceptance of its duties under Article 14 by its signature below. Participant Accounts under the Trust will be invested among the Fidelity Funds listed below pursuant to Participant and/or Employer directions. Fund Name Fund Number 1 Fidelity Retirement Government Money Market Portfolio 0631 2 Fidelity Managed Income Portfolio 0632 3 Fidelity Investment Grade Bond Fund 0026 4 Fidelity International Bond Fund 0451 5 Fidelity Growth & Income Portfolio 0027 6 Fidelity Magellan(R)Fund 0021 7 Fidelity Growth Company Fund 0025 8 Fidelity Overseas Fund 0094 9 Fidelity Puritan(R)Fund 0004 10 Fidelity Contrafund 0022 11 Fidelity Low-Priced Stock Fund 0316 12 Spartan(R)U.S. Equity Index Fund 0650 Note: An additional annual recordkeeping fee will be charged for each fund in excess of seven funds. To the extent that the Employer selects as an investment option the Managed Income Portfolio of the Fidelity Group Trust for Employee Benefit Plans (the "Group Trust"), the Employer hereby (A) agrees to the terms of the Group Trust and adopts said terms as a part of this Agreement and (B) acknowledges that it has received from the Trustee a copy of the Group Trust, the Declaration of Separate Fund for the Managed Income Portfolio of the Group Trust, and the Circular for the Managed Income Portfolio. Note: The method and frequency for change of investments will be determined under the rules applicable to the selected funds or, if applicable, the rules of the Employer adopted in accordance with Section 6.03. Information will be provided regarding expenses, if any, for changes in investment options. 19 20 1.15 RELIANCE ON OPINION LETTER An adopting Employer may not rely on the opinion letter issued by the National Office of the Internal Revenue Service as evidence that this Plan is qualified under Section 401 of the Code. If the Employer wishes to obtain reliance that his or her Plan(s) are qualified, application for a determination letter should be made to the appropriate Key District Director of the Internal Revenue Service. Failure to fill out the Adoption Agreement properly may result in disqualification of the Plan. This Adoption Agreement may be used only in conjunction with Fidelity Prototype Plan Basic Plan Document No. 07. The Prototype Sponsor shall inform the adopting Employer of any amendments made to the Plan or of the discontinuance or abandonment of the prototype plan document. 1.16 PROTOTYPE INFORMATION: Name of Prototype Sponsor: Fidelity Management & Research Co. Address of Prototype Sponsor: 82 Devonshire Street Boston, MA 02109 Questions regarding this prototype document may be directed to the following telephone number: 1-(800) 343-9184. 20 21 EXECUTION PAGE (Fidelity's Copy) IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be executed this 24th day of June, 1994. Employer Marine Transport Lines, Inc. ----------------------------------- By Signed by Peter N. Popov ----------------------------------- Title Secretary ----------------------------------- Employer Marine Transport Lines, Inc. ----------------------------------- By Signed by Paul B. Gridley ----------------------------------- Title President ----------------------------------- Accepted by Fidelity Management Trust Company, as Trustee By Signed by Gary L. Yerke Date July 22, 1994 ---------------------------------- ----------------------------- Title Legal Counsel/Authorized Signatory ---------------------------------- 21 22 EXECUTION PAGE (Employer's Copy) IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be executed this 24th day of June, 1994. Employer Marine Transport Lines, Inc. ----------------------------------- By Signed by Peter N. Popov ----------------------------------- Title Secretary ----------------------------------- Employer Marine Transport Lines, Inc. ----------------------------------- By Signed by Paul B. Gridley ----------------------------------- Title President ----------------------------------- Accepted by Fidelity Management Trust Company, as Trustee By Signed by Gary L. Yerke Date June 21, 1994 ---------------------------------- ----------------------------- Title Legal Counsel/Authorized Signatory ---------------------------------- 22 23 Exhibit 10.17 The CORPORATEplan for Retirement THE PROFIT SHARING/401(K) PLAN FIDELITY BASIC PLAN DOCUMENT NO. 07 24 THE CORPORATE PLAN FOR RETIREMENT PROFIT SHARING/401(K) PLAN ARTICLE 1 ADOPTION AGREEMENT ARTICLE 2 DEFINITIONS 2.01 - Definitions ARTICLE 3 PARTICIPATION 3.01 - Date of Participation 3.02 - Resumption of Participation Following Reemployment 3.03 - Cessation or Resumption of Participation Following a Change in Status 3.04 - Participation by Owner-Employee; Controlled Businesses 3.05 - Omission of Eligible Employee ARTICLE 4 CONTRIBUTIONS 4.01 - Deferral Contributions 4.02 - Additional Limit on Deferral Contributions 4.03 - Matching Contributions 4.04 - Limit on Matching Contributions and Employee Contributions 4.05 - Special Rules 4.06 - Fixed/Discretionary Employer Contributions 4.07 - Time of Making Employer Contributions 4.08 - Return of Employer Contributions 4.09 - Employee Contributions 4.10 - Rollover Contributions 4.11 - Deductible Voluntary Employee Contributions 4.12 - Additional Rules for Paired Plans ARTICLE 5 PARTICIPANTS' ACCOUNTS 5.01 - Individual Accounts 5.02 - Valuation of Accounts 5.03 - Code Section 415 Limitations ARTICLE 6 INVESTMENT OF CONTRIBUTIONS 6.01 - Manner of Investment 6.02 - Investment Decisions 6.03 - Participant Directions to Trustee 2 25 ARTICLE 7 RIGHT TO BENEFITS 7.01 - Normal or Early Retirement 7.02 - Late Retirement 7.03 - Disability Retirement 7.04 - Death 7.05 - Other Termination of Employment 7.06 - Separate Account 7.07 - Forfeitures 7.08 - Adjustment for Investment Experience 7.09 - Participant Loans 7.10 - In-Service Withdrawals 7.11 - Prior Plan In-Service Distribution Rules ARTICLE 8 DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE 8.01 - Distribution of Benefits to Participants and Beneficiaries 8.02 - Annuity Distributions 8.03 - Joint and Survivor Annuities/Preretirement Survivor Annuities 8.04 - Installment Distributions 8.05 - Immediate Distributions 8.06 - Determination of Method of Distribution 8.07 - Notice to Trustee 8.08 - Time of Distribution 8.09 - Whereabouts of Participants and Beneficiaries ARTICLE 9 TOP-HEAVY PROVISIONS 9.01 - Application 9.02 - Definitions 9.03 - Minimum Contribution 9.04 - Adjustment to the Limitation on Contributions and Benefits 9.05 - Minimum Vesting ARTICLE 10 AMENDMENT AND TERMINATION 10.01 - Amendment by Employer 10.02 - Amendment by Prototype Sponsor 10.03 - Amendments Affecting Vested and/or Accrued Benefits 10.04 - Retroactive Amendments 10.05 - Termination 10.06 - Distribution Upon Termination of the Plan 10.07 - Merger or Consolidation of Plan; Transfer of Plan Assets ARTICLE 11 AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN; TRANSFER OF FUNDS TO OR FROM OTHER QUALIFIED PLANS 11.01 - Amendment and Continuation of Predecessor Plan 11.02 - Transfer of Funds from an Existing Plan 11.03 - Acceptance of Assets by Trustee 3 26 11.04 - Transfer of Assets from Trust ARTICLE 12 MISCELLANEOUS 12.01 - Communication to Participants 12.02 - Limitation of Rights 12.03 - Nonalienability of Benefits and Qualified Domestic Relations Orders 12.04 - Facility of Payment 12.05 - Information Between Employer and Trustee 12.06 - Effect of Failure to Qualify Under Code 12.07 - Notices 12.08 - Governing Law ARTICLE 13 PLAN ADMINISTRATION 13.01 - Powers and Responsibilities of the Administrator 13.02 - Nondiscriminatory Exercise of Authority 13.03 - Claims and Review Procedures 13.04 - Named Fiduciary 13.05 - Costs of Administration ARTICLE 14 TRUST AGREEMENT 14.01 - Acceptance of Trust Responsibilities 14.02 - Establishment of Trust Fund 14.03 - Exclusive Benefit 14.04 - Powers of Trustee 14.05 - Accounts 14.06 - Approving of Accounts 14.07 - Distribution from Trust Fund 14.08 - Transfer of Amounts from Qualified Plan 14.09 - Transfer of Assets from Trust 14.10 - Separate Trust or Fund for Existing Plan Assets 14.11 - Voting; Delivery of Information 14.12 - Compensation and Expenses of Trustee 14.13 - Reliance by Trustee on other Persons 14.14 - Indemnification by Employer 14.15 - Consultation by Trustee with Counsel 14.16 - Persons Dealing with the Trustee 14.17 - Resignation or Removal of Trustee 14.18 - Fiscal Year of the Trust 14.19 - Discharge of Duties by Fiduciaries 14.20 - Amendment 14.21 - Plan Termination 14.22 - Permitted Reversion of Funds to Employer 14.23 - Governing Law 4 27 Article 1. Adoption Agreement. Article 2. Definitions. 2.01. Definitions. (a) Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context: (1) "Account" means an account established on the books of the Trust for the purpose of recording contributions made on behalf of a Participant and any income, expenses, gains or losses incurred thereon. (2) "Administrator" means the Employer adopting this Plan, or other person designated by the Employer in Section 1.01(c). (3) "Adoption Agreement" means Article 1, under which the Employer establishes and adopts, or amends, the Plan and Trust and designates the optional provisions selected by the Employer, and the Trustee accepts its responsibilities under Article 14. The provisions of the Adoption Agreement shall be an integral part of the Plan. (4) "Annuity Starting Date" means the first day of the first period for which an amount is payable as an annuity or in any other form. (5) "Beneficiary" means the person or persons entitled under Section 7.04 to receive benefits under the Plan upon the death of a Participant, provided that for purposes of Section 7.04 such term shall be applied in accordance with Section 401(a)(9) of the Code and the regulations thereunder. (6) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (7) "Compensation" shall mean (A) for purposes of Article 4 (Contributions), compensation as defined in Section 5.03(e)(2) excluding any items elected by the Employer in Section 1.04(a), reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation and welfare benefits, but including amounts that are not includable in the gross income of the Participant under a salary reduction agreement by reason of the application of Sections 125, 402(a)(8), 402(h), or 403(b) of the Code; and (B) for purposes of Section 2.01(a)(16) (Highly Compensated Employees), Section 5.03 (Code Section 415 Limitations), and Section 9.03 (Top-Heavy Plan Minimum Contribution), compensation as defined in Section 5.03(e)(2). 28 Compensation shall generally be based on the amount actually paid to the Participant during the Plan Year or, for purposes of Article 4 if so elected by the Employer in Section 1.04(b), during that portion of the Plan Year during which the Employee is eligible to participate. Notwithstanding the preceding sentence, compensation for purposes of Section 5.03 (Code Section 415 Limitations) shall be based on the amount actually paid or made available to the Participant during the Limitation Year. Compensation for the initial Plan Year for a new plan shall be based upon eligible Participant Compensation, subject to Section 1.04(b), from the Effective Date listed in Section 1.01(g)(1) through the end of the first Plan Year. In the case of any Self-Employed Individual, Compensation shall mean the Individual's Earned Income. For years beginning after December 31, 1988, the annual Compensation of each Participant taken into account for determining all benefits provided under the plan for any determination period shall not exceed $200,000. This limitation shall be adjusted by the Secretary at the same time and in the same manner as under Section 415(d) of the Code, except that the dollar increase in effect on January 1 of any calendar year is effective for years beginning in such calendar year and the first adjustment to the $200,000 limitation is effected on January 1, 1990. If a plan determines Compensation on a period of time that contains fewer than 12 calendar months, then the annual Compensation limit is the amount equal to the annual Compensation limit for the calendar year in which the Compensation period begins multiplied by the ratio obtained by dividing the number of full months in the period by 12. If Compensation for any prior determination period is taken into account in determining an Employee's allocations or benefits for the current determination period, the Compensation for such prior year is subject to the applicable annual compensation limit in effect for that prior year. For this purpose, for years beginning before January 1, 1990, the applicable annual compensation limit is $200,000. In determining the Compensation of a Participant for purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except that in applying such rules, the term "family" shall include only the spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If the $200,000 limitation is exceeded as a result of the application of these rules, then the limitation shall be prorated among the affected individuals in proportion to each such individual's Compensation as determined under this Section prior to the application of this limitation. 2 29 (8) "Earned Income" means the net earnings of a Self-Employed Individual derived from the trade or business with respect to which the Plan is established and for which the personal services of such individual are a material income-providing factor, excluding any items not included in gross income and the deductions allocated to such items, except that for taxable years beginning after December 31, 1989 net earnings shall be determined with regard to the deduction allowed under Section 164(f) of the Code, to the extent applicable to the Employer. Net earnings shall be reduced by contributions of the Employer to any qualified plan, to the extent a deduction is allowed to the Employer for such contributions under Section 404 of the Code. (9) "Eligibility Computation Period" means each 12-consecutive month period beginning with the Employment Commencement Date and each anniversary thereof or, in the case of an Employee who, before completing the eligibility requirements set forth in Section 1.03(a)(1), incurs a break in service for participation purposes and thereafter returns to the employ of the Employer or Related Employer, each 12-consecutive month period beginning with the first day of reemployment and each anniversary thereof. A "break in service for participation purposes" shall mean an Eligibility Computation Period during which the participant does not complete more than 500 Hours of Service with the Employer. (10) "Employee" means any employee of the Employer, any Self-Employed Individual or Owner-Employee. The Employer must specify in Section 1.03(a)(3) any Employee or class of Employees not eligible to participate in the Plan. If the Employer elects to exclude collective bargaining employees, the exclusion applies to any employee of the Employer included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers unless the collective bargaining agreement requires the employee to be included within the Plan. The term "employee representatives" does not include any organization more than half the members of which are owners, officers, or executives of the Employer. For purposes of the Plan, an individual shall be considered to become an Employee on the date on which he first completes an Hour of Service and he shall be considered to have ceased to be an Employee on the date on which he last completes an Hour of Service. The term also includes a Leased Employee, such that contributions or benefits provided by the leasing organization which are attributable to services performed for the Employer shall be treated as provided by the Employer. Notwithstanding the above, a Leased Employee shall not be considered an Employee if Leased Employees do not constitute more than 20 percent of the Employer's non-highly compensated work-force (taking into account all Related Employers) and the Leased Employee is covered by a money purchase pension plan maintained by the 3 30 leasing organization and providing (A) a nonintegrated employer contribution rate of at least 10 percent of compensation, as defined for purposes of Section 415(c)(3) of the Code, but including amounts contributed pursuant to a salary reduction agreement which are excludable from gross income under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code, (B) full and immediate vesting, and (C) immediate participation by each employee of the leasing organization. (11) "Employer" means the employer named in Section 1.02(a) and any Related Employers required by this Section 2.01(a)(11). If Article 1 of the Employer's Plan is the Standardized Adoption Agreement, the term "Employer" includes all Related Employers. If Article 1 of the Employer's Plan is the Non-standardized Adoption Agreement, the term "Employer" includes those Related Employers designated in Section 1.02(b). (12) "Employment Commencement Date" means the date on which the Employee first performs an Hour of Service. (13) "ERISA" means the Employee Retirement Income Security Act of 1974, as from time to time amended. (14) "Fidelity Fund" means any Registered Investment Company or Managed Income Portfolio of the Fidelity Group Trust for Employee Benefit Plans which is made available to plans utilizing the CORPORATEplan for Retirement. (15) "Fund Share" means the share, unit, or other evidence of ownership in a Fidelity Fund. (16) "Highly Compensated Employee" means both highly compensated active Employees and highly compensated former Employees. A highly compensated active Employee includes any Employee who performs service for the Employer during the determination year and who, during the "look-back year," (A) received compensation from the Employer in excess of $75,000 (as adjusted pursuant to Section 415(d) of the Code), (B) received compensation from the Employer in excess of $50,000 (as adjusted pursuant to Section 415(d) of the Code) and was a member of the top-paid group for such year, or (C) was an officer of the Employer and received compensation during such year that is greater than 50 percent of the dollar limitation in effect under Section 415(b)(1)(A) of the Code. The term "Highly Compensated Employee" also includes (i) Employees who are both described in the preceding sentence if the term "determination year" is substituted for the term "look-back year" and the Employee is one of the 100 Employees who received the most compensation from the Employer during the determination year, and (ii) Employees who are 5-percent owners at any time during the look-back year or determination year. 4 31 If no officer has satisfied the compensation requirement of (C) above during either a determination year or look-back year, the highest paid officer for such year shall be treated as a highly compensated Employee. For this purpose, the determination year shall be the Plan Year. The look-back year shall be the twelve-month period immediately preceding the determination year. The Employer may elect to make the look-back year calculation for a determination on the basis of the calendar year ending with or within the applicable determination year, as prescribed by Section 414(q) of the Code and the regulations issued thereunder. A highly compensated former Employee includes any Employee who separated from service (or was deemed to have separated) prior to the determination year, performs no service for the Employer during the determination year, and was a highly compensated active Employee for either the separation year or any determination year ending on or after the Employee's 55th birthday. If an Employee is, during a determination year or look-back year, a family member of either a 5-percent owner who is an active or former Employee or a highly compensated Employee who is one of the 10 most highly compensated Employees ranked on the basis of compensation paid by the Employer during such year, then the family member and the 5-percent owner or top-ten highly compensated Employee shall be aggregated. In such case, the family member and 5-percent owner or top-ten highly compensated Employee shall be treated as a single Employee receiving compensation and plan contributions or benefits equal to the sum of such compensation and contributions or benefits of the family member and 5-percent owner or top-ten highly compensated Employee. For purposes of this Section, family member includes the spouse, lineal ascendants and descendants of the Employee or former Employee and the spouses of such lineal ascendants and descendants. The determination of who is a highly compensated Employee, including the determinations of the number and identity of Employees in the top-paid group, the top 100 Employees, the number of Employees treated as officers, and the compensation that is considered, will be made in accordance with Section 414(q) of the Code and the regulations thereunder. (17) "Hour of Service" means, with respect to any Employee, (A) Each hour for which the Employee is directly or indirectly paid, or entitled to payment, for the performance of duties for the Employer or a Related Employer, each such hour to be credited to the Employee for the Eligibility Computation Period in which the duties were performed; 5 32 (B) Each hour for which the Employee is directly or indirectly paid, or entitled to payment, by the Employer or Related Employer (including payments made or due from a trust fund or insurer to which the Employer contributes or pays premiums) on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity, disability, layoff, jury duty, military duty, or leave of absence, each such hour to be credited to the Employee for the Eligibility Computation Period in which such period of time occurs, subject to the following rules: (i) No more than 501 Hours of Service shall be credited under this paragraph (B) on account of any single contin-uous period during which the Employee performs no duties; (ii) Hours of Service shall not be credited under this paragraph (B) for a payment which solely reimburses the Employee for medically-related expenses, or which is made or due under a plan maintained solely for the purpose of complying with applicable workmen's compensation, unemployment compensation or disability insurance laws; and (iii) If the period during which the Employee performs no duties falls within two or more Eligibility Computation Periods and if the payment made on account of such period is not calculated on the basis of units of time, the Hours of Service credited with respect to such period shall be allocated between not more than the first two such Eligibility Computation Periods on any reasonable basis consistently applied with respect to similarly situated Employees; and (C) Each hour not counted under paragraph (A) or (B) for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to be paid by the Employer or a Related Employer, shall be credited to the Employee for the Eligibility Computation Period to which the award or agreement pertains rather than the Eligibility Computation Period in which the award agreement or payment is made. For purposes of determining Hours of Service, Employees of the Employer and of all Related Employers will be treated as employed by a single employer. For purposes of paragraphs (B) and (C) above, Hours of Service will be calculated in accordance with the provisions of Section 2530.200b-2(b) of the Department of Labor regulations, which are incorporated herein by reference. Solely for purposes of determining whether a break in service for participation purposes has occurred in a computation period, an individual who is absent from work for maternity or paternity reasons shall receive credit for 6 33 the hours of service which would otherwise have been credited to such individual but for such absence, or in any case in which such hours cannot be determined, 8 hours of service per day of such absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual, (ii) by reason of a birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement. The hours of service credited under this paragraph shall be credited (a) in the computation period in which the absence begins if the crediting is necessary to prevent a break in service in that period, or (b) in all other cases, in the following computation period. (18) "Leased Employee" means any individual who provides services to the Employer or a Related Employer (the "recipient") but is not otherwise an employee of the recipient if (A) such services are provided pursuant to an agreement between the recipient and any other person (the "leasing organization"), (B) such individual has performed services for the recipient (or for the recipient and any related persons within the meaning of Section 414(n)(6) of the Code) on a substantially full-time basis for at least one year, and (C) such services are of a type historically performed by employees in the business field of the recipient. (19) "Normal Retirement Age" means the normal retirement age specified in Section 1.06(a) of the Adoption Agreement. If the Employer enforces a mandatory retirement age, the Normal Retirement Age is the lesser of that mandatory age or the age specified in Section 1.06(a). (20) "Owner-Employee" means, if the Employer is a sole proprietorship, the individual who is the sole proprietor, or if the Employer is a partnership, a partner who owns more than 10 percent of either the capital interest or the profits interest of the partnership. (21) "Participant" means any Employee who participates in the Plan in accordance with Article 3 hereof. (22) "Plan" means the plan established by the Employer in the form of the prototype plan, as set forth herein as a new plan or as an amendment to an existing plan, by executing the Adoption Agreement, together with any and all amendments hereto. (23) "Plan Year" means the 12-consecutive-month period ending on the date designated by the Employer in Section 1.01(f). (24) "Prototype Sponsor" means Fidelity Management and Research Company or its successor. 7 34 (25) "Registered Investment Company" means any one or more corporations, partnerships or trusts registered under the Investment Company Act of 1940 for which Fidelity Management and Research Company serves as investment advisor. (26) "Related Employer" means any employer other than the Employer named in Section 1.02(a) if the Employer and such other employer are members of a controlled group of corporations (as defined in Section 414(b) of the Code) or an affiliated service group (as defined in Section 414(m)), or are trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c)), or such other employer is required to be aggregated with the Employer pursuant to regulations issued under Section 414(o). (27) "Self-Employed Individual" means an individual who has Earned Income for the taxable year from the Employer or who would have had Earned Income but for the fact that the trade or business had no net profits for the taxable year. (28) "Trust" means the trust created by the Employer in accordance with the provisions of Section 14.01. (29) "Trust Agreement" means the agreement between the Employer and the Trustee, as set forth in Article 14, under which the assets of the Plan are held, administered, and managed. (30) "Trust Fund" means the property held in Trust by the Trustee for the Accounts of the Participants and their Beneficiaries. (31) "Trustee" means the Fidelity Management Trust Company, or its successor. (32) "Year of Service for Participation" means, with respect to any Employee, an Eligibility Computation Period during which the Employee has been credited with at least 1,000 Hours of Service. If the Plan maintained by the Employer is the plan of a predecessor employer, an Employee's Years of Service for Participation shall include years of service with such predecessor employer. In any case in which the Plan maintained by the Employer is not the plan maintained by a predecessor employer, service for such predecessor shall be treated as service for the Employer, to the extent provided in Section 1.08. (33) "Years of Service for Vesting" means, with respect to any Employee, the number of whole years of his periods of service with the Employer or a Related Employer (the elapsed time method to compute vesting service), subject to any exclusions elected by the Employer in Section 1.07(b). An Employee will receive credit for the aggregate of all time period(s) commencing with the Employee's Employment Commencement Date and ending on the date a break in service begins, unless any such years are excluded by Section 1.07(b). An Employee will also receive credit for any period of 8 35 severance of less than 12 consecutive months. Fractional periods of a year will be expressed in terms of days. In the case of a Participant who has 5 consecutive 1-year breaks in service, all years of service after such breaks in service will be disregarded for the purpose of vesting the Employer-derived account balance that accrued before such breaks, but both pre-break and post-break service will count for the purposes of vesting the Employer-derived account balance that accrues after such breaks. Both accounts will share in the earnings and losses of the fund. In the case of a Participant who does not have 5 consecutive 1-year breaks in service, both the pre-break and post-break service will count in vesting both the pre-break and post-break employer-derived account balance. A break in service is a period of severance of at least 12 consecutive months. Period of severance is a continuous period of time during which the Employee is not employed by the Employer. Such period begins on the date the Employee retires, quits or is discharged, or if earlier, the 12-month anniversary of the date on which the Employee was otherwise first absent from service. In the case of an individual who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the first anniversary of the first date of such absence shall not constitute a break in service. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (A) by reason of the pregnancy of the individual, (B) by reason of the birth of a child of the individual, (C) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (D) for purposes of caring for such child for a period beginning immediately following such birth or placement. If the Plan maintained by the Employer is the plan of a predecessor employer, an Employee's Years of Service for Vesting shall include years of service with such predecessor employer. In any case in which the Plan maintained by the Employer is not the plan maintained by a predecessor employer, service for such predecessor shall be treated as service for the Employer to the extent provided in Section 1.08. (b) Pronouns used in the Plan are in the masculine gender but include the feminine gender unless the context clearly indicates otherwise. Article 3. Participation. 