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Table of Contents

United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 1-12289
SEACOR Holdings Inc.
(Exact name of Registrant as Specified in Its Charter)
Delaware 13-3542736
(State or Other Jurisdiction of
Incorporation or Organization) 		(I.R.S. Employer
Identification No.)
2200 Eller Drive, P.O. Box 13038,
Fort Lauderdale, Florida
33316
(Address of Principal Executive Office) (Zip Code)
Registrant’s telephone number, including area code (954) 523-2200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
Common Stock, par value $.01 per share CKH New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes    ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes     ☒ No
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 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    ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes    ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes    ☒ No
The aggregate market value of the voting stock of the registrant held by non-affiliates as of June 30, 2019 was approximately 821,127,160 based on the closing price on the New York Stock Exchange on such date. The total number of shares of Common Stock issued and outstanding as of February 25, 2020 was 20,179,162.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement for its 2020 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission (the “Commission”) pursuant to Regulation 14A within 120 days after the end of the Registrant’s last fiscal year is incorporated by reference into Part III of this Annual Report on Form 10-K.


Table of Contents
SEACOR HOLDINGS INC.
FORM 10-K
TABLE OF CONTENTS
PART I
Item 1.
1
1
1
2
7
12
Other
12
13
18
18
Item 1A.
19
Item 1B.
31
Item 2.
31
Item 3.
31
Item 4.
32
33
PART II
Item 5.
34
34
35
36
Item 6.
37
i
Table of Contents
Item 7.
38
38
51
56
56
58
58
Item 7A.
61
Item 8.
62
Item 9.
62
Item 9A.
62
Item 9B.
63
PART III
Item 10.
63
Item 11.
63
Item 12.
63
Item 13.
63
Item 14.
63
PART IV
Item 15.
119
Item 16.
121

ii
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FORWARD-LOOKING STATEMENTS
Certain statements discussed in Item 1. (Business), Item 1A. (Risk Factors), Item 3. (Legal Proceedings), Item 7. (Management’s Discussion and Analysis of Financial Condition and Results of Operations), Item 7A. (Quantitative and Qualitative Disclosures About Market Risk) and elsewhere in this Annual Report on Form 10-K, as well as in other materials and oral statements that the Company releases from time to time to the public constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concern management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters and involve significant known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Certain of these risks, uncertainties and other important factors are discussed in Item 1A. (Risk Factors) and Item 7. (Management’s Discussion and Analysis of Financial Condition and Results of Operations). However, it should be understood that it is not possible to identify or predict all such risks and other factors that could affect these forward looking statements. These statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “estimate,” “expect,” “project,” “intend,” “believe,” “plan,” “target,” “forecast” and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. It is advisable, however, to consult any further disclosures the Company makes on related subjects in its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission.
PART I
ITEM 1. BUSINESS
General
Unless the context indicates otherwise, the terms “we,” “our,” “ours,” “us” and the “Company” refer to SEACOR Holdings Inc. and its consolidated subsidiaries. “SEACOR” refers to SEACOR Holdings Inc., incorporated in 1989 in Delaware, without its subsidiaries. “Common Stock” refers to the common stock, par value $.01 per share, of SEACOR. The Company’s fiscal year ended on December 31, 2019.
SEACOR’s principal executive office is located at 2200 Eller Drive, P.O. Box 13038, Fort Lauderdale, Florida 33316, and its telephone number is (954) 523-2200. SEACOR’s website address is www.seacorholdings.com. Any reference to SEACOR’s website is not intended to incorporate the information on the website into this Annual Report on Form 10-K.
The Company’s corporate governance documents, including the Board of Directors’ Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee charters are available, free of charge, on SEACOR’s website or in print for stockholders.
All of the Company’s periodic reports filed with the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on SEACOR’s website, including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and any amendments to those reports. These reports and amendments are available on SEACOR’s website as soon as reasonably practicable after the Company electronically files the reports or amendments with the SEC. The SEC maintains a website (www.sec.gov) that contains these reports, proxy and information statements and other information.
Segment Information
SEACOR is a diversified holding company with interests in domestic and international transportation and logistics, risk management consultancy and other businesses. The Company conducts its activities in the following reporting segments:
•Ocean Transportation & Logistics Services
•Inland Transportation & Logistics Services
•Witt O’Brien’s
•Other
1
Table of Contents
Discontinued Operations
On June 1, 2017, the Company completed the spin-off of SEACOR Marine Holdings Inc. (“SEACOR Marine”), the company that operated SEACOR’s Offshore Marine Services business segment, by means of a dividend of all the issued and outstanding common stock of SEACOR Marine to SEACOR’s shareholders (the “Spin-off”). Prior to the Spin-off, SEACOR and SEACOR Marine entered into a Distribution Agreement and other agreements that govern the post-Spin-off relationship between SEACOR and SEACOR Marine. For all periods presented herein, the Company has reported the historical financial position, results of operations and cash flows of SEACOR Marine as discontinued operations.
On July 3, 2017, the Company completed the sale of its 70% interest in Illinois Corn Processing LLC (“ICP”), the company that operated SEACOR’s Illinois Corn Processing business segment. For all periods presented herein, the Company has reported the historical financial position, results of operations and cash flows of ICP as discontinued operations.
Ocean Transportation & Logistics Services
Business
Ocean Transportation & Logistics Services (“Ocean Services”) owns and operates a diversified fleet of bulk transportation, port and infrastructure, and logistics assets, including U.S. coastwise eligible vessels and vessels trading internationally. Ocean Services owns and operates U.S.-flag petroleum and chemical carriers servicing the U.S. coastwise crude oil, petroleum products and chemical trades. Ocean Services’ dry bulk vessels operate in the U.S. coastwise trade. Ocean Services’ port and infrastructure services includes assisting deep-sea vessels docking in U.S. Gulf and East Coast ports, providing ocean towing services between U.S. ports and providing oil terminal support and bunkering operations in St. Eustatius and the Bahamas. Ocean Services’ logistics assets and services include U.S.-flag Pure Car/Truck Carriers (“PCTCs”) operating globally under the U.S. Maritime Security Program (“MSP”) and liner, short-sea, rail car and project cargo transportation and logistics solutions to and from ports in the Southeastern United States, the Caribbean (including Puerto Rico), the Bahamas and Mexico as well as ‘door-to-door’ solutions for certain customers. Ocean Services also provides technical ship management services for third-party vessel owners. Ocean Services contributed 53%, 50% and 54% of the Company's consolidated operating revenues during the years ended December 31, 2019, 2018 and 2017, respectively.
For a discussion of risk and economic factors that may impact Ocean Services’ financial position and its results of operations, see “Item 1A. Risk Factors” and “Ocean Transportation & Logistics Services” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
2
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Equipment, Services and Markets
The following tables identify the types of equipment that comprise Ocean Services' fleet as of December 31 for the indicated years. “Owned” are majority owned and controlled by Ocean Services. “Leased-in” may either be equipment contracted from leasing companies to which Ocean Services may have sold such equipment or equipment chartered-in from third parties. “Joint Ventured” are owned by entities in which Ocean Services does not have a controlling interest.
Owned Leased-in Joint Ventured Total
2019
Bulk Transportation Services:
Petroleum and chemical carriers - U.S.-flag 7    2    —    9   
Bulk carriers - U.S.-flag 2    —    —    2   
Port & Infrastructure Services:
Harbor tugs - U.S.-flag 20    4    —    24   
Harbor tugs - Foreign-flag 6    —    2    8   
Offshore tugs - U.S.-flag 1    —    —    1   
Ocean liquid tank barges - U.S.-flag 5    —    —    5   
Ocean liquid tank barges - Foreign-flag —    —    1    1   
Specialty vessels - Foreign-flag(1)
—    —    2    2   
Logistics Services:
PCTC(2) - U.S.-flag
—    4    —    4   
Short-sea container/RORO(3) vessels - Foreign-flag
8    —    —    8   
RORO(3) & deck barges - U.S.-flag
—    —    7    7   
Rail ferries - Foreign-flag —    —    2    2   
49    10    14    73   
2018
Bulk Transportation Services:
Petroleum and chemical carriers - U.S.-flag 7    3    —    10   
Bulk carriers - U.S.-flag 2    —    —    2   
Port & Infrastructure Services:
Harbor tugs - U.S.-flag 19    5    —    24   
Harbor tugs - Foreign-flag 6    —    2    8   
Offshore tugs - U.S.-flag 1    —    —    1   
Ocean liquid tank barges - U.S.-flag 5    —    —    5   
Ocean liquid tank barges - Foreign-flag —    —    1    1   
Logistics Services:
PCTC(2) - U.S.-flag
—    4    —    4   
Short-sea container/RORO(3) vessels - Foreign-flag
9    —    —    9   
RORO(3) & deck barges - U.S.-flag
—    —    7    7   
Rail ferries - Foreign-flag —    —    2    2   
49    12    12    73   
2017
Bulk Transportation Services:
Petroleum and chemical carriers - U.S.-flag 8    3    —    11   
Bulk carriers - U.S.-flag 2    —    —    2   
Port & Infrastructure Services:
Harbor tugs - U.S.-flag 15    8    —    23   
Harbor tugs - Foreign-flag 6    —    2    8   
Offshore tugs - U.S.-flag 1    —    —    1   
Ocean liquid tank barges - U.S.-flag 5    —    —    5   
Ocean liquid tank barges - Foreign-flag —    —    1    1   
Logistics Services:
PCTC(2) - U.S.-flag
—    4    —    4   
Short-sea container/RORO(3) vessels - Foreign-flag
7    —    —    7   
RORO(3) & deck barges - U.S.-flag
—    —    7    7   
Rail ferries - Foreign-flag —    —    2    2   
44    15    12    71   
______________________
(1)One line handling and one crew transport vessel.
(2)Pure Car/Truck Carrier.
(3)Roll On/Roll Off.
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Bulk Transportation Services
Petroleum and Chemical Transportation. In the U.S. coastwise petroleum and chemical transportation trade, Ocean Services’ oceangoing vessels transport crude oil, petroleum products and chemicals primarily from production areas, refineries and storage facilities along the coast of the U.S. Gulf of Mexico to refineries, utilities, waterfront industrial facilities and distribution facilities along the U.S. Gulf of Mexico and the U.S. Atlantic and Pacific coasts. Ocean Services operates a fleet of owned and leased-in U.S.-flag petroleum and chemical carriers servicing this trade, which as of December 31, 2019 included the following vessels:
Name of Vessel Year of Build Capacity
in barrels
Tonnage
in  “dwt”(1)
Seabulk Challenge 1981 294,000    48,700   
Seabulk Arctic 1998 340,000    46,000   
Mississippi Voyager(2)
1998 340,000    46,000   
Florida Voyager(2)(3)
1998 340,000    46,000   
Brenton Reef 1999 341,000    45,000   
Independence 2016 330,000    49,000   
Constitution(2)
2016 330,000    49,000   
Sea-Power/Sea-Chem I(4)
2016 185,000    29,999   
Texas Voyager(2)(3)
2017 330,000    49,000   
______________________
(1)Deadweight tons or “dwt.”
(2)Operating under long-term bareboat charter with a customer.
(3)Leased-in vessel.
(4)Articulated tug-barge.
Dry Bulk Transportation. In the U.S. coastwise dry bulk trade, Ocean Services’ U.S.-flag bulk carriers transport Agremax, coal, petroleum coke, finished fertilizer, phosphate rock and other bulk commodities within the U.S. Gulf of Mexico, U.S. East Coast ports and Puerto Rico. As of December 31, 2019, Ocean Services’ fleet of owned vessels servicing this trade included the following vessels:
Name of Vessel Year of Build
Tonnage
in  “dwt”(1)
Mississippi Enterprise 1980 37,000   
Texas Enterprise 1981 37,000   
______________________
(1)Deadweight tons or “dwt.”
Port & Infrastructure Services
Harbor tugs operate alongside oceangoing vessels to escort them to their berth, assist in docking and undocking, and escort them back out to sea. As of December 31, 2019, Ocean Services’ U.S.-flag harbor tugs were operating in various ports including three in Port Canaveral, Florida, three in Port Everglades, Florida, one in the Port of Miami, Florida, four in Port Tampa, Florida, three in the Port of Mobile, Alabama, three in the Port of Lake Charles, Louisiana and seven in Port Arthur, Texas.
Offshore towing activities include the long haul towing of ocean barges, dead ships and other large floating equipment requiring auxiliary power.
Ocean Services also provides bunkering (fueling) services to ships operating in the Caribbean Sea, more specifically in St. Eustatius and vessels calling in the Bahamas. Bunkering activities typically include one tug and one ocean liquid tank barge mooring alongside a docked or anchored vessel and transferring fuel. Ocean Services leases out four foreign-flag harbor tugs and five U.S.-flag ocean liquid tank barges to a bunkering operator in St. Eustatius and operates four foreign-flag harbor tugs and one ocean liquid tank barge in Freeport, Grand Bahama supporting terminal and bunkering operations through its 50% noncontrolling interest in Kotug Seabulk Maritime LLC (“KSM”).
Logistics Services
In the logistics services business, PCTCs, RORO barges, deck barges, small RORO and container vessels and specialized rail ferries provide unit freight and general cargo transportation services. These services include receiving and transporting full container loads and Less-Container-Load ("LCL") cargo for transporting in shipping containers, rail cars, out-of-gauge project cargoes, automobiles and U.S. military vehicles. PCTCs generally handle cargo moving to and from the United States and international destinations, including Europe, the Middle East and Western Pacific ports (including ports in Guam, Japan and South Korea). Short-sea container/RORO vessels are engaged in services to and from ports in the
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Southeastern United States, the Caribbean (including Puerto Rico), the Bahamas and Mexico. RORO and deck barges are operated in the Puerto Rico liner trade through Ocean Services’ 55% noncontrolling interest in Trailer Bridge, Inc. (“Trailer Bridge”). The rail ferries operate between Alabama and Mexico through Ocean Services’ 50% noncontrolling interest in Golfo de Mexico Rail Ferry Holdings LLC (“Golfo de Mexico”).
As of December 31, 2019, Ocean Services’ fleet of owned and leased-in equipment servicing the logistics trade included the following vessels:
Capacity
Name of Vessel Year of Build
TEU(1)
CEU(2)
Tonnage
in  “dwt”(3)
PCTCs:
Green Ridge(4) - U.S.-flag
1998 n/a 6,000    21,523   
Green Lake(4) - U.S.-flag
1998 n/a 5,980    22,799   
Green Cove(4) - U.S.-flag
1999 n/a 5,980    22,747   
Green Bay(4) - U.S.-flag
2007 n/a 6,400    18,090   
Short-sea Container/RORO Vessels:
Bahamas Express - Foreign-flag 2010 46    n/a    648   
Cape Express - Foreign-flag 2008 46    n/a    648   
Caribbean Express I - Foreign-flag 2000 46    n/a    648   
Emerald Express - Foreign-flag 2001 46    n/a    648   
Florida Express - Foreign-flag 1998 46    n/a    1,740   
Grand Express - Foreign-flag 2011 144    n/a    2,244   
Sea Express II - Foreign-flag 2006 46    n/a    648   
Pelagic Express - Foreign-flag 2008 128    n/a    2,778   
______________________
(1)Twenty-foot equivalent unit is a measure of volume in units of twenty-foot long containers.
(2)Car equivalent unit is a measure of the cargo carrying capacity of a Pure Car/Truck Carrier.
(3)Deadweight tons or “dwt.”
(4)Leased-in vessel.
Managed Services
Ocean Services provides crew and technical ship management services to third party ship owners and certain of its 50% or less owned companies. As of December 31, 2019, Ocean Services provided management services for ten vessels including one U.S.-flag petroleum carrier, two U.S.-flag heavy lift vessels, two foreign-flag rail ferries, four foreign-flag harbor tugs and one foreign-flag ocean liquid tank barge.