3.01. Date of Participation. All Employees in the eligible class (as defined in Section 1.03(a)(3)) who are in the service of the Employer on the Effective Date will become Participants on the date elected by the Employer in Section 1.03(c). Any other Employee will become a 9 36 Participant in the Plan as of the first Entry Date on which he first satisfies the eligibility requirements set forth in Section 1.03(a). In the event that an Employee who is not a member of an eligible class (as defined in Section 1.03(a)(3)) becomes a member of an eligible class, the individual shall participate immediately if such individual had already satisfied the eligibility requirements and would have otherwise previously become a Participant. If an eligibility requirement other than one Year of Service is elected in 1.03(a)(1), an Employee may not be required to complete a minimum number of Hours of Service before becoming a Participant. An otherwise eligible Employee subject to a minimum months of service requirement shall become a Participant on the first Entry Date following his completion of the required number of consecutive months of employment measured from his Employment Commencement Date to the coinciding date in the applicable following month. For purposes of determining consecutive months of service, the Related Employer and predecessor employer rules contained in Sections 2.01(a)(17) and 2.01(a)(32) shall apply. 3.02. Resumption of Participation Following Reemployment. If a Participant ceases to be an Employee and thereafter returns to the employ of the Employer he will be treated as follows: (a) he will again become a Participant on the first date on which he completes an Hour of Service for the Employer following his reemployment and is in the eligible class of Employees as defined in Section 1.03(a)(3), and (b) any distribution which he is receiving under the Plan will cease except as otherwise required under Section 8.08. 3.03. Cessation or Resumption of Participation Following a Change in Status. If any Participant continues in the employ of the Employer or Related Employer but ceases to be a member of an eligible class as defined in Section 1.03(a)(3), the individual shall continue to be a Participant for most purposes until the entire amount of his benefit is distributed; however, the individual shall not be entitled to receive an allocation of contributions or forfeitures during the period that he is not a member of the eligible class. Such Participant shall continue to receive credit for service completed during the period for purposes of determining his vested interest in his Accounts. In the event that the individual subsequently again becomes a member of an eligible class of Employees, the individual shall resume full participation immediately upon the date of such change in status. 3.04. Participation by Owner-Employee; Controlled Businesses. If the Plan provides contributions or benefits for one or more Owner-Employees who control both the trade or business with respect to which the Plan is established and one or more other trades or businesses, the Plan and any plan established with respect to such other trades or businesses must, when looked at as a single plan, satisfy Sections 401(a) and 401(d) of the Code with respect to the employees of this and all such other trades or businesses. If the Plan provides contributions or benefits for one or more Owner-Employees who control one or more 10 37 other trades or businesses, the Employees of each such other trade or business must be included in a plan which satisfies Sections 401(a) and 401(d) of the Code and which provides contributions and benefits not less favorable than provided for Owner-Employees under the Plan. If an individual is covered as an Owner-Employee under the plans of two or more trades or businesses which are not controlled and the individual controls a trade or business, then the contributions or benefits of the Employees under the plan of the trades or businesses which are controlled must be as favorable as those provided for him under the most favorable plan of the trade or business which is not controlled. For purposes of this Section, an Owner-Employee, or two or more Owner-Employees, shall be considered to control a trade or business if such Owner-Employee, or such Owner-Employees together, (a) own the entire interest in an unincorporated trade or business or (b) in the case of a partnership, own more than 50 percent of either the capital interest or the profits interest in such partnership. For this purpose, an Owner-Employee, or two or more Owner-Employees, shall be treated as owning any interest in a partnership which is owned, directly or indirectly, by a partnership controlled by such Owner-Employee or such Owner-Employees. 3.05. Omission of Eligible Employee. If any Employee who should be included as a Participant in the Plan is erroneously omitted and discovery of such omission is not made until after a contribution by his Employer for the year has been made, the Employer shall make a subsequent contribution, if necessary, so that the omitted Employee receives the total amount which the said Employee would have received had he not been omitted. For purposes of this Section 3.05, the term "contribution" shall not include Deferral Contributions and Matching Contributions made pursuant to Sections 4.01 and 4.03, respectively. Article 4. Contributions. 4.01. Deferral Contributions. (a) 4.01. If so provided by the Employer in Section 1.05(b), each Participant may elect to execute a salary reduction agreement with the Employer to reduce his Compensation by a specified percentage not exceeding 15% per payroll period, subject to any exceptions elected by the Employer in Section 1.05(b)(2) and 1.05(b)(3) and equal to a whole number multiple of one (1) percent. Such agreement shall become effective on the first day of the first payroll period for which the Employer can reasonably process the request. The Employer shall make a Deferral Contribution on behalf of the Participant corresponding to the amount of said reduction, subject to the restrictions set forth below. Under no circumstances may a salary reduction agreement be adopted retroactively. 11 38 (b) A Participant may elect to change or discontinue the percentage by which his Compensation is reduced by notice to the Employer as provided in Section 1.05(b)(1). (c) No Participant shall be permitted to have Deferral Contributions made under the Plan, or any other qualified plan maintained by the Employer, during the taxable year, in excess of the dollar limitation contained in Section 402(g) of the Code in effect at the beginning of such taxable year. A Participant may assign to the Plan any Excess Deferrals made during the taxable year of the Participant by notifying the Plan Administrator on or before March 15 following the taxable year of the amount of the Excess Deferrals to be assigned to the Plan. A Participant is deemed to notify the Administrator of any Excess Deferrals that arise by taking into account only those Deferral Contributions made to the Plan and any other plan of the Employer. Notwithstanding any other provision of the Plan, Excess Deferrals, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any Participant to whose Account Excess Deferrals were so assigned for the preceding year and who claims Excess Deferrals for such taxable year. "Excess Deferrals" shall mean those Deferral Contributions that are includable in a Participant's gross income under Section 402(g) of the Code to the extent such Participant's Deferral Contributions for a taxable year exceed the dollar limitation under such Code section. For purposes of determining Excess Deferrals, the term "Deferral Contributions" shall include the sum of all Employer Contributions made on behalf of such Participant pursuant to an election to defer under any qualified CODA as described in Section 401(k) of the Code, any simplified employee pension cash or deferred arrangement as described in Section 402(h)(1)(B) of the Code, any eligible deferred compensation plan under Section 457 of the Code, any plan as described under Section 501(c)(18) of the Code, and any Employer Contributions made on the behalf of a Participant for the purchase of an annuity contract under Section 403(b) of the Code pursuant to a salary reduction agreement. Deferral Contributions shall not include any deferrals properly distributed as excess annual additions. Excess Deferrals shall be treated as annual additions under the Plan, unless such amounts are distributed no later than the first April 15 following the close of the Participant's taxable year. Excess Deferrals shall be adjusted for any income or loss up to the date of distribution. The income or loss allocable to Excess Deferrals is (1) income or loss allocable to the Participant's Deferral Contributions Account for the taxable year multiplied by a fraction, the numerator of which is such Participant's Excess Deferrals for the year and the denominator is the Participant's Account balance attributable to Deferral Contributions without regard to any income or loss occurring during such taxable year, or (2) such other amount determined under any reasonable method, provided that such method is used consistently for all Participants 12 39 in calculating the distributions required under this Section 4.01(c) and Sections 4.02(d) and 4.04(d) for the Plan Year, and is used by the Plan in allocating income or loss to Participants' Accounts. Income or loss allocable to the period between the end of the Plan Year and the date of distribution shall be disregarded in determining income or loss. (d) In order for the Plan to comply with the requirements of Sections 401(k), 402(g) and 415 of the Code and the regulations promulgated thereunder, at any time in a Plan Year the Administrator may reduce the rate of Deferral Contributions to be made on behalf of any Participant, or class of Participants, for the remainder of that Plan Year, or the Administrator may require that all Deferral Contributions to be made on behalf of a Participant be discontinued for the remainder of that Plan Year. Upon the close of the Plan Year or such earlier date as the Administrator may determine, any reduction or discontinuance in Deferral Contributions shall automatically cease until the Administrator again determines that such a reduction or discontinuance of Deferral Contributions is required. 4.02. Additional Limit on Deferral Contributions. (a) The Actual Deferral Percentage (hereinafter "ADP") for Participants who are Highly Compensated Employees for each Plan Year and the ADP for participants who are Non-highly Compensated Employees for the same Plan Year must satisfy one of the following tests: (1) The ADP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Participants who are Non-highly Compensated Employees for the same Plan Year multiplied by 1.25; or (2) The ADP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Participants who are Non-highly Compensated Employees for the same Plan Year multiplied by 2.0, provided that the ADP for Participants who are Highly Compensated Employees does not exceed the ADP for Participants who are Non-highly Compensated Employees by more than two (2) percentage points. (b) The following special rules apply for the purposes of this Section: (1) The ADP for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Deferral Contributions (and Qualified Discretionary Contributions if treated as Deferral Contributions for purposes of the ADP test) allocated to his or her accounts under two or more arrangements described in Section 401(k) of the Code that are maintained by the Employer, shall be determined as if such Deferral Contributions (and, if applicable, such Qualified Discretionary Contributions) were made under a single arrangement. If a 13 40 Highly Compensated Employee participates in two or more cash or deferred arrangements that have different Plan Years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under regulations under Section 401(k) of the Code. (2) In the event that this Plan satisfies the requirements of Sections 401(k), 401(a)(4), or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Sections of the Code only if aggregated with this plan, then this Section shall be applied by determining the ADP of Employees as if all such plans were a single plan. For Plan Years beginning after December 31, 1989, plans may be aggregated in order to satisfy section 401(k) of the Code only if they have the same Plan Year. (3) For purposes of determining the ADP of a Participant who is a 5-percent owner or one of the ten most highly-paid Highly Compensated Employees, the Deferral Contributions (and Qualified Discretionary Contributions if treated as Deferral Contributions for purposes of the ADP test) and Compensation of such Participant shall include the Deferral Contributions (and, if applicable, Qualified Discretionary Contributions) and Compensation for the Plan Year of Family Members (as defined in Section 414(q)(6) of the Code). Family Members, with respect to between the end of the Plan Year and the date of distribution shall be disregarded in determining income or loss. Excess Contributions shall be distributed from the Participant's Qualified Discretionary Contribution account only to the extent that such Excess Contributions exceed the balance in the Participant's Deferral Contributions account. (4) For purposes of determining the ADP test, Deferral Contributions and Qualified Discretionary Contributions must be made before the last day of the twelve-month period immediately following the Plan Year to which contributions relate. (5) The Employer shall maintain records sufficient to demonstrate satisfaction of the ADP test and the amount of Qualified Discretionary Contributions used in such test. (6) The determination and treatment of the ADP amounts of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. (c) The following definitions shall apply for purposes of this Section: (1) "Actual Deferral Percentage" shall mean, for a specified group of Participants for a Plan Year, the average of the ratios 14 41 (calculated separately for each Participant in such group) of (A) the amount of Employer contributions actually paid over to the Trust on behalf of such Participant for the Plan Year to (B) the Participant's Compensation for such Plan Year. Employer contributions on behalf of any Participant shall include (i) any Deferral Contributions made pursuant to the Participant's deferral election, including Excess Deferrals of Highly Compensated Employees, but excluding (a) Excess Deferrals of Non-highly Compensated Employees that arise solely from Deferral Contributions made under the Plan or plans of the Employer and (b) Deferral Contributions that are taken into account in the Contribution Percentage test (provided the ADP test is satisfied both with and without exclusion of these Deferral Contributions) and (ii) at the election of the Employer, Qualified Discretionary Contributions. Matching Contributions, whether or not non-forfeitable when made, shall not be considered as Employer Contributions for purposes of this paragraph. For purposes of computing Actual Deferral Percentages, an Employee who would be a Participant but for the failure to make Deferral Contributions shall be treated as a Participant on whose behalf no Deferral Contributions are made. (2) "Excess Contributions" shall mean, with respect to any Plan Year, the excess of (a) The aggregate amount of Employer contributions actually taken into account in computing the ADP of Highly Compensated Employees for such Plan Year, over (b) The maximum amount of such contributions permitted by the ADP test (determined by reducing contributions made on behalf of Highly Compensated Employees in order of the ADPs, beginning with the highest of such percentages). (3) "Qualified Discretionary Contributions" shall mean contributions made by the Employer as elected in Section 1.05(b)(4) and allocated to Participant Accounts of Non-highly Compensated Employees that such Participants may not elect to receive in cash until distributed from the Plan, that are nonforfeitable when made, and that are distributable only in accordance with the distribution provisions that are applicable to Deferral Contributions. Participants shall not be required to satisfy any hours of service or employment requirement in order to receive an allocation of such contributions. (d) Notwithstanding any other provision of this Plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of each Plan Year to Participants to whose Accounts such Excess Contributions were allocated for the preceding Plan Year. If such excess amounts are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess amounts arose, a ten- (10-) percent excise tax will be imposed on the Employer maintaining the Plan with respect to such amounts. Such 15 42 distributions shall be made to Highly Compensated Employees on the basis of the respective portions of the Excess Contributions attributable to each of such employees. Excess Contributions of Participants who are subject to the family member aggregation rules of Section 414(q)(6) of the Code shall be allocated among the family members in proportion to the Deferral Contributions (and amounts treated as Deferral Contributions) of each family member that is combined to determine the combined ADP. Excess Contributions shall be treated as annual additions under the Plan. Excess Contributions shall be adjusted for any income or loss up to the date of distribution. The income or loss allocable to Excess Contributions is (1) income or loss allocable to the Participant's Deferral Contribution Account (and if applicable, the Qualified Discretionary Contribution Account) for the Plan Year multiplied by a fraction, the numerator of which is such Participant's Excess Contributions for the year and the denominator is the Participant's Account balance attributable to Deferral Contributions without regard to any income or loss occurring during such Plan Year, or (2) an amount determined under any reasonable method, provided that such method is used consistently for all Participants in calculating any distributions required under Section 4.02(d) and Sections 4.01(c) and 4.04(d) for the Plan Year, and is used by the Plan in allocating income or loss to the Participants' Accounts. Income or loss allocable to the period between the end of the Plan Year and the date of distibution shall be disregarded in determining income or loss. Excess Contributions shall be distributed from the Participant's Qualified Discretionary Contribution Account only to the extent that such Excess Contributions exceed the balance in the Participant's Deferral Contributions Account. 4.03 Matching Contributions: If so provided by the Employer in Section 1.05(c), the Employer shall make a Matching Contribution on behalf of each Participant who had Deferral Contributions made on his behalf during the year and who meets the requirement, if any, of Section 1.05(c)(4). The amount of the Matching Contribution shall be determined in accordance with Section 1.05(c), subject to the limitations set forth in Section 4.04 and Section 404 of the Code. Matching Contributions will not be allowed to be made by the Employer on any voluntary non-deductible Employee Contributions. 4.04 Limit on Matching Contributions and Employee Contributions: (a) The Average Contribution Percentage (hereinafter "ACP") for Participants who are Highly Compensated Employees for each Plan Year and the ACP for Participants who are Non-highly Compensated Employees for the same Plan Year must satisfy one of the following tests: 16 43 (1) The ACP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Participants who are Non-highly Compensated Employees for the same Plan Year multiplied by 1.25; or (2) The ACP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Participants who are Non-highly Compensated Employees for the same Plan Year multiplied by two (2), provided that the ACP for Participants who are Highly Compensated Employees does not exceed the ACP for Participants who are Non-highly Compensated Employees by more than two (2) percentage points. (b) The following special rules apply for purposes of this section: (1) If one or more Highly Compensated Employees participate in both a qualified cash or deferred arrangement described in Section 401(k) of the Code (hereafter "CODA") and a plan subject to the ACP test maintained by the Employer and the sum of the ADP and ACP of those Highly Compensated Employees subject to either or both tests exceeds the Aggregate Limit, then the ACP of those Highly Compensated Employees who also participate in a CODA will be reduced (beginning with such Highly Compensated Employee whose ACP is the highest) so that the limit is not exceeded. The amount by which each Highly Compensated Employee's Contribution Percentage Amounts is reduced shall be treated as an Excess Aggregate Contribution. The ADP and ACP of the Highly Compensated Employees are determined after any corrections required to meet the ADP and ACP tests. Multiple use does not occur if either the ADP or ACP of the Highly Compensated Employees does not exceed 1.25 multiplied by the ADP and ACP of the Non-highly Compensated Employees. (2) For purposes of this section, the Contribution Percentage for any Participant who is a Highly Compensated Employee and who is eligible to have Contribution Percentage Amounts allocated to his or her account under two or more plans described in section 401(a) of the Code, or arrangements described in section 401(k) of the Code that are maintained by the Employer, shall be determined as if the total of such Contribution Percentage Amounts was made under each plan. If a Highly Compensated Employee participates in two or more cash or deferred arrangements that have different plan years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under regulations under Section 401(m) of the Code. (3) In the event that this Plan satisfies the requirements of Sections 401(m), 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such sections of the Code only 17 44 if aggregated with this Plan, then this section shall be applied by determining the Contribution Percentage of Employees as if all such plans were a single plan. For plan years beginning after December 31, 1989, plans may be aggregated in order to satisfy Section 401(m) of the Code only if they have the same Plan Year. (4) For purposes of determining the Contribution percentage of a Participant who is a five-percent owner or one of the ten most highly-paid Highly Compensated Employees, the Contribution Percentage Amounts and Compensation of such Participant shall include the Contribution Percentage Amounts and Compensation for the Plan Year of family members (as defined in Section 414(q)(6) of the Code). Family members, with respect to Highly Compensated Employees, shall be disregarded as separate Employees in determining the Contribution Percentage both for Participants who are Non-highly Compensated Employees and for Participants who are Highly Compensated Employees. (5) For purposes of determining the Contribution Percentage test, Employee Contributions made pursuant to Section 1.05(d)(1) are considered to have been made in the Plan Year in which contributed to the Trust. Matching Contributions and Qualified Discretionary Contributions will be considered made for a Plan Year if made no later than the end of the twelve-month period beginning on the day after the close of the Plan Year. (6) The Employer shall maintain records sufficient to demonstrate satisfaction of the ACP test and the amount of Qualified Discretionary Contributions used in such test. (7) The determination and treatment of the Contribution Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of Treasury. (c) The following definitions shall apply for purposes of this Section: (1) "Aggregate Limit" shall mean the greater of (A) or (B) where (A) is the sum of (i) 125 percent of the greater of the ADP of the Non-highly Compensated Employees for the Plan Year or the ACP of Non-highly Compensated Employees under the Plan subject to Section 401(m) of the Code for the Plan Year beginning with or within the Plan Year of the CODA and (ii) the lesser of 200% or two plus the lesser of such ADP or ACP and where (B) is the sum of (i) 125 percent of the lesser of the ADP of the Non-highly Compensated Employees for the Plan Year or the ACP of Non-highly Compensated Employees under the Plan subject to Section 401(m) of the Code for the Plan Year beginning with or within the Plan Year of the CODA and (ii) the lesser of 200% or two plus the greater of such ADP or ACP. 18 45 (2) "Average Contribution Percentage" or "ACP" shall mean the average of the Contribution Percentages of the Eligible Participants in a group. (3) "Contribution Percentage" shall mean the ratio (expressed as a percentage) of the Participant's Contribution Percentage Amounts to the Participant's Compensation for the Plan Year. (4) "Contribution Percentage Amounts" shall mean the sum of the Employee Contributions and Matching Contributions made under the plan on behalf of the Participant for the Plan Year. Such Contribution Percentage Amounts shall not include Matching Contributions that are forfeited either to correct Excess Aggregate Contributions or because the contributions to which they relate are Excess Deferrals, Excess Contributions or Excess Aggregate Contributions. If so elected by the Employer in Section 1.05(b)(4), the Employer may include Qualified Discretionary Contributions in the Contribution Percentage Amounts. The Employer also may elect to use Deferral Contributions in the Contribution Percentage Amounts so long as the ADP test is met before the Deferral Contributions are used in the ACP test and continues to be met following the exclusion of those Deferral Contributions that are used to meet the ACP test. (5) "Deferral Contribution" shall mean any contribution made at the election of the Participant pursuant to a salary reduction agreement in accordance with Section 4.01(a). (6) "Eligible Participant" shall mean any Employee who is eligible to make an Employee Contribution, or a Deferral Contribution (if the Employer takes such contributions into account in the calculation of the Contribution Percentage), or to receive a Matching Contribution. (7) "Employee Contribution" shall mean any voluntary non-deductible contribution made to the plan by or on behalf of a Participant that is included in the Participant's gross income in the year in which made and that is maintained in a separate Account to which earnings and losses are allocated. (8) "Matching Contribution" shall mean an Employer contribution made to this or any other defined contribution plan on behalf of a Participant on account of a Participant's Deferral Contribution. (9) "Excess Aggregate Contributions" shall mean, with respect to any Plan Year, the excess of (A) The aggregate Contribution Percentage Amounts taken into account in computing the numerator of the Contribution Percentage actually made on behalf of Highly Compensated Employees for such Plan Year, over 19 46 (B) The maximum Contribution Percentage Amounts permitted by the ACP test (determined by reducing contributions made on behalf of Highly Compensated Employees in the order of their Contribution Percentages beginning with the highest of such percentages). Such determination shall be made after first determining Excess Deferrals pursuant to Section 4.01 and then determining Excess Contributions pursuant to Section 4.02. (d) Notwithstanding any other provision of the Plan, Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be forfeited, if forfeitable, or if not forfeitable, distributed no later than the last day of each Plan Year to Participants to whose Accounts such Excess Aggregate Contributions were allocated for the preceding Plan Year. Excess Aggregate Contributions of Participants who are subject to the family member aggregation rules of Section 414(q)(6) of the Code shall be allocated among the family members in proportion to the Employee and Matching Contributions of each family member that is combined to determine the combined ACP. If such Excess Aggregate Contributions are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess amounts arose, a ten (10) percent excise tax will be imposed on the employer maintaining the Plan with respect to those amounts. Excess Aggregate Contributions shall be treated as annual additions under the Plan. Excess Aggregate Contributions shall be adjusted for any income or loss up to the date of distribution. The income or loss allocable to Excess Aggregate Contributions is (1) income or loss allocable to the Participant's Employee Contribution Account, Matching Contribution Account (if any, and if all amounts therein are not used in the ADP test) and if applicable, Qualified Non-elective Contribution Account for the Plan Year multiplied by a fraction, the numerator of which is such Participant's Excess Aggregate Contributions for the year and the denominator is the Participant's Account balance(s) attributable to Contribution Percentage Amounts without regard to income or loss occurring during such Plan Year, or (2) such other amount determined under any reasonable method, provided that such method is used consistently for all Participants in calculating any distributions required under Section 4.04(d) and Sections 4.01(c) and 4.02(d) for the Plan Year, and is used by the Plan in allocating income or loss to the Participants' Accounts. Income or loss allocable to the period between the end of the Plan Year and the date of distribution shall be disregarded in determining income or loss. Forfeitures of Excess Aggregate Contributions shall be applied to reduce Employer contributions; the forfeitures shall be held in the money market fund, if any, listed in Section 1.14(b) pending such application. Excess Aggregate Contributions shall be forfeited, if forfeitable, or distributed on a prorata basis from the 20 47 Participant's Employee Contribution Account, Matching Contribution Account and if applicable, the Participant's Deferral Contributions Account or Qualified Discretionary Contribution Account or both. 4.05. Special Rules. Deferral Contributions and Qualified Discretionary Contributions and income allocable to each are not distributable to a Participant or his or her Beneficiary or Beneficiaries, in accordance with such Participant's or beneficiary's or beneficiaries' election, earlier than upon separation from service, death, or disability, except as otherwise provided in Section 7.10, 7.11 or 10.06. Such amounts may also be distributed, but after March 31, 1988, in the form of a lump sum only, upon (a) Termination of the Plan without establishment of another defined contribution plan, other than an employee stock ownership plan (as defined in Section 4975(e) or Section 409 of the Code) or a simplified employee pension plan as defined in Section 408(k) of the Code. (b) The disposition by a corporation to an unrelated corporation of substantially all of the assets (within the meaning of Section 409(d)(2) of the Code) used in a trade or business of such corporation if such corporation continues to maintain this Plan after the disposition, but only with respect to Employees who continue employment with the corporation acquiring such assets. (c) The disposition by a corporation to an unrelated entity of such corporation's interest in a subsidiary (within the meaning of Section 409(d)(2) of the Code) if such corporation continues to maintain this Plan, but only with respect to Employees who continue employment with such subsidiary. The Participant's accrued benefit derived from Deferral Contributions, Qualified Discretionary Contributions and Employee Contributions (as defined in Section 4.09) is nonforfeitable. Separate Accounts for Deferral Contributions, Qualified Discretionary Contributions, Employee Contributions and Matching Contributions will be maintained for each Participant. Each Account will be credited with the applicable contributions and earnings thereon. 