Customers and Contractual Arrangements
Bulk Transportation Services. The primary customers for petroleum and chemical transportation services are multinational oil companies, refining companies, major gasoline retailers, oil trading companies and large industrial consumers or producers of crude, petroleum and chemicals. Services are generally contracted on the basis of short-term or long-term time charters, bareboat charters, voyage charters and contracts of affreightment or other transportation agreements tailored to the shipper's requirements. The primary customers for dry bulk transportation services are regional power utilities requiring waterborne coal, petroleum coke and residual ash transportation and large fertilizer producers moving Florida sourced products into the lower Mississippi River. Dry bulk services are generally contracted under multi-year contracts of affreightment and voyage charters.
Port & Infrastructure Services. The primary customers for port and infrastructure services are vessel owners and charterers, which are typically industrial companies, trading houses and shipping companies and commercial shipping pools. Services are contracted using prevailing port tariff terms on a per-use basis or on the basis of short-term or long-term time charters or bareboat charters.
Logistics Services. The primary customers for PCTC logistics services are major, integrated automobile shippers and in certain circumstances automobile manufacturers or auto dealerships directly, and the U.S. Government. Services to these customers are generally contracted on the basis of short-term or long-term time charter or on a liner basis. Services for the U.S. Government are generally contracted on a voyage charter or liner basis in accordance with a master services agreement. The primary customers for unit freight logistics services are individuals and businesses shipping consumer, industrial and energy goods and personal parcels between ports in the Southeastern United States, the Caribbean (including Puerto Rico), the Bahamas and Mexico. Unit freight services are generally contracted on a per unit basis for the specified cargo and destination.
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Managed Services. Ocean Services provides crew and technical ship management services to third-party ship owners and certain of its 50% or less owned companies.
In 2019, one customer of Ocean Services (U.S. Federal Government) accounted for 10% of the Company's consolidated operating revenues. The ten largest customers of Ocean Services accounted for approximately 61% of its operating revenues in 2019. The loss of one or more of these customers could have a material adverse effect on Ocean Services’ results of operations.
Under a time charter, Ocean Services provides a vessel to a customer and is responsible for all operating expenses, typically excluding fuel and port charges. Under a bareboat charter, Ocean Services provides a vessel to a customer and the customer assumes responsibility for all operating expenses and risks of operation. Vessel charters may range from several days to several years. Contracts of affreightment are contracts for cargoes that are committed on a multi-voyage basis for various periods of time, with minimum and maximum cargo tonnages specified over the period at a fixed or variable rate per ton. Voyage charters are contracts to carry cargoes on a single voyage basis regardless of time to complete. Tariff and unit freight are typically contracted in accordance with a publicly available or contracted tariff rate or based on a negotiated rate when moving larger volumes over an extended period.
Competitive Conditions
Each of the markets in which Ocean Services operates is highly competitive, including the U.S. “Jones Act” coastwise market, even though participation in the "Jones Act" market is not open to foreign-based competition. The most important competitive factors are pricing, vessel age, vessel type and vessel availability to fit customer requirements and delivery schedules.
Bulk Transportation Services. The primary direct competitors for Jones Act petroleum and chemical transportation services are other operators of Jones Act petroleum and chemical carriers, operators of refined product and crude pipelines, railroads and foreign-flag vessels delivering foreign sourced petroleum and chemicals to U.S. ports. The primary direct competitors for Jones Act dry bulk transportation services are other operators of Jones Act bulk carriers, foreign-flag vessels delivering foreign sourced dry bulk goods to U.S. ports and U.S. railroad operators.
Port & Infrastructure Services. The primary direct competitors for port and infrastructure services are other operators of Jones Act U.S.-flagged harbor tugs and operators of foreign-flagged harbor and ocean tugs and bunkering barges.
Logistics Services. The primary direct competitors for PCTC logistics services are other operators of PCTCs, U.S.-flag cargo vessels eligible for the MSP subsidy and other vessels controlled by the U.S. government via the Military Sealift Command including the ready reserve fleet. The primary direct competitors for unit freight logistics are other operators of cargo vessels trading between ports in the Southeastern United States, the Caribbean (including Puerto Rico), the Bahamas and Mexico. The rail ferries primarily compete with railroad operators offering overland connections between Central and Southeastern Mexico and the United States.
Managed Services. The primary direct competitors of managed services are other Jones Act qualified ship management companies, ship owners and other ship operators.

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Inland Transportation & Logistics Services
Business
Inland Transportation & Logistics Services (“Inland Services”) provides customer supply chain solutions with its domestic river transportation equipment, fleeting services and high-speed multi-modal terminal locations adjacent to and along the U.S. Inland Waterways, primarily in the St. Louis, Memphis and Baton Rouge areas. Inland Services operates under the SCF name. SCF’s barges are primarily used for moving agricultural and industrial commodities and containers on the U.S. Inland Waterways, including the Mississippi River, Illinois River, Tennessee River, Ohio River and their tributaries and the Gulf Intracoastal Waterways. Internationally, Inland Services owns inland river liquid tank barges that operate on the Magdalena River in Colombia. These barges primarily transport petroleum products with the ability to move agricultural and industrial commodities and containers. Inland Services also has a 50% noncontrolling interest in dry-cargo barge operations on the Parana-Paraguay Waterway in Brazil, Bolivia, Paraguay, Argentina and Uruguay primarily transporting agricultural and industrial commodities, a 63% noncontrolling interest in towboat operations on the U.S. Inland Waterways and a 50% noncontrolling interest in grain terminals/elevators in the Midwest and/or along the U.S. Inland Waterways. Inland Services contributed 33%, 34% and 38% of the Company's consolidated operating revenues during the years ended December 31, 2019, 2018 and 2017, respectively.
For a discussion of risk and economic factors that may impact Inland Services’ financial position and its results of operations, see “Item 1A. Risk Factors” and “Inland Transportation & Logistics Services” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Equipment and Services
The following tables set forth the barges, towboats and harbor boats that comprise Inland Services’ fleet as of December 31 for the indicated years. “Owned” are majority owned and controlled by Inland Services. “Leased-in” may either be equipment contracted from leasing companies to which Inland Services may have sold such equipment or equipment chartered-in from others. “Joint Ventured” are owned by entities in which Inland Services does not have a controlling interest. “Pooled” are barges owned by and managed for third parties with operating revenues and voyage expenses pooled with barges of a similar age and type which are owned by Inland Services. Pool revenues and expenses are allocated to participants based upon the number of days their barges participate in the pool. For “Pooled” barges, each barge owner is responsible for the costs of insurance, maintenance and repair as well as for capital and financing costs of its own equipment in the pool and pays a daily management fee to Inland Services for their participation in the pool.
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Owned Leased-in Joint
Ventured 		Pooled Total Owned Fleet Average Age
2019
Bulk Transportation Services:
Dry-cargo barges 591    50    258    473    1,372    11   
Liquid tank barges 20    —    —    —    20    16   
Specialty barges 5    —    —    —    5    38   
Towboats:
4,000 hp - 6,600 hp 4    4    11    —    19    3   
3,300 hp - 3,900 hp 1    —    2    —    3    4   
Less than 3,300 hp(1)
2    —    —    —    2    57   
Port & Infrastructure Services:
Harbor boats:
1,100 hp - 2,000 hp(1)
12    6    —    —    18    39   
Less than 1,100 hp(1)
6    —    —    —    6    45   
Logistics Services:
Dry-cargo barges 20    —    —    15    35    16   
Towboats:
Less than 3,300 hp 1    —    —    —    1    6   
662    60    271    488    1,481   
2018
Bulk Transportation Services:
Dry-cargo barges 585    48    258    481    1,372    10   
Liquid tank barges 20    —    —    —    20    15   
Specialty barges 5    —    —    —    5    37   
Towboats:
4,000 hp - 6,600 hp 3    4    11    —    18    2   
3,300 hp - 3,900 hp 1    —    2    —    3    3   
Less than 3,300 hp(1)
2    —    —    —    2    56   
Port & Infrastructure Services:
Harbor boats:
1,100 hp - 2,000 hp(1)
12    6    —    —    18    38   
Less than 1,100 hp(1)
6    —    —    —    6    44   
Logistics Services:
Dry-cargo barges 26    2    —    7    35    14   
660    60    271    488    1,479   
2017
Bulk Transportation Services:
Dry-cargo barges 618    48    258    489    1,413    9   
Liquid tank barges 20    —    —    —    20    14   
Specialty barges 7    —    —    —    7    38   
Towboats:
4,000 hp - 6,600 hp 3    4    11    —    18    1   
3,300 hp - 3,900 hp 1    —    2    —    3    2   
Less than 3,300 hp(1)
2    —    —    —    2    55   
Port & Infrastructure Services:
Harbor boats:
1,100 hp - 2,000 hp(1)
11    6    —    —    17    37   
Less than 1,100 hp(1)
7    —    —    —    7    43   
Logistics Services:
Dry-cargo barges 23    2    —    1    26    14   
692    60    271    490    1,513   
______________________
(1)Towboats and harbor boats have been upgraded and maintained to meet or exceed current industry standards.
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Bulk Transportation Services
Inland river barges are unmanned and are moved by towboats. The combination of a towboat and barges is commonly referred to as a “tow.”
Inland Services’ dry-cargo barge fleet consists of hopper barges, which are (i) covered for the transport of products such as grain and grain by-products, fertilizer, steel and frac sand or (ii) “open tops” primarily used for the transport of commodities that are not sensitive to water such as coal, aggregate scrap and containers. Each dry-cargo barge in the Inland Services’ fleet is capable of transporting approximately 1,500 to 2,200 tons (1,350 to 2,000 metric tons) of cargo depending on water depth (draft), river conditions and hull depth of the barge. Adverse river conditions, such as high water resulting from excessive rainfall or low water caused by drought, can impact operations by limiting the speed at which tows travel, the number of barges included in tows and the quantity of cargo that is loaded in the barges.
A typical dry-cargo grain voyage begins by shifting a clean, empty barge from a fleeting location to a loading facility. The barge is then moved from the loading location and assembled into a tow before proceeding to its discharge destination. After unloading, it is shifted to a fleeting area for cleaning, and service if needed, and then placed again in a tow to move to a load facility. In some instances after discharge of grain, barges pick up cargo and move it north to the grain originating areas of the river system instead of moving empty.
Inland Services’ fleet of inland river liquid tank barges transports primarily petroleum products on long-term voyage affreightment contracts on the Magdalena River in Colombia.
Inland Services’ 50% or less owned companies that provide bulk transportation services include SCF Bunge Marine LLC, which operates towboats on the U.S. Inland Waterways; and SCFCo Holdings LLC (“SCFCo”), which transports various agricultural and industrial commodities on the Parana-Paraguay Waterway in Brazil, Bolivia, Paraguay, Argentina and Uruguay.
Port & Infrastructure Services
Terminals. Inland Services owns and operates high speed multi-modal terminal facilities located along the Mississippi River in the St. Louis harbor providing loading and unloading, transshipment, warehousing and drayage services. These terminals handle grain, grain by-products, fertilizer, steel, ethanol and other products for a multitude of customers. In addition, Inland Services owns a 50% noncontrolling interest in grain terminals/elevators in the Midwest and/or along the U.S. Inland Waterways.
In general, Inland Services operates these terminals by first unloading product that arrives by railcar or truck. The product is then loaded onto dry-cargo barges along with similar products. This process may also operate in reverse, with Inland Services unloading dry-cargo barges into trucks or railcars. A typical 15 dry-cargo barge tow, assuming no loading restrictions as a result of river conditions, can hold the equivalent of approximately 1,050 trucks or 216 railcars. A tow may consist of 15-40 barges and can take from several hours to several days to load and assemble.
Fleeting. Inland Services owns and/or operates a series of fleeting locations and harbor boats from Davenport, Iowa through Memphis, Tennessee. Inland Services’ fleeting services include fleeting barges, port services, minor repairs, barge cleaning and line haul boat assists.
Fleeting locations are locations where barges may be parked prior to being loaded, unloaded, cleaned, repaired or stored until needed for future use. Typically, fleeting locations are in close proximity to terminals. Fleeting services generally include disassembling a tow by moving dry-cargo barges into the fleet, moving barges from the fleet to a terminal for loading or unloading, cleaning and repairing barges, if needed, and then reassembling the barges into a tow for future operations.
Logistics Services
SEACOR America’s Marine Highway (“AMH”). Inland Services uses dry-cargo barges to move containers on the Mississippi River from Memphis, Tennessee to New Orleans, Louisiana. On this route, AMH transports empty containers in dry-cargo barges from Memphis to Baton Rouge, Louisiana. The containers are then trucked (drayed) to customers in Baton Rouge for loading. Loaded containers are then transported in dry-cargo barges from Baton Rouge to New Orleans, primarily for export. AMH also provides drayage services in Freeport, Texas for resin customers. Logistics services also provides local intermodal and maintenance services to its customers.
Managed Services
Inland Services provides management services related to barge and towboat operations.
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Markets
Inland Services operates equipment in three principal geographic regions. The table below sets forth equipment by geographic market as of December 31 for the indicated years. Inland Services sometimes participates in investments, at equity and 50% or less owned company arrangements in certain geographic locations in order to enhance marketing capabilities and facilitate operations in foreign markets allowing for the expansion of its operations while diversifying risks and reducing capital outlays associated with such expansion.
2019 2018 2017
U.S. Inland Waterways
Bulk Transportation Services:
Dry-cargo barges 1,114    1,114    1,155   
Specialty barges 5    5    7   
Towboats(1):
4,000 hp – 6,600 hp 8    7    7   
Port & Infrastructure Services:
Harbor boats:
1,100 hp - 2,000 hp(1)
18    18    17   
Less than 1,100 hp(1)
6    6    7   
Logistics Services:
Dry-cargo barges 35    35    26   
Towboats:
Less than 3,300 hp 1    —    —   
1,187    1,185    1,219   
Magdalena River
Bulk Transportation Services:
Liquid tank barges 20    20    20   
Towboats:
3,300 hp - 3,900 hp 1    1    1   
Less than 3,300 hp(1)
2    2    2   
23    23    23   
Parana-Paraguay Waterway
Bulk Transportation Services:
Dry-cargo barges 258    258    258   
Towboats:
4,000 hp – 6,600 hp 11    11    11   
3,300 hp - 3,900 hp 2    2    2   
271    271    271   
1,481    1,479    1,513   
______________________
(1)Towboats and harbor boats have been upgraded and maintained to meet or exceed current industry standards.
U.S. Inland Waterways. Inland Services transports various commodities on the U.S. Inland Waterways in dry-cargo barges, primarily grain and grain by-products, fertilizer, steel products, containers and other dry bulk commodities. Grain cargoes primarily move south and originate in the major grain producing areas of the U.S. Industrial cargoes such as steel products including steel coils, fertilizer and general cargo typically move north. Generally, Inland Services attempts to coordinate the logistical match-up of northbound and southbound movements of cargo to minimize repositioning costs and optimize barge usage. In addition to its barge and towboat activities, Inland Services owns and operates high-speed multi-modal terminal facilities for both dry and liquid commodities and barge fleeting locations in various areas of the Inland Waterway System.
Magdalena River. Inland Services primarily transports petroleum products outbound from central Colombia to the Caribbean Sea for export or distribution.
Parana-Paraguay Waterway. Inland Services, through its 50% noncontrolling interest in SCFCo, transports various commodities on the Parana-Paraguay Waterway in dry-cargo barges, primarily grains, iron ore, and other bulk commodities. In addition to its primary barge and towboat business, SCFCo controls a transshipment terminal at the Port of Ibicuy, Argentina.
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Seasonality
The volume of grain transported from the major grain producing areas of the U.S. for export through the U.S. Gulf of Mexico is greatest during the period from mid-August through March. This period is particularly significant to Inland Services because pricing for hauling freight tends to peak during these months in response to higher demand for transportation services. The severity of winter weather can also impact operations and contribute to volatility in revenues and expenses. Harsh winters typically force the upper Mississippi River to close and restrict barge traffic from mid-December to mid-March. Ice can also hinder the navigation of barge traffic on the mid-Mississippi River, the Illinois River, and the upper reaches of the Ohio River. Significant closures could negatively affect Inland Services' utilization, and therefore its results of operations.
The Magdalena River basin has two rainy and two dry seasons annually. The lowest river levels occur from mid-December to mid-February and can cause difficult navigational conditions within the mid and upper river regions, potentially reducing the utilization of Inland Services’ barges in this region during that period.
On the Parana-Paraguay Waterway, water levels are typically lower during December and January and can make navigation difficult on the northern portion of the river. During this time period, barge traffic is primarily focused on transporting grains from Paraguay to Argentina.
Customers and Contractual Arrangements
Bulk Transportation Services. The primary customers for bulk transportation services are major grain exporters, farm cooperatives, importers and distributors of industrial materials, fertilizer companies, trading companies, oil companies and industrial companies. Inland Services’ pooled dry-cargo barges are typically employed on a voyage basis at agreed rates for tons moved and with users having specified days for loading and discharging the cargo. In the trade, this is referred to as a contract of affreightment. If the user exceeds the specified number of days for loading and discharging the barges, the user pays demurrage (revenue to compensate for using the assets longer than allowed by contract). For longer term contracts of affreightment, base rates may be adjusted in response to changes in fuel prices and other operating expenses. Some term contracts provide for the transport of a minimum number of tons of cargo or specific transportation requirements for a particular customer. Inland Services may also lease out barges (“bareboat charter”) to competitors or cargo owners with all expenses being the responsibility of the lessee. Such leases are typically at a fixed rate per day and the duration may vary from short periods necessary for the lessee to perform a single voyage to multi-year charters. Inland Services’ inland river liquid tank barges and specialty barges are operated under term contracts ranging from one to five years.
Port & Infrastructure Services. The primary customers for port and infrastructure services are similar to those of bulk transportation services. Inland Services’ multi-modal terminals are marketed under contractual rates and terms driven by throughput volume. Inland Services' fleeting operations charge a day rate for holding barges in fleeting areas. Harbor boats pick up and drop off barges and assist in assembling tows that are moving up and down the river on line haul towboats. The service is provided for an agreed upon hourly charge. The harbor boats also perform shifting services, which include moving barges to and from the dock for loading and unloading. Typically, shifting is priced based on a fee per move. Inland Services’ fleeting operations also include cleaning, minor repairs to barges and line haul boat assists. Inland Services’ machine shop and shipyard repairs and upgrades towboats, repairs barges and other equipment and provides fabrication and dock repairs, which are charged either on an hourly basis or a fixed fee basis depending on the scope and nature of work.
Logistics Services. The primary customers for logistics services are shippers of raw materials, bulk and finished products. Over-the-road shipping costs, pollution and congestion of roadways are reduced by consolidating multiple containers onto a single barge for shipment. Inland Services also provides local drayage services. Inland Services’ logistics services are primarily marketed under contracted rates.
Managed Services. The primary customers for managed services are typically third-party asset owners.
In 2019, no single customer of Inland Services accounted for 10% or more of the Company's consolidated operating revenues. The ten largest customers of Inland Services accounted for approximately 61% of its operating revenues in 2019. The loss of one or more of its customers could have a material adverse effect on Inland Services’ results of operations.
Competitive Conditions
Bulk Transportation Services. The primary competitors for Inland Services’ bulk transportation services are other barge lines. Inland Services believes that 77% of the domestic dry-cargo hopper barge fleet is controlled by five companies. Railroads also compete for traffic that might otherwise move on the U.S. Inland Waterways.
Barriers to entry include complexity of operations, the difficulty of accumulating a sufficiently large asset base to cycle equipment efficiently, the challenge of hiring qualified personnel to oversee the complex logistics of exchanging equipment between fleets and long haul tows and executing timely placement for loading and discharging. In addition to these factors, Inland Services also benefits from long-term arrangements with key customers and SCF’s reputation for service.
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Inland Services believes the primary barriers to effective competitive entry into the Magdalena River and Parana-Paraguay Waterway markets are similar to those in the U.S. In addition, there are local flag requirements for equipment and local content requirements for operation. The primary competitive factors among established operators are price, availability, reliability and suitability of equipment for the various cargoes moved.
Port & Infrastructure Services. The primary competitors for port and infrastructure services are other terminal and fleet operators. Location and access to inland waterways, rail and roads are Inland Services' primary competitive advantages over other service providers.
Logistics Services. The primary competitors for logistics services are trucking companies and other logistics companies that transport shipping containers and provide drayage services. Location of facilities, road access and the proximity to the inland waterways are Inland Services' primary competitive advantages over other logistics providers.
Managed Services. The primary competitors for managed services are other third-party asset managers.
Witt O’Brien’s
Business, Services and Markets
Witt O’Brien’s, LLC (“Witt O’Brien’s”) provides crisis and emergency management services for both the public and private sectors. These services strengthen clients’ resilience and assist their response to natural and man-made disasters in four core areas:
•Preparedness: planning, training, exercises and compliance services that enhance government and corporate disaster readiness.
•Response: on-site emergency management services that strengthen clients’ ability to manage a disaster, such as an oil spill, vessel incident or hurricane impact.
•Recovery: assisting qualifying clients to plan for, obtain and administer federal disaster recovery funds following major disasters.
•Mitigation: helping clients reduce the impact of future disasters on operations and communities and helping them rebuild stronger after disasters occur.
Witt O’Brien’s contributed 13%, 16% and 8% of the Company's consolidated operating revenues during the years ended December 31, 2019, 2018 and 2017, respectively.
Witt O’Brien’s serves markets representing key areas of critical national infrastructure, including government, energy, transportation, healthcare and education, in the United States and abroad.
Customers and Contractual Arrangements
Witt O’Brien’s primary client sectors are government, shipping, energy, manufacturing, technology and education. Services are generally contracted on a project basis, under retainer agreements or through “stand-by” arrangements, whereby Witt O’Brien’s is pre-contracted to support a client if a given set of circumstances arises. Services are generally billed on a time-and-materials basis or through retainer arrangements.
In 2019, no single customer of Witt O'Brien's accounted for 10% or more of the Company's consolidated operating revenues. The ten largest customers of Witt O'Brien's accounted for approximately 82% of its operating revenues in 2019. The loss of one or more of its customers could have a material adverse effect on Witt O'Brien's results of operations.
Competitive Conditions
Each of the services that Witt O’Brien’s provides is offered by others with similar expertise and a roster of personnel with similar experience. Competitors primarily include large management consultant firms, engineering firms and smaller specialty consultant groups. The most important factors in obtaining work are technical credentials of personnel, availability, historical performance and pricing. As a result, there is significant competition for the opportunity of project-related services, activations or selections as the retained provider of services.
Other
The Company has other activities that primarily include:
Cleancor. CLEANCOR Energy Solutions LLC (“Cleancor”) designs, develops and maintains alternative energy and power solutions for end users looking to displace legacy petroleum-based fuels and adopt energy supplies that have a favorable environmental footprint. Cleancor provides liquefied natural gas (“LNG”) and compressed natural gas (“CNG”) fuel supply and logistics to commercial, industrial, agricultural and transportation customers and provides natural gas during pipeline supply interruptions due to planned maintenance or other curtailments.
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Noncontrolling investments in various other businesses. These investments primarily include sales, storage, and maintenance support for general aviation in Asia and an agricultural commodity trading and logistics business that is primarily focused on the global origination, and trading and merchandising of sugar and other commodities, pairing producers and buyers and arranging for the transportation and logistics of the product.
Government Regulation
The Company’s ownership, operation, construction and staffing of vessels is subject to significant regulation under various international, federal, state and local laws and regulations, including international conventions and ship registry laws of the nations under which the Company’s vessels are flagged.
Regulatory Matters
Domestically registered vessels are subject to extensive governmental regulation and oversight, including by the United States Coast Guard (“USCG”), the Occupational Safety and Health Administration ("OSHA"), the National Transportation Safety Board (“NTSB”), the U.S. Customs and Border Protection (“CBP”), the U.S. Environmental Protection Agency (“EPA”) and the U.S. Maritime Administration, as well as in certain instances, applicable state and local laws. These agencies establish safety requirements and standards and are authorized to investigate vessels and accidents and to recommend improved maritime safety standards.
Ocean Services and Inland Services are subject to regulation under the Jones Act and related U.S. cabotage laws, which restrict ownership and operation of vessels in the U.S. coastwise trade (i.e., trade between points in the United States), including the transportation of cargo. Subject to limited exceptions, the Jones Act requires that vessels engaged in U.S. coastwise trade be built in the United States, registered under the U.S.-flag, manned by predominantly U.S. crews, and owned and operated by U.S. citizens within the meaning of the Jones Act. Violation of the Jones Act could prohibit operation of vessels in the U.S. coastwise trade during the period of such non-compliance, result in material fines and subject the Company’s vessels to seizure and forfeiture. For information on certain stock ownership limitations designed to facilitate our compliance with the Jones Act, see “Risk Factors” in Item 1A of this report.
Ocean Services and Inland Services operate vessels that are registered both in the United States and in a number of foreign jurisdictions. Vessels may be subject to the laws of the applicable jurisdiction as to ownership, registration, manning, environmental protection and safety. In addition, the Company’s vessels are subject to the requirements of a number of international conventions that are applicable to vessels depending on their jurisdiction of registration. Among the more significant of these conventions are: (i) the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto (“MARPOL”); (ii) the International Convention for the Safety of Life at Sea, 1974 and 1978 Protocols (“SOLAS”); and (iii) the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (“STCW”).
The Maritime Labour Convention, 2006 (the “MLC”) establishes comprehensive minimum requirements for working conditions of seafarers including, among other things, conditions of employment, hours of work and rest, grievance and complaints procedures, accommodations, recreational facilities, food and catering, health protection, medical care, welfare, and social security protection. The MLC defines the term "seafarer" to include all persons engaged in work on a vessel in addition to the vessel’s crew. As a result, the Company may be responsible for proving that customer and contractor personnel aboard its vessels have contracts of employment that comply with the MLC requirements. The Company could also be responsible for salaries and/or benefits of third parties that may board one of the Company’s vessels. The MLC requires certain vessels that engage in international trade to maintain a valid Maritime Labour Certificate issued by their flag administration. Although the United States is not a party to the MLC, U.S.-flag vessels operating internationally must comply with the MLC when calling on a port in a country that is a party to the MLC. The Company has developed and implemented a fleetwide action plan to comply with the MLC to the extent applicable to its vessels.
The hull and machinery of every commercial vessel must be classed by an international classification society authorized by its country of registry, as well as being subject to survey and inspection by shipping regulatory bodies. The international classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and SOLAS. All of Ocean Services’ vessels are subject to the periodic inspection, survey, dry-docking and maintenance requirements of the USCG and/or the American Bureau of Shipping (“ABS”) and other marine classification societies.
Under the Merchant Marine Act of 1936, the Company’s U.S.-flagged vessels are subject to requisitioning by the U.S. Government under certain terms and conditions during a national emergency, as described further under “Item 1A. Risk Factors” of this Annual Report on Form 10-K.
The Maritime Security Act of 1996 created the Maritime Security Program (the "MSP") and authorized annual payments, subject to annual Congressional appropriations, for privately-owned and militarily useful U.S.-flag vessel in exchange for commitments from the vessel owners to move U.S. military cargoes in the time of war or national emergency.
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Congress amended the MSP to increase the number of U.S.-flag vessels eligible to participate from 47 to 60 vessels and to incrementally increase the level of authorized payments under the program. In December of 2019, Congress extended the MSP through fiscal year 2035 and increased the authorized level of MSP payments in specific increments from the current annual rate of $5.0 million per vessel, to $5.2 million per vessel beginning in fiscal year 2021 and to higher amounts in later years. The Company currently has six vessels enrolled in the MSP. These vessels are under contract with the U.S. government through fiscal year 2025 and the Company anticipates that all six of these contracts will be extended in the near future through fiscal year 2035. MSP payments are subject to annual appropriations by Congress. In the event that Congress does not fully fund the MSP, the Maritime Security Act permits MSP participants, including the Company, to re-flag their vessels under foreign registry under an expedited procedure.
The Company is required by various governmental and quasi-governmental agencies to obtain permits, licenses and certificates with respect to its vessels. The Company’s failure to maintain or comply with these authorizations could adversely impact its operations.
In addition to the USCG, the EPA, the U.S. Department of Transportation’s Office of Pipeline Safety, the Bureau of Ocean Energy Management, the Bureau of Safety and Environmental Enforcement, and certain individual states regulate vessels (and other structures) in accordance with the requirements of the Oil Pollution Act of 1990 (“OPA 90”) or under analogous state law. There is currently little uniformity among the regulations issued by these agencies and states, which increases the Company’s compliance costs and risk of non-compliance.
Although the Company faces risk when managing responses to third-party oil spills, a responder engaged in emergency and crisis activities has immunity from liability under federal law and all U.S. coastal state laws for any spills arising from its response efforts, except in the event of death or personal injury or as a result of its gross negligence or willful misconduct. The Company may also have derivative immunity when working under the orders of authorized federal officials.
Environmental Compliance
The Company is subject to federal, state, local and international environmental and safety laws, regulations and conventions, including those related to the discharge of oil and pollutants into waters regulated thereunder. Violations of these laws may result in civil and criminal penalties, fines, injunctions or other sanctions.
The Company does not expect that it will be required to make capital expenditures in the near future that would be material to its financial position or operations to comply with environmental laws and regulations; however, because such laws and regulations frequently change and may impose increasingly strict requirements, the Company cannot predict the ultimate cost of complying with these laws and regulations.
OPA 90 establishes a regulatory and liability regime for the protection of the environment from oil spills. OPA 90 applies to owners and operators of facilities operating near navigable waters of the United States and owners, operators and bareboat charterers of vessels operating in U.S. waters, which include the navigable waters of the United States and the 200-mile Exclusive Economic Zone (“EEZ”) around the United States. For purposes of its liability limits and financial responsibility, and response planning requirements, OPA 90 differentiates between tank vessels (such as the Company’s petroleum and chemical carriers and liquid tank barges) and “other vessels” (such as the Company’s tugs and dry-cargo barges).
Under OPA 90, owners and operators of regulated facilities and owners and operators or bareboat charterers of vessels are “responsible parties” and may be jointly, severally and strictly liable for removal costs and damages arising from facility and vessel oil spills or threatened spills up to certain limits of liability as discussed further below. Damages are defined broadly to include: (i) injury to natural resources and the costs of remediation thereof; (ii) injury to, or economic losses resulting from the destruction of, real and personal property; (iii) net loss by various governmental bodies of taxes, royalties, rents, fees and profits; (iv) lost profits or impairment of earning capacity due to property or natural resources damage; (v) net costs of providing increased or additional public services necessitated by a spill response, such as protection from fire or other hazards or taking additional safety precautions; and (vi) loss of subsistence use of available natural resources.
OPA 90 limits liability for responsible parties for nontank vessels to the greater of $1,100 per gross ton or $939,800 and for tank vessels to the greater of $3,500 per gross ton or $25,845,600. These liability limits do not apply (a) if an incident is caused by the responsible party’s violation of federal safety, construction or operating regulations or by the responsible party’s gross negligence or willful misconduct, (b) if the responsible party fails to report the incident or to provide reasonable cooperation and assistance in connection with oil removal activities as required by a responsible official or (c) if the responsible party fails to comply with an order issued under OPA 90.
The OPA 90 regulations also implement the financial responsibility requirements of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), which imposes liability for discharges of hazardous substances, similar to OPA 90, and provides compensation for cleanup, removal and natural resource damages. Liability per vessel under CERCLA is limited to the greater of $300 per gross ton or $5.0 million, unless the incident is caused by gross negligence, willful misconduct, or a violation of certain regulations, in which case liability is unlimited.