4.06. Fixed/Discretionary Employer Contributions. If so provided by the Employer in Sections 1.05(a)(1) or 1.05(a)(2), for the Plan Year in which the Plan is adopted and for each Plan Year thereafter, the Employer will make Fixed or Discretionary Employer contributions to the Trust in accordance with Section 1.05 to be allocated as follows: (a) Fixed Employer contributions shall be allocated among eligible Participants (as determined in accordance with Section 1.05(a)(3)) in the manner specified in Section 1.05(a). (b) Discretionary Employer contributions shall be allocated among eligible Participants, as determined in accordance with Section 1.05(a)(3), as follows: 21 48 (1) If the Non-Integrated Formula is elected in Section 1.05(a)(2)(A), such contributions shall be allocated to eligible Participants in the ratio that each Participant's Compensation bears to the total Compensation paid to all eligible Participants for the Plan Year; or (2) If the Integrated Formula is elected in Section 1.05(a)(2)(B), such contributions shall be allocated in the following steps: (A) First, to each eligible Participant in the same ratio that the sum of the Participant's Compensation and Excess Compensation for the Plan Year bears to the sum of the Compensation and Excess Compensation of all Participants for the Plan Year. This allocation as a percentage of the sum of each Participant's Compensation and Excess Compensation shall not exceed 5.7%. (B) Any remaining Discretionary Employer Contribution shall be allocated to each eligible Participant in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. For purposes of this Section, "Excess Compensation" means Compensation in excess of the taxable wage base, as determined under Section 230 of the Social Security Act, in effect on the first day of the Plan Year. Further, this Section 4.06(b)(2) shall be modified as provided in Section 9.03 for years in which the Plan is top heavy under Article 9. 4.07. Time of Making Employer Contributions. The Employer will pay its contribution for each Plan Year not later than the time prescribed by law for filing the Employer's federal income tax return for the fiscal (or taxable) year with or within which such Plan Year ends (including extensions thereof). The Trustee will have no authority to inquire into the correctness of the amounts contributed and paid over to the Trustee, to determine whether any contribution is payable under this Article 4, or to enforce, by suit or otherwise, the Employer's obligation, if any, to make a contribution to the Trustee. 4.08. Return of Employer Contributions. The Trustee shall, upon request by the Employer, return to the Employer the amount (if any) determined under Section 14.22. Such amount shall be reduced by amounts attributable thereto which have been credited to the Accounts of Participants who have since received distributions from the Trust, except to the extent such amounts continue to be credited to such Participants' Accounts at the time the amount is returned to the Employer. Such amount shall also be reduced by the losses of the Trust attributable thereto, if and to the extent such losses exceed the gains and income attributable thereto, but will not be increased by the gains and income of the Trust 22 49 attributable thereto, if and to the extent such gains and income exceed the losses attributable thereto. In no event will the return of a contribution hereunder cause the balance of the individual Account of any Participant to be reduced to less than the balance which would have been credited to the Account had the mistaken amount not been contributed. 4.09. Employee Contributions. If the Employer elected to permit Deferral Contributions in Section 1.05(b) and if so provided by the Employer in Section 1.05(d), each Participant may elect to make Employee Contributions to the Plan in accordance with the rules and procedures established by the Employer and in an amount not less than one percent (1%) and not greater than ten percent (10%) of such Participant's Compensation for the Plan Year. Such contributions and all Employee Contributions for Plan Years beginning after December 31, 1986, shall be subject to the nondiscrimination requirements of Section 401(m) of the Code as set forth in Section 4.04. For purposes of this Plan, "Employee Contributions" shall mean any voluntary non-deductible contribution made to a plan by or on behalf of a Participant that is or was included in the Participant's gross income in the year in which made and that is maintained under a separate account to which applicable earnings and losses are allocated. Excess Contributions may not be recharacterized as Employee Contributions. Employee Contributions shall be paid over to the Trustee not later than thirty (30) days following the end of the month in which the Participant makes the contribution. A Participant shall have a fully vested 100% nonforfeitable right to his Employee Contributions and the earnings or losses allocated thereon. Distributions of Employee Contributions shall be made in accordance with Section 7.10. 4.10. Rollover Contributions. (a) Rollover of Eligible Rollover Distributions (1) An Employee who is or was a distributee of an "eligible rollover distribution"(as defined in Section 402(c)(4) of the Code and the regulations issued thereunder) from a qualified plan may directly transfer all or any portion of such distribution to the Trust or transfer all or any portion of such distribution to the Trust within sixty (60) days of payment. The transfer shall be made in the form of cash or allowable Fund Shares only. (2) The Employer may refuse to accept rollover contributions or instruct the Trustee not to accept rollover contributions under the Plan. (b) Treatment of Rollover Amount. 23 50 (1) An account will be established for the transferring Employee under Article 5, the rollover amount will be credited to the account and such amount will be subject to the terms of the Plan, including Section 8.01, except as otherwise provided in this Section 4.10. (2) The rollover account will at all times be fully vested in and nonforfeitable by the Employee. (c) Entry into Plan by Transferring Employee. Although an amount may be transferred to the Trust Fund under this Section 4.10 by an Employee who has not yet become a Participant in accordance with Article 3, and such amount is subject to the terms of the Plan as described in paragraph (b) above, the Employee will not become a Participant entitled to share in Employer contributions until he has satisfied such requirements. (d) Monitoring of Rollovers. (1) The Administrator shall develop such procedures and require such information from transferring Employees as it deems necessary to insure that amounts transferred under this Section 4.10 meet the requirements for tax-free rollovers established by such Section and by Section 402(c) of the Code. No such amount may be transferred until approved by the Administrator. (2) If a transfer made under this Section 4.10 is later determined by the Administrator not to have met the requirements of this Section or of the Code or Treasury regulations, the Trustee shall, within a reasonable time after such determination is made, and on instructions from the Administrator, distribute to the Employee the amounts then held in the Trust attributable to the transferred amount. 4.11. Deductible Voluntary Employee Contributions. The Administrator will not accept deductible Employee Contributions which are made for a taxable year beginning after December 31, 1986. Contributions made prior to that date will be maintained in a separate Account which will be nonforfeitable at all times and which will share in the gains and losses of the trust in the same manner as described in Section 5.02. No part of the deductible voluntary contribution Account will be used to purchase life insurance. Subject to Article 8, the Participant may withdraw any part of the deductible voluntary contribution Account upon request. 4.12. Additional Rules for Paired Plans. If the Employer has adopted a qualified plan under Fidelity Basic Plan Document No. 09 which is to be considered as a paired plan with this Plan, the elections in Section 1.03 must be identical to the Employer's corresponding elections for the other plan. When the paired plans are top-heavy or are deemed to be top-heavy as provided in Section 9.01, the plan paired with this Plan will provide a minimum contribution to each non-key Employee which is equal to 3 percent (or such other percent elected by the Employer in Section 1.12(c)) of such Employee's Compensation. Notwithstanding the 24 51 preceding sentence, the minimum contribution shall be provided by this Plan if contributions under the other plan paired with this Plan are frozen. Article 5. Participants' Accounts. 5.01. Individual Accounts. The Administrator will establish and maintain an Account for each Participant which will reflect Employer and Employee Contributions made on behalf of the Participant and earnings, expenses, gains and losses attributable thereto, and investments made with amounts in the Participant's Account. The Administrator will establish and maintain such other accounts and records as it decides in its discretion to be reasonably required or appropriate in order to discharge its duties under the Plan. 5.02. Valuation of Accounts. Participant Accounts will be valued at their fair market value at least annually as of a date specified by the Administrator in accordance with a method consistently followed and uniformly applied, and on such date earnings, expenses, gains and losses on investments made with amounts in each Participant's Account will be allocated to such Account. Participants will be furnished statements of their Account values at least once each Plan Year. 5.03. Code Section 415 Limitations. Notwithstanding any other provisions of the Plan: Subsections (a)(1) through (a)(4)--(These subsections apply to Employers who do not maintain any qualified plan, including a Welfare Benefit Fund, an Individual Medical Account, or a simplified employee pension in addition to this Plan.) (a)(1) If the Participant does not participate in, and has never participated in any other qualified plan, Welfare Benefit Fund, Individual Medical Account, or a simplified employee pension, as defined in section 408(k) of the Code, maintained by the Employer, which provides an annual addition as defined in Section 5.03(e)(1), the amount of Annual Additions to a Participant's Account for a Limitation Year shall not exceed the lesser of the Maximum Permissible Amount or any other limitation contained in this Plan. If the Employer contribution that would otherwise be contributed or allocated to the Participant's Account would cause the Annual Additions for the Limitation Year to exceed the Maximum Permissible Amount, the amount contributed or allocated will be reduced so that the Annual Additions for the Limitation Year will equal the Maximum Permissible Amount. (a)(2) Prior to the determination of the Participant's actual Compensation for a Limitation Year, the Maximum Permissible Amount may be determined on the basis of a reasonable estimation of the Participant's compensation for such Limitation Year, uniformly determined for all Participants similarly situated. Any Employer contributions based on estimated annual compensation shall be reduced by any Excess Amounts carried over from prior years. 25 52 (a)(3) As soon as is administratively feasible after the end of the Limitation Year, the Maximum Permissible Amount for such Limitation Year shall be determined on the basis of the Participant's actual Compensation for such Limitation Year. (a)(4) If, pursuant to subsection (a)(3) or as a result of the allocation of forfeitures or a reasonable error in determining the total Elective Deferrals there is an Excess Amount with respect to a Participant for a Limitation Year, such Excess Amount shall be disposed of as follows: (A) Any nondeductible voluntary employee contributions ("employee contributions") or Elective Deferrals, to the extent they would reduce the Excess Amount, will be returned to the Participant. Any gains attributable to returned employee contributions will also be returned or will be treated as additional employee contributions for the Limitation Year in which the employee contributions were made. (B) If after the application of paragraph (A) an Excess amount still exists and the Participant is in the service of the Employer which is covered by the Plan at the end of the Limitation Year, then such Excess Amount shall be reapplied to reduce future Employer contributions under this Plan for the next Limitation Year (and for each succeeding year, as necessary) for such Participant, so that in each such Year the sum of actual Employer contributions plus the reapplied amount shall equal the amount of Employer contributions which would otherwise be made to such Participant's Account. (C) If after the application of paragraph (A) an Excess Amount still exists and the Participant is not in the service of the Employer which is covered by the Plan at the end of a Limitation Year, then such Excess Amount will be held unallocated in a suspense account. The suspense account will be applied to reduce future Employer contributions for all remaining Participants in the next Limitation Year and each succeeding Limitation Year if necessary. (D) If a suspense account is in existence at any time during the Limitation Year pursuant to this subsection, it will not participate in the allocation of the Trust Fund's investment gains and losses. All amounts in the suspense account must be allocated to the Accounts of Participants before any Employer contribution may be made for the Limitation Year. Except as provided in paragraph (A), Excess Amounts may not be distributed to Participants or former Participants. Subsections (b)(1) through (b)(6)--(These subsections apply to Employers who, in addition to this Plan, maintain one or more plans, all of which are qualified Master or Prototype defined contribution Plans, any Welfare Benefit Fund, any Individual Medical Account, or any simplified employee pension.) 26 53 (b)(1) If, in addition to this Plan, the Participant is covered under any other qualified defined contribution plans (all of which are qualified Master or Prototype Plans), Welfare Benefit Funds, Individual Medical Accounts, or simplified employee pension Plans, maintained by the Employer, that provide an annual addition as defined in Section 5.03(e)(1), the amount of Annual Additions to a Participant's Account for a Limitation Year shall not exceed the lesser of (A) the Maximum Permissible Amount, reduced by the sum of any Annual Additions to the Participant's accounts for the same Limitation Year under such other qualified Master or Prototype defined contribution plans, and Welfare Benefit Funds, Individual Medical Accounts, and simplified employee pensions, or (B) any other limitation contained in this Plan. If the annual additions with respect to the Participant under other qualified Master or Prototype defined contribution Plans, Welfare Benefit Funds, Individual Medical Accounts, and simplified employee pensions maintained by the Employer are less than the maximum permissible amount and the Employer contribution that would otherwise be contributed or allocated to the Participant's account under this plan would cause the annual additions for the limitation year to exceed this limitation, the amount contributed or allocated will be reduced so that the annual additions under all such plans and funds for the limitation year will equal the maximum permissible amount. If the annual additions with respect to the Participant under such other qualified Master or Prototype defined contribution Plans, Welfare Benefit Funds, Individual Medical Accounts, and simplified employee pensions in the aggregate are equal to or greater than the maximum permissible amount, no amount will be contributed or allocated to the Participant's account under this plan for the limitation year. (b)(2) Prior to the determination of the Participant's actual Compensation for the Limitation Year, the amounts referred to in (b)(1)(A) above may be determined on the basis of a reasonable estimation of the Participant's compensation for such Limitation Year, uniformly determined for all Participants similarly situated. Any Employer contribution based on estimated annual compensation shall be reduced by any Excess Amounts carried over from prior years. (b)(3) As soon as is administratively feasible after the end of the Limitation Year, the amounts referred to in (b)(1)(A) shall be determined on the basis of the Participant's actual Compensation for such Limitation Year. (b)(4) If a Participant's Annual Additions under this Plan and all such other plans result in an Excess Amount, such Excess Amount shall be deemed to consist of the Annual Additions last allocated, except that Annual Additions attributable to a simplified employee 27 54 pension will be deemed to have been allocated first, followed by Annual Additions to a Welfare Benefit Fund or Individual Medical Account regardless of the actual allocation date. (b)(5) If an Excess Amount was allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, the Excess Amount attributed to this Plan will be the product of (A) the total Excess Amount allocated as of such date (including any amount which would have been allocated but for the limitations of Section 415 of the Code), and (B) the ratio of (i) the Annual Additions allocated to the Participant as of such date under this Plan, and (ii) the Annual Additions allocated as of such date under all qualified defined contribution plans (determined without regard to the limitations of Section 415 of the Code). (b)(6) Any Excess Amounts attributed to this Plan shall be disposed of as provided in subsection (a)(4). Subsection (c)--(This subsection applies only to Employers who, in addition to this Plan, maintain one or more qualified plans which are qualified defined contribution plans other than Master or Prototype Plans.) (c) If the Employer also maintains another plan which is a qualified defined contribution plan other than a Master or Prototype Plan, Annual Additions allocated under this Plan on behalf of any Participant shall be limited in accordance with the provisions of (b)(1) through (b)(6), as though the other plan were a Master or Prototype Plan, unless the Employer provides other limitations in the Adoption Agreement. Subsection (d)--(This subsection applies only to Employers who, in addition to this Plan, maintain or at any time maintained a qualified defined benefit plan.) (d) If the Employer maintains, or at any time maintained, a qualified defined benefit plan, the sum of any Participant's Defined Benefit Fraction and Defined Contribution Fraction shall not exceed the combined plan limitation of 1.0 in any Limitation Year. The combined plan limitation will be met as provided by the Employer in the Adoption Agreement. Subsections (e)(1) through (e)(11)--(Definitions.) (e)(1) "Annual Additions" means the sum of the following amounts credited to a Participant for a Limitation Year: (A) all Employer contributions, (B) all Employee Contributions, 28 55 (C) all forfeitures, (D) amounts allocated, after March 31, 1984, to an Individual Medical Account which is part of a pension or annuity plan maintained by the Employer are treated as Annual Additions to a defined contribution plan. Also, amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a key employee, as defined in Section 419A(d)(3) of the Code, under a Welfare Benefit Fund maintained by the Employer are treated as Annual Additions to a defined contribution plan, and (E) allocations under a simplified employee pension. For purposes of this Section 5.03, amounts reapplied to reduce Employer contributions under subsection (a)(4) shall also be included as Annual Additions. (e)(2) "Compensation" means wages as defined in Section 3401(a) of the Code and all other payments of compensation to an employee by the employer (in the course of the employer's trade or business) for which the employer is required to furnish the employee a written statement under Sections 6041(d) and 6051(a)(3) of the Code. Compensation must be determined without regard to any rules under Section 3401(a) of the Code that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2) of the Code.) For any Self-Employed Individual compensation will mean Earned Income. For limitation years beginning after December 31, 1991, for purposes of applying the limitations of this article, compensation for a limitation year is the compensation actually paid or made available during such limitation year. (e)(3) "Defined Benefit Fraction" means a fraction, the numerator of which is the sum of the Participant's annual benefits (adjusted to an actuarially equivalent straight life annuity if such benefit is expressed in a form other than a straight life annuity or qualified joint and survivor annuity) under all the defined benefit plans (whether or not terminated) maintained by the Employer, each such annual benefit computed on the assumptions that the Participant will remain in employment until the normal retirement age under each such plan (or the Participant's current age, if later) and that all other factors used to determine benefits under such plan will remain constant for all future Limitation Years, and the denominator of which is the lesser of 125 percent of the dollar limitation determined for the Limitation Year under Sections 29 56 415(b)(1)(A) and 415(d) of the Code or 140 percent of the Participant's highest average Compensation for 3 consecutive calendar years of service during which the Participant was active in each such plan, including any adjustments under Section 415(b) of the Code. However, if the Participant was a participant as of the first day of the first Limitation Year beginning after December 31, 1986, in one or more defined benefit plans maintained by the Employer which were in existence on May 6, 1986 then the denominator of the Defined Benefit Fraction shall not be less than 125 percent of the Participant's total accrued benefit as of the close of the last Limitation Year beginning before January 1, 1987, disregarding any changes in the terms and conditions of the plan after May 5, 1986, under all such defined benefit plans that met, individually and in the aggregate, the requirements of Section 415 of the Code for all Limitation Years beginning before January 1, 1987. (e)(4) "Defined Contribution Fraction" means a fraction, the numerator of which is the sum for the current and all prior Limitation Years of (A) all Annual Additions (if any) to the Participant's accounts under each defined contribution plan (whether or not terminated) maintained by the Employer and (B) all Annual Additions attributable to the Participant's nondeductible Employee Contributions to all defined benefit plans (whether or not terminated) maintained by the Employer, and the Participant's Annual Additions attributable to all Welfare Benefit Funds, Individual Medical Accounts, and simplified employee pensions, maintained by the Employer, and the denominator of which is the sum of the maximum aggregate amounts for the current and all prior Limitation Years during which the Participant was an Employee (regardless of whether the Employer maintained a defined contribution plan in any such year). The maximum aggregate amount in any Limitation Year is the lesser of 125 percent of the dollar limitation in effect under Section 415(c)(1)(A) of the Code for each such year or 35 percent of the Participant's Compensation for each such year. If the Participant was a participant as of the first day of the first Limitation Year beginning after December 31, 1986, in one or more defined contribution plans maintained by the Employer which were in existence on May 6, 1986, then the numerator of the Defined Contribution Fraction shall be adjusted if the sum of this fraction and the Defined Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment an amount equal to the product of (i) the excess of the sum of the fractions over 1.0 and (ii) the denominator of this fraction will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1987, and disregarding any changes in the terms and conditions of the plan made after May 6, 1986, but using the Section 415 limitation applicable to the first Limitation Year beginning on or after January 1, 1987. 30 57 The annual addition for any limitation year beginning before January 1, 1987 shall not be recomputed to treat all employee contributions as annual additions. (e)(5) "Employer" means the Employer and any Related Employer that adopts this Plan. In the case of a group of employers which constitutes a controlled group of corporations (as defined in Section 414(b) of the Code as modified by Section 415(h)) or which constitutes trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c) of the Code as modified by Section 415(h) of the Code) or which constitutes an affiliated service group (as defined in Section 414(m)of the Code) and any other entity required to be aggregated with the Employer pursuant to regulations issued under Section 414(o) of the Code, all such employers shall be considered a single employer for purposes of applying the limitations of this Section 5.03. (e)(6) "Excess Amount" means the excess of the Participant's Annual Additions for the Limitation Year over the Maximum Permissible Amount. (e)(7) "Individual Medical Account" means an individual medical account as defined in Section 415(l)(2) of the Code. (e)(8) "Limitation Year" means the Plan Year. All qualified plans of the Employer must use the same Limitation Year. If the Limitation Year is amended to a different 12-consecutive month period, the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made. (e)(9) "Master or Prototype Plan" means a plan the form of which is the subject of a favorable opinion letter from the Internal Revenue Service. (e)(10) "Maximum Permissible Amount" means for a Limitation Year with respect to any Participant the lesser of (A) $30,000 or, if greater, 25 percent of the dollar limitation set forth in Section 415(b)(1) of the Code, as in effect for the Limitation Year, or (B) 25 percent of the Participant's Compensation for the Limitation Year. If a short Limitation Year is created because of an amendment changing the Limitation Year to a different 12-consecutive-month period, the Maximum Permissible Amount will not exceed the limitation in (e)(10)(A) multiplied by a fraction whose numerator is the number of months in the short Limitation Year and whose denominator is 12. The compensation limitation referred to in subsection (e)(10)(B) shall not apply to any contribution for medical benefits within the meaning of Section 401(h) or Section 419A(f)(2) of the Code after separation from service which is otherwise treated as an Annual Addition under Section 419A(d)(2) or Section 415(l)(1) of the Code. 31 58 (e)(11) "Welfare Benefit Fund" means a welfare benefit fund as defined in Section 419(e) of the Code. Article 6. Investment of Contributions. 6.01. Manner of Investment. All contributions made to the Accounts of Participants shall be held for investment by the Trustee. The Accounts of Participants shall be invested and reinvested only in eligible investments selected by the Employer in Section 1.14(b), subject to Section 14.10. 6.02. Investment Decisions. Investments shall be directed by the Employer or by each Participant or both, in accordance with the Employer's election in Section 1.14(a). Pursuant to Section 14.04, the Trustee shall have no discretion or authority with respect to the investment of the Trust Fund. (a) With respect to those Participant Accounts for which Employer investment direction is elected, the Employer has the right to direct the Trustee in writing with respect to the investment and reinvestment of assets comprising the Trust Fund in the Fidelity Fund(s) designated in Section 1.14(b) and as allowed by the Trustee. (b) If Participant investment direction is elected, each Participant shall direct the investment of his Account among the Fidelity Funds listed in Section 1.14(b). The Participant shall file initial investment instructions with the Administrator, on such form as the Administrator may provide, selecting the Funds in which amounts credited to his Account will be invested. (1) Except as provided in this Section 6.02, only authorized Plan contacts and the Participant shall have access to a Participant's Account. While any balance remains in the Account of a Participant after his death, the Beneficiary of the Participant shall make decisions as to the investment of the Account as though the Beneficiary were the Participant. To the extent required by a qualified domestic relations order as defined in Section 414(p) of the Code, an alternate payee shall make investment decisions with respect to a Participant's Account as though such alternate payee were the Participant. (2) If the Trustee receives any contribution under the Plan as to which investment instructions have not been provided, the Trustee shall promptly notify the Administrator and the Administrator shall take steps to elicit instructions from the Participant. The Trustee shall credit any such contribution to the Participant's Account and such amount shall be invested in the Fidelity Fund selected by the Employer for such purposes or, absent Employer selection, in the most conservative Fidelity Fund listed in Section 1.14(b), until investment instructions have been received by the Trustee. 