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Under the Nontank Vessel Response Plan Final Rule, owners and operators of nontank vessels are required to prepare Nontank Vessel Response Plans. The Company expects its pollution liability insurance to cover spill removal costs, subject to coverage deductibles and limitations, including a cap of $1.0 billion. The Company’s business, financial position, results of operations or cash flows could be materially adversely affected if it incurs spill liability under circumstances in which the insurance carrier fails or refuses to provide coverage or the loss exceeds the Company’s coverage limitations.
MARPOL is the main international convention covering prevention of pollution of the marine environment by vessels from operational or accidental discharges. It is implemented in the United States pursuant to the Act to Prevent Pollution from Ships.
Since the 1990s, the Department of Justice (“DOJ”) has been aggressively enforcing U.S. criminal laws against vessel owners, operators, managers, crewmembers, shoreside personnel and corporate officers related to violations of MARPOL. Violations have frequently related to pollution prevention devices, such as the oily-water separator, and include falsifying records, obstructing justice, and making false statements. In certain cases, responsible shipboard officers and shoreside officials have been sentenced to prison. In addition, the DOJ has required most defendants to implement a comprehensive environmental compliance plan (“ECP”) or risk losing the ability to trade in U.S. waters. If the Company is subjected to a DOJ prosecution, it could suffer significant adverse effects, including substantial criminal penalties and defense costs, reputational damages and costs associated with the implementation of an ECP.
The Clean Water Act (“CWA”) prohibits the discharge of “pollutants” into the navigable waters of the United States. The CWA also prohibits the discharge of oil or hazardous substances into navigable waters of the United States and the EEZ around the United States and imposes civil and criminal penalties for unauthorized discharges, thereby creating exposures in addition to those arising under OPA 90 and CERCLA.
The CWA also established the National Pollutant Discharge Elimination System (“NPDES”) permitting program, which governs discharges of pollutants into navigable waters of the United States. Pursuant to the NPDES program, the EPA has issued Vessel General Permits covering discharges incidental to normal vessel operations. The EPA issued the 2013 Vessel General Permit (“2013 VGP”) in early 2013 with an effective five-year period of December 19, 2013 to December 18, 2018. In light of the recent legislation described below, the 2013 VGP continues to apply to U.S.-flag and foreign-flag commercial vessels that are at least 79 feet in length and operate within the three-mile territorial sea of the United States. The 2013 VGP requires vessel owners and operators to adhere to “best management practices” to manage the covered discharges that occur normally in the operation of a vessel, including ballast water, and implements various training, inspection, monitoring, recordkeeping, and reporting requirements, as well as corrective actions upon identification of deficiencies. The Company has filed a Notice of Intent to be covered by the 2013 VGP for each of the Company's ships that operate in U.S. waters.
In late 2018, the U.S. Congress passed the Vessel Incidental Discharge Act (“VIDA”), which establishes a new framework for the regulation of vessel incident discharges. VIDA requires the EPA to develop performance standards for those discharges within two years of enactment and requires the USCG to develop implementation, compliance, and enforcement regulations within two years of the EPA’s promulgation of standards. VIDA extends the 2013 VGP’s provisions, leaving them in effect until new regulations are final and enforceable. Non-military, non-recreational vessels greater than 79 feet in length must continue to comply with the requirements of the 2013 VGP, including submission of annual reports. The Company can provide no assurance when the new regulations and performance standards will be issued, nor can it predict what additional costs it may incur to comply with any such new regulations and performance standards.
Many countries have ratified and are thus subject to the liability scheme adopted by the International Maritime Organization (“IMO”) and set out in the International Convention on Civil Liability for Oil Pollution Damage of 1969 (the “1969 Convention”). Some of these countries have also adopted the 1992 Protocol to the 1969 Convention (the “1992 Protocol”). Under both the 1969 Convention and the 1992 Protocol, a vessel’s registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil from ships carrying oil in bulk as cargo, subject to certain complete defenses. These conventions also limit the liability of the shipowner under certain circumstances, provided the discharge was not caused by the shipowner’s actual fault or intentional or reckless misconduct.
Vessels trading to countries that are parties to these conventions must provide evidence of insurance covering the liability of the owner. The Company believes that its Protection and Indemnity (“P&I”) insurance will cover any liability under these conventions, subject to applicable policy deductibles, exclusions and limitations.
The United States is not a party to the 1969 Convention or the 1992 Protocol and, as a result, OPA 90, CERCLA, CWA and other federal and state laws apply in the United States as discussed above. In other jurisdictions where the 1969 Convention has not been adopted, various legislative and regulatory schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to that convention.
The International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 was adopted to ensure that adequate, prompt and effective compensation is available to persons who suffer damage caused by spills of oil when used as fuel by vessels. The convention applies to damage caused to the territory, including the territorial sea, and in the EEZs, of the
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countries that are party to it. Although the United States has not ratified this convention, U.S.-flag vessels operating internationally would be subject to it if they sail within the territories of those countries that have implemented its provisions. The Company believes that its vessels comply with these requirements.
The National Invasive Species Act (“NISA”) was enacted in the United States in 1996 in response to growing reports of harmful organisms being released into United States waters through ballast water taken on by vessels in foreign ports. The USCG adopted regulations under NISA that impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering U.S. waters. All new vessels constructed on or after December 1, 2013, regardless of ballast water capacity, must comply with these requirements on delivery from the shipyard absent an extension from the USCG. Existing vessels with a ballast water capacity between 1,500 and 5,000 cubic meters must comply by their first scheduled dry-docking after January 1, 2014 or obtain a USCG extension. For non-exempt vessels, ballast water treatment equipment may be required to be utilized on the vessel. The Company believes that its vessels comply with these requirements.
Some U.S. states have enacted legislation or regulations to address invasive species through ballast water and hull cleaning management and permitting requirements, which in many cases have also become part of the state’s 2013 VGP certification. Other states may proceed with the enactment of similar requirements that could increase the Company’s costs of operating in state waters.
In addition, the IMO ratified the International Convention for the Control and Management of Ships’ Ballast Water Sediments on September 8, 2016, otherwise known as the Ballast Water Management Convention (the “BWM Convention”). The Company’s vessels that operate internationally will have to become compliant with international ballast water management regulations by their first renewal survey of the International Oil Pollution Prevention (“IOPP”) Certificate issued under MARPOL after September 8, 2017. Because the United States is not a party to the BWM Convention, those vessels may have to install an IMO approved ballast water management system (“BWMS”) or use one of the other management options under the BWM Convention. The Company believes that its vessels comply with these requirements.
The U.S. Endangered Species Act, related regulations and comparable state laws protect species threatened with possible extinction. Protection may include restrictions on the speed of vessels in certain ocean waters and may require the Company to change the routes of the Company’s vessels during particular periods. For example, in an effort to prevent the collision of vessels with the North Atlantic right whale, federal regulations restrict the speed of vessels to ten knots or less in certain areas along the Atlantic Coast of the United States during certain times of the year. The reduced speed and special routing along the Atlantic Coast may result in the use of additional fuel, which could affect the Company’s financial position, results of operations and cash flows.
The Clean Air Act (as amended, the “CAA”) requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. The CAA also requires states to submit State Implementation Plans (“SIPs”), which are designed to attain national health-based air quality standards throughout the United States, including major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. The EPA and some states have each proposed more stringent regulations of air emissions from propulsion and auxiliary engines on oceangoing vessels.
MARPOL also addresses air emissions, including emissions of sulfur and nitrous oxide (“NOx”), from vessels, including a requirement to use low sulfur fuels worldwide in both auxiliary and main propulsion diesel engines on vessels. As of January 1, 2020, vessels worldwide are required to use fuel with a sulfur content no greater than 0.5%, which is a reduction from the prior sulphur limit of 3.5%. As a result of this reduction, fuel costs for vessel operators could rise dramatically beginning in 2020, which could adversely affect the Company’s profitability or its results of operations. MARPOL also imposes NOx emissions standards on installed marine diesel engines of over 130 kW output power other than those used solely for emergency purposes irrespective of the tonnage of the vessel into which such an engine is installed. The actual NOx limit is determined by a variety of factors, including the vessel’s construction date, the rated speed of the vessel’s engine, and the area in which the vessel is operating.
More stringent sulfur and NOx requirements apply in certain designated Emission Control Areas (“ECAs”). There are currently four ECAs worldwide: the Baltic Sea ECA, North Sea ECA, North American ECA and U.S. Caribbean ECA. As of January 1, 2015, vessels operating in an ECA must burn fuel with a sulfur content no greater than 0.1%. Further, marine diesel engines on vessels constructed on or after January 1, 2016 that are operated in an ECA must meet the stringent NOx standards described above.
The Company’s operations occasionally generate and require the transportation, treatment and disposal of both hazardous and non-hazardous solid wastes that are subject in the United States to the requirements of the Resource Conservation and Recovery Act (“RCRA”) or comparable state, local or foreign requirements. From time to time, the Company arranges for the disposal of hazardous waste or hazardous substances at offsite disposal facilities. The EPA has a longstanding policy that RCRA only applies after wastes are “purposely removed” from a vessel. As a general matter, with certain exceptions, vessel owners and operators are required to determine if their wastes are hazardous, obtain a generator identification number, comply with certain standards for the proper management of hazardous wastes, and use hazardous waste
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manifests for shipments to disposal facilities. Moreover, vessel owners and operators may be subject to more stringent state hazardous waste requirements. If such materials are improperly disposed of by third parties with which the Company contracts, the Company may still be held liable for cleanup costs under applicable laws.
MARPOL also governs the discharge of garbage from ships. MARPOL defines certain sea areas, such as the “Wider Caribbean region,” requiring a higher level of protection than other areas of the sea.
Applicable MARPOL regulations provide for strict garbage management procedures and documentation requirements for all vessels and fixed and floating platforms. These regulations impose a general prohibition on the discharge of all garbage unless the discharge is expressly provided for under the regulations. The regulations have greatly reduced the amount of garbage that vessels are allowed to dispose of at sea and have increased the Company’s costs of disposing garbage remaining on board vessels at their port calls.
Various international conventions and federal, state and local laws and regulations have been considered or implemented to address the environmental effects of emissions of greenhouse gases, such as carbon dioxide and methane. The U.S. Congress has considered, but not adopted, legislation designed to reduce emission of greenhouse gases. At United Nations climate change conferences over the past few decades, various countries have agreed to specific international accords or protocols to establish limitations on greenhouse gas emissions. In 2015, various countries adopted the Paris Agreement, which seeks to reduce greenhouse gas emissions in an effort to slow global warming. The United States signed the Paris Agreement in 2016, but has subsequently taken steps to withdraw from the agreement. The Paris Agreement does not specifically mention shipping.
The IMO has announced its intention to develop limits on greenhouse gases from international shipping and is working on proposed mandatory technical and operational measures to achieve these limits. The first step toward this goal occurred in October 2016, when the IMO adopted a system for collecting data on ships’ fuel-oil consumption, which will be mandatory and apply globally.
Member states of the European Union are required to take steps to ensure that ships operating in the Baltic, the North Sea and the English Channel are using fuels with a sulfur content of no more than 0.1%. In addition, the European Parliament and E.U. Council have adopted a series of regulations that establish a system for monitoring, reporting and verifying emissions from vessels of 5,000 or more gross tons calling at E.U. ports.
In the United States, pursuant to an April 2007 decision of the U.S. Supreme Court, the EPA was required to consider whether carbon dioxide should be considered a pollutant that endangers public health and welfare, and thus subject to regulation under the CAA. In October 2007, the California Attorney General and a coalition of environmental groups petitioned the EPA to regulate greenhouse gas emissions from oceangoing vessels under the CAA. On December 1, 2009, the EPA issued an “endangerment finding” regarding greenhouse gases under the CAA. To date, the regulations proposed and enacted by the EPA regarding carbon dioxide have not specifically involved oceangoing vessels. Under MARPOL, vessels operating in designated ECAs are required to meet fuel sulfur limits and NOx emission limits, including the use of engines that meet the EPA standards for NOx emissions as discussed above.
Any future adoption of climate control treaties, legislation or other regulatory measures by the United Nations, IMO, United States or other countries where the Company operates that restrict emissions of greenhouse gases could result in financial and operational impacts on the Company’s business (including potential capital expenditures to reduce such emissions) that the Company cannot predict with certainty at this time. In addition, there may be significant physical effects of climate change from such emissions that have the potential to negatively impact the Company’s customers, personnel, and physical assets any of which could adversely impact cargo levels, the demand for Company’s services or the Company’s ability to recruit personnel.
The Company seeks to manage exposure to losses from the above-described laws through its development of appropriate risk management programs, including compliance programs, safety management systems and insurance programs. Although the Company believes these programs mitigate its legal risk, there can be no assurance that any future regulations or requirements or any discharge or emission of pollutants by the Company will not have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.
Security
In recent years, the USCG, the IMO, states and local ports have adopted heightened security procedures relating to ports and vessels.
Specifically, on November 25, 2002, the U.S. Maritime Transportation Security Act of 2002 (“MTSA”) was signed into law. To implement certain portions of MTSA, in July 2003, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, the IMO adopted amendments to SOLAS, known as the International Ship and Port Facility Security Code (the
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“ISPS Code”), creating a new chapter dealing specifically with maritime security. The chapter imposes various detailed security obligations on vessels and port authorities. Among the various requirements under MTSA and/or the ISPS Code are:
•onboard installation of automatic information systems to enhance vessel-to-vessel and vessel-to-shore communications;
•onboard installation of ship security alert systems;
•the development of vessel and facility security plans;
•the implementation of a Transportation Worker Identification Credential program; and
•compliance with flag state security certification requirements.
The USCG regulations, which are intended to align with international maritime security standards, generally deem foreign-flag vessels to be in compliance with MTSA vessel security measures provided such vessels have onboard a valid International Ship Security Certificate that attests to the vessel’s compliance with SOLAS security requirements and the ISPS Code. However, U.S.-flag vessels that are engaged in international trade must comply with all of the security measures required by MTSA, as well as SOLAS and the ISPS Code.
In response to these new security programs and applicable regulations, the Company has implemented security plans and procedures for each of its U.S.-flag vessels, its terminal operation in Sauget, Illinois and its Port Dania facility in Dania Beach, Florida.
The International Safety Management Code (“ISM Code”), adopted by the IMO as an amendment to SOLAS, provides international standards for the safe management and operation of ships and for the prevention of marine pollution from ships. The United States enforces the ISM Code for all U.S.-flag vessels and those foreign-flag vessels that call at U.S. ports. All of the Company’s vessels that are 500 or more gross tons are required to be certified under the standards set forth in the ISM Code’s safety and pollution protocols. The Company also voluntarily complies with these protocols for some vessels that are under the mandatory 500 gross ton threshold. Under the ISM Code, vessel operators are required to develop an extensive safety management system (“SMS”) that includes, among other things, the adoption of a written system of safety and environmental protection policies setting forth instructions and procedures for operating their vessels subject to the ISM Code, and describing procedures for responding to emergencies. The Company has developed such a safety management system. These SMS policies apply to both the vessel and shore-side personnel and are vessel specific. The ISM Code also requires a Document of Compliance (“DOC”) to be obtained for the vessel manager and a Safety Management Certificate (“SMC”) to be obtained for each vessel subject to the ISM Code that it operates or manages. The Company has obtained DOCs for its shore-side offices that have responsibility for vessel management and SMCs for each of the vessels that such offices operate or manage.
Noncompliance with the ISM Code and other IMO regulations may subject the shipowner or charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. For example, the USCG authorities have indicated that vessels not in compliance with the ISM Code will be prohibited from trading to United States ports.
Industry Hazards and Insurance
Vessel operations involve inherent risks associated with carrying large volumes of cargo and rendering services in a marine environment. Hazards include adverse weather conditions, collisions, fire and mechanical failures, which may result in death or injury to personnel, damage to equipment, loss of operating revenues, contamination of cargo, pollution and other environmental damages and increased costs. The Company maintains hull, liability and war risk, general liability, workers compensation and other insurance customary in the industries in which the Company operates. The Company believes it will be able to renew any expiring policy without causing a material adverse effect on the Company. The Company also conducts training and safety programs to promote a safe working environment and minimize hazards.