32 59 (c) All dividends, interest, gains and distributions of any nature received in respect of Fund Shares shall be reinvested in additional shares of that Fidelity Fund. (d) Expenses attributable to the acquisition of investments shall be charged to the Account of the Participant for which such investment is made. 6.03. Participant Directions to Trustee. All Participant initial investment instructions filed with the Administrator pursuant to the provisions of Section 6.02 shall be promptly transmitted by the Administrator to the Trustee. A Participant shall transmit subsequent investment instructions directly to the Trustee by means of the telephone exchange system maintained by the Trustee for such purposes. The method and frequency for change of investments will be determined under the (a) rules applicable to the investments selected by the Employer in Section 1.14(b) and (b) the additional rules of the Employer, if any, limiting the frequency of investment changes, which are included in a separate written administrative procedure adopted by the Employer and accepted by the Trustee. The Trustee shall have no duty to inquire into the investment decisions of a Participant or to advise him regarding the purchase, retention or sale of assets credited to his Account. Article 7. Right to Benefits. 7.01. Normal or Early Retirement. Each Participant who attains his Normal Retirement Age or, if so provided by the Employer in Section 1.06(b), Early Retirement Age, will have a 100-percent nonforfeitable interest in his Account regardless of any vesting schedule elected in Section 1.07. If a Participant retires upon the attainment of Normal or Early Retirement Age, such retirement is referred to as a normal retirement. Upon his normal retirement the balance of the Participant's Account, plus any amounts thereafter credited to his Account, subject to the provisions of Section 7.08, will be distributed to him in accordance with Article 8. If a Participant separates from service before satisfying the age requirements for early retirement, but has satisfied the service requirement, the Participant will be entitled to elect an early retirement distribution upon satisfaction of such age requirement. 7.02. Late Retirement. If a Participant continues in the service of the Employer after attainment of Normal Retirement Age, he will continue to have a 100-percent nonforfeitable interest in his Account and will continue to participate in the Plan until the date he establishes with the Employer for his late retirement. Until he retires, he has a continuing election to receive all or any portion of his Account. Upon the earlier of his late retirement or the distribution date required under Section 8.08, the balance of his Account, plus any amounts 33 60 thereafter credited to his Account, subject to the provisions of Section 7.08, will be distributed to him in accordance with Article 8 below. 7.03. Disability Retirement. If so provided by the Employer in Section 1.06(c), a Participant who becomes disabled will have a 100-percent nonforfeitable interest in his Account, the balance of which Account, plus any amounts thereafter credited to his Account, subject to the provisions of Section 7.08, will be distributed to him in accordance with Article 8 below. A Participant is considered disabled if he cannot engage in any substantial, gainful activity because of a medically determinable physical or mental impairment likely to result in death or to be of a continuous period of not less than 12 months, and terminates his employment with the Employer. Such termination of employment is referred to as a disability retirement. Determinations with respect to disability shall be made by the Administrator who may rely on the criteria set forth in Section 1.06(c) as evidence that the Participant is disabled. 7.04. Death. Subject, if applicable, to Section 8.04, if a Participant dies before the distribution of his Account has commenced, or before such distribution has been completed, his Account shall become 100 percent vested and his designated Beneficiary or Beneficiaries will be entitled to receive the balance or remaining balance of his Account, plus any amounts thereafter credited to his Account, subject to the provisions of Section 7.08. Distribution to the Beneficiary or Beneficiaries will be made in accordance with Article 8. A Participant may designate a Beneficiary or Beneficiaries, or change any prior designation of Beneficiary or Beneficiaries by giving notice to the Administrator on a form designated by the Administrator. If more than one person is designated as the Beneficiary, their respective interests shall be as indicated on the designation form. In the case of a married Participant, the Participant's spouse shall be deemed to be the designated Beneficiary unless the Participant's spouse has consented to another designation in the manner described in Section 8.03(d). A copy of the death notice or other sufficient documentation must be filed with and approved by the Administrator. If upon the death of the Participant there is, in the opinion of the Administrator, no designated Beneficiary for part or all of the Participant's Account, such amount will be paid to his surviving spouse or, if none, to his estate (such spouse or estate shall be deemed to be the Beneficiary for purposes of the Plan). If a Beneficiary dies after benefits to such Beneficiary have commenced, but before they have been completed, and, in the opinion of the Administrator, no person has been designated to receive such remaining benefits, then such benefits shall be paid in a lump sum to the deceased Beneficiary's estate. 7.05. Other Termination of Employment. If a Participant terminates his employment for any reason other than death or normal, late, or disability retirement, he will be entitled to a termination benefit equal to the sum of (a) the vested percentage(s) of the value of the Matching and/or Fixed/Discretionary Contributions to his Account, as 34 61 adjusted for income, expense, gain, or loss, such percentage(s) determined in accordance with the vesting schedule(s) selected by the Employer in Section 1.07, and (b) the value of the Deferral, Employee, Qualified Discretionary and Rollover Contributions to his Account as adjusted for income, expense, gain or loss. The amount payable under this Section 7.05 will be subject to the provisions of Section 7.08 and will be distributed in accordance with Article 8 below. 7.06. Separate Account. If a distribution from a Participant's Account has been made to him at a time when he has a nonforfeitable right to less than 100 percent of his Account, the vesting schedule in Section 1.07 will thereafter apply only to amounts in his Account attributable to Employer contributions allocated after such distribution. The balance of his Account immediately after such distribution will be transferred to a separate account which will be maintained for the purpose of determining his interest therein according to the following provisions. At any relevant time prior to a forfeiture of any portion thereof under Section 7.07, a Participant's nonforfeitable interest in his Account held in a separate account described in the preceding paragraph will be equal to P(AB + (RxD))-(RxD), where P is the nonforfeitable percentage at the relevant time determined under Section 7.05; AB is the account balance of the separate account at the relevant time; D is the amount of the distribution; and R is the ratio of the account balance at the relevant time to the account balance after distribution. Following a forfeiture of any portion of such separate account under Section 7.07 below, any balance in the Participant's separate account will remain fully vested and nonforfeitable. 7.07. Forfeitures. If a Participant terminates his employment, any portion of his Account (including any amounts credited after his termination of employment) not payable to him under Section 7.05 will be forfeited by him upon the complete distribution to him of the vested portion of his Account, if any, subject to the possibility of reinstatement as described in the following paragraph. For purposes of this paragraph, if the value of an Employee's vested Account balance is zero, the Employee shall be deemed to have received a distribution of his vested interest immediately following termination of employment. Such forfeitures will be applied to reduce the contributions of the Employer next payable under the Plan (or administrative expenses of the Plan); the forfeitures shall be held in a money market fund pending such application. If a Participant forfeits any portion of his Account under the preceding paragraph but again becomes an Employee after such date, then the amount so forfeited, without any adjustment for the earnings, expenses, or losses or gains of the assets credited to his Account since the date forfeited, will be recredited to his Account (or to a separate account as described in Section 7.06, if applicable) but only if he repays to the Plan before the earlier of five years after the date of his reemployment or the date he incurs 5 consecutive 1-year breaks in service following the date of the distribution the amount previously distributed to him, without interest, under Section 7.05. If an 35 62 Employee is deemed to receive a distribution pursuant to this Section 7.07, and the Employee resumes employment before 5 consecutive 1-year breaks in service, the Employee shall be deemed to have repaid such distribution on the date of his reemployment. Upon such an actual or deemed repayment, the provisions of the Plan (including Section 7.06) will thereafter apply as if no forfeiture had occurred. The amount to be recredited pursuant to this paragraph will be derived first from the forfeitures, if any, which as of the date of recrediting have yet to be applied as provided in the preceding paragraph and, to the extent such forfeitures are insufficient, from a special Employer contribution to be made by the Employer. If a Participant elects not to receive the nonforfeitable portion of his Account following his termination of employment, the non-vested portion of his Account shall be forfeited after the Participant has incurred five consecutive 1-year breaks in service as defined in Section 2.01(a)(33). No forfeitures will occur solely as a result of a Participant's withdrawal of Employee contributions. 7.08. Adjustment for Investment Experience. If any distribution under this Article 7 is not made in a single payment, the amount retained by the Trustee after the distribution will be subject to adjustment until distributed to reflect the income and gain or loss on the investments in which such amount is invested and any expenses properly charged under the Plan and Trust to such amounts. 7.09. Participant Loans. If permitted under Section 1.09, the Administrator shall allow Participants to apply for a loan from the Plan, subject to the following: (a) Loan Application. All Plan loans shall be administered by the Administrator. Applications for loans shall be made to the Administrator on forms available from the Administrator. Loans shall be made available to all Participants on a reasonably equivalent basis. For this purpose, the term "Participant" means any Participant or Beneficiary, including an alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, who is a party-in-interest (as determined under ERISA Section 3(14)) with respect to the Plan except no loans will be made to (1) an Employee who makes a rollover contribution in accordance with Section 4.10 who has not satisfied the requirements of Section 3.01 or (2) a shareholder-employee or Owner-Employee. For purposes of this requirement, a shareholder-employee means an employee or officer of an electing small business (Subchapter S) corporation who owns (or is considered as owning within the meaning of Section 318(a)(1) of the Code), on any day during the taxable year of such corporation, more than 5% of the outstanding stock of the corporation. A Participant with an existing loan may not apply for another loan until the existing loan is paid in full and may not refinance an existing loan or attain a second loan for the purpose of paying 36 63 off the existing loan. A Participant may not apply for more than one loan during each Plan Year. (b) Limitation of Loan Amount/Purpose of Loan. Loans shall not be made available to Highly Compensated Employees in an amount greater than the amount made available to other Employees. No loan to any Participant or Beneficiary can be made to the extent that such loan when added to the outstanding balance of all other loans to the Participant or Beneficiary would exceed the lesser of (1) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans during the one-year period ending on the day before the loan is made over the outstanding balance of loans from the plan on the date the loan is made, or (2) one-half the present value of the nonforfeitable Account of the Participant. For the purpose of the above limitation, all loans from all plans of the Employer and Related Employers are aggregated. A Participant may not request a loan for less than $1,000. The Employer may provide that loans only be made from certain contribution sources within Participant Account(s) by notifying the Trustee in writing of the restricted source. Loans may be made for any purpose or if elected by the Employer in Section 1.09(a), on account of hardship only. A loan will be considered to be made on account of hardship only if made on account of an immediate and heavy financial need described in Section 7.10(b)(1). (c) Terms of Loan. All loans shall bear a reasonable rate of interest as determined by the Administrator based on the prevailing interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances. The determination of a reasonable rate of interest must be based on appropriate regional factors unless the Plan is administered on a national basis in which case the Administrator may establish a uniform reasonable rate of interest applicable to all regions. All loans shall by their terms require that repayment (principal and interest) be amortized in level payments, not less than quarterly, over a period not extending beyond five years from the date of the loan unless such loan is for the purchase of a Participant's primary residence, in which case the repayment period may not extend beyond ten years from the date of the loan. A Participant may prepay the outstanding loan balance prior to maturity without penalty. (d) Security. Loans must be secured by the Participant's Accounts not to exceed 50 percent of the Participant's vested Account. A Participant must obtain the consent of his or her spouse, if any, to use a Participant Account as security for the loan, if the provisions of Section 8.03 apply to the Participant. Spousal consent shall be obtained no earlier than the beginning of the 90-day period that ends on the date on which the loan is to be so secured. The consent must be in writing, must acknowledge the effect of the loan, and must be witnessed by a Plan representative 37 64 or notary public. Such consent shall thereafter be binding with respect to the consenting spouse or any subsequent spouse with respect to that loan. (e) Default. The Administrator shall treat a loan in default if (1) any scheduled repayment remains unpaid more than 90 days or (2) there is an outstanding principal balance existing on a loan after the last scheduled repayment date. Upon default or termination of employment, the entire outstanding principal and accrued interest shall be immediately due and payable. If a distributable event (as defined by the Code) has occurred, the Administrator shall direct the Trustee to foreclose on the promissory note and offset the Participant's vested Account by the outstanding balance of the loan. If a distributable event has not occurred, the Administrator shall direct the Trustee to foreclose on the promissory note and offset the Participant's vested Account as soon as a distributable event occurs. (f) Pre-existing loans. The provision in paragraph (a) of this Section 7.09 limiting a Participant to one outstanding loan shall not apply to loans made before the Employer adopted this prototype plan document. A Participant may not apply for a new loan until all outstanding loans made before the Employer adopted this prototype plan have been paid in full. The Trustee may accept any loans made before the Employer adopted this prototype plan document except such loans which require the Trustee to hold as security for the loan property other than the Participant's vested Account. As of the effective date of amendment of this Plan in Section 1.01(g)(2), the Trustee shall have the right to reamortize the outstanding principal balance of any Participant loan that is delinquent. Such reamortization shall be based upon the remaining life of the loan and the original maturity date may not be extended. Notwithstanding any other provision of this Plan, the portion of the Participant's vested Account used as a security interest held by the plan by reason of a loan outstanding to the Participant shall be taken into account for purposes of determining the amount of the Account payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. If less than 100% of the Participant's vested Account (determined without regard to the preceding sentence) is payable to the surviving spouse, then the Account shall be adjusted by first reducing the vested Account by the amount of the security used as repayment of the loan, and then determining the benefit payable to the surviving spouse. No loan to any Participant or Beneficiary can be made to the extent that such loan when added to the outstanding balance of all 38 65 other loans to the Participant or Beneficiary would exceed the lesser of (1) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans during the one-year period ending on the day before the loan is made over the outstanding balance of loans from the plan on the date the loan is made or (2) one-half the present value of the nonforfeitable Account of the Participant. For the purpose of the above limitation, all loans from all plans of the Employer and Related Employers are aggregated. 7.10. In-Service/Hardship Withdrawals. Subject to the provisions of Article 8, a Participant shall not be permitted to withdraw any Employer or Employee Contributions (and earnings thereon) prior to retirement or termination of employment, except as follows: (a) Age 59 1/2. If permitted under Section 1.11(b), a Participant who has attained the age of 59 1/2 is permitted to withdraw upon request all or any portion of the Accounts specified by the Employer in 1.11(b). (b) Hardship. If permitted under Section 1.10, a Participant may apply to the Administrator to withdraw some or all of his Deferral Contributions (and earnings thereon accrued as of December 31, 1988) and, if applicable, Rollover Contributions and such other amounts allowed by a predecessor plan, if such withdrawal is made on account of a hardship. For purposes of this Section, a distribution is made on account of hardship if made on account of an immediate and heavy financial need of the Employee where such Employee lacks other available resources. Determinations with respect to hardship shall be made by the Administrator and shall be conclusive for purposes of the Plan, and shall be based on the following special rules: (1) The following are the only financial needs considered immediate and heavy: expenses incurred or necessary for medical care (within the meaning of Section 213(d) of the Code) of the Employee, the Employee's spouse, children, or dependents; the purchase (excluding mortgage payments) of a principal residence for the Employee; payment of tuition and related educational fees for the next twelve (12) months of post-secondary education for the Employee, the Employee's spouse, children or dependents; or the need to prevent the eviction of the Employee from, or a foreclosure on the mortgage of, the Employee's principal residence. (2) A distribution will be considered as necessary to satisfy an immediate and heavy financial need of the Employee only if: (i) The Employee has obtained all distributions, other than the hardship distributions, and all nontaxable (at the time of the loan) loans currently available under all plans maintained by the Employer; (ii) The Employee suspends Deferral Contributions and Employee Contributions to the Plan for the 12-month period 39 66 following the date of his hardship distribution. The suspension must also apply to all elective contributions and Employee Contributions to all other qualified plans and non-qualified plans maintained by the Employer, other than any mandatory employer contribution portion of a defined benefit plan, including stock option, stock purchase and other similar plans, but not including health and welfare benefit plans (other than the cash or deferred arrangement portion of a cafeteria plan); (iii) The distribution is not in excess of the amount of an immediate and heavy financial need (including amounts necessary to pay any Federal, state or local income taxes or penalties reasonably anticipated to result from the distribution); and (iv) The Employee agrees to limit Deferral Contributions (elective contributions)to the Plan and any other qualified plan maintained by the Employer for the Employee's taxable year immediately following the taxable year of the hardship distribution to the applicable limit under Section 402(g) of the Code for such taxable year less the amount of such Employee's Deferral Contributions for the taxable year of the hardship distribution. (3) A Participant must obtain the consent of his or her spouse, if any, to obtain a hardship withdrawal, if the provisions of Section 8.03 apply to the Participant. (c) Employee Contributions. A Participant may elect to withdraw, in cash, up to one hundred percent of the amount then credited to his Employee Contribution Account. Such withdrawals shall be limited to one (1) per Plan Year unless this prototype plan document is an amendment of a prior plan document, in which case the rules and restrictions governing Employee Contribution withdrawals, if any, are incorporated herein by reference. 7.11. Prior Plan In-Service Distribution Rules. If designated by the Employer in Section 1.11(b), a Participant shall be entitled to withdraw at anytime prior to his termination of employment, subject to the provisions of Article 8 and the prior plan, any vested Employer Contributions maintained in a Participant's Account for the specified period of time. Article 8. Distribution of Benefits Payable After Termination of Service. 8.01. Distribution of Benefits to Participants and Beneficiaries. (a) Distributions from the Trust to a Participant or to the Beneficiary of the Participant shall be made in a lump sum in cash or, if elected by the Employer in Section 1.11, under a systematic withdrawal plan (installment(s)) upon retirement, death, 40 67 disability, or other termination of employment, unless another form of distribution is required or permitted in accordance with paragraph (d) of this Section 8.01 or Sections 1.11(c), 8.02, 8.03, 8.04 or 11.02. A distribution may be made in Fund Shares, at the election of the Participant, pursuant to the qualifying rollover of such distribution to a Fidelity Investments individual retirement account. (b) Distributions under a systematic withdrawal plan must be made in substantially equal annual, or more frequent, installments, in cash, over a period certain which does not extend beyond the life expectancy of the Participant or the joint life expectancies of the Participant and his Beneficiary, or, if the Participant dies prior to the commencement of his benefits the life expectancy of the Participant's Beneficiary, as further described in Section 8.04. (c) Notwithstanding the provisions of Section 8.01(b) above, if a Participant's Account is, and at the time of any prior distribution(s) was, $3,500 or less, the balance of such Account shall be distributed in a lump sum as soon as practicable following retirement, disability, death or other termination of employment. (d) This paragraph (d) applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article 8, a distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. The following definitions shall apply for purposes of this paragraph (d): (1) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (2) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover 41 68 distribution to a surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (3) Distributee: A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (4) Direct rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee. 8.02. Annuity Distributions. If so provided in Section 1.11(c), a Participant may elect distributions made in whole or in part in the form of an annuity contract subject to the provisions of Section 8.03. (a) An annuity contract distributed under the Plan must be purchased from an insurance company and must be nontransferable. The terms of an annuity contract shall comply with the requirements of the Plan and distributions under such contract shall be made in accordance with Section 401(a)(9) of the Code and the regulations thereunder. (b) The payment period of an annuity contract distributed to the Participant pursuant to this Section may be as long as the Participant lives. If the annuity is payable to the Participant and his spouse or designated Beneficiary, the payment period of an annuity contract may be for as long as either the Participant or his spouse or designated Beneficiary lives. Such an annuity may provide for an annuity certain feature for a period not exceeding the life expectancy of the Participant. If the annuity is payable to the Participant and his spouse such period may not exceed the joint life and last survivor expectancy of the Participant and his spouse, or, if the annuity is payable to the Participant and a designated Beneficiary, the joint life and last survivor expectancy of the Participant and such Beneficiary. If the Participant dies prior to the commencement of his benefits, the payment period of an annuity contract distributed to the Beneficiary of the Participant may be as long as the Participant's Beneficiary lives, and may provide for an annuity certain feature for a period not exceeding the life expectancy of the Beneficiary. Any annuity contract distributed under the Plan must provide for nonincreasing payments. 8.03. Joint and Survivor Annuities/Preretirement Survivor Annuities. (a) Application. The provisions of this Section supersede any conflicting provisions of the Plan; however, paragraph (b) of this Section shall not apply if the Participant's Account does not exceed or at the time of any prior distribution did not exceed 42 69 $3,500. A Participant is described in this Section only if (i) the Participant has elected distribution of his Account in the form of an Annuity Contract in accordance with Section 8.02, or (ii) the Trustee has directly or indirectly received a transfer of assets from another plan (including a predecessor plan) to which Section 401(a)(11) of the Code applies with respect to such Participant. (b) Retirement Annuity. Unless the Participant elects to waive the application of this subsection in a manner satisfying the requirements of subsection (d) below, to the extent applicable to the Participant, within the 90-day period preceding his Annuity Starting Date (which election may be revoked, and if revoked, remade, at any time in such period), the vested Account due any Participant to whom this subsection (b) applies will be paid to him by the purchase and delivery to him of an annuity contract described in Section 8.02 providing a life annuity only form of benefit or, if the Participant is married as of his Annuity Starting Date, providing an immediate annuity for the life of the Participant with a survivor annuity for the life of the Participant's spouse (determined as of the date of distribution of the contract) which is 50 percent of the amount of the annuity which is payable during the joint lives of the Participant and such spouse. The Participant may elect to receive distribution of his benefits in the form of such annuity as of the earliest date on which he could elect to receive retirement benefits under the Plan. Within the period beginning 90 days prior to the Participant's Annuity Starting Date and ending 30 days prior to such Date, the Administrator will provide such Participant with a written explanation of (1) the terms and conditions of the annuity contract described herein, (2) the Participant's to make, and the effect of, an election to waive application of this subsection, (3) the rights of the Participant's spouse under subsection (d), and (4) the right to revoke and the period of time necessary to revoke the election to waive application of this subsection. (c) Annuity Death Benefit. Unless the Participant elects to waive the application of this subsection in a manner satisfying the requirements of subsection (d) below at any time within the applicable election period (which election may be revoked, and if revoked, remade, at any time in such period), if a married Participant to whom this Section applies dies before his Annuity Starting Date, then notwithstanding any designation of a Beneficiary to the contrary, 50 percent of his vested Account will be applied to purchase an annuity contract described in Section 8.02 providing an annuity for the life of the Participant's surviving spouse, which contract will then be promptly distributed to such spouse. In lieu of the purchase of such an annuity contract, the spouse may elect in writing to receive distributions under the Plan as if he or she had been designated by the Participant as his Beneficiary with respect to 50 percent of his Account. For purposes of this subsection, the applicable election period will commence on the first day of the Plan Year in which the Participant attains age 35 and will end on the date of the 43 70 Participant's death, provided that in the case of a Participant who terminates his employment the applicable election period with respect to benefits accrued prior to the date of such termination will in no event commence later than the date of his termination of employment. A Participant may elect to waive the application of this subsection prior to the Plan Year in which he attains age 35, provided that any such waiver will cease to be effective as of the first day of the Plan Year in which the Participant attains age 35. The Administrator will provide a Participant to whom this subsection applies with a written explanation with respect to the annuity death benefit described in this subsection (c) comparable to that required under subsection (b) above. Such explanation shall be furnished within whichever of the following periods ends last: (1) the period beginning with the first day of the Plan Year in which the Participant reaches age 32 and ending with the end of the Plan Year preceding the Plan Year in which he reaches age 35, (2) a reasonable period ending after the Employee becomes a Participant, (3) a reasonable period ending after this Section 8.04 first becomes applicable to the Participant in accordance with Section 8.04(a), (4) in the case of a Participant who separates from service before age 35, a reasonable period of time ending after separation from service. For purposes of the preceding sentence, the two-year period beginning one year prior to the date of the event described in clause (2), (3) or (4), whichever is applicable, and ending one year after such date shall be considered reasonable, provided, that in the case of a Participant who separates from service under (4) above and subsequently recommences employment with the Employer, the applicable period for such Participant shall be redetermined in accordance with this subsection. (d) Requirements of Elections. This subsection will be satisfied with respect to a waiver or designation which is required to satisfy this subsection if such waiver or designation is in writing and either (1) the Participant's spouse consents thereto in writing, which consent must acknowledge the effect of such waiver or designation and be witnessed by a notary public or Plan representative, or (2) the Participant establishes to the satisfaction of the Administrator that the consent of the Participant's spouse cannot be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary of Treasury may prescribe. Any consent by a spouse, or establishment that the consent of a spouse may not be obtained, will be effective only with respect to a specific Beneficiary (including any class of Beneficiaries or any contingent Beneficiaries) or form of benefits identified in the Participant's waiver or designation, unless the consent of the spouse expressly permits designations 44 71 by the Participant without any requirement of further consent by the spouse. A consent which permits such designations by the Participant shall acknowledge that the spouse has the right to limit consent to a specific Beneficiary and form of benefits and that the spouse voluntarily elects to relinquish both such rights. A consent by a spouse shall be irrevocable once made. Any such consent, or establishment that such consent may not be obtained, will be effective only with respect to such spouse. For purposes of subsections (b) and (c) above, no consent of a spouse shall be valid unless the notice required by whichever subsection is applicable has been provided to the Participant. (e) Former Spouse. For purposes of this Section 8.03, a former spouse of a Participant will be treated as the spouse or surviving spouse of the Participant, and a current spouse will not be so treated, to the extent required under a qualified domestic relations order, as defined in Section 414(p) of the Code. (f) Vested Account Balance. For purposes of this Section, vested Account shall include the aggregate value of the Participant's vested Account derived from Employer and Employee Contributions (including rollovers), whether vested before or upon death. The provisions of this Section shall apply to a Participant who is vested in amounts attributable to Employer contributions, Employee Contributions, or both, upon death or at the time of distribution. 8.04 Installment Distributions. This Section shall be interpreted and applied in accordance with the regulations under Section 401(a)(9) of the Code, including the minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2 of the Proposed Treasury Regulations, or any successor regulations of similar import. (a) In General. If a Participant's benefit may be distributed in accordance with Section 8.01(b), the amount to be distributed for each calendar year for which a minimum distribution is required shall be at least an amount equal to the quotient obtained by dividing the Participant's interest in his Account by the life expectancy of the Participant or Beneficiary or the joint life and last survivor expectancy of the Participant and his Beneficiary, whichever is applicable. For calendar years beginning before January 1, 1989, if a Participant's Beneficiary is not his spouse, the method of distribution selected must insure that at least 50 percent of the present value of the amount available for distribution is paid within the life expectancy of the Participant. For calendar years beginning after December 31, 1988, the amount to be distributed for each calendar year shall not be less than an amount equal to the quotient obtained by dividing the Participant's interest in his Account by the lesser of (1) the applicable life expectancy under Section 8.01(b), or (2) if a Participant's Beneficiary is not his spouse, the applicable divisor determined under Section 1.401(a)(9)-2, Q&A 4 of the Proposed Treasury Regulations, or any successor regulations of similar import. Distributions after the death of the Participant shall be made 45 72 using the applicable life expectancy under (1) above, without regard to Section 1.401(a)(9)-2 of such regulations. The minimum distribution required under this subsection (a) for the calendar year immediately preceding the calendar year in which the Participant's required beginning date, as determined under Section 8.08(b), occurs shall be made on or before the Participant's required beginning date, as so determined. Minimum distributions for other calendar years shall be made on or before the close of such calendar year. (b) Additional Requirements for Distributions After Death of Participant. (1) Distribution beginning before Death. If the Participant dies before distribution of his benefits has begun, distributions shall be made in accordance with the provisions of this paragraph. Distributions under Section 8.01(a) shall be completed by the close of the calendar year in which the fifth anniversary of the death of the Participant occurs. Distributions under Section 8.01(b) shall commence, if the Beneficiary is not the Participant's spouse, not later than the close of the calendar year immediately following the calendar year in which the death of the Participant occurs. Distributions under Section 8.01(b) to a Beneficiary who is the Participant's surviving spouse shall commence not later than the close of the calendar year in which the Participant would have attained age 70 1/2 or, if later, the close of the calendar year immediately following the calendar year in which the death of the Participant occurs. In the event such spouse dies prior to the date distribution to him or her commences, he or she will be treated for purposes of this subsection (other than the preceding sentence) as if he or she were the Participant. If the Participant has not designated a Beneficiary, or the Participant or Beneficiary has not effectively selected a method of distribution, distribution of the Participant's benefit shall be completed by the close of the calendar year in which the fifth anniversary of the death of the Participant occurs. Any amount paid to a child of the Participant will be treated as if it had been paid to the surviving spouse if the amount becomes payable to the surviving spouse when the child reaches the age of majority. For purposes of this subsection (b)(1), the life expectancy of a Beneficiary who is the Participant's surviving spouse shall be recalculated annually unless the Participant's spouse irrevocably elects otherwise prior to the time distributions are required to begin. Life expectancy shall be computed in accordance with the provisions of subsection (a) above. (2) Distribution beginning after Death. If the Participant dies after distribution of his benefits has begun, distributions to the Participant's Beneficiary will be made at least as 46 73 rapidly as under the method of distribution being used as of the date of the Participant's death. For purposes of this Section 8.04(b), distribution of a Participant's interest in his Account will be considered to begin as of the Participant's required beginning date, as determined under Section 8.08(b). If distribution in the form of an annuity irrevocably commences prior to such date, distribution will be considered to begin as of the actual date distribution commences. (c) Life Expectancy. For purposes of this Section, life expectancy shall be recalculated annually in the case of the Participant or a Beneficiary who is the Participant's spouse unless the Participant or Beneficiary irrevocably elects otherwise prior to the time distributions are required to begin. If not recalculated in accordance with the foregoing, life expectancy shall be calculated using the attained age of the Participant or Beneficiary, whichever is applicable, as of such individual's birth date in the first year for which a minimum distribution is required reduced by one for each elapsed calendar year since the date life expectancy was first calculated. For purposes of this Section, life expectancy and joint life and last survivor expectancy shall be computed by use of the expected return multiples in Table V and VI of section 1.72-9 of the income tax Regulations. A Participant's interest in his Account for purposes of this Section 8.04 shall be determined as of the last valuation date in the calendar year immediately preceding the calendar year for which a minimum distribution is required, increased by the amount of any contributions allocated to, and decreased by any distributions from, such Account after the valuation date. Any distribution for the first year for which a minimum distribution is required made after the close of such year shall be treated as if made prior to the close of such year. 8.05. Immediate Distributions. If the Account distributable to a Participant exceeds, or at the time of any prior distribution exceeded, $3,500, no distribution will be made to the Participant before he reaches his Normal Retirement Age (or age 62, if later), unless the written consent of the Participant has been obtained. Such consent shall be made in writing within the 90-day period ending on the Participant's Annuity Starting Date. Within the period beginning 90 days before the Participant's Annuity Starting Date and ending 30 days before such Date, the Administrator will provide such Participant with written notice comparable to the notice described in Section 8.03(b) containing a general description of the material features and an explanation of the relative values of the optional forms of benefit available under the Plan and informing the Participant of his right to defer receipt of the distribution until his Normal Retirement Age (or age 62, if later). The consent of the Participant's spouse must also be obtained if the Participant is subject to the provisions of Section 8.03(a), unless the distribution will be made in the form of the applicable retirement 47 74 annuity contract described in Section 8.03(b). A spouse's consent to early distribution, if required, must satisfy the requirements of Section 8.03(d). Neither the consent of the Participant nor the Participant's spouse shall be required to the extent that a distribution is required to satisfy Section 401(a)(9) or Section 415 of the Code. In addition, upon termination of the Plan if it does not offer an annuity option (purchased from a commercial provider) and if the Employer or any Related Employer does not maintain another defined contribution plan (other than an employee stock ownership plan as defined in Code Section 4975(e)(7)) the Participant's Account will, without the Participant's consent, be distributed to the Participant. However, if any Related Employer maintains another defined contribution plan (other than an employee stock ownership plan as defined in Section 4975(e)(7) of the Code) then the Participant's Account will be transferred, without the Participant's consent, to the other plan if the Participant does not consent to an immediate distribution. 8.06. Determination of Method of Distribution. The Participant will determine the method of distribution of benefits to himself and may determine the method of distribution to his Beneficiary. Such determination will be made prior to the time benefits become payable under the Plan. If the Participant does not determine the method of distribution to his Beneficiary or if the Participant permits his Beneficiary to override his determination, the Beneficiary, in the event of the Participant's death, will determine the method of distribution of benefits to himself as if he were the Participant. A determination by the Beneficiary must be made no later than the close of the calendar year in which distribution would be required to begin under Section 8.04(b) or, if earlier, the close of the calendar year in which the fifth anniversary of the death of the Participant occurs. 8.07. Notice to Trustee. The Administrator will notify the Trustee in writing whenever any Participant or Beneficiary is entitled to receive benefits under the Plan. The Administrator's notice shall indicate the form of benefits that such Participant or Beneficiary shall receive and (in the case of distributions to a Participant) the name of any designated Beneficiary or Beneficiaries. 8.08. Time of Distribution. In no event will distribution to a Participant be made latest than the earlier of the dates described in (a) and (b) below: (a) Absent the consent of the Participant (and his spouse, if appropriate), the 60th day after the close of the Plan Year in which occurs the later of the date on which the Participant attains age 65, the date on which the Participant ceases to be employed by the Employer, or the 10th anniversary of the year in which the Participant commenced participation in the Plan; and (b) April 1 of the calendar year first following the calendar year in which the Participant attains age 70 1/2 or, in the case of a Participant who had attained age 70 1/2 before January 1, 1988, 48 75 the required beginning date determined in accordance with (1) or (2) below: (1) The required beginning date of a Participant who is not a 5-percent owner is the first day of April of the calendar year following the calendar year in which the later of retirement or attainment of age 70 1/2 occurs. (2) The required beginning date of a Participant who is a 5-percent owner during any year beginning after December 31, 1979, is the first day of April following the later of (A) the calendar year in which the Participant attains age 70 1/2, or (B) the earlier of the calendar year with or within which ends the Plan Year in which the Participant becomes a 5-percent owner, or the calendar year in which the Participant retires. Notwithstanding the foregoing, in the case of a Participant who attained age 70 1/2 during 1988 and who had not retired prior to January 1, 1989, the required beginning date described in this paragraph shall be April 1, 1990. Notwithstanding (a) above, the failure of a Participant (and spouse) to consent to a distribution while a benefit is immediately distributable, within the meaning of Section 8.05, shall be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy (a) above. Once distributions have begun to a 5-percent owner under (b) above, they must continue to be distributed, even if the Participant ceases to be a 5-percent owner in a subsequent year. For purposes of (b) above, a Participant is treated as a 5-percent owner if such Participant is a 5-percent owner as defined in Section 416(i) of the Code (determined in accordance with Section 416 but without regard to whether the Plan is top-heavy) at any time during the Plan Year ending with or within the calendar year in which such owner attains age 66 1/2 or any subsequent Plan Year. The Administrator shall notify the Trustee in writing whenever a distribution is necessary in order to comply with the minimum distribution rules set forth in this Section. 8.09. Whereabouts of Participants and Beneficiaries. The Administrator will at all times be responsible for determining the whereabouts of each Participant or Beneficiary who may be entitled to benefits under the Plan and will at all times be responsible for instructing the Trustee in writing as to the current address of each such Participant or Beneficiary. The Trustee will be entitled to rely on the latest written statement received from the Administrator as to such addresses. The Trustee will be under no duty to make any distributions under the Plan 49 76 unless and until it has received written instructions from the Administrator satisfactory to the Trustee containing the name and address of the distributee, the time when the distribution is to occur, and the form which the distribution will take. Notwithstanding the foregoing, if the Trustee attempts to make a distribution in accordance with the Administrator's instructions but is unable to make such distribution because the whereabouts of the distributee is unknown, the Trustee will notify the Administrator of such situation and thereafter the Trustee will be under no duty to make any further distributions to such distributee until it receives further written instructions from the Administrator. If a benefit is forfeited because the Administrator determines that the Participant or Beneficiary cannot be found, such benefit will be reinstated by the Sponsor if a claim is filed by the Participant or Beneficiary with the Administrator and the Administrator confirms the claim to the Sponsor. Article 9. Top-Heavy Provisions. 9.01 Application. If the Plan is or becomes a Top-Heavy Plan in any Plan Year or is automatically deemed to be Top-Heavy in accordance with the Employer's election in Section 1.12(a)(1) of the Adoption Agreement, the provisions of this Article 9 shall supersede any conflicting provision in the Plan. 9.02 Definitions. For purposes of this Article 9, the following terms have the meanings set forth below: (a) Key Employee. Any Employee or former Employee (and the Beneficiary of any such Employee) who at any time during the determination period was (1) an officer of the Employer whose annual Compensation exceeds 50 percent of the dollar limitation under Section 415(b)(1)(A) of the Code, (2) an owner (or considered an owner under Section 318 of the Code) of one of the ten largest interests in the Employer if such individual's annual Compensation exceeds the dollar limitation under Section 415(c)(1)(A) of the Code, (3) a 5-percent owner of the Employer, or (4) a 1-percent owner of the Employer who has annual Compensation of more than $150,000. For purposes of this paragraph, the determination period is the Plan Year containing the Determination Date and the four preceding Plan Years. The determination of who is a Key Employee shall be made in accordance with Section 416(i)(1) of the Code and the regulations thereunder. Annual Compensation means compensation as defined in Section 5.03(e)(2), but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the employee's gross income under Section 125, Section 402(a)(8), and Section 403(b) of the Code. (b) Top-Heavy Plan. The Plan is a Top-Heavy Plan if any of the following conditions exists: (1) the Top-Heavy Ratio for the Plan exceeds 60 percent and the Plan is not part of any Required Aggregation Group or Permissive Aggregation Group, 50 77 (2) the Plan is a part of a Required Aggregation Group but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Required Aggregation Group exceeds 60 percent, or (3) the Plan is a part of a Required Aggregation Group and a Permissive Aggregation Group and the Top-Heavy Ratio for both Groups exceeds 60 percent. (c) Top-Heavy Ratio. (1) With respect to this Plan, or with respect to any Required Aggregation Group or Permissive Aggregation Group that consists solely of defined contribution plans (including any simplified employee pension plans) and the Employer has not maintained any defined benefit plan which during the 5-year period ending on the determination date(s) has or has had accrued benefits, the Top-Heavy Ratio is a fraction, the numerator of which is the sum of the account balances of all Key Employees under the plans as of the Determination Date (including any part of any account balance distributed in the 5-year period ending on the Determination Date), and the denominator of which is the sum of all account balances (including any part of any account balance distributed in the 5-year period ending on the Determination Date) of all participants under the plans as of the Determination Date. Both the numerator and denominator of the Top-Heavy Ratio shall be increased, to the extent required by Section 416 of the Code, to reflect any contribution which is due but unpaid as of the Determination Date. (2) With respect to any Required Aggregation Group or Permissive Aggregation Group that includes one or more defined benefit plans which, during the 5-year period ending on the Determination Date, has covered or could cover a Participant in this Plan, the Top-Heavy Ratio is a fraction, the numerator of which is the sum of the account balances under the defined contribution plans for all Key Employees and the present value of accrued benefits under the defined benefit plans for all Key Employees, and the denominator of which is the sum of the account balances under the defined contribution plans for all participants and the present value of accrued benefits under the defined benefit plans for all participants. Both the numerator and denominator of the Top-Heavy Ratio shall be increased for any distribution of an account balance or an accrued benefit made in the 5-year period ending on the Determination Date and any contribution due but unpaid as of the Determination Date. (3) For purposes of (1) and (2) above, the value of Accounts and the present value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in Section 416 of the Code and the regulations thereunder for the first and second plan years of a defined benefit plan. The Account and accrued benefits of a Participant 51 78 (A) who is not a Key Employee but who was a Key Employee in a prior year, or (B) who has not been credited with at least one Hour of Service with the Employer at any time during the 5-year period ending on the Determination Date, will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account, shall be made in accordance with Section 416 of the Code and the regulations thereunder. Deductible employee contributions shall not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans, the value of Accounts and accrued benefits shall be calculated with reference to the Determination Dates that fall within the same calendar year. For purposes of determining if the Plan, or any other plan included in a Required Aggregation Group of which this Plan is a part, is a Top-Heavy Plan, the accrued benefit in a defined benefit plan of an Employee other than a Key Employee shall be determined under (i) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Employer, or (ii) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Section 411(b)(1)(C) of the Code. (d) Permissive Aggregation Group. The Required Aggregation Group plus any other qualified plans of the Employer or a Related Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code. (e) Required Aggregation Group. (1) Each qualified plan of the Employer or Related Employer in which at least one Key Employee participates, or has participated at any time during the determination period (regardless of whether the plan has terminated), and (2) any other qualified plan of the Employer or Related Employer which enables a plan described in (1) above to meet the requirements of Sections 401(a)(4) or 410 of the Code. (f) Determination Date. For any Plan Year of the Plan subsequent to the first Plan Year, the last day of the preceding Plan Year. For the first Plan Year of the Plan, the last day of that Plan Year. (g) Valuation Date. The Determination Date. (h) Present Value. Present value shall be based only on the interest rate and mortality table specified in the Adoption Agreement. 9.03. Minimum Contribution. 52 79 (a) Except as otherwise provided in (b) and (c) below, the Fixed/Discretionary Contributions made on behalf of any Participant who is not a Key Employee shall not be less than the lesser of 3 percent (or such other percent elected by the Employer in Section 1.12(c)) of such Participant's Compensation or, in the case where the Employer has no defined benefit plan which designates this Plan to satisfy Section 401 of the Code, the largest percentage of Employer contributions, as a percentage of the first $200,000 of the Key Employee's Compensation, made on behalf of any Key Employee for that year. If the Employer selected the Integrated Formula in Section 1.05(a)(2), the minimum contribution shall be determined under paragraph (e) of this Section 9.03. Further, the minimum contribution under this Section 9.03 shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive a contribution, or would have received a lesser contribution for the year, because (1) the Participant failed to complete 1,000 Hours of Service or any equivalent service requirement provided in the Adoption Agreement; or (2) the Participant's Compensation was less than a stated amount. (b) The provisions of (a) above shall not apply to any Participant who was not employed by the Employer on the last day of the Plan Year. (c) The Employer contributions for the Plan Year made on behalf of each Participant who is not a Key Employee and who is a participant in a defined benefit plan maintained by the Employer shall not be less than 5 percent of such Participant's Compensation, unless the Employer has provided in Section 1.12(c) that the minimum contribution requirement will be met in the other plan or plans of the Employer. (d) The minimum contribution required under (a) above (to the extent required to be nonforfeitable under Section 416(b) of the Code) may not be forfeited under Section 411(a)(3)(B) or 411(a)(3)(D) of the Code. (e) If the Employer elected an Integrated Formula in Section 1.05(a)(2), the allocation steps in Section 4.06(b)(2) shall be preceded by the following steps: (1) The Discretionary Employer Contributions will be allocated to each eligible Participant (as determined under this Section 9.03) in the ratio that the Participant's Compensation bears to all Participants' Compensation, but not in excess of 3%(or such other percent elected by the Employer in Section 1.12(c). (2) Any Discretionary Employer Contributions remaining after (e)(1) above will be allocated to each eligible Participant in the ratio that the Participant's Excess Compensation for the Plan Year bears to the Excess Compensation of all eligible Participants, but not in excess of 3%(or such other percent elected by the Employer in Section 1.12(c)). 53 80 9.04. Adjustment to the Limitation on Contributions and Benefits. If this Plan is in Top-Heavy status, the number 100 shall be substituted for the number 125 in subsections (e)(3) and (e)(4) of Section 5.03. However, this substitution shall not take effect with respect to this Plan in any Plan Year in which the following requirements are satisfied: (a) The Employer contributions for such Plan Year made on behalf of each Participant who is not a Key Employee and who is a participant in a defined benefit plan maintained by the Employer is not less than 7 1/2 percent of such Participant's Compensation. (b) The sum of the present value as of the Determination Date of (1) the aggregate accounts of all Key Employees under all defined contribution plans of the Employer and (2) the cumulative accrued benefits of all Key Employees under all defined benefit plans of the Employer does not exceed 90 percent of the same amounts determined for all Participants under all plans of the Employer that are Top-Heavy Plans, excluding Accounts and accrued benefits for Employees who formerly were but are no longer Key Employees. The substitutions of the number 100 for 125 shall not take effect in any Limitation Year with respect to any Participant for whom no benefits are accrued or contributions made for such Year. 9.05. Minimum Vesting. For any Plan Year in which the Plan is a Top-Heavy Plan and all Plan Years thereafter, the Top-Heavy vesting schedule elected in Section 1.12(d) will automatically apply to the Plan. The Top-Heavy vesting schedule applies to all benefits within the meaning of Section 411(a)(7) of the Code except those attributable to Employee Contributions or those already subject to a vesting schedule which vests at least as rapidly in all cases as the schedule elected in Section 1.12(d), including benefits accrued before the Plan becomes a Top-Heavy Plan. Further, no decrease in a Participant's nonforfeitable percentage may occur in the event the Plan's status as a Top-Heavy Plan changes for any Plan Year. However, this Section 9.05 does not apply to the Account of any Employee who does not have an Hour of Service after the Plan has initially become a Top-Heavy Plan and such Employee's Account attributable to Employer Contributions will be determined without regard to this Section 9.05. Article 10. Amendment and Termination. 10.01 Amendment by Employer. The Employer reserves the authority, subject to the provisions of Article 1 and Section 10.03, to amend the Plan: (a) Changes to Elections Contained in the Adoption Agreement. By filing with the Trustee an amended Adoption Agreement, executed by the Employer only, on which said Employer has indicated a change or changes in provisions previously elected by it. Such changes are to be effective on the effective date of such amended Adoption 54 81 Agreement except that retroactive changes to a previous election or elections pursuant to the regulations issued under Section 401(a)(4) of the Code shall be permitted. Any such change notwithstanding, no Participant's Account shall be reduced by such change below the amount to which the Participant would have been entitled if he had voluntarily left the employ of the Employer immediately prior to the date of the change. The Employer may from time to time make any amendment to the Plan that may be necessary to satisfy Sections 415 or 416 of the Code because of the required aggregation of multiple plans by completing overridingplan language in the Adoption Agreement. The Employer may also add certain model amendments published by the Internal Revenue Service which specifically provide that their adoption will not cause the Plan to be treated as an individually designed plan; or (b) Other Changes. By amending any provision of the Plan for any reason other than those specified in (a) above. However, upon making such amendment, including a waiver of the minimum funding requirement under Section 412(d) of the Code, the Employer may no longer participate in this prototype plan arrangement and will be deemed to have an individually designed plan. Following such amendment, the Trustee may transfer the assets of the Trust to the trust forming part of such newly adopted plan upon receipt of sufficient evidence (such as a determination letter or opinion letter from the Internal Revenue Service or an opinion of counsel satisfactory to the Trustee) that such trust will be a qualified trust under the Code. 10.02. Amendment by Prototype Sponsor. The Prototype Sponsor may in its discretion amend the Plan or the Adoption Agreement at any time, subject to the provisions of Article 1 and Section 10.03, and provided that the Prototype Sponsor mails a copy of such amendment to the Employer at its last known address as shown on the books of the Prototype Sponsor. 10.03. Amendments Affecting Vested and/or Accrued Benefits. (a) Except as permitted by Section 10.04, no amendment to the Plan shall be effective to the extent that it has the effect of decreasing a Participant's Account or eliminating an optional form of benefit with respect to benefits attributable to service before the amendment. Furthermore, if the vesting schedule of the Plan is amended, the nonforfeitable interest of a Participant in his Account, determined as of the later of the date the amendment is adopted or the date it becomes effective, will not be less than the Participant's nonforfeitable interest in his Account determined without regard to such amendment. (b) If the Plan's vesting schedule is amended, including any amendment resulting from a change to or from Top-Heavy Plan status, or the Plan is amended in any way that directly or indirectly affects the computation of a Participant's nonforfeitable interest in his Account, each Participant with at least three (3) Years of Service for Vesting with the Employer may elect, within a 55 82 reasonable period after the adoption of the amendment, to have the nonforfeitable percentage of his Account computed under the Plan without regard to such amendment. The Participant's election may be made within 60 days from the latest of (1) the date the amendment is adopted, (2) the date the amendment becomes effective, or (3) the date the Participant is issued written notice of the amendment by the Employer or the Administrator. 10.04. Retroactive Amendments. An amendment made by the Prototype Sponsor in accordance with Section 10.02 may be made effective on a date prior to the first day of the Plan Year in which it is adopted if such amendment is necessary or appropriate to enable the Plan and Trust to satisfy the applicable requirements of the Code or to conform the Plan to any change in federal law, or to any regulations or ruling thereunder. Any retroactive amendment by the Employer shall be subject to the provisions of Section 10.01. 10.05. Termination. The Employer has adopted the Plan with the intention and expectation that contributions will be continued indefinitely. However, said Employer has no obligation or liability whatsoever to maintain the Plan for any length of time and may discontinue contributions under the Plan or terminate the Plan at any time by written notice delivered to the Trustee without any liability hereunder for any such discontinuance or termination. 10.06. Distribution upon Termination of the Plan. Upon termination or partial termination of the Plan or complete discontinuance of contributions thereunder, each Participant (including a terminated Participant with respect to amounts not previously forfeited by him) who is affected by such termination or partial termination or discontinuance will have a fully vested interest in his Account, and, subject to Section 4.05 and Article 8, the Trustee will distribute to each Participant or other person entitled to distribution the balance of the Participant's Account in a single lump sum payment. In the absence of such instructions, the Trustee will notify the Administrator of such situation and the Trustee will be under no duty to make any distributions under the Plan until it receives written instructions from the Administrator. Upon the completion of such distributions, the Trust will terminate, the Trustee will be relieved from all liability under the Trust, and no Participant or other person will have any claims thereunder, except as required by applicable law. 10.07. Merger or Consolidation of Plan; Transfer of Plan Assets. In case of any merger or consolidation of the Plan with, or transfer of assets and liabilities of the Plan to, any other plan, provision must be made so that each Participant would, if the Plan then terminated, receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer if the Plan had then terminated. 56 83 Article 11. Amendment and Continuation of Predecessor Plan; Transfer of Funds to or from Other Qualified Plans. 11.01. Amendment and Continuation of Predecessor Plan. In the event the Employer has previously established a plan (the "predecessor plan") which is a defined contribution plan under the Code and which on the date of adoption of the Plan meets the applicable requirements of section 401(a) of the Code, the Employer may, in accordance with the provisions of the predecessor plan, amend and continue the predecessor plan in the form of the Plan and become the Employer hereunder, subject to the following: (a) Subject to the provisions of the Plan, each individual who was a Participant or former Participant in the predecessor plan immediately prior to the effective date of such amendment and continuation will become a Participant or former Participant in the Plan; (b) No election may be made under the vesting provisions of the Adoption Agreement if such election would reduce the benefits of a Participant under the Plan to less than the benefits to which he would have been entitled if he voluntarily separated from the service of the Employer immediately prior to such amendment and continuation; (c) No amendment to the Plan shall decrease a Participant's accrued benefit or eliminate an optional form of benefit and if the amendment of the predecessor plan in the form of the Plan results in a change in the method of crediting service for vesting purposes between the general method set forth in Section 2530.200b-2 of the Department of Labor Regulations and the elapsed-time method in Section 2.01(a)(33) of the Plan, each Participant with respect to whom the method of crediting vesting service is changed shall be treated in the manner set forth by the provisions of Section 1.410(a)-7(f)(1) of the Treasury Regulations which are incorporated herein by reference; (d) The amounts standing to the credit of a Participant's Account immediately prior to such amendment and continuation which represent the amounts properly attributable to (1) contributions by the Participant and (2) contributions by the Employer and forfeitures will constitute the opening balance of his Account or Accounts under the Plan; (e) Amounts being paid to a former Participant or to a Beneficiary in accordance with the provisions of the predecessor plan will continue to be paid in accordance with such provisions; (f) Any election and waiver of the qualified pre-retirement annuity in effect after August 23, 1984, under the predecessor plan immediately before such amendment and continuation will be deemed a valid election and waiver of Beneficiary under Section 8.04 if such designation satisfies the requirements of Section 8.04(d), unless 57 84 and until the Participant revokes such election and waiver under the Plan; and (g) Unless the Employer and the Trustee agree otherwise, all assets of the predecessor trust will be deemed to be assets of the Trust as of the effective date of such amendment. Such assets will be invested by the Trustee as soon as reasonably practicable pursuant to Article 6. The Employer agrees to assist the Trustee in any way requested by the Trustee in order to facilitate the transfer of assets from the predecessor trust to the Trust Fund. 11.02. Transfer of Funds from an Existing Plan. The Employer may from time to time direct the Trustee, in accordance with such rules as the Trustee may establish, to accept cash, allowable Fund Shares or participant loan promissory notes transferred for the benefit of Participants from a trust forming part of another qualified plan under the Code, provided such plan is a defined contribution plan. Such transferred assets will become assets of the Trust as of the date they are received by the Trustee. Such transferred assets will be credited to Participants' Accounts in accordance with their respective interests immediately upon receipt by the Trustee. A Participant's interest under the Plan in transferred assets which were fully vested and nonforfeitable under the transferring plan will be fully vested and nonforfeitable at all times. Such transferred assets will be invested by the Trustee in accordance with the provisions of paragraph (g) of Section 11.01 as if such assets were transferred from a predecessor plan. No transfer of assets in accordance with this Section may cause a loss of an accrued or optional form of benefit protected by Section 411(d)(6) of the Code. 11.03. Acceptance of Assets by Trustee. The Trustee will not accept assets which are not either in a medium proper for investment under the Plan, as set forth in Section 1.14(b), or in cash. Such assets shall be accompanied by written instructions showing separately the respective contributions by the prior employer and by the Employee, and identifying the assets attributable to such contributions. The Trustee shall establish such accounts as may be necessary or appropriate to reflect such contributions under the Plan. The Trustee shall hold such assets for investment in accordance with the provisions of Article 6, and shall in accordance with the written instructions of the Employer make appropriate credits to the Accounts of the Participants for whose benefit assets have been transferred. 11.04. Transfer of Assets from Trust. The Employer may direct the Trustee to transfer all or a specified portion of the Trust assets to any other plan or plans maintained by the Employer or the employer or employers of a former Participant or Participants, provided that the Trustee has received evidence satisfactory to it that such other plan meets all applicable requirements of the Code. The assets so transferred shall be accompanied by written instructions from the Employer naming the persons for whose benefit such assets have been transferred, showing separately the respective contributions by the Employer and by each Participant, if any, and identifying the assets 58 85 attributable to the various contributions. The Trustee shall have no further liabilities with respect to assets so transferred. 59 86 Article 12. Miscellaneous. 12.01. Communication to Participants. The Plan will be communicated to all Participants by the Employer promptly after the Plan is adopted. 12.02. Limitation of Rights. Neither the establishment of the Plan and the Trust, nor any amendment thereof, nor the creation of any fund or account, nor the payment of any benefits, will be construed as giving to any Participant or other person any legal or equitable right against the Employer, Administrator or Trustee, except as provided herein; and in no event will the terms of employment or service of any Participant be modified or in any way affected hereby. It is a condition of the Plan, and each Participant expressly agrees by his participation herein, that each Participant will look solely to the assets held in the Trust for the payment of any benefit to which he is entitled under the Plan. 12.03. Nonalienability of Benefits and Qualified Domestic Relations Orders. The benefits provided hereunder will not be subject to alienation, assignment, garnishment, attachment, execution or levy of any kind, either voluntarily or involuntarily, and any attempt to cause such benefits to be so subjected will not be recognized, except to such extent as may be required by law. The preceding sentence shall also apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant pursuant to a domestic relations order, unless such order is determined by the Plan Administrator to be a qualified domestic relations order, as defined in Section 414(p) of the Code, or any domestic relations order entered before January 1, 1985. The Administrator must establish reasonable procedures to determine the qualified status of a domestic relations order. Upon receiving a domestic relations order, the Administrator will promptly notify the Participant and any alternate payee named in the order, in writing, of the receipt of the order and the Plan's procedures for determining the qualified status of the order. Within a reasonable period of time after receiving the domestic relations order, the Administrator must determine the qualified status of the order and must notify the Participant and each alternate payee, in writing, of its determination. The Administrator must provide notice under this paragraph by mailing to the individual's address specified in the domestic relations order, or in a manner consistent with the Department of Labor regulations. If any portion of the Participant's Account is payable during the period the Administrator is making its determination of the qualified status of the domestic relations order, the Administrator must make a separate accounting of the amounts payable. If the Administrator determines the order is a qualified domestic relations order within 18 months of the date amounts first are payable following receipt of the order, the Administrator will direct the Trustee to distribute the payable amounts in accordance with the order. If the Administrator does not make his determination of the qualified status of the order within the 18-month determination period, the Administrator will direct the Trustee to distribute the payable amounts in the manner the Plan would distribute if the order did not exist and will apply the order 60 87 prospectively if the Administrator later determines the order is a qualified domestic relations order. A domestic relations order will not fail to be deemed a qualified domestic relations order merely because it requires the distribution or segregation of all or part of a Participant's Account with respect to an alternate payee prior to the Participant's earliest retirement age (as defined in Section 414(p) of the Code) under the Plan. A distribution to an alternate payee prior to the Participant's attainment of the earliest retirement age is available only if (a) the order specifies distribution at that time and (b) if the present value of the alternate payee's benefits under the Plan exceeds $3,500, and the order requires, and the alternate payee consents to, a distribution occurring prior to the Participant's attainment of earliest retirement age. 12.04. Facility of Payment. In the event the Administrator determines, on the basis of medical reports or other evidence satisfactory to the Administrator, that the recipient of any benefit payments under the Plan is incapable of handling his affairs by reason of minority, illness, infirmity or other incapacity, the Administrator may direct the Trustee to disburse such payments to a person or institution designated by a court which has jurisdiction over such recipient or a person or institution otherwise having the legal authority under state law for the care and control of such recipient. The receipt by such person or institution of any such payments shall be complete acquittance therefore, and any such payment to the extent thereof, shall discharge the liability of the Trust for the payment of benefits hereunder to such recipient. 12.05. Information between Employer and Trustee. The Employer agrees to furnish the Trustee, and the Trustee agrees to furnish the Employer, with such information relating to the Plan and Trust as may be required by the other in order to carry out their respective duties hereunder, including without limitation information required under the Code and any regulations issued or forms adopted by the Treasury Department thereunder or under the provisions of ERISA and any regulations issued or forms adopted by the Labor Department thereunder. 12.06. Effect of Failure to Qualify Under Code. Notwithstanding any other provision contained herein, if the Employer fails to obtain or retain approval of the Plan by the Internal Revenue Service as a qualified Plan under the Code, the Employer may no longer participate in this prototype Plan arrangement and will be deemed to have an individually designed plan. 12.07. Notices. Any notice or other communication in connection with this Plan shall be deemed delivered in writing if addressed as provided below and if either actually delivered at said address or, in the case of a letter, three business days shall have elapsed after the same shall have been deposited in the United States mails, first-class postage prepaid and registered or certified: 61 88 (a) If to the Employer or Administrator, to it at the address set forth in the Adoption Agreement, to the attention of the person specified to receive notice in the Adoption Agreement; (b) If to the Trustee, to it at the address set forth in the Adoption Agreement; or, in each case at such other address as the addressee shall have specified by written notice delivered in accordance with the foregoing to the addressor's then effective notice address. 12.08. Governing Law. The Plan and the accompanying Adoption Agreement will be construed, administered and enforced according to ERISA, and to the extent not preempted thereby, the laws of the Commonwealth of Massachusetts. Article 13. Plan Administration. 13.01. Powers and Responsibilities of the Administrator. The Administrator has the full power and the full responsibility to administer the Plan in all of its details, subject, however, to the requirements of ERISA. The Administrator's powers and responsibilities include, but are not limited to, the following: (a) To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan; (b) To interpret the Plan, its interpretation thereof in good faith to be final and conclusive on all persons claiming benefits under the Plan; (c) To decide all questions concerning the Plan and the eligibility of any person to participate in the Plan; (d) To administer the claims and review procedures specified in Section 13.03; (e) To compute the amount of benefits which will be payable to any Participant, former Participant or Beneficiary in accordance with the provisions of the Plan; (f) To determine the person or persons to whom such benefits will be paid; (g) To authorize the payment of benefits and provide for the distribution of Code Section 402(f) notices; (h) To comply with the reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA; (i) To appoint such agents, counsel, accountants, and consultants as may be required to assist in administering the Plan; 62 89 (j) By written instrument, to allocate and delegate its fiduciary responsibilities in accordance with Section 405 of ERISA including the formation of an Administrative Committee to administer the Plan; (k) To provide bonding coverage as required under Section 412 of ERISA. 13.02. Nondiscriminatory Exercise of Authority. Whenever, in the administration of the Plan, any discretionary action by the Administrator is required, the Administrator shall exercise its authority in a nondiscriminatory manner so that all persons similarly situated will receive substantially the same treatment. 13.03. Claims and Review Procedures. (a) Claims Procedure. If any person believes he is being denied any rights or benefits under the Plan, such person may file a claim in writing with the Administrator. If any such claim is wholly or partially denied, the Administrator will notify such person of its decision in writing. Such notification will contain (1) specific reasons for the denial, (2) specific reference to pertinent Plan provisions, (3) a description of any additional material or information necessary for such person to perfect such claim and an explanation of why such material or information is necessary, and (4) information as to the steps to be taken if the person wishes to submit a request for review. Such notification will be given within 90 days after the claim is received by the Administrator (or within 180 days, if special circumstances require an extension of time for processing the claim, and if written notice of such extension and circumstances is given to such person within the initial 90-day period). If such notification is not given within such period, the claim will be considered denied as of the last day of such period and such person may request a review of his claim. (b) Review Procedure. Within 60 days after the date on which a person receives a written notice of a denied claim (or, if applicable, within 60 days after the date on which such denial is considered to have occurred), such person (or his duly authorized representative) may (1) file a written request with the Administrator for a review of his denied claim and of pertinent documents and (2) submit written issues and comments to the Administrator. The Administrator will notify such person of its decision in writing. Such notification will be written in a manner calculated to be understood by such person and will contain specific reasons for the decision as well as specific references to pertinent Plan provisions. The decision on review will be made within 60 days after the request for review is received by the Administrator (or within 120 days, if special circumstances require an extension of time for processing the request, such as an election by the Administrator to hold a hearing, and if written notice of such extension and circumstances is given to such person within the initial 60-day period). If the decision on review is not made within such period, the claim will be considered denied. 63 90 13.04. Named Fiduciary. The Administrator is a "named fiduciary" for purposes of Section 402(a)(1) of ERISA and has the powers and responsibilities with respect to the management and operation of the Plan described herein. 13.05. Costs of Administration. Unless some or all are paid by the Employer, all reasonable costs and expenses (including legal, accounting, and employee communication fees) incurred by the Administrator and the Trustee in administering the Plan and Trust will be paid first from the forfeitures (if any) resulting under Section 7.07, then from the remaining Trust Fund. All such costs and expenses paid from the Trust Fund will, unless allocable to the Accounts of particular Participants, be charged against the Accounts of all Participants on a prorata basis or in such other reasonable manner as may be directed by the Employer. Article 14. Trust Agreement. 14.01. Acceptance of Trust Responsibilities. By executing the Adoption Agreement, the Employer establishes a trust to hold the assets of the Plan. By executing the Adoption Agreement, the Trustee agrees to accept the rights, duties and responsibilities set forth in this Article 14. 14.02. Establishment of Trust Fund. A trust is hereby established under the Plan and the Trustee will open and maintain a trust account for the Plan and, as part thereof, Participants' Accounts for such individuals as the Employer shall from time to time give written notice to the Trustee are Participants in the Plan. The Trustee will accept and hold in the Trust Fund such contributions on behalf of Participants as it may receive from time to time from the Employer. The Trust Fund shall be fully invested and reinvested in accordance with the applicable provisions of the Plan in Fund Shares or as otherwise provided in Section 14.10. 14.03. Exclusive Benefit. The Trustee shall hold the assets of the Trust Fund for the exclusive purpose of providing benefits to Participants and Beneficiaries and defraying the reasonable expenses of administering the Plan. No assets of the Plan shall revert to the Employer except as specifically permitted by the terms of the Plan. 14.04. Powers of Trustee. The Trustee shall have no discretion or authority with respect to the investment of the Trust Fund but shall act solely as a directed trustee of the funds contributed to it. In addition to and not in limitation of such powers as the Trustee has by law or under any other provisions of the Plan, the Trustee will have the following powers, each of which the Trustee exercises solely as directed Trustee in accordance with the written direction of the Employer except to the extent a Plan asset is subject to Participant direction of investment and provided that no such power shall be exercised in any manner inconsistent with the provisions of ERlSA: 64 91 (a) to deal with all or any part of the Trust Fund and to invest all or a part of the Trust Fund in investments available under the Plan, without regard to the law of any state regarding proper investment; (b) to retain uninvested such cash as it may deem necessary or advisable, without liability for interest thereon, for the administration of the Trust; (c) to sell, convert, redeem, exchange, or otherwise dispose of all or any part of the assets constituting the Trust Fund; (d) to enforce by suit or otherwise, or to waive, its rights on behalf of the Trust, and to defend claims asserted against it or the Trust, provided that the Trustee is indemnified to its satisfaction against liability and expenses; (e) to employ such agents and counsel as may be reasonably necessary in collecting, managing, administering, investing, distributing and protecting the Trust Fund or the assets thereof and to pay them reasonable compensation; (f) to compromise, adjust and settle any and all claims against or in favor of it or the Trust; (g) to oppose, or participate in and consent to the reorganization, merger, consolidation, or readjustment of the finances of any enterprise, to pay assessments and expenses in connection therewith, and to deposit securities under deposit agreements; (h) to apply for or purchase annuity contracts in accordance with Section 8.02; (i) to hold securities unregistered, or to register them in its own name or in the name of nominees; (j) to appoint custodians to hold investments within the jurisdiction of the district courts of the United States and to deposit securities with stock clearing corporations or depositories or similar organizations; (k) to make, execute, acknowledge and deliver any and all instruments that it deems necessary or appropriate to carry out the powers herein granted; and (l) generally to exercise any of the powers of an owner with respect to all or any part of the Trust Fund. The Employer specifically acknowledges and authorizes that affiliates of the Trustee may act as its agent in the performance of ministerial, nonfiduciary duties under the Trust. The expenses and compensation of such agent shall be paid by the Trustee. The Trustee shall provide the Employer with reasonable notice of any claim filed against the Plan or Trust or with regard to any related 65 92 matter, or of any claim filed by the Trustee on behalf of the Plan or Trust or with regard to any related matter. 14.05. Accounts. The Trustee will keep full accounts of all receipts and disbursements and other transactions hereunder. Within 60 days after the close of each Plan Year, within 60 days after termination of the Trust, and at such other times as may be appropriate, the Trustee will determine the then net fair market value of the Trust Fund as of the close of the Plan Year, as of the termination of the Trust, or as of such other time, whichever is applicable, and will render to the Employer and Administrator an account of its administration of the Trust during the period since the last such accounting, including all allocations made by it during such period. 14.06. Approving of Accounts. To the extent permitted by law, the written approval of any account by the Employer or Administrator will be final and binding, as to all matters and transactions stated or shown therein, upon the Employer, Administrator, Participants and all persons who then are or thereafter become interested in the Trust. The failure of the Employer or Administrator to notify the Trustee within six (6) months after the receipt of any account of its objection to the account will, to the extent permitted by law, be the equivalent of written approval. If the Employer or Administrator files any objections within such six (6) month period with respect to any matters or transactions stated or shown in the account, and the Employer or Administrator and the Trustee cannot amicably settle the question raised by such objections, the Trustee will have the right to have such questions settled by judicial proceedings. Nothing herein contained will be construed so as to deprive the Trustee of the right to have judicial settlement of its accounts. In any proceeding for a judicial settlement of any account or for instructions, the only necessary parties will be the Trustee, the Employer and the Administrator. 14.07. Distribution from Trust Fund. The Trustee shall make such distribution from the Trust Fund as the Employer or Administrator may in writing direct, as provided by the terms of the Plan, upon certification by the Employer or Administrator that the same is for the exclusive benefit of Participants or their Beneficiaries, or for the payment of expenses of administering the Plan. 14.08. Transfer of Amounts from Qualified Plan. If the Plan provides that amounts may be transferred to the Plan from another qualified plan or trust under Section 401(a) of the Code, such transfer shall be made in accordance with the provisions of the Plan and with such rules as may be established by the Trustee. The Trustee will only accept assets which are in a medium proper for investment under this agreement or in cash. Such amounts shall be accompanied by written instructions showing separately the respective contributions by the prior employer and the transferring Employee, and identifying the assets attributable to such contributions. The Trustee shall hold such assets for investment in accordance with the provisions of this agreement. 14.09. Transfer of Assets from Trust. Subject to the provisions of the Plan, the Employer may direct the Trustee to transfer all or a specified 66 93 portion of the Trust assets to any other plan or plans maintained by the Employer or the employer or employers of a former Participant or Participants, provided that the Trustee has received evidence satisfactory to it that such other plan meets all applicable requirements of the Code. The assets so transferred shall be accompanied by written instructions from the Employer naming the persons for whose benefit such assets have been transferred, showing separately the respective contributions by the Employer and by each Participant, if any, and identifying the assets attributable to the various contributions. The Trustee shall have no further liabilities with respect to assets so transferred. 