Employees
As of December 31, 2019, the Company employed 2,309 individuals. In the United States, a total of 871 employees in Ocean Services and Inland Services are unionized under collective bargaining agreements that expire at varying times through August 31, 2022.
Management considers relations with its employees to be satisfactory.
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ITEM 1A. RISK FACTORS
Risks, Uncertainties and Other Factors That May Affect Future Results
The Company’s results of operations, financial condition and cash flows may be adversely affected by numerous risks. Material risks that the Company is aware of are set forth below, but there could be risks of which the Company is not aware or risks that could be material that are not identified as such at this time. Carefully consider the risks described below, as well as the other information that has been provided in this Annual Report on Form 10-K. Additional risks and circumstances, not presently known to management, or perceived as a threat, may exist or materialize and could also impair the Company’s business operations.
Difficult economic conditions, including those caused by natural disasters and other extraordinary events, could materially adversely affect the Company. The success of the Company’s business is both directly and indirectly dependent upon conditions in the global financial markets and economic conditions throughout the world that are outside its control and difficult to predict. Factors such as commodity prices, interest rates, availability of credit, inflation rates, availability and cost of labor, changes in laws (including laws relating to taxation), elimination or imposition of trade barriers and protective rules, currency exchange rates and controls, pandemic disease or other health crisis and national and international political circumstances (including wars, terrorist acts or security operations) can have a material negative impact on the Company’s business and investments, which could reduce its revenues and profitability. Uncertainty about global economic conditions may lead or require businesses to postpone capital spending in response to tighter credit and reductions in income or asset values and to cancel or renegotiate existing contracts because their access to capital is impeded. This would in turn affect the Company’s profitability or results of operations. These factors may also adversely affect the Company’s liquidity and financial condition and the liquidity and financial condition of the Company’s customers. Volatility in the conditions of the global economic markets can also affect the Company’s ability to raise capital at attractive prices. The Company’s ongoing exposure to credit risks on its accounts receivable balances are heightened during periods when economic conditions worsen. The Company has procedures that are designed to monitor and limit exposure to credit risk on its receivables; however, there can be no assurance that such procedures will effectively limit its credit risk and avoid losses that could have a material adverse effect on the Company’s financial position, results of operations and cash flows. Unstable economic conditions may also increase the volatility of the Company’s stock price.
In addition, public health threats, such as the coronavirus, influenza and other highly communicable diseases or viruses, outbreaks of which have from time-to-time occurred in various parts of the world in which the Company or its vendors, including its shipbuilders, operate could adversely impact the Company's business, results of operations, financial condition and delivery schedule of new equipment. For instance, the Company has contracted with a company located in China for the construction of new rail ferry vessels. As a result of the recent outbreak of the 2019 novel coronavirus (COVID-19) in Wuhan, Hubei Province, China and subsequent appearance of the disease in other parts of the world, many Chinese companies, including the company contracted to build the rail ferry vessels have suspended operations, which could affect the delivery schedule for these vessels and other equipment.
Changes in U.S. policies governing foreign trade, international travel, immigration, manufacturing and foreign investment could have a material adverse effect on the Company. Changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, travel to and from the United States, immigration, manufacturing, development and investment in the territories and countries in which the Company operates, and any negative sentiments towards the United States as a result of such changes, could adversely affect the domestic and global transportation services industry, which could adversely affect the Company’s business and results of operations.
Recent world events have increased the risks posed by international trade wars, tariffs, and sanctions. The United States has imposed tariffs on a list of products imported from China and other countries and, such countries have in turn announced tariffs on products exported to them from the United States. Although there is uncertainty as to the duration of the proposed tariffs and the products and materials that ultimately will be covered by future tariffs, the tariffs have and may continue to increase the costs of certain raw materials and have led, and may continue to lead, to retaliatory tariffs on U.S. goods, which in turn could reduce the volume of commodities moving from or to the U.S. and thus the demand for the services provided by Ocean Services and Inland Services, negatively impacting their results. For example, tariffs have reduced the overseas demand for U.S. grains. Such tariffs could also cause a permanent loss of market position for U.S. agricultural products due to competitors having added capacity. Although the United States and China recently announced a trade agreement, the agreement leaves many tariffs intact and many points open for negotiation and interpretation. As such, trade tensions with China and other countries could continue to create uncertainty for the marine transportation industry.
There are risks associated with the Company’s debt structure. As of December 31, 2019, the Company had $314.5 million of consolidated indebtedness. The Company’s ability to meet its debt service obligations, comply with its financial and restrictive covenants under its debt instruments and refinance its indebtedness is dependent upon its ability to generate cash in the future from operations, financings or asset sales, and its ability to access the capital markets, each of which are subject to general economic conditions, industry cycles, seasonality and financial, business and other factors, many of which are beyond
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its control. The Company’s debt levels and the terms of its indebtedness may limit its liquidity and flexibility in obtaining additional financing and pursuing other business opportunities. If the Company is unable to repay or refinance its debt as it becomes due, it may be forced to sell assets or take other disadvantageous actions, including undertaking alternative financing plans, which may have onerous terms or may be unavailable, reducing financing in the future for working capital, capital expenditures and general corporate purposes or dedicating an unsustainable level of its cash flow from operations to the payment of principal and interest on its indebtedness. In addition, the failure of the Company to comply with the financial or restrictive covenants contained in its debt instruments could result in an event of default, which, if not cured or waived could accelerate the Company's debt repayment obligations.
Revenues from Ocean Services could be adversely affected by a decline in demand for domestic refined petroleum products, crude oil or chemical products, or a change in existing methods of delivery. A reduction in domestic consumption of refined petroleum products, crude oil or chemical products, the development of alternative methods of delivery of such products, or an increase in domestic sources of such products or in refining capacity, could reduce demand for the Company’s services.
Construction of additional refined petroleum product, natural gas or crude oil pipelines could have a material adverse effect on Ocean Services’ revenues. Long-haul transportation of refined petroleum products, crude oil and natural gas is generally less costly by pipeline than by ship. Existing pipeline systems are either insufficient to meet demand in, or do not reach, all of the markets served by Ocean Services’ petroleum and chemical carriers. As a result, the Company’s customers require the services provided by Ocean Services to meet demand. However, the construction and operation of new pipeline segments could replace the demand for Ocean Services’ services and have a material adverse effect on Ocean Services’ business.
Failure to maintain an acceptable safety record may have an adverse impact on the Company’s ability to retain customers. The Company’s customers consider safety and reliability a primary concern in selecting a service provider. The Company must maintain a record of safety and reliability that is acceptable to its customers. Should this not be achieved, the ability to retain current customers and attract new customers may be adversely affected, which in turn could affect the Company’s financial position, results of operations and cash flows.
Adverse results of legal proceedings could materially adversely affect the Company. The Company is subject to, and may in the future be subject to, a variety of legal proceedings and claims that arise out of the ordinary conduct of its business. Results of legal proceedings cannot be predicted with certainty. Irrespective of its merits, litigation may be both lengthy and disruptive to the Company’s operations and may cause significant expenditure and diversion of management attention. If the Company suffers an adverse judgment, it may be faced with significant monetary damages or injunctive relief against it that could materially adversely affect a portion of its business operations or materially adversely affect the Company’s financial position, results of operations and cash flows.
The Company’s activities outside of the United States subjects it to risks associated with international operations. The Company operates vessels and transacts other business worldwide. Its ability to compete in international markets may be adversely affected by foreign government regulations that favor or require the awarding of contracts to local competitors, or that require foreign persons to employ citizens of, or purchase supplies from, a particular jurisdiction. Further, the Company’s foreign subsidiaries may face governmentally imposed restrictions on their ability to transfer funds to their parent company.
Activity outside the United States involves additional risks, including the possibility of:
•embargoes or restrictive actions by the United States and/or foreign governments that could limit the Company’s ability to provide services in foreign countries or cause retaliatory actions by such governments;
•a change in, or the imposition of, withholding or other taxes on foreign income, tariffs or restrictions on foreign trade and investment;
•limitations on the repatriation of earnings or currency exchange controls and import/export quotas;
•unwaivable, burdensome local cabotage and local ownership laws and requirements;
•nationalization, expropriation, asset seizure, blockades and blacklisting;
•limitations in the availability, amount or terms of insurance coverage;
•loss of contract rights and inability to enforce contracts;
•longer payment cycles and problems collecting accounts receivable;
•political instability, war and civil disturbances or other risks that may limit or disrupt markets, such as terrorist acts, piracy, and kidnapping;
•fluctuations in currency exchange rates, hard currency shortages and controls on currency exchange that affect demand for the Company’s services and its profitability;
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•potential noncompliance with a wide variety of laws and regulations, such as the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”), and similar non-U.S. laws and regulations, including the U.K. Bribery Act 2010;
•labor strikes;
•import or export quotas and other forms of public and government regulation;
•changes in general economic and political conditions; and
•difficulty in staffing and managing widespread operations.
The decision of the United Kingdom to exit from the European Union (generally referred to as “BREXIT”) could cause disruptions to and create uncertainty surrounding the Company’s business. The effects of BREXIT will depend on several factors, including any agreements the United Kingdom makes to retain access to European Union and other markets. The measures could lead to legal uncertainty and potentially divergent national laws and regulations, as the United Kingdom determines which European Union laws to replace or replicate, including those governing maritime, labor, environmental, competition and other matters applicable to the provision of the Company’s services. The impact on the Company’s business of any treaties, laws and regulations with and in the U.K. that replace the existing E.U. counterparts cannot be predicted. BREXIT also may create global economic uncertainty, which may cause the Company’s customers and potential customers to monitor their costs and reduce their budgets for the Company’s services. Any of these effects, and others the Company cannot anticipate, could materially adversely affect its business, financial position, results of operations and cash flows.
The Company may undertake one or more significant corporate transactions that may not achieve their intended results, produce less than expected returns, may be dilutive to existing businesses, may adversely affect the Company’s financial condition and its results of operations, and may result in additional risks to its businesses. The Company continuously evaluates the acquisition and disposition of operating businesses and assets and may in the future undertake significant transactions. Any such transaction could be material to the Company’s business and could take any number of forms, including mergers, joint ventures, investments in new lines of business and the purchase of equity interests or assets. The form of consideration associated with such transactions may include, among other things, cash, common stock, equity interests or loans payable to the Company and its affiliates by the purchaser. The Company also regularly evaluates the merits of disposing its operating businesses and assets, in whole or in part, which could take the form of asset sales, mergers or sales of equity interests in its subsidiaries (privately or through a public offering), or the spin-off of equity interests of the Company’s subsidiaries to its stockholders. For instance, in 2017, the Company spun-off its offshore marine services business, SEACOR Marine, to its stockholders and sold its 70% interest in ICP, the company that operated SEACOR’s Illinois Corn Processing business segment. In connection with significant corporate transactions, the Company may agree to indemnify other parties to such transactions, which may subject the Company to significant liability. For example, pursuant to the ICP merger agreement, the Company agreed to indemnify the purchaser of its interests in ICP against certain losses.
These types of significant transactions may present significant risks and uncertainties, including distraction of management from current operations, insufficient revenue to offset liabilities assumed, potential loss of significant revenue and income streams, unexpected expenses, inadequate return of capital, potential acceleration of taxes currently deferred, regulatory or compliance issues, the triggering of certain covenants in the Company’s debt instruments (including accelerated repayment) and other unidentified issues not discovered in due diligence. As a result of the risks inherent in such transactions, the Company cannot guarantee that any such transaction will ultimately result in the realization of the anticipated benefits of the transaction or that significant transactions will not have a material adverse impact on the Company’s financial condition or its results of operations. If the Company were to complete such an acquisition, disposition, investment or other strategic transaction, it may require additional debt or equity financing that could result in a significant increase in its amount of debt or the number of outstanding shares of its Common Stock.
Investment in new business strategies and initiatives present risks not originally contemplated. The Company has invested, and in the future may again invest, in new business plans or acquisitions, some of which may not be directly linked to existing business lines or activities. These activities may involve significant risks and uncertainties, including distraction of management from current operations, insufficient revenue to offset liabilities assumed and expenses associated with the plans or acquisitions, inadequate return of capital and unidentified issues not discovered in due diligence. To the extent such investments are not directly linked to existing business lines or activities, such investments may expose the Company to unforeseen risks. These investments may take the form of securities or other assets that are not very liquid. As a result of the risks inherent in new ventures, there can be no assurance that any such venture will be successful, or that new ventures will not have a material adverse impact on the Company’s financial position, results of operations and cash flows.
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If there is a determination that the SMHI Spin-Off was taxable for U.S. federal income tax purposes because the facts, assumptions, representations or undertakings underlying the tax opinion are incorrect or for any other reason, then the Company and its stockholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities. The SMHI Spin-Off was conditioned upon the Company’s receipt of an opinion of Milbank, Tweed, Hadley & McCloy LLP, counsel to the Company, substantially to the effect that the separation qualified as a transaction that is described in Section 355 of the Code. The opinion relied on certain facts, assumptions, representations and undertakings from the Company and SEACOR Marine regarding the past and future conduct of each of the company’s respective businesses and other matters. If any of these facts, assumptions, representations or undertakings were incorrect, the Company and its stockholders may not be able to rely on the opinion of counsel and could be subject to significant tax liabilities. Notwithstanding the opinion of counsel, the IRS could determine on audit that the separation is taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion, or for other reasons, including as a result of certain significant changes in the stock ownership of the Company or SEACOR Marine after the separation. If the separation is determined to be taxable, the Company and its stockholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities.
Prior to the SMHI Spin-Off, the Company and SEACOR Marine entered into a tax matters agreement (the “SMHI Tax Matters Agreement”) that governs the parties’ respective rights, responsibilities and obligations with respect to taxes, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and assistance and cooperation in respect of tax matters. Taxes relating to or arising out of the failure of the separation to qualify as a tax-free transaction for U.S. federal income tax purposes are the responsibility of the Company, except, in general, if such failure is attributable to SEACOR Marine’s actions or inactions.
The Company’s obligations under the SMHI Tax Matters Agreement are not limited in amount or subject to any cap. Further, even if the Company is not responsible for its tax liabilities under the SMHI Tax Matters Agreement, the Company nonetheless could be liable under applicable tax law for such liabilities if SEACOR Marine were to fail to pay them. If the Company is required to pay any liabilities under the circumstances set forth in the SMHI Tax Matters Agreement or pursuant to applicable tax law, the amounts may be significant.
The Company’s operations are subject to certain foreign currency, interest rate, fixed-income, equity and commodity price risks. The Company is exposed to certain foreign currency, interest rate, fixed-income, equity and commodity price risks. Although some of these risks may be hedged, fluctuations could impact the Company’s financial position, results of operations and cash flows. For instance, a strengthening of the U.S. dollar results in higher prices for U.S. exports, which may adversely affect Inland Services and Ocean Services’ operating results. The Company has, and anticipates that it will continue to have, contracts denominated in foreign currencies. It is often not practicable for the Company to effectively hedge the entire risk of significant changes in currency rates. The Company’s financial position, results of operations and cash flows have been negatively impacted for certain periods and positively impacted for other periods, and may continue to be affected to a material extent by the impact of foreign currency exchange rate fluctuations.
The Company’s financial position, results of operations and cash flows may also be affected by the cost of hedging activities that the Company undertakes. The Company holds a portion of its net assets in cash equivalents, short-term investments and marketable securities. Such investments subject the Company to risks generally inherent in the capital markets. Volatility in the financial markets and overall economic uncertainty also increase the risk that the actual amounts realized in the future on the Company’s marketable securities could differ significantly from the fair values currently assigned to them. In addition, rising interest rates could increase the Company’s cost of capital, which may have an adverse impact on the Company’s financial position, results of operations and cash flows.
The Company engages in hedging activities, which expose it to risks. The Company has in the past and may in the future use futures and swaps to hedge risks, such as escalation in fuel costs and movements in foreign exchange rates and interest rates. However, hedging activities can result in losses when a position is purchased in a declining market or a position is sold in a rising market. Such purchases expose the Company to risks of meeting margin calls and drawing on its capital, counterparty risk due to failure of an exchange or institution with which it has entered into a swap, incurring higher costs than competitors or similar businesses that do not engage in such strategies, and losses on its investment portfolio. Such strategies can also cause earnings to be volatile, and the current volatility in the financial markets exacerbates these risks. If the Company fails to offset such volatility, its results of operations, cash flows and financial position may be adversely affected.
The Company’s ability to access capital markets could be limited. From time to time, the Company may need to access the capital markets to obtain long-term and short-term financing. However, the Company’s ability to access the capital markets for long-term financing could be limited by among other things, its existing capital structure, its credit ratings demand for its services. In addition, volatility and weakness in capital markets may adversely affect the Company’s credit availability and related financing costs. Capital markets can experience periods of volatility and disruption. If the disruption in these markets is prolonged, the Company’s ability to obtain new credit or refinance obligations as they become due, on acceptable terms, if at all, could be adversely affected.
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In addition, the trading markets for the Company's securities rely in part on the research and reports that industry or financial analysts publish about the Company and the marine transportation industry. If one or more analysts downgrade or provide negative outlook on the Company's securities or the marine transportation industry or the securities of any of the Company's competitors, or publish inaccurate or unfavorable research about the Company's business, the price of the Company's securities could decline. If one or more of these analysts ceases coverage of the Company's business or fails to publish reports on the Company regularly, the Company could lose visibility in the market, which in turn could cause the price or trading volume of its securities to decline.
There can be no assurance that such markets will be a reliable source of financing for the Company, which may adversely affect the Company’s business and its ability to service its debts.
The Company could incur liability in connection with its provision of spill response services. On April 22, 2010, the Deepwater Horizon, a semi-submersible deepwater drilling rig operating in the U.S. Gulf of Mexico, sank after an apparent blowout and fire resulting in a significant flow of hydrocarbons from the BP Macondo well (the “Deepwater Horizon/BP Macondo Well Incident”). The Company provided spill and emergency response services in connection with the Deepwater Horizon/BP Macondo Well Incident. O’Brien’s Response Management, L.L.C. (“ORM”), a subsidiary of the Company, and National Response Corporation (“NRC”), which was a subsidiary of the Company at the time of the incident operating in the Company’s now discontinued Environmental Services segment (the Company subsequently sold NRC to J.F. Lehman & Company (“JFL”)) are currently defendants in litigation arising from the Deepwater Horizon/BP Macondo Well Incident. Although companies are generally exempt in the United States from liability under the CWA for their own actions and omissions in providing spill response services, this exemption might not apply if a company were found to have been grossly negligent or to have engaged in willful misconduct, or if it were to have failed to provide these services consistent with the National Contingency Plan or as otherwise directed under the CWA. In addition, the exemption under the CWA would not protect a company against liability for personal injury or wrongful death claims, or against prosecution under other federal or state laws. All of the coastal states of the United States in which the Company provides services have adopted similar exemptions, but, several inland states have not. If a court or other applicable authority were to determine that the Company does not benefit from federal or state exemptions from liability in providing emergency response services, or if the other defenses asserted by the Company and its business segments are rejected, the Company could be liable together with the local contractor and the responsible party for any resulting damages, including damages caused by others, subject to the indemnification provisions and other liability terms and conditions negotiated with its domestic customers. In the international market, the Company does not benefit from the spill response liability protection provided by the CWA and, therefore, is subject to the liability terms and conditions negotiated with its international clients, in addition to any other defenses available to the Company and its business segments.
If Congress repeals the current $134.0 million cap for non-reclamation liabilities under OPA 90 or otherwise scales back the protections afforded to contractors thereunder, there may be increased exposure for remediation work and the cost for securing insurance for such work may become prohibitively expensive. Without affordable insurance and appropriate legislative regulation limiting liability, drilling, exploration, remediation and further investment in oil and gas exploration in the U.S. Gulf of Mexico may be discouraged and thus reduce the demand for the Company’s services.
The Company could incur liability in connection with certain obligations relating to the Deepwater Horizon incident. In connection with the Deepwater Horizon/BP Macondo Well Incident, BP Exploration & Production, Inc. and BP America Production Company (collectively, the “responsible party”) engaged the services of ORM and NRC. ORM and NRC were subsequently made defendants in litigation arising from the Deepwater Horizon/BP Macondo Well Incident. In connection with claims relating to clean-up operations following the Deepwater Horizon/BP Macondo Well Incident, the responsible party acknowledged and agreed to indemnify and defend ORM and NRC pursuant and subject to certain contractual agreements and potential limitations. No assurance can be given that the responsible party will honor its obligation to indemnify the Company under these arrangements. If the responsible party were to fail to honor its obligations, the Company may be faced with significant monetary payments that could materially and adversely affect the Company’s financial position, results of operations and cash flows. See the immediately following risk factor and “Item 3. Legal Proceedings.”
Negative publicity may adversely impact the Company. Media coverage and public statements that insinuate improper actions by the Company or senior executives, regardless of their factual accuracy or truthfulness, may result in negative publicity, litigation or governmental investigations by regulators. Similar events impacting other vessel operators could indirectly harm the Company by causing substantial adverse publicity affecting the marine transportation industry in general. Addressing negative publicity and any resulting litigation or investigations may distract management, increase costs, impede hiring and divert resources. Negative publicity may have an adverse impact on the Company’s reputation and the morale of its employees, which could adversely affect the Company’s financial position, results of operations or cash flows.
Ocean Services, Inland Services and Witt O’Brien’s rely on several customers and marketing agreements for a significant share of their revenues, the loss of any of which could adversely affect each of their businesses and operating results. As of December 31, 2019, one Ocean Services customer accounted for 10% of the Company’s consolidated operating revenues. The portion of Ocean Services, Inland Services and Witt O’Brien’s revenues attributable to any single customer may
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change over time, depending on the level of relevant activity by any such customer, the segment’s ability to meet the customer’s needs and other factors, many of which are beyond the Company’s control. The loss by any segment of business from a significant customer could have a material adverse effect on such segment’s or the Company’s business, financial condition, results of operations and cash flows. Further, to the extent any of the Company’s customers experience an extended period of operating difficulty, the Company’s revenues, results of operations and cash flows could be materially adversely effected.
Consolidation of the Company’s customer base could adversely affect demand for its services and reduce its revenues. In recent years, oil and natural gas companies, energy companies, major grain exporters and farm cooperatives, importers and distributors of industrial materials, agricultural companies, fertilizer companies, trading companies, and industrial companies, which make up a significant portion of the Company’s customer base, have undergone substantial consolidation and additional consolidation is possible. Consolidation results in fewer companies to charter or contract for the Company’s services, which could adversely affect demand for the Company’s petroleum and chemical carriers thereby reducing the Company’s revenues.
An increase in the supply of vessels, barges or equipment the Company operates could have an adverse impact on the rates earned by the Company’s vessels, barges and equipment. The Company’s industry is highly competitive, with vessel oversupply and intense price competition. Expansion of the supply of vessels, barges and equipment would further increase competition in the markets in which the Company operates. The refurbishment of disused or “mothballed” vessels and barges, conversion of vessels from other uses or construction of new vessels, barges and equipment could all add vessel, barge and equipment capacity to current worldwide levels. A significant increase in vessel, barge and equipment capacity could lower rates and result in lower operating revenues.
The Company may not be able to renew or replace expiring contracts for its vessels. The Company’s ability to renew or replace expiring contracts or obtain new contracts, and the terms of any such contracts, for the use of its vessels will depend on various factors, including market conditions and the specific needs of the Company’s customers. Given the highly competitive and historically cyclical nature of the Company’s industry, the Company may not be able to renew or replace the contracts or may be required to renew or replace expiring contracts or obtain new contracts at rates that are below, and potentially substantially below, existing rates, or that have terms that are less favorable to the Company than its existing contracts. In addition, newer, more technologically advanced vessels may be more desirable, and the presence of those vessels in our fleets and those of our competitors may decrease the demand for other vessels in our fleet and decrease the resale value of those other vessels. This could have a material adverse effect on the Company’s financial condition, results of operations and cash flows.
Maintaining the Company’s current fleet size and configuration and acquiring vessels required for additional future growth require significant capital. Expenditures required for the repair, certification and maintenance of a vessel typically increase with vessel age. These expenditures may increase to a level at which they are not economically justifiable and, therefore, to maintain the Company’s current fleet size, it may seek to construct or acquire additional vessels. Also, customers may prefer modern vessels over older vessels, especially in weaker markets and some potential customers may not be willing to use vessels older than a specified age, even if the vessel has been subsequently rebuilt. The cost of adding a new vessel to the Company’s fleet can be substantial. The Company can give no assurance that it will have sufficient capital resources to build or acquire the vessels required to expand or to maintain its current fleet size and vessel configuration.
The Company leases certain of the vessels it operates. Certain vessels operated by the Company are leased from third parties. The Company is exposed to the risk that the vessel owner may be unwilling or unable to continue to renew the leasing arrangement in the future on terms favorable to the Company or at all. If any such leases are terminated, the Company's ability to provide services to its customers could be adversely impacted.
If the Company does not restrict the amount of ownership of its Common Stock by non-U.S. citizens, it could be prohibited from operating inland river vessels and barges and tankers in the United States, which would adversely impact its business and operating results. The Company is subject to the Jones Act, which governs, among other things, the ownership and operation of vessels used to carry cargo between U.S. ports. Subject to limited exceptions, the Jones Act requires that vessels engaged in the U.S. coastwise trade be built in the United States, registered under the U.S.-flag and manned by predominantly U.S. crews. The Jones Act also requires that vessels engaged in coastwise trade be owned and operated by “U.S. citizens” within the meaning of the Jones Act. Compliance with the Jones Act requires that non-U.S. citizens own no more than 25% of the entities that directly or indirectly own or operate the vessels that the Company operates in the U.S. coastwise trade. Although SEACOR’s Restated Certificate of Incorporation and By-Laws contain provisions intended to assure compliance with these provisions of the Jones Act, a failure to maintain compliance by the Company or any of the entities that directly or indirectly own its vessels would adversely affect the Company’s financial position, results of operations and cash flows and could temporarily or permanently prohibit the Company from operating vessels in the U.S. coastwise trade. In addition, the Company could be subject to fines and its vessels could be subject to seizure and forfeiture for violations of the Jones Act and the related U.S. vessel documentation laws.
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Repeal, Amendment, Suspension or Non-Enforcement of the Jones Act would result in additional competition for Ocean Services and Inland Services and could have a material adverse effect on the Company’s business. A substantial portion of the operations of Ocean Services and Inland Services are conducted in the U.S. coastwise trade and thus subject to the provisions of the Jones Act (as discussed above). For years there have been attempts to repeal or amend such provisions, and such attempts are expected to continue in the future. For example, in a recent congressional review of Puerto Rico’s financial circumstances, several proponents of repealing the Jones Act introduced bills in Congress to exempt the island from the Jones Act. Although the proposals were limited in scope and failed, there is a risk that similar legislation could be reintroduced upon the occurrence of similar future events, which could lead to broader legislation affecting other aspects of the Jones Act.
Under certain conditions, the U.S. Secretary of Homeland Security can grant waivers of the Jones Act to foreign vessel operators. Thus far, the Secretary has granted waivers only for relatively short periods in connection with natural disasters and the transportation of petroleum released from the U.S. Strategic Petroleum Reserve. Nonetheless, future waivers, particularly if for longer periods, could result in increased competition, which could negatively impact the Company’s Jones Act operations.
Repeal, substantial amendment or waiver of provisions of the Jones Act could significantly adversely affect the Company by, among other things, resulting in additional competition from competitors with lower operating costs, because of their ability to use vessels built in lower-cost foreign shipyards, owned and manned by foreign nationals with promotional foreign tax incentives and with lower wages and benefits than U.S. citizens. In addition, the Company’s advantage as a U.S.-citizen operator of Jones Act vessels could be eroded by periodic efforts and attempts by foreign interests to circumvent certain aspects of the Jones Act. If maritime cabotage services were included in the General Agreement on Trade in Services,or other prevailing trade agreements, or if the restrictions contained in the Jones Act were otherwise altered, the shipping of maritime cargo between covered U.S. ports could be opened to foreign-flag or foreign-built vessels. Such a change could significantly increase competition in the U.S. coastwise trade, which would likely have a material adverse effect on the Company’s business, financial position, results of operations and cash flows.
Restrictions on non-U.S. citizen ownership of the Company’s vessels could limit its ability to sell off any portion of its business or result in the forfeiture of its vessels. As noted above, compliance with the Jones Act requires that non-U.S. citizens own no more than 25% in the entities that directly or indirectly own or operate the vessels that the Company operates in the U.S. coastwise trade. If the Company were to seek to sell any portion of its business that owns any of these vessels, it would have fewer potential purchasers, since some potential purchasers might be unable or unwilling to satisfy the U.S. citizenship restrictions described above. As a result, the sales price for that portion of the Company’s business may not attain the amount that could be obtained in an unconstrained sale.
The restrictions in SEACOR’s Restated Certificate of Incorporation and By-Laws limiting the ownership of Common Stock by individuals and entities that are not U.S. citizens within the meaning of the Jones Act may affect the liquidity of SEACOR’s Common Stock and may result in non-U.S. citizens being required to sell their shares at a loss or relinquish their voting, dividend and distribution rights. Under the Jones Act, at least 75% of the outstanding shares of each class or series of SEACOR’s capital stock must be owned and controlled by U.S. citizens within the meaning of the Jones Act. Certain provisions of SEACOR’s Restated Certificate of Incorporation and By-Laws are intended to facilitate compliance with this requirement and may have an adverse effect on holders of shares of the Common Stock. In addition, the indentures governing the Company’s 2.5% Convertible Senior Notes, 3.0% Convertible Senior Notes and 3.25% Convertible Senior Notes include provisions that are designed to ensure compliance with the Jones Act.
Under the provisions of SEACOR’s Restated Certificate of Incorporation and By-Laws, the aggregate percentage of ownership by non-U.S. citizens of any class of SEACOR’s capital stock (including Common Stock) is limited to 22.5% of the outstanding shares of each such class to ensure that such ownership by non-U.S. citizens will not exceed the maximum percentage permitted by the Jones Act, which is presently 25%. The Restated Certificate of Incorporation and By-Laws authorizes SEACOR’s Board of Directors, under certain circumstances, to increase the foregoing permitted percentage to no more than 24%. The Restated Certificate of Incorporation further provides that any issuance or transfer of shares to non-U.S. citizens in excess of such permitted percentage shall be ineffective as against the Company and that neither the Company nor its transfer agent shall register such purported issuance or transfer of shares to non-U.S. citizens or be required to recognize the purported transferee or owner as a stockholder of the Company for any purpose whatsoever except to exercise the Company’s remedies. Any such excess shares in the hands of a non-U.S. citizen shall not have any voting or dividend rights and are subject to redemption by the Company in its discretion. The liquidity or market value of the shares of Common Stock may be adversely impacted by such transfer restrictions.
As a result of the above provisions, a proposed transferee of the Common Stock that is a non-U.S. citizen may not receive any return on its investment in shares it purportedly purchases or owns, and it may sustain a loss. The Company, in its discretion, is entitled to redeem all or any portion of such shares most recently acquired (as determined by its Board of Directors in accordance with guidelines that are set forth in SEACOR’s Restated Certificate of Incorporation) by non-U.S. citizens in excess of such maximum permitted percentage for such class or series at a redemption price based on a fair market value formula that is set forth in the Restated Certificate of Incorporation, which may be paid in cash or promissory notes at the
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discretion of the Company. Such excess shares shall also not be accorded any voting, dividend or distribution rights until they have ceased to be excess shares, provided that they have not been already redeemed by the Company. As a result of these provisions, a purported stockholder who is not a U.S. citizen within the meaning of the Jones Act may be required to sell its shares of Common Stock at an undesirable time or price and may not receive any return on its investment in such shares. Further, the Company may have to incur additional indebtedness, or use available cash (if any), to fund all or a portion of such redemption, in which case the Company’s financial condition may be materially weakened.