14.10. Separate Trust or Fund for Existing Plan Assets. With the consent of the Trustee, the Employer may maintain a trust or fund (including a group annuity contract) under this prototype plan document separate from the Trust Fund for Plan assets purchased prior to the adoption of this prototype plan document which are not Fidelity Funds listed in Section 1.14(b). The Trustee shall have no authority and no responsibility for the Plan assets held in such separate trust or fund. The duties and responsibilities of the trustee of a separate trust shall be provided by a separate trust agreement, between the Employer and the trustee. Notwithstanding the preceding paragraph, the Trustee or an affiliate of the Trustee may agree in writing to provide ministerial recordkeeping services for guaranteed investment contracts held in the separate trust or fund. The guaranteed investment contract(s) shall be valued as directed by the Employer or the Trustee of the separate trust. The trustee of the separate trust (hereafter referred to as "trustee") will be the owner of any insurance contract purchased prior to the adoption of this prototype plan document. The insurance contract(s) must provide that proceeds will be payable to the trustee; however the trustee shall be required to pay over all proceeds of the contract(s) to the Participant's designated Beneficiary in accordance with the distribution provisions of this plan. A Participant's spouse will be the designated Beneficiary of the proceeds in all circumstances unless a qualified election has been made in accordance with Article 8. Under no circumstances shall the trust retain any part of the proceeds. In the event of any conflict between the terms of this plan and the terms of any insurance contract purchased hereunder, the plan provisions shall control. Any life insurance contracts held in the Trust Fund or in the separate trust are subject to the following limits: (a) Ordinary life - For purposes of these incidental insurance provisions, ordinary life insurance contracts are contracts with both nondecreasing death benefits and nonincreasing premiums. If such contracts are held, less than 1/2 of the aggregate employer contributions allocated to any Participant will be used to pay the premiums attributable to them. 67 94 (b) Term and universal life - No more than 1/4 of the aggregate employer contributions allocated to any participant will be used to pay the premiums on term life insurance contracts, universal life insurance contracts, and all other life insurance contracts which are not ordinary life. (c) Combination - The sum of 1/2 of the ordinary life insurance premiums and all other life insurance premiums will not exceed 1/4 of the aggregate employer contributions allocated to any Participant. 14.11. Voting; Delivery of Information. The Trustee shall deliver, or cause to be executed and delivered, to the Employer or Plan Administrator all notices, prospectuses, financial statements, proxies and proxy soliciting materials received by the Trustee relating to securities held by the Trust or, if applicable, deliver these materials to the appropriate Participant or the Beneficiary of a deceased Participant. The Trustee shall not vote any securities held by the Trust except in accordance with the written instructions of the Employer, Participant or the Beneficiary of the Participant, if the Participant is deceased; however, the Trustee may, in the absence of instructions, vote "present" for the sole purpose of allowing such shares to be counted for establishment of a quorum at a shareholders' meeting. The Trustee shall have no duty to solicit instructions from Participants, Beneficiaries, or the Employer. 14.12. Compensation and Expenses of Trustee. The Trustee's fee for performing its duties hereunder will be such reasonable amounts as the Trustee may from time to time specify by written agreement with the Employer. Such fee, any taxes of any kind which may be levied or assessed upon or with respect to the Trust Fund, and any and all expenses, including without limitation legal fees and expenses of administrative and judicial proceedings, reasonably incurred by the Trustee in connection with its duties and responsibilities hereunder will, unless some or all have been paid by said Employer, be paid first from forfeitures resulting under Section 7.07, then from the remaining Trust Fund and will, unless allocable to the Accounts of particular Participants, be charged against the respective Accounts of all Participants, in such reasonable manner as the Trustee may determine. 14.13. Reliance by Trustee on Other Persons. The Trustee may rely upon and act upon any writing from any person authorized by the Employer or Administrator to give instructions concerning the Plan and may conclusively rely upon and be protected in acting upon any written order from the Employer or Administrator or upon any other notice, request, consent, certificate, or other instructions or paper reasonably believed by it to have been executed by a duly authorized person, so long as it acts in good faith in taking or omitting to take any such action. The Trustee need not inquire as to the basis in fact of any statement in writing received from the Employer or Administrator. The Trustee will be entitled to rely on the latest certificate it has received from the Employer or Administrator as to any person or persons authorized to act for the Employer or Administrator hereunder 68 95 and to sign on behalf of the Employer or Administrator any directions or instructions, until it receives from the Employer or Administrator written notice that such authority has been revoked. Notwithstanding any provision contained herein, the Trustee will be under no duty to take any action with respect to any Participant's Account (other than as specified herein) unless and until the Employer or Administrator furnishes the Trustee with written instructions on a form acceptable to the Trustee, and the Trustee agrees thereto in writing. The Trustee will not be liable for any action taken pursuant to the Employer's or Administrator's written instructions (nor for the collection of contributions under the Plan, nor the purpose or propriety of any distribution made thereunder). 14.14. Indemnification by Employer. The Employer shall indemnify and save harmless the Trustee from and against any and all liability to which the Trustee may be subjected by reason of any act or conduct (except willful misconduct or negligence) in its capacity as Trustee, including all expenses reasonably incurred in its defense. 14.15. Consultation by Trustee with Counsel. The Trustee may consult with legal counsel (who may be but need not be counsel for the Employer or the Administrator) concerning any question which may arise with respect to its rights and duties under the Plan and Trust, and the opinion of such counsel will, to the extent permitted by law, be full and complete protection in respect of any action taken or omitted by the Trustee hereunder in good faith and in accordance with the opinion of such counsel. 14.16. Persons Dealing with the Trustee. No person dealing with the Trustee will be bound to see to the application of any money or property paid or delivered to the Trustee or to inquire into the validity or propriety of any transactions. 14.17. Resignation or Removal of Trustee. The Trustee may resign at any time by written notice to the Employer, which resignation shall be effective 60 days after delivery to the Employer. The Trustee may be removed by the Employer by written notice to the Trustee, which removal shall be effective 60 days after delivery to the Trustee. Upon resignation or removal of the Trustee, the Employer may appoint a successor trustee. Any such successor trustee will, upon written acceptance of his appointment, become vested with the estate, rights, powers, discretion, duties and obligations of the Trustee hereunder as if he had been originally named as Trustee in this Agreement. Upon resignation or removal of the Trustee, the Employer will no longer participate in this prototype plan and will be deemed to have adopted an individually designed plan. In such event, the Employer shall appoint a successor trustee within said 60-day period and the Trustee will transfer the assets of the Trust to the successor trustee upon receipt of sufficient evidence (such as a determination letter or opinion letter from the Internal Revenue Service or an opinion of 69 96 counsel satisfactory to the Trustee) that such trust will be a qualified trust under the Code. The appointment of a successor trustee shall be accomplished by delivery to the Trustee of written notice that the Employer has appointed such successor trustee, and written acceptance of such appointment by the successor trustee. The Trustee may, upon transfer and delivery of the Trust Fund to a successor trustee, reserve such reasonable amount as it shall deem necessary to provide for its fees, compensation, costs and expenses, or for the payment of any other liabilities chargeable against the Trust Fund for which it may be liable. The Trustee shall not be liable for the acts or omissions of any successor trustee. 14.18. Fiscal Year of the Trust. The fiscal year of the Trust will coincide with the Plan Year. 14.19. Discharge of Duties by Fiduciaries. The Trustee and the Employer and any other fiduciary shall discharge their duties under the Plan and this Trust Agreement solely in the interests of Participants and their Beneficiaries in accordance with the requirements of ERISA. 14.20. Amendment. In accordance with provisions of the Plan, and subject to the limitations set forth therein, this Trust Agreement may be amended by an instrument in writing signed by the Employer and the Trustee. No amendment to this Trust Agreement shall divert any part of the Trust Fund to any purpose other than as provided in Section 2 hereof. 14.21. Plan Termination. Upon termination or partial termination of the Plan or complete discontinuance of contributions thereunder, the Trustee will make distributions to the Participants or other persons entitled to distributions as the Employer or Administrator directs in accordance with the provisions of the Plan. In the absence of such instructions and unless the Plan otherwise provides, the Trustee will notify the Employer or Administrator of such situation and the Trustee will be under no duty to make any distributions under the Plan until it receives written instructions from the Employer or Administrator. Upon the completion of such distributions, the Trust will terminate, the Trustee will be relieved from all liability under the Trust, and no Participant or other person will have any claims thereunder, except as required by applicable law. 14.22. Permitted Reversion of Funds to Employer. If it is determined by the Internal Revenue Service that the Plan does not initially qualify under Section 401 of the Code, all assets then held under the Plan will be returned by the Trustee, as directed by the Administrator, to the Employer, but only if the application for determination is made by the time prescribed by law for filing the Employer's return for the taxable year in which the Plan was adopted or such later date as may be prescribed by regulations. Such distribution will be made within one year after the date the initial qualification is denied. Upon such distribution the Plan will be considered to be rescinded and to be of no force or effect. 70 97 Contributions under the Plan are conditioned upon their deductibility under Section 404 of the Code. In the event the deduction of a contribution made by the Employer is disallowed under Section 404 of the Code, such contribution (to the extent disallowed) must be returned to the Employer within one year of the disallowance of the deduction. Any contribution made by the Employer because of a mistake of fact must be returned to the Employer within one year of the contribution. 14.23. Governing Law. This Trust Agreement will be construed, administered and enforced according to ERISA and, to the extent not preempted thereby, the laws of the Commonwealth of Massachusetts. 71 98 ADDENDUM to CORPORATEplan for Retirement THE PROFIT SHARING/401(K) PLAN FIDELITY BASIC PLAN DOCUMENT No. 07 Re: Retroactive Effective Dates This Addendum is intended to clarify and set forth the effective dates of certain provisions of the Plan with respect to the adopting Employer. This Addendum applies only to the extent that the Employer has not amended the Plan with respect to the applicable provisions of the Tax Reform Act of 1986 ("TRA '86"). Unless otherwise specifically provided by the terms of the Plan, this amendment and restatement is effective with respect to each change made to satisfy the provisions of (i) TRA '86, (ii) any other change in the Code or ERISA, or (iii) regulations, rulings, or other published guidance issued under the Code, ERISA, or TRA '86, the first day of the first period (which may or may not be the first day of a Plan year) with respect to which such change became required because of such provision (including any day that became such as a result of an election or waiver by an Employer or a waiver or exemption issued under the Code, ERISA, or TRA `86), including, but not limited to, the following: (a) The following changes as required by TRA '86 are effective for Plan Years beginning after December 31, 1986, unless a delayed effective date applies because the Plan is collectively-bargained or because of an applicable exemption or waiver: (1) Changes in the definition of Employee in Section 2.01(a)(10) to reflect changes in the safe harbor exclusion for Leased Employees; (2) Changes in the definition of Highly Compensated Employee in Section 2.01(a)(16) (3) Addition of the aggregate deferral limit under Section 402(g) of the Code in Section 4.01(c); (4) Changes to the Code Section 401(k) discrimination test in Section 4.02; (5) Addition of the Code Section 401(m) discrimination test and application of the Aggregate Limit in Section 4.04; (6) Compliance with the Code Section 414(s) compensation definition requirements in Sections 5.03 and 9.03; (7) Changes in the Participant Loan provisions in Section 7.09; if applicable, to reflect new dollar limitations, repayment requirements, and restrictions applicable to Highly Compensated Employees under Section 72(p) of the Code; (8) Changes in the definition of Key Employee in Section 9.02(a); and 99 (9) Changes in the definition of Top-Heavy Ratio in Section 9.02(c)(3) to provide for ratable accrual. (b) Changes in the 415 limitations in Section 5.03 as required by TRA '86 are effective for limitation years beginning after December 31, 1986, unless a delayed effective date applies because the Plan is collectively-bargained or because of an applicable waiver or exemption; provided, however, that Annual Additions shall not be recalculated to take into account all Employee contributions for limitation years beginning before the effective date. (c) The following changes as required by TRA '86 are effective for Plan years beginning After December 31, 1987, unless a delayed effective date applies because the Plan is collectively-bargained or because of an applicable waiver or exemption: (1) Changes required to provide that allocations shall not be decreased or discontinued because of attainment of any age, if any; and (2) Changes in the definition of Normal Retirement Age in Section 1.06(a), if any, to reflect the five years of participation rule. (d) The following changes as required by TRA '86 are effective for Plan Years beginning after December 31, 1988, unless a delayed effective date applies because the Plan is collectively-bargained or because of an applicable waiver or exemption: (1) Changes in the vesting schedule specified in Section 1.07, if applicable; (2) Changes in the permitted disparity rules in Section 4.06(b0(2), if applicable; and (3) Changes in the requirements for electing a former vesting schedule in Section 10.03, if applicable. Notwithstanding the foregoing and subject to applicable law, with respect to Plan years beginning after December 31, 1986, and before the date of this restatement of the Plan, the Employer may elect to operate the Plan in accordance with any transitional rule published by the Internal Revenue Service or a reasonable, good faith interpretation of TRA '86 and related applicable law, in which event such transitional rule or good faith interpretation shall prevail over the provisions in this restatement of the Plan with respect to such Plan Year. Each other change made under the Plan is effective as of the date specified in Section 1.01(g) of the Adoption Agreement, unless otherwise specifically provided by the terms of the Plan. 2 100 CORPORATEplan for Retirement(SM) Profit Sharing/401(k) Plan Fidelity Basic Plan Document No. 07 Amendment One Section 2.01(a)(7) "Compensation" is amended to include: In addition to other applicable limitations set forth in the plan, and notwithstanding any other provision of the plan to the contrary, for plan years beginning on or after January 1, 1994, the annual compensation of each Employee taken into account under the plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For plan years beginning on or after January 1, 1994, any reference in this plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation limit set forth in this provision. Notwithstanding 2.01(a)(7)(A), for purpose of Section 4.02 (Additional Limit on Deferral Contributions) and Section 4.04 (Limit on Matching Contributions), the Employer may use Compensation as defined in Section 5.03(e)(2) excluding reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation and welfare benefits, but including amounts that are not includable in the gross income of the Participant under a salary reduction agreement by reason of the application of Section 125, 402(a)(8), 402(h) or 403(b) of the Code. If compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current plan year, the compensation for that prior determination period is subject to the OBRA '93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day of the first plan year beginning on or after January 1, 1994, the OBRA '93 annual compensation limit is $150,000. Section 8.01(d) "Distribution of Benefits to Participants and Beneficiaries" is amended to include: (5) If a distribution is one to which sections 401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution may commence less than 30 days after the notice required under section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (1) the administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and 3 101 the Participant, after receiving the notice, affirmatively elects a distribution. 4 102 Model Amendment to The CORPORATEplan FOR RETIREMENT(SM) PROFIT SHARING / 401 (k) PLAN (Document No. 07) This amendment is effective for plan years beginning after December 11, 1994. Notwithstanding any provision of this plan to the contrary, to the extent any optional form of benefit under this plan permits a distribution prior to the employee's retirement, death, disability, or severance from employment, and prior to plan termination, the optional form of benefit is not available with respect to benefits attributable to assets (including the post-transfer earnings thereon) and liabilities that are transferred, within the meaning of ss. 414 (1) of the Internal Revenue Code, to this plan from a money purchase pension plan qualified under ss. 401(a) of the Internal Revenue Code (other than any portion of those assets and liabilities attributable to voluntary employee contributions). 5 103 CORPORATEplan for Retirement(SM) Profit Sharing/401(k) Plan Fidelity Basic Plan Document No. 07 Amendment Two Effective December 1, 1996, Section 2.01(a)(25) shall be amended to read as follows: (25) "Registered Investment Company" means any one or more corporations, partnerships or trusts registered under the Investment Company Act of 1940. 6 104 SUMMARY PLAN DESCRIPTION MARINE TRANSPORT LINES, INC. SALARIED EMPLOYEES RETIREMENT INCOME PLAN [LOGO] 105 SUMMARY PLAN DESCRIPTION MARINE TRANSPORT LINES, INC. SALARIED EMPLOYEES RETIREMENT INCOME PLAN MARINE TRANSPORT LINES, INC. SALARIED EMPLOYEES RETIREMENT INCOME PLAN I. BASIC PLAN INFORMATION....................................................................... 1 A. Account............................................................................. 2 B. Employer............................................................................ 2 C. Participant......................................................................... 2 D. Plan Administrator.................................................................. 2 E. Plan Number......................................................................... 2 F. Plan Qualification.................................................................. 2 G. Plan Year........................................................................... 2 H. Service of Process.................................................................. 2 I. Trust Fund.......................................................................... 2 J. Trustee............................................................................. 3 II. PARTICIPATION............................................................................... 3 A. Eligibility Requirements............................................................ 3 III. CONTRIBUTIONS.............................................................................. 3 A. Employee Pretax Contributions....................................................... 4 B. Employee After-Tax Contributions.................................................... 5 C. Employer Matching Contributions..................................................... 5 D. Employer Contributions.............................................................. 5 E. Limit on Contributions.............................................................. 5 F. Rollover Contributions.............................................................. 5 IV. INVESTMENTS................................................................................. 6 A. Investments......................................................................... 7 B. Statement of Account................................................................ 8 V. VESTING...................................................................................... 9 VII. HARDSHIP WITHDRAWALS....................................................................... 10 VIII. IN-SERVICE WITHDRAWALS.................................................................... 11
106 A. Withdrawals After Age 59-1/2........................................................ 11 IX. TOTAL DISTRIBUTION OF BENEFITS.............................................................. 11 A. Benefit on Termination of Employment................................................ 12 B. Death Benefit....................................................................... 12 C. Retirement Benefit.................................................................. 12 D. Payment and Form of Benefits........................................................ 12 X. MISCELLANEOUS INFORMATION.................................................................... 14 A. Benefits Not Insured by PBGC........................................................ 15 B. Nontransferable Account............................................................. 15 C. Plan Amendment...................................................................... 15 D. Plan Termination.................................................................... 15 E. Interpretation of Plan.............................................................. 15 XI. INTERNAL REVENUE SERVICE TEST............................................................... 15 A. Non-Discrimination Test............................................................. 16 B. Top Heavy Test...................................................................... 16 XII. PARTICIPANT RIGHTS......................................................................... 16 A. Claims.............................................................................. 17 B. Statement of ERISA Rights........................................................... 17
107 SUMMARY PLAN DESCRIPTION MARINE TRANSPORT LINES, INC. SALARIED EMPLOYEES RETIREMENT INCOME PLAN The Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan (the 'Plan') of Marine Transport Lines, Inc. (the 'Employer') has been amended as of October 1, 1994 (the 'Effective Date'). This Plan is intended to be a qualified retirement plan under the Internal Revenue Code. The purpose of the Plan is to enable eligible Employees to save for retirement. It may also provide certain benefits in the event of death, disability, or other termination of employment. The Plan is for the exclusive benefit of eligible Employees and their beneficiaries. This booklet is called a Summary Plan Description (SPD) and it contains a summary in understandable language of your rights and benefits under the Plan. If you have difficulty understanding any part of this SPD, you should contact the Plan Administrator identified on page two during normal business hours for assistance. This SPD is a brief description of the Plan and Trust Agreement (Plan Document). It is not meant to interpret, extend or change the Plan Document in any way. A copy of the Plan Document is on file with the Plan Administrator and may be read by any Employee at any reasonable time. The Plan Document shall govern in the event of any discrepancy between this SPD and the actual provisions of the Plan. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 1 108 I. BASIC PLAN INFORMATION A. ACCOUNT This is an Account established by the Trustee for the purpose of recording contributions made on your behalf and any income, expenses, gains or losses thereon. It may also be referred to as 'Account' balance. B. EMPLOYER The name, address and business telephone number of the Employer is: Marine Transport Lines, Inc. 1200 Harbor Blvd. Weehawken, NJ 07087-0901 (201) 330-0200 The Employer's Identification Number is 51-0115513. C. PARTICIPANT A participant is an eligible Employee who has satisfied the eligibility and entry date requirements and is eligible to participate in the Plan. D. PLAN ADMINISTRATOR The Plan Administrator is responsible for the administration of the Plan. The Plan Administrator's duties are specifically identified in the Plan Document. The name, address and business telephone number of the Plan Administrator is: Marine Transport Lines, Inc. 1200 Harbor Blvd. Weehawken, NJ 07087-0901 (201) 330-0200 E. PLAN NUMBER The Plan number is 001. F. PLAN QUALIFICATION The Employer intends to request an individual Determination Letter from the Internal Revenue Service for the qualification of the Plan. G. PLAN YEAR The Plan Year is the twelve-month period ending on the last day of December. H. SERVICE OF PROCESS The Plan's agent for service of legal process is the Plan Administrator. I. TRUST FUND The Plan is administered under a trust fund arrangement. There is a written Plan and Trust Agreement entered into between the Trustee and the Employer. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 2 109 J. TRUSTEE The trustee is responsible for holding the Plan assets. The trustee's duties are specifically identified in the Plan Document and relate only to the assets in its possession. The name and address of the Plan's Trustee is: Fidelity Management Trust Company 82 Devonshire Street, L10A Boston, MA 02109. II. PARTICIPATION A. ELIGIBILITY REQUIREMENTS You are eligible to participate in the Plan if you are an Employee of the Employer. You will become eligible to participate in the Plan on the first day of the following month. However, if you are employed as of October 1, 1994 then you will become eligible to participate on that date. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 3 110 III. CONTRIBUTIONS For purposes of computing contributions under the Plan, as listed below, your Employer must first define 'compensation'. Eligible compensation generally means the taxable compensation for a Plan Year reportable by your Employer on your IRS Form W-2 for a Plan Year. Your compensation will also include any Employee pretax contributions you made under the Plan and any salary reductions you made under your Employer's cafeteria plan, 401(k) plan or other similar plan, if any. Compensation does not include any taxable fringe benefits or taxable Employee moving and other expense reimbursements reportable on your annual IRS Form W-2. Compensation for your first year of eligible Plan participation will be based upon compensation paid for the entire Plan Year. Tax laws limit the amount of compensation that may be taken into account each Plan Year and the maximum amount for the 1999 Plan Year is $160,000 (this amount is subject to adjustment each year). A. EMPLOYEE PRETAX CONTRIBUTIONS (1). REGULAR CONTRIBUTIONS You may elect to contribute a percentage of your eligible compensation into the Plan after you satisfy the Plan's eligibility requirements. The percentage of your compensation you elect will be withheld from each payroll on a pretax basis and contributed to the Plan on your behalf. You may defer, in whole percentages, up to an annual maximum of the lesser of 15% of eligible compensation or $10,000 in a calendar year (in 1999 and thereafter as adjusted by the Secretary of the Treasury). Your Employee pretax contributions belong to you and cannot be forfeited for any reason. However, there are special Internal Revenue Code rules which must be satisfied and may require that the amount of your contributions be reduced. If a reduction in your contribution is necessary, you will be notified by the Plan Administrator. You may increase or decrease the amount you contribute as of the first day of each month. You may completely suspend your contributions with sufficient notice to the Plan Administrator. Thereafter, if you want to resume your Employee pretax contributions as of January 1 and July 1, you must complete a new election form. (2). BONUS CONTRIBUTIONS You may make Employee pretax contributions on any Employer-paid bonus. You may defer a whole percentage from 1 to 100% of any bonus designated by the Employer into the Plan on a pretax basis by completing a special election form. The total amount of your bonus, catch up and Employee pretax contributions for the Plan Year may not exceed 15% of your eligible compensation or other applicable Internal Revenue Code limits. The Employer may refuse to accept any or all of your bonus contribution if it will have an adverse effect on the Plan's Non-Discrimination Test. (3). CATCH UP CONTRIBUTIONS You may make 'catch up' Employee pretax contributions in December. You may defer a whole percentage between 1 to 100% of your eligible compensation in December into the Plan on a pretax basis by completing a special election form. The total amount of your catch up, bonus, and Employee pretax contributions for the Plan Year may not exceed 15% of your eligible compensation or other applicable Internal Revenue Code limits. The Employer may refuse to accept any or all of your catch up contribution if it will have an adverse effect on the Plan's Non-Discrimination Test. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 4 111 B. EMPLOYEE AFTER-TAX CONTRIBUTIONS After you satisfy the Plan's eligibility requirements, you may elect to contribute a percentage of your compensation into the Plan on an after-tax basis. You may contribute, in whole percentages, up to an annual maximum of 10% of eligible compensation. However, there are special Internal Revenue Code rules which must be satisfied and the maximum may be a lower percentage. If a reduction in your contribution is necessary, you will be notified by the Plan Administrator. The Employer may refuse to accept your after-tax contributions if they will have an adverse effect on the Plan's Non-Discrimination Test. Your after-tax contributions belong to you and cannot be forfeited for any reason. C. EMPLOYER MATCHING CONTRIBUTIONS Each Plan Year the Employer will make matching contributions in an amount equal to 100% of your employee pretax contributions but subject to a maximum of 3% of your eligible compensation contributed to the Plan. You become eligible for the matching contribution only if you make a pretax Employee contribution. D. EMPLOYER CONTRIBUTIONS After you satisfy the Plan's eligibility requirements, the Employer will make profit sharing contributions in an amount equal to 3%. Additionally, the Employer may make annual discretionary profit sharing contributions in an amount to be determined at Plan Year-end by the Board of Directors Profit sharing contributions will be allocated in the ratio that your eligible compensation bears to the total compensation paid to all eligible participants for the Plan Year. You must be employed as of the last day of the Plan Year to be eligible for any profit sharing contributions that may be made for that Plan Year. Employer contributions must be made within prescribed legal time limits. E. LIMIT ON CONTRIBUTIONS Federal law requires that amounts contributed by you and on your behalf by your Employer for a given limitation year generally may not exceed the lesser of: - $30,000 (or such amount as may be prescribed by the Secretary of the Treasury); or - 25% of your annual compensation, excluding any salary reductions to an employer sponsored cafeteria plan, a 401(k) plan, a simplified employee pension or a tax-deferred annuity. Contributions under this Plan may not exceed the above limits. If this does occur then excess contributions in your Account may be forfeited or refunded to you. Income tax consequences may apply to you on any refund. You will be notified by the Plan Administrator if you will be subject to reduced contributions on your behalf. The limitation year for purposes of applying the above limits is the twelve month period ending December 31. Rollover contributions are not included in the limits on Employee and Employer contributions. F. ROLLOVER CONTRIBUTIONS You can rollover part or all of an 'eligible rollover distribution' you received from a prior employer's qualified plan, if allowed by the Plan Administrator. (The Plan Administrator reserves the right to refuse to accept any rollover contribution.) Alternatively, you may rollover a distribution you received from a rollover Individual Retirement Account (IRA) which consisted solely of an eligible rollover distribution and earnings thereon. If the rollover to the Plan is not a direct rollover (i.e. you received a cash distribution from your prior employer's plan or from your rollover IRA), then it must be received by the Trustee within 60 DAYS of your receipt of the distribution. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 5 112 You may make a rollover contribution to the Plan before becoming a Participant. However, you will not become a Participant entitled to make Employee pretax contributions and share in Employer contributions until you have met the Plan's eligibility and entry date requirements. Your rollover contribution Account will be subject to the terms of this Plan and will always be fully vested and nonforfeitable. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 6 113 IV. INVESTMENTS A. INVESTMENTS The Employee Retirement Income Security Act of 1974 (ERISA) imposes certain duties on the parties who are responsible for the operation of the plan. These parties, called fiduciaries, have a duty to invest plan assets in a prudent manner. However, an exception exists for plans which comply with ERISA Section 404(c) and permit a participant to exercise control over the assets in his/her Account and choose from a broad range of investment alternatives. This Plan is intended to be a Section 404(c) plan. This means that you and not the Plan fiduciaries are responsible for the investment decisions relating to the assets in your individual Account under the Plan. You will have the opportunity to direct the investments of your Account among the following Fidelity Investments Funds (the Fidelity Fund Number assigned to each fund is identified in parentheses): 1. Fidelity Retirement Government Money Market Portfolio (0631) Objective: Seeks a high current income, preservation of capital, and liquidity from money market instruments issued by the U.S. Government or its agencies. 2. Managed Income Portfolio (0632) Objective: Seeks the preservation of capital and high current income from GIC's, BIC's and money market instruments. 3. Fidelity Investment Grade Bond Fund (0026) Objective: Seeks a high current income consistent with reasonable investment risk. The Fund also seeks capital appreciation where appropriate. 4 Fidelity Growth & Income Portfolio (0027) Objective: Seeks high total return through a combination of current income and capital appreciation. Invests mainly in equity securities of companies that pay current dividends and offer potential growth of earnings. 5. Fidelity Growth Company Fund (0025) Objective: Seeks long-term capital appreciation through investments in companies with above-average growth potential. 6. Fidelity Magellan Fund (0021) Objective: Seeks growth of capital through investments in common stocks or securities convertible into common stocks. 7. Fidelity Global Bond Fund (0451) Objective: Seeks high total return by investing principally in debt securities issued anywhere in the world. 8. Fidelity Overseas Fund (0094) Objective: Long-term capital appreciation; invests mainly in foreign securities of issuers whose principal activities are outside of the U.S. 9. Fidelity Puritan Fund (0004) - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 7 114 Objective: High income consistent with preservation of capital; invests in a broadly diversified portfolio of high-yeilding common stocks, preferred stocks, and bonds of any quality. 10. Fidelity Contrafund (0022) Objective: Capital appreciation; a broad -based stock fund that seeks out undervalued or out-of-favor companies both in the U.S. and abroad. 11. Fidelity Low-Priced Stock (0316) Objective: Capital appreciation; invests mainly in a portfolio of low-priced stocks ($25 or less at time of purchase) that may be undervalued,overlooked or out-of-favor. 12. Spartan U.S. Equity Index Portfolio (0650) Objective: Seeks investment results that correspond to the total return performance of the Standard and Poor's 500 Index by duplicating the investment composition. You may obtain a prospectus or financial report for each of the above mutual funds by calling Fidelity at 1-800-544-8888. You may redirect the investment of your future contributions or exchange your existing Account balance among the above Fidelity mutual funds by calling 1-800-835-5097 on any business day between 8:30 AM (ET) and 8:00 PM (ET). Exchanges of your existing Account balance may only be made . You may call this same number 24 hours per day, seven days per week to check Account balances, prices or yields. All telephone calls will be recorded. You have the right to vote any mutual funds proxies based on the number of shares you own. Exchanges requested before 4:00 PM (ET) will be processed on that same business day based on the closing price of the mutual fund. Exchanges requested after 4:00 PM (ET) will be processed based on the next business day's closing price of the mutual fund. The minimum exchange is the lesser of $250 or 100% of your Account balance in the mutual fund. If your exchange is less than $250 then it may only be exchanged into one mutual fund. A written confirmation of your exchange will be mailed to you within seven business days. Fidelity reserves the right to change, restrict, or terminate participant exchange procedures to protect mutual fund shareholders. Exchanges from the Managed Income Portfolio* to certain bond or money market funds (considered "competing funds"), must first be exchanged to an option that is "non-competing", such as an equity mutual fund. After 90-days, you can then exchange to a "competing fund". Please contact your Plan Administrator or a Fidelity Participant Services Group representative at 1-800-835-5097 for more information. * The Managed Income Portfolio is not a mutual fund, but it is a commingled pool of the Fidelity Group Trust for Employee Benefit Plan. It is managed by Fidelity Management Trust Company. B. STATEMENT OF ACCOUNT Your Account will be updated each business day to reflect any investment earnings or losses on each Fidelity Investments mutual fund. A quarterly statement disclosing the value of your Account will be mailed to you within 20 days of the following dates: January 31, April 30, July 31 and October 31 - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 8 115 V. VESTING The term 'vesting' refers to your nonforfeitable right to the money in your Account. You receive vesting credit for the number of year(s) that you have worked for the Employer and any other legally related Employer. If you terminate your employment with the Employer, then you may be able to receive a portion or all of your Account based on your vested percentage. You are always 100% vested in your own Employee pretax Account, after-tax Account, Employer match, Employer profit sharing contribution Account, rollover Account and earnings thereon. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 9 116 VII. HARDSHIP WITHDRAWALS If approved by the Plan Administrator, you may withdraw your Employee pretax contributions, and rollover contributions if applicable, to satisfy any of the following immediate and heavy financial needs: (1) unreimbursed medical expenses for you, your spouse, children or dependents; (2) the purchase of your principal residence; (3) to prevent your eviction from or foreclosure on your principal residence; or (4) to pay for post-secondary education expenses for you, your spouse, children or dependents for the next twelve months. In accordance with Internal Revenue Service regulations you must first withdraw your Employee after-tax contributions Account and exhaust all other assets available to you prior to obtaining a hardship withdrawal. This includes obtaining a withdrawal of any Employee after-tax contribution in your Account and a loan from any other qualified plan maintained by your Employer. Your Employee pretax contributions to this Plan and any other Employer-sponsored qualified or non-qualified plan will be suspended for twelve months after your receipt of the hardship withdrawal. If you are married your spouse's consent will be required on the hardship withdrawal form. Your spouse's consent must be witnessed by a Plan representative or a Notary Public. The minimum hardship withdrawal is $1,000. The Plan Administrator will provide you with the appropriate form upon request. Hardship withdrawals will be withdrawn from available investment options in the order established by the Trustee. Consult your Plan Administrator for more information. You will be taxed on the amount of any hardship withdrawal under Internal Revenue Code rules and a 10% IRS premature distribution penalty tax may also be imposed on your withdrawal. Your hardship withdrawal will also be subject to the mandatory 20% Federal income tax withholding. You should refer to the 'Total Distribution of Benefits' section of this SPD. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 10 117 VIII. IN-SERVICE WITHDRAWALS A. WITHDRAWALS AFTER AGE 59-1/2 If you have reached age 59-1/2 then you may elect to withdraw all or a portion of your entire Account while you are still employed by your Employer. The Plan Administrator will provide you with the appropriate form upon request. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 11 118 IX. TOTAL DISTRIBUTION OF BENEFITS A. BENEFIT ON TERMINATION OF EMPLOYMENT If you terminate your employment with your Employer, then you may elect to receive a distribution of your vested Account balance from the Plan. You should contact the Plan Administrator to obtain the appropriate form to complete to request a distribution. B. DEATH BENEFIT If you die while a Participant in the Plan or before any or all benefits are paid to you, then your beneficiary or beneficiaries will be entitled to receive your Account balance. You may designate a beneficiary or beneficiaries on a designation form. The completed beneficiary designation form must be filed with the Plan Administrator. If you are married and want to designate someone other than your spouse as your primary beneficiary, then your spouse must consent to this designation by signing the form. His/her signature must be witnessed by a Plan representative or a Notary Public. You should contact the Plan Administrator to obtain a beneficiary designation form. C. RETIREMENT BENEFIT You do not have to terminate your employment with your Employer just because you attain your early retirement age of 55 or you attain your normal retirement age of 65. D. PAYMENT AND FORM OF BENEFITS The Plan is designed to provide you with benefits at the time of your retirement. However, if your employment with your Employer is terminated because of death, disability, retirement, or for any other reason, then you may request a distribution of your vested Account balance upon proper written direction delivered to the Plan Administrator. You should contact the Plan Administrator to obtain the appropriate form to request a distribution and a copy of the 'Special Tax Notice Regarding Plan Payments'. Even if your employment with the Employer has not terminated, the Plan Administrator will direct the Trustee to begin distributions to you no later than April 1 of the calendar year after you attain the age of 70-1/2. The Plan Administrator will direct the Trustee to make a lump sum distribution to you if you terminate your employment and your vested Account balance is less than $5,000 regardless of whether you request the distribution. Your written consent and your spouse's written consent will be required for any distribution before age 65 if your vested Account balance is greater than $5,000. Properly authorized distribution requests will be processed by the Trustee on a monthly basis. The following forms of benefits are available under the Plan: - - LUMP SUM DISTRIBUTIONS Your entire vested Account balance will be paid to you within one calendar year. If your vested Account balance is greater than $5,000 and you are a married Participant, spousal consent for a lump sum distribution will be required on the Payout Request Form. The consent must be witnessed by a Plan representative or a Notary Public. - - INSTALLMENT DISTRIBUTIONS Your vested Account balance will be paid to you in periodic payments if your Account balance is greater than $5,000. If you are a married Participant, spousal consent for an installment distribution will be required on the Payout Request Form and must be witnessed by a Plan representative or a Notary Public. - - PURCHASE OF AN ANNUITY - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 12 119 The normal form of payment under this Plan is an annuity. This means that your vested Account balance as of your annuity starting date will be used to purchase a life annuity contract from an insurance company if you are single, or a qualified joint and survivor annuity if you are married. (The annuity starting date is the date that is ninety days prior to the initial annuity payment.) The insurance company will make monthly payments to you for your life based upon the type of annuity purchased. Upon your death, your spouse, if he/she is still living at your death, will receive 50% of the monthly amount you received. The annuity will stop once your spouse dies and all payments will cease. You may choose a form of payment other than the annuity only upon proper election by you and your spouse, if applicable. Any election to waive the qualified joint and survivor annuity must be made in writing by you and your spouse. Your spouse's signature must be witnessed by a Plan representative or a Notary Public. You may obtain the appropriate waiver election form from the Plan Administrator. If you are 35 or older and die while you are still employed by the Employer then your surviving spouse will be entitled to a qualified pre-retirement survivor annuity. Your Account balance may be used to purchase an annuity contract from an insurance company. Monthly benefit payments will then be made from the insurance company directly to your spouse for his/her lifetime. You and your spouse may waive the qualified pre-retirement survivor annuity upon proper election and choose another form of payment or another beneficiary. Any waiver must be made in writing by you and your spouse. Your spouse's signature must be witnessed by a Plan representative or a Notary Public. You can obtain the appropriate waiver election form from the Plan Administrator. Lump sum distributions and in certain situations installment distributions will be subject to the following rules: (1). CASH DISTRIBUTION Any taxable distribution paid by the Trustee directly to you will be subject to mandatory Federal income tax withholding of 20% of the requested distribution. You will receive 80% of the taxable distribution and the other 20% will be sent to the IRS as Federal income tax withholding for that year. You cannot elect out of this tax withholding. This withholding is not a penalty but rather a prepayment of your Federal income taxes. You may rollover the taxable distribution you receive to an IRA or your new employer's qualified Plan, if it accepts rollover contributions. However, you must rollover this distribution within 60 DAYS after receipt. You will not be taxed on any amounts rolled over directly into the IRA or your new employer's qualified Plan until those amounts are later distributed to you. (2). DIRECT ROLLOVER DISTRIBUTION As an alternative to a cash distribution, you may request that your entire distribution be rolled directly into a Fidelity IRA, a non-Fidelity IRA or to your new employer's qualified plan if it accepts rollover contributions. Federal income taxes will not be withheld on any direct rollover distribution. (a). Rollover to a Fidelity IRA - You must complete a Fidelity 'SEE' Rollover IRA application. Attach this application to the completed Payout form. After authorizing your distribution, the Plan Administrator will forward this material to the Trustee. Your vested Account balance will be transferred to a Fidelity Rollover IRA. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 13 120 (b). Rollover to a Non-Fidelity IRA - You must complete a Payout form and indicate the name and address of the custodian or trustee, and Account number for your IRA. After authorizing your distribution, the Plan Administrator will forward the form to the Trustee. A check will be issued by the Trustee payable to the IRA custodian or trustee for your benefit. The check will contain the notation 'Direct Rollover' and it will be mailed directly to you. You will be responsible for forwarding it on to the custodian or trustee. You must provide the Plan Administrator with complete information to facilitate your direct rollover distribution. (c). Rollover to your New Employer's Qualified Plan - You should check with your new employer to determine if its plan will accept rollover contributions. If allowed, then you must complete a Payout form and indicate the name, address and plan number of your new employer's qualified plan. After authorizing your distribution, the Plan Administrator will forward the form to the Trustee. A check will be issued by the Trustee payable to the trustee of your new employer's qualified plan. The check will contain the notation 'Direct Rollover' and it will be mailed directly to you. You will be responsible for forwarding it on to the new trustee. You must provide the Plan Administrator with complete information to facilitate your direct rollover distribution. (3). COMBINATION CASH DISTRIBUTION AND DIRECT ROLLOVER DISTRIBUTION You may request that part of your distribution be paid directly to you and the balance to be rolled into an IRA or your new employer's qualified Plan. Any cash distribution you receive will be subject to the Federal income tax withholding rules referred to in (1). Any direct rollover distribution will be made in accordance with (2). You will pay income tax on the amount of any taxable distribution you receive from the Plan unless it is rolled into an IRA or your new employer's qualified Plan. A 10% IRS premature distribution penalty tax may also apply to your taxable distribution unless it is rolled into an IRA or another qualified plan. The 20% Federal income tax withheld under this section may not cover your entire income tax liability. Consult with your tax advisor for further details. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 14 121 X. MISCELLANEOUS INFORMATION A. BENEFITS NOT INSURED BY PBGC Benefits provided by the Plan are not insured or guaranteed by the Pension Benefit Guaranty Corporation (PBGC) under Title IV of the Employee Retirement Income Security Act of 1974 (ERISA) because the insurance provisions under ERISA are not applicable to this particular Plan. You will only be entitled to the vested benefits in your Account based upon the provisions of the Plan. B. NONTRANSFERABLE ACCOUNT Your Account may not be transferred, assigned or used as collateral for a loan except to the extent required by law. Creditors may not attach, garnish or otherwise interfere with your Account balance except in the case of a Qualified Domestic Relations Order (QDRO). A QDRO is a special order issued by the court in a divorce, child support or similar proceeding. In this situation, your spouse (or former spouse) or someone other than you or your beneficiary, may be entitled to a portion or all of your Account balance. C. PLAN AMENDMENT Certain provisions of the Plan are subject to amendment by the Employer that may directly or indirectly modify certain Plan rights and benefits. Any amendment changing the vesting schedule cannot reduce the existing vested percentage of your Account balance derived from Employer contributions. If you have three or more years of service with the Employer and the vesting schedule is amended then you will be given a choice to have the vested percentage of future Employer contributions made to your Account computed under the new or the old vesting schedule. The Plan Administrator will provide you with the appropriate information to make an informed decision if the Plan's vesting schedule is amended. D. PLAN TERMINATION The Employer has no legal or contractual obligation to make annual contributions to or to continue the Plan. With the approval of the Board of Directors, the Employer may at any time reduce or suspend its contributions, if applicable. In the event the Plan should terminate, the Plan Administrator will facilitate the distribution of Account balances under the provisions of the Plan and Trust Agreement until all assets have been distributed by the Trustee. While the Employer intends to continue the Plan, it reserves the right to change or terminate the Plan at any time as circumstances may dictate. E. INTERPRETATION OF PLAN The Plan Administrator has the power and discretionary authority to construe the terms of the Plan and to determine all questions that arise under it. Such power and authority include, for example, the administrative discretion necessary to resolve issues with respect to an Employee's eligibility for benefits, credited services, disability, and retirement, or to interpret any other term contained in Plan documents. The Plan Administrator's interpretations and determinations are binding on all participants, employees, former employees, and their beneficiaries. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 15 122 XI. INTERNAL REVENUE SERVICE TEST A. NON-DISCRIMINATION TEST Your Plan is intended to qualify under Section 401(k) of the Internal Revenue Code. The Internal Revenue Service requires the Plan to meet special non-discrimination test as of the last day of each Plan Year. This test is intended to ensure that there is a fair level of participation by all eligible participants. In order to meet the test, the Employer encourages participation from all eligible Employees. Depending upon the results of the test, the Plan Administrator may have to refund Employee pretax contributions contributed to the Plan to certain highly compensated employees, as determined under Internal Revenue Service regulations. Employee pretax contributions will be refunded on a prorata basis from each investment option. You will be notified by the Plan Administrator if any of your contributions will be refunded to you. B. TOP HEAVY TEST The Plan is subject to strict Internal Revenue Service rules. One of these rules involves a 'Top-Heavy' test. Each Plan Year, the Plan Administrator tests this Plan together with all other Employer-sponsored qualified plans to make sure that no more than 60% of the benefits are for 'Key' Employees. If this Plan is Top-Heavy, then the Employer may be required to make minimum annual contributions to this Plan for you if you are employed as of Plan Year-end. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 16 123 XII. PARTICIPANT RIGHTS A. CLAIMS (1). CLAIM PROCEDURE You or your Beneficiary should make a request to obtain any benefits you are entitled to under the Plan in the event of your termination of employment. The Plan Administrator will provide you with a request form to complete. Your request will be considered a claim and will be subject to a full and fair review by the Plan Administrator. If your claim is wholly or partially denied by the Plan Administrator then you may appeal it in accordance with the claim review procedure. (2). CLAIM REVIEW PROCEDURE You or your Beneficiary may file a claim for benefits under the Plan with the Plan Administrator on a form supplied by the Employer. The Plan Administrator will provide you with written notice of the disposition of your claim within 90 days after it has been filed (or, in certain circumstances, within 180 days). In the event the claim is denied then the reasons shall be disclosed and/or provisions of the Plan shall be cited as appropriate. You or your Beneficiary upon request to the Plan Administrator may appeal the denial of your claim. If you wish further consideration of your position then you must provide the Plan Administrator with a written request for a hearing. You must also provide a detailed written statement of your position for your claim and file it with the Plan Administrator no later than 60 days after requesting a hearing. The Plan Administrator shall make a decision on your claim and it will be communicated to you in writing within 60 days (or, in certain circumstances, within 120 days). It will advise you if you have any right to appeal the decision. B. STATEMENT OF ERISA RIGHTS As a participant in this Plan you are entitled to certain rights and protections under ERISA that provides that all Plan Participants shall be entitled to the following: - Examine, without charge, at the Plan Administrator's office and at other specified locations such as work sites and union halls, all Plan Documents, including insurance contracts, collective bargaining agreements and copies of all documents filed by the Plan with the U.S. Department of Labor, such as detailed annual reports and Plan descriptions. - Obtain copies of all Plan Documents and other Plan information upon written request to the Plan Administrator; the Plan Administrator may make a reasonable charge for the copies. - Receive a summary of the Plan's annual financial report. The Plan Administrator is required by law to furnish you with a copy of this summary annual report. - Obtain a statement of your Account under the Plan. You must direct this request in writing to the Plan Administrator. You may request a statement only once a year and the Plan must provide the statement free of charge. In addition to creating rights for Plan Participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate your Plan, called 'fiduciaries' of the Plan, have a duty to do so prudently and in the interest of you and other Plan Participants and beneficiaries. No one, including your Employer, your union, or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a pension benefit or exercising your rights under ERISA. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 17 124 If your claim for a benefit is denied, in whole or in part, you must receive a written explanation of the reason for the denial. You have the right to have the Plan Administrator review and reconsider your claim. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the Plan and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent for reasons beyond the control of the Plan Administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or federal court. If it should happen that Plan fiduciaries misuse the Plan's money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees; for example, if it finds your claim frivolous. If you have any questions about your Plan, you should contact the Plan Administrator. If you have any questions about your rights under ERISA, you should contact the nearest area office of the U.S. Labor-Management Services Administration, Department of Labor. - -------------------------------------------------------------------------------- Marine Transport Lines, Inc. Salaried Employees Retirement Income Plan 18 EX-21 14 SUBSIDIARIES OF THE COMPANY 1 Exhibit 21 SUBSIDIARIES OF MARINE TRANSPORT CORPORATION DELAWARE SUBSIDIARIES: Hanover Marine Carriers, Inc. Harlink Corp. Intrepid Ship Management, Inc. Marine Alaska, Inc. Marine Barge Company Marine Car Carriers, Inc. Marine Chemical Carriers Corporation Marine Chemical Trading, Inc. Marine Chemical Navigation Corporation Marine Navigation Company, Inc. Marine Navigation Sulphur Carriers, Inc. Marine Personnel & Provisioning, Inc. Marine Purchasing Corporation Marine Sulphur Shipping Corporation Marine Technical Services Corporation Marine Transport Lines, Inc. Marine Transport Management, Inc. MTL Petrolink, Corp. Nuelink Corp. Offshore Marine Services, Inc. OMI Challenger Transport, Inc. Oswego Shipping Corporation Patriot Transport, Inc. Rover Transport, Inc. LIBERIAN SUBSIDIARIES: Oswego Chemical Carriers Corporation Oswego Corporation Oswego Shipbuilding Corporation MARSHALLL ISLANDS SUBSIDIARY: Marine Car Carriers, Inc. (MI) NEW YORK: Courier Transport Inc. TEXAS: OMIP Inc. EX-27.1 15 FINANCIAL DATA SCHEDULE
5 EXHIBIT 27 CONTAINS SUMMARY INFORMATION EXTRACTED FROM MARINE TRANSPORT CORPORATION SUBSIDIARIES CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 12-MOS DEC-31-1998 DEC-31-1998 1 8,652 0 13,624 509 0 28,940 106,481 67,703 106,470 20,730 24,111 0 0 3,277 12,692 106,470 0 184,778 0 151,930 38,803 0 8,378 (6,913) (39,985) 0 0 0 0 33,072 6.31 6.31
-----END PRIVACY-ENHANCED MESSAGE-----