So that the Company may ensure its compliance with the Jones Act, SEACOR’s Restated Certificate of Incorporation and By-Laws permit it to require that owners of any shares of its capital stock provide confirmation of their citizenship. In the event that a person does not submit such documentation to the Company, the Restated Certificate of Incorporation and By-Laws provide the Company with certain remedies, including the suspension of the payment of dividends and distributions with respect to those shares and deposit of any such dividends and distributions into an escrow account. As a result of non-compliance with these provisions, an owner of the shares of the Company’s Common Stock may lose significant rights associated with those shares.
In addition to the risks described above, the foregoing foreign ownership restrictions could delay, defer or prevent a transaction or change in control that might involve a premium price for SEACOR’s Common Stock or otherwise be in the best interest of the SEACOR’s stockholders.
If non-U.S. citizens own more than 22.5% of SEACOR’s Common Stock, the Company may not have the funds or the ability to redeem any excess shares and it could be forced to suspend its operations in the U.S. coastwise trade. SEACOR’s Restated Certificate of Incorporation and By-Laws contain provisions prohibiting ownership of its Common Stock by persons who are not U.S. citizens within the meaning of the Jones Act, in the aggregate, in excess of 22.5% of such shares in order to ensure that such ownership by non-U.S. citizens will not exceed the maximum percentage permitted by the Jones Act, which is presently 25%. The Restated Certificate of Incorporation permits the Company to redeem such excess shares, including those shares issued upon conversion or exchange of the Company’s convertible notes. The per share redemption price may be paid, as determined by the Company’s Board of Directors, by cash or promissory notes. However, the Company may not be able to redeem such excess shares for cash because its operations may not have generated sufficient excess cash flow to fund such redemption. If, for any reason, the Company is unable to effect such a redemption when such ownership of shares by non-U.S. citizens is in excess of 25% of the Common Stock, or otherwise prevent non-U.S. citizens in the aggregate from owning shares in excess of 25% of any such class or series of the Company’s capital stock, or fail to exercise its redemption rights because it is unaware that such ownership exceeds such percentage, the Company will likely be unable to comply with the Jones Act and will likely be required by the applicable governmental authorities to suspend its operations in the U.S. coastwise trade. Any such actions by governmental authorities would have a severely detrimental impact on the Company’s financial position, results of operations and cash flows.
The Company’s U.S-flag vessels are subject to requisition for ownership or use by the United States in case of national emergency or national defense need and certain of the Company’s vessels participate in the MSP. The Merchant Marine Act of 1936 provides that, during a national emergency declared by Presidential proclamation or a period for which the President has proclaimed that the security of the national defense makes it advisable, the Secretary of Transportation may requisition the ownership or use of any vessel owned by U.S. citizens (which includes the Company) and any vessel under construction in the United States. If any of the Company’s vessels were purchased or chartered by the federal government under this law, the Company would be entitled to just compensation, which is generally the fair market value of the vessel in the case of a purchase or, in the case of a charter, the fair market value of charter hire, but the Company would not be entitled to compensation for any consequential damages it may suffer. In addition, the Company operates vessels that participate in the MSP, which ensures that militarily useful U.S.-flag vessels are available to the U.S. Department of Defense in the event of war or national emergency. The purchase, charter or use for an extended period of time by the federal government of one or more of the Company’s vessels under these laws or programs could have a material adverse effect on its business, financial position, results of operations and cash flows.
Ocean Services' participation in the MSP subjects the Company to certain financial risks. As noted in "Item 1. Government Regulation - Regulatory Matters" on this report, the Company currently receives an annual fee per vessel for participating in the MSP. These payments are subject to annual appropriations by the U.S. Congress. Although Congress has fully funded this program since its inception in 1996, there is no guarantee that it will continue to do so in the future. Moreover, supplemental revenues earned under this program for carrying U.S. governmental cargoes are volatile and depend substantially on the level of U.S. military and other government-impelled cargoes.
The Company is subject to hazards customary for the operation of vessels that could disrupt operations and expose the Company to liability. The operation of petroleum and chemical carriers, short-sea container, Roll On/Roll Off vessels, Pure Car/Truck Carriers, bulk carriers, towboats, tugs and barges is subject to various risks, including catastrophic disaster, adverse weather, mechanical failure and collision. For instance, the Company’s operations in the U.S. Gulf of Mexico, Atlantic Ocean and Caribbean Sea may be adversely affected by weather, including severe hurricanes and tropical storms, which have adversely affected the Company in the past. Tropical storms and hurricanes may limit the Company’s ability to operate its
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vessels in the proximity of storms, reduce development and production activity, result in the Company incurring additional expenses to secure equipment and facilities or require the Company to evacuate its vessels, personnel and equipment out of the path of a storm. Additional risks to vessels include adverse sea conditions, capsizing, grounding, oil and hazardous substance spills and navigation errors. These risks could endanger the safety of the Company’s personnel, equipment, cargo and other property, as well as the environment. If any of these events were to occur, the Company could be held liable for resulting damages, including loss of revenues from or termination of charter contracts, higher insurance rates, increased operating costs, increased governmental regulation and reporting and damage to the Company’s reputation and customer relationships. Any such events would likely result in negative publicity for the Company and adversely affect its safety record, which would likely affect demand for the Company’s services. In addition, the affected vessels could be removed from service and would then not be available to generate revenues.
The Company is subject to complex laws and regulations, including environmental laws and regulations that can adversely affect the cost, manner or feasibility of doing business. Increasingly stringent federal, state, local and international laws and regulations governing worker safety and health and the manning, construction and operation of vessels significantly affect the Company’s operations. Many aspects of the marine industry are subject to extensive governmental regulation and oversight, including by the USCG, OSHA, NTSB, CBP, EPA, IMO, the U.S. Department of Homeland Security and the U.S. Maritime Administration, state environmental protection agencies for those jurisdictions in which the Company operates, and to regulation by states, port authorities and classification societies (such as the American Bureau of Shipping). The Company is also subject to regulation under international treaties, such as SOLAS, MARPOL, and the STCW. These agencies, organizations, regulations and treaties establish safety requirements and standards and are authorized to investigate vessels and accidents and to recommend improved safety standards. The CBP and USCG are authorized to inspect vessels at will. The Company has and will continue to spend significant funds to comply with these regulations and treaties. Failure to comply with these regulations and treaties may cause the Company to incur significant liabilities or restrictions on its operations, any of which could have a material adverse effect on its financial position, results of operations and cash flows.
The Company’s business and operations are also subject to federal, state, local and international laws and regulations relating to environmental protection and occupational safety and health, including laws that that govern the discharge of oil and pollutants into waters restricted thereunder. Violations of these laws and regulations may result in civil and criminal penalties, fines, injunctions, or other sanctions, or the suspension or termination of the Company’s operations. Compliance with such laws and regulations frequently requires installation of costly equipment, increased staffing, increased fuel costs, specific training, or operational changes, and the phase-out of certain vessels. Some environmental laws impose strict and, under certain circumstances, joint and several liability for remediation of spills and releases of oil and hazardous materials and damage to natural resources, which could subject the Company to liability without regard to whether it was negligent or at fault. Under OPA 90, owners, operators and bareboat charterers are jointly and severally strictly liable for the removal costs and damages resulting from the discharge of oil within the navigable waters of the United States and the EEZ around the United States. In addition, an oil spill could result in significant liability, including fines, penalties, criminal liability and costs for natural resource and other damages under other federal and state laws and civil actions. Liability for a catastrophic spill could exceed the Company’s available insurance coverage and result in it having to liquidate assets to pay claims. These laws and regulations may expose the Company to liability for the conduct of or conditions caused by others, including charterers. Because such laws and regulations frequently change and may impose increasingly strict requirements, the Company cannot predict the ongoing cost of complying with these laws and regulations. Moreover, the lack of uniformity of environmental regulations imposed by different agencies increases the Company's compliance costs and risk of non-compliance.
In recent years, governments and supranational groups have regulated vessel fuel and air emissions, including requirements to use low sulfur fuels, which have increased the Company's operating costs. Other new environmental or emissions control laws or regulations may similarly require an increase in the Company's operating costs and/or in the Company's capital spending for additional equipment or personnel to comply with such requirements and could also result in a reduction in revenues due to downtime required for the installation of such equipment.
The Company cannot be certain that existing laws, regulations or standards, as interpreted now or in the future, or future laws, regulations and standards will not have a material adverse effect on its business, financial position, results of operations and cash flows. Regulation of the shipping industry will likely continue to become more stringent and more expensive for the Company. In addition, a serious marine incident that results in significant oil pollution could result in additional regulation and lead to strict governmental enforcement or other legal challenges. The variability and uncertainty of current and future shipping regulations could hamper the ability of the Company and its customers to plan for the future or establish long-term strategies. Additional environmental and other requirements, as well as more stringent enforcement policies, may be adopted that could limit the Company’s ability to operate, require the Company to incur substantial additional costs or otherwise have a material adverse effect on the Company’s business, results of operations or financial condition. For more information, see “Item 1. Government Regulation - Environmental Compliance.”
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The Company is required by various governmental and quasi-governmental agencies to obtain, maintain and periodically renew certain permits, licenses and certificates with respect to its operations or vessels. In certain instances, the failure to obtain, maintain or renew these authorizations could have a material adverse effect on the Company’s business.
There are risks associated with climate change, as well as climate change legislation and regulations. The physical risks of climate change, such as more frequent or more extreme weather events, changes in temperature and precipitation patterns, changes in river flow patterns and other related phenomena, could affect some, or all, of the Company’s operations. Severe weather or other natural disasters could be destructive to the Company’s operations and the operations of its customers. Weather patterns, such as excessive rainfall or drought, can affect river levels and cause ice conditions during winter months, which can hamper barge navigation. Locks and dams on river systems may be closed for maintenance or other causes, which may delay barge movements. These conditions could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.
In addition, governments and supranational groups around the world have, in recent years, placed increasing attention on matters affecting the environment and this could lead to new laws or regulations pertaining to climate change, carbon emissions or energy use that in turn could result in a reduction in demand for hydrocarbon-based fuel. A number of countries and organizations have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures or international treaties may include, among others, adoption of cap and trade regimes, carbon taxes, increased efficiency standards, and incentives or mandates for renewable energy and could include specific restrictions on shipping emissions. In 2015, various countries adopted the Paris Agreement, which seeks to reduce greenhouse gas emissions in an effort to slow global warming. The United States signed the Paris Agreement in 2016 but has subsequently taken steps to withdraw from the agreement. The Paris Agreement does not specifically mention shipping.
Governments could also pass laws or regulations encouraging or mandating the use of alternative energy sources such as wind power and solar energy. These requirements could reduce demand for traditional energy commodities and therefore impact services provided by the Company. In recent years, governments and supranational groups have regulated vessel fuel and air emissions, including requirements to use low sulfur fuels, which have increased the Company's operating costs. Other new environmental or emissions control laws or regulations may similarly require an increase in the Company’s operating costs and/or in the Company’s capital spending for additional equipment or personnel to comply with such requirements and could also result in a reduction in revenues due to downtime required for the installation of such equipment. Such initiatives could have a material adverse effect on the Company’s financial position, results of operations and cash flows.
Increased security and inspection procedures and tighter import and export controls could increase costs and disrupt the Company’s business. Maritime shipping is subject to various security and customs inspections and related procedures in countries of origin and destination. Applicable inspection procedures can result in the seizure of contents of the Company’s vessels, delays in delivering cargoes, and the levying of customs payments, duties, fines and other penalties. The U.S. government, foreign governments, international organizations, and industry associations have from time-to-time considered ways to expand inspection procedures. Such changes, if implemented, could impose additional financial and legal obligations on the Company, including additional responsibility for physically inspecting the contents of cargoes it is shipping. Furthermore, changes to inspection procedures could also impose additional costs and obligations on the Company’s customers and may, in certain cases, render the shipment of certain types of cargo impractical. Any such changes or developments may have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.
Inland Services’ results of operations could be adversely affected by international economic and political factors. The actions of the United States and foreign governments could affect the import and export of the dry bulk commodities typically transported by Inland Services. Foreign trade agreements and each country’s adherence to the terms of such agreements can raise or lower demand for U.S. imports and exports of the dry bulk commodities that Inland Services transports. National and international boycotts and embargoes of other countries or U.S. imports or exports together with the raising or lowering of tariff rates could affect the demand for the transportation of cargoes handled by Inland Services.
Inland Services’ results of operations could be adversely affected by the decline in U.S. grain exports. Inland Services’ business is significantly affected by the volume of grain exports handled through ports in the U.S. Gulf of Mexico. Grain exports can vary due to a number of factors including crop harvest yield levels in the United States and abroad, the demand for grain in the United States and international trade wars. A shortage of available grain overseas can increase demand for U.S. grain. Conversely, an abundance of grain overseas, or international tariffs on U.S. grain, can decrease demand for U.S. grain. For example, the deteriorating trade relationship between the U.S. and China has caused decreased demand for U.S. grain overseas. A decline in exports could result in excess barge capacity, which would likely lower freight rates earned by Inland Services.
Inland Services could experience variation in freight rates. Freight transportation rates may fluctuate as the volume of cargo and availability of barges change. The volume of freight transported on inland waterways may vary as a result of various factors, such as global economic conditions and business cycles, domestic and international agricultural production and demand, and foreign currency exchange rates. Barge participation in the industry can also vary year-to-year and is dependent
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on the number of barges built and retired from service. Extended periods of high barge availability and low cargo demand could adversely impact Inland Services.
Inland Services’ results of operations are affected by seasonal activity. Inland Services’ business is seasonal, and its quarterly revenues and profits have historically been lower in the first and second quarters of the year and higher in the third and fourth quarters, during the grain harvest. Expenses are not incurred and recognized evenly throughout the year. Because of these factors, Inland Services’ quarterly operating results may be uneven and may be marked by lower revenues and earnings in some quarters than in others.
The aging infrastructure on the U.S. Inland Waterways may lead to increased costs and disruptions in Inland Services’ operations. Many of the locks and dams on the U.S. Inland Waterways were built early in the last century, and their age makes them costly to maintain and susceptible to unscheduled maintenance outages. Delays caused by malfunctioning locks and dams could increase Inland Services’ operating costs and delay the delivery of cargoes. Moreover, in the future, increased taxes could be imposed on users of the U.S. Inland Waterways to fund necessary infrastructure improvements, and such increases may not be recoverable by Inland Services through pricing increases. In addition, infrastructure improvements in other such modes of transportation could result in increased competition for inland barge transport relative to other modes of transportation if such other modes of transportation become more economical or accessible. The foregoing risks could make inland barge transport less competitive than rail and other modes of transportation, and could adversely impact Inland Services’ results of operations and cash flows.
Inland Services’ results of operations could be materially and adversely affected by fuel price fluctuations. Primarily, Inland Services purchases towboat and fleeting services from third party vendors. The price of these services can rise when fuel prices escalate and could adversely impact Inland Services’ results of operations and cash flows.
The Company’s insurance coverage may be inadequate to protect it from the liabilities that could arise in its businesses. Although the Company maintains insurance coverage against the risks related to its businesses, risks may arise for which the Company is not insured. Claims covered by insurance are subject to deductibles, the aggregate amount of which could be material and may be subject to caps on insurance payments. Insurance policies are also subject to compliance with certain conditions, the failure of which could lead to a denial of coverage as to a particular claim or the voiding of a particular insurance policy. There also can be no assurance that existing insurance coverage can be renewed at commercially reasonable rates or that available coverage will be adequate to cover future claims. If a loss occurs that is partially or completely uninsured, the Company could be exposed to substantial liability. Further, to the extent the proceeds from insurance are not sufficient to repair or replace a damaged asset, the Company would be required to expend funds to supplement the insurance and in certain circumstances may decide that such expenditures are not justified, which, in either case, could adversely affect its liquidity and ability to grow.
The Company’s inability to attract and retain qualified personnel and crew its vessels could have an adverse effect on its business and is also dependent on unionized employees. Attracting and retaining skilled personnel across all of the Company’s business segments is an important factor in its future success. In addition, the success of the Company is dependent upon its ability to crew its vessels. The market for qualified personnel is highly competitive and the Company cannot be certain that it will be successful in attracting and retaining qualified personnel and crewing its vessels in the future. Approximately 850 of the Company’s employees, out of a total of approximately 2,300 employees as of December 31, 2019, are covered by collective bargaining agreements with unions. The Company could be adversely affected if it is unable to successfully negotiate and maintain collective bargaining agreements with these unionized employees.
The Company’s success depends on key members of its management, the loss of whom could disrupt its business operations. The Company depends to a large extent on the efforts and continued employment of its executive officers and key management personnel. The Company does not maintain key-man insurance. The loss of services of one or more of the Company’s executive officers or key management personnel could have a negative impact on its financial position, results of operations and cash flows.
The failure to successfully complete construction or conversion of the Company’s vessels, repairs, maintenance or routine dry-dockings on schedule and on budget could adversely affect the Company’s financial position, results of operations and cash flows. From time to time, the Company may have a number of vessels under conversion and may plan to construct or convert other vessels in response to current and future market conditions. The Company also routinely engages shipyards to dry-dock vessels for regulatory compliance and to provide repair and maintenance services. Construction and conversion projects and dry-dockings are subject to risks of delay and cost overruns, resulting from shortages of equipment, lack of shipyard availability, unforeseen engineering problems, work stoppages, weather interference, unanticipated cost increases, inability to obtain necessary certifications and approvals and shortages of materials or skilled labor. A significant delay in either construction or dry-dockings could have a material adverse effect on contract commitments and revenues with respect to vessels under construction, conversion or undergoing dry-dockings. Significant cost overruns or delays for vessels under construction, conversion or retrofit could also adversely affect the Company’s financial position, results of operations and cash flows.
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The Company may face unexpected dry-dock costs for its vessels. Vessels must be dry-docked periodically for inspection and maintenance, and in the event of accidents or other unforseen damage. The cost of repairs and renewals required at each dry-dock are difficult to predict with certainty, can be susbtantial and the Company's insurance may not cover these costs. Vessels in dry-dock will generally not generate any income. Large dry-docking expenses could adversely affect the Company’s results of operations and cash flows. In addition, the time when a vessel is out of service for maintenance is determined by a number of factors including regulatory deadlines, market conditions, shipyard availability and customer requirements. Large dry-docking expenses and longer than anticipated off-hire time could adversely affect the Company’s business, financial condition, results of operations and cash flows.
A violation of the FCPA may adversely affect the Company’s business and operations. In order to effectively compete in certain foreign jurisdictions, the Company seeks to establish joint ventures with local operators or strategic partners. As a U.S. corporation, the Company is subject to the regulations imposed by the FCPA, which generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or maintaining business. The Company has adopted stringent procedures to enforce compliance with the FCPA. Nevertheless, the Company does business and may do additional business in the future in countries and regions where strict compliance with anti-bribery laws may not be customary and it may be held liable for actions taken by its strategic or local partners even though these partners may not be subject to the FCPA. The Company’s personnel and intermediaries, including its local operators and strategic partners, may face, directly or indirectly, corrupt demands by government officials, political parties and officials, tribal or insurgent organizations, or private entities in the countries in which the Company operates or may operate in the future. As a result, the Company faces the risk that an unauthorized payment or offer of payment could be made by one of its employees or intermediaries, even if such parties are not always subject to the Company’s control or are not themselves subject to the FCPA or other similar laws to which the Company may be subject. Any allegation or determination that the Company has violated the FCPA could have a material adverse effect on its business, financial position, results of operations and cash flows.
The Company’s business and stock price may be materially adversely affected if its internal control over financial reporting is not effective. Under Section 404 of the Sarbanes-Oxley Act of 2002 and rules promulgated by the SEC, companies are required to conduct a comprehensive evaluation of their internal control over financial reporting. As part of this process, the Company is required to document and test its internal control over financial reporting; management is required to assess and issue a report concerning the Company's internal control over financial reporting; and the Company's independent registered certified public accounting firm is required to attest on the effectiveness of the Company’s internal control over financial reporting. In the past, the Company has identified material weaknesses in its internal control over financial reporting. While all such identified material weaknesses have been remediated, there can be no assurance that the Company will not identify material weaknesses in its internal control in the future. Moreover, the Company’s internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. The existence of a material weakness could result in errors in the Company’s financial statements that could result in a restatement of financial statements, which could cause the Company to fail to meet its reporting obligations, lead to a loss of investor confidence and have a negative impact on the trading price of the Company’s securities.
The Company relies on information technology, and if it is unable to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, its operations could be disrupted and its business could be negatively affected. The Company relies on information technology networks and systems to process, transmit and store electronic and financial information; to capture knowledge of its business; to coordinate its business across its operation bases; and to communicate within the Company and with customers, suppliers, partners and other third-parties. These information technology systems, some of which are managed by third parties, may be susceptible to damage, disruptions or shutdowns, hardware or software failures, cyber-attacks, power outages, computer viruses, telecommunication failures, user errors or catastrophic events. The Company’s technology systems are also subject to cybersecurity attacks including malware, other malicious software, phishing email attacks, attempts to gain unauthorized access to its data, the unauthorized release, corruption or loss of its data, loss or damage to its data delivery systems, and other electronic security breaches. The Company’s information technology systems are becoming increasingly integrated, so damage, disruption or shutdown to the system could result in a more widespread impact.
If the Company’s information technology systems suffer severe damage, disruption or shutdown, and its business continuity plans do not effectively resolve the issues in a timely manner, the Company’s operations could be disrupted and its business could be negatively affected. In addition, cyber-attacks could lead to potential unauthorized disclosure of confidential information, data loss or data corruption impacting proprietary data of the Company or its customers. The recent passage of strict data protection laws by the European Union and other governmental bodies has increased the risk of penalties for data protection violations. There is no assurance that the Company will not experience these service interruptions or cyber-attacks in the future. Recent action by the IMO’s Maritime Safety Committee and United States agencies indicate that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. The Company is unable to predict the impact of such regulations at this time. Further, as the threat of cyber-attacks
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continues to grow, the Company may be required to expend additional resources to continue to modify or enhance its protective measures or to investigate and remediate any vulnerabilities to cyber-attacks.
Significant exercises of stock options or conversion of convertible debt could adversely affect the market price of the Company’s Common Stock. As of December 31, 2019, the Company had 20,176,168 shares of Common Stock issued and outstanding; however, the total number of shares of the Company’s Common Stock issued and outstanding does not include shares reserved for issuance under the Company’s stock plans, including upon the exercise of options issued under such plans, or shares issuable upon the conversion of the Company’s convertible debt. The exercise of outstanding options, the issuance of shares reserved for issuance under the Company’s Stock Plans and the conversion of convertible debt instruments could adversely affect the price of the Company’s Common Stock, will reduce the percentage of Common Stock held by the Company’s current stockholders and may cause its current stockholders to suffer significant dilution, which may adversely affect the market for the Company’s Common Stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Petroleum and chemical carriers, bulk carriers, PCTCs, harbor and offshore towboats and barges, RORO vessels and barges, inland river towboats and barges, terminals and servicing facilities are the principal physical properties owned by the Company and are more fully described in “Ocean Transportation & Logistics Services” and “Inland Transportation & Logistics Services” in “Item 1. Business.”
ITEM 3. LEGAL PROCEEDINGS
During 2012, the Company sold National Response Corporation (“NRC”), NRC Environmental Services Inc., SEACOR Response Ltd., and certain other subsidiaries to J.F. Lehman & Company, a private equity firm (the “SES Business Transaction”).
On December 15, 2010, O’Brien’s Response Management L.L.C. (“ORM”) and NRC were named as defendants in several “master complaints” filed in the overall multi-district litigation relating to the Deepwater Horizon oil spill response and clean-up in the Gulf of Mexico (the "DWH Response"), which is currently pending in the U.S. District Court for the Eastern District of Louisiana (the “MDL”). The “B3” master complaint naming ORM and NRC asserted various claims on behalf of a putative class against multiple defendants concerning the clean-up activities generally and the use of dispersants specifically. Both prior to and following the filing of the aforementioned “B3” master complaint, individual civil actions naming the Company, ORM, and/or NRC alleging B3 exposure-based injuries and/or damages were consolidated with the MDL and stayed pursuant to court order. On February 16, 2016, all but eleven “B3” claims against ORM and NRC were dismissed with prejudice (the “B3 Dismissal Order”). On August 2, 2016, the Court granted an omnibus motion for summary judgment as it concerns ORM and NRC in its entirety, dismissing the remaining eleven plaintiffs’ claims against ORM and NRC with prejudice (the “Remaining Eleven Plaintiffs’ Dismissal Order”). The deadline to appeal both of these orders has expired. The last remaining claim against the Company in connection with the "B3" master complaint was dismissed with prejudice, by an order of the Court granted on July 25, 2019.
On February 18, 2011, Triton Asset Leasing GmbH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., and Transocean Deepwater Inc. (collectively “Transocean”) named ORM and NRC as third-party defendants in a Rule 14(c) Third-Party Complaint in Transocean’s own Limitation of Liability Act action, which is part of the overall MDL, tendering to ORM and NRC the claims in the “B3” master complaint that have already been asserted against ORM and NRC. Various contribution and indemnity cross-claims and counterclaims involving ORM and NRC were subsequently filed. The Company believes that the potential exposure, if any, resulting therefrom has been reduced as a result of the various developments in the MDL, including the B3 Dismissal Order and Remaining Eleven Plaintiffs’ Dismissal Order, and does not expect that these matters will have a material effect on its consolidated financial position, results of operations or cash flows.
Separately, on March 2, 2012, the Court announced that BP Exploration and Production Inc. (“BPXP”) and BP America Production Company (“BP America,” and with BPXP, “BP”) and the Plaintiffs had reached an agreement on the terms of two proposed class action settlements that will resolve, among other things, Plaintiffs’ economic loss and property damage claims and clean-up related claims against BP. The Company, ORM, and NRC had no involvement in negotiating or agreeing to the terms of either settlement, nor are they parties or signatories thereto. The BP settlement pertaining to personal injury claims (the “Medical Settlement”) purported to resolve the “B3” claims asserted against BP and also established a right for class members to pursue individual claims against BP (but not ORM or NRC) for “later-manifested physical conditions,” defined in the Medical Settlement to be physical conditions that were “first diagnosed” after April 16, 2012 and which are claimed to have resulted from exposure during the DWH Response. The back-end litigation-option (“BELO”) provision of the Medical Settlement has specifically-delineated procedures and limitations, should any “B3” class member seek to invoke their BELO
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right. For example, there are limitations on the claims and defenses that can be asserted, as well as on the issues, elements, and proofs that may be litigated at any trial and the potential recovery for any Plaintiff. Notwithstanding that the Company, ORM, and NRC are listed on the Medical Settlement’s release as to claims asserted by Plaintiffs, the Medical Settlement still permits BP to seek indemnity from any party, to the extent BP has a valid indemnity right. The Medical Settlement was approved by the Court on January 11, 2013 and made effective on February 12, 2014.
As of mid-January 2020, BP has tendered approximately 2,380 claims pursuant to the Medical Settlement’s BELO provision for indemnity to ORM and approximately 230 of such claims to NRC. Recently, approximately 450 of the claims that were tendered by BP to ORM and approximately 35 of the claims tendered to NRC have been dismissed with prejudice. ORM and NRC have rejected all of BP’s indemnity demands relating to the Medical Settlement’s BELO provision and on February 14, 2019 commenced a legal action against BPXP and BP America with respect to same. That action, captioned O’Brien’s Response Management, L.L.C. et al. v. BP Exploration & Production Inc. et al., Case No. 2:19-CV-01418-CJB-JCW (E.D. La.) (the “Declaratory Judgment Action”), seeks declaratory relief that neither ORM nor NRC have any indemnity obligation to BP with respect to the exposure-based claims expressly contemplated by the Medical Settlement’s BELO provision, nor any contribution, in light of BP’s own actions and conduct over the past nine years (including its complete failure to even seek indemnity) and the resultant prejudice to ORM and NRC; that any indemnity or contribution rights BP may have once had with respect to these personal injury and exposure claims were extinguished once the Medical Settlement was approved by the MDL Court in 2013; and that the immunity already afforded to ORM and NRC via the B3 Dismissal Order and the Remaining Eleven Plaintiffs’ Dismissal Order operates to bar any indemnity or contribution claims against them by BP. BP subsequently proceeded to begin tendering personal injury claims to ORM and NRC that are being pursued by plaintiffs who opted out of the Medical Settlement and who are thus proceeding with their “B3” claims in their ordinary course (as opposed to pursuant to the Medical Settlement’s BELO provision). ORM and NRC also rejected these demands, and amended its Declaratory Judgment Action on December 11, 2019 to cover BP’s indemnity demands for these opt out claims as well.
On October 16, 2019, BP asserted four amended counterclaims against ORM and NRC, as well as two claims against ORM’s insurer (Navigators). Those amended counterclaims are breach of contract against ORM for failing to indemnify BP or name BP as an additional insured on the Navigators policy, declaratory judgment that NRC must indemnify BP under certain circumstances, and unjust enrichment against ORM and NRC. ORM and NRC moved to dismiss the last three of those counterclaims. That motion to dismiss was fully briefed as of January 10, 2020, and remains pending. The Court also ordered the parties to file simultaneous judgment on the pleadings briefs by February 14, 2020, and any oppositions by March 16, 2020.
Generally, the Company, ORM, and NRC believe that BP’s indemnity demands with respect to any “B3” claims, including those involving Medical Settlement class members invoking BELO rights and those involving Medical Settlement opt-out Plaintiffs, are untimely and improper, and intend to vigorously defend their interests. Moreover, ORM has contractual indemnity coverage for the above-referenced claims through its separate agreements with sub-contractors that worked for ORM during the DWH Response and has preserved their rights in that regard while the Declaratory Judgment Action is pending. Overall, however, the Company believes that both of BP’s settlements have reduced the potential exposure in connection with the various cases relating to the DWH Response. The Company is unable to estimate the potential exposure, if any, resulting from these claims, but does not expect that they will have a material effect on its consolidated financial position, results of operations or cash flows.
In the ordinary course of the Company’s business, it may agree to indemnify its counterparty to an agreement. If the indemnified party makes a successful claim for indemnification, the Company would be required to reimburse that party in accordance with the terms of the indemnification agreement. Indemnification agreements generally, but not always, are subject to threshold amounts, specified claim periods and other restrictions and limitations.
In connection with the SES Business Transaction, the Company remains contingently liable for work performed in connection with the DWH Response. Pursuant to the agreement governing the sale, the Company’s potential liability to the purchaser may not exceed the consideration received by the Company for the SES Business Transaction. The Company is currently indemnified under contractual agreements with BP for the potential “B3” liabilities relating to the DWH Response; this indemnification is unrelated to, and thus not impacted by, the indemnification BP has demanded and discussed above.
In the ordinary course of its business, the Company becomes involved in various other litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company’s estimates of that exposure could occur, but the Company does not expect such changes in estimated costs would have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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INFORMATION ABOUT EXECUTIVE OFFICERS OF THE REGISTRANT
Officers of SEACOR serve at the pleasure of the Board of Directors. The name, age and offices held by each of the executive officers of SEACOR as of December 31, 2019 were as follows:
Name Age Position
Charles Fabrikant 75 Executive Chairman of the Board, President and Chief Executive Officer, and a director of SEACOR and several of its subsidiaries. Effective February 23, 2015, Mr. Fabrikant was appointed President and Chief Executive Officer a position he had resigned from in September 2010 when he was designated Executive Chairman of the Board. Mr. Fabrikant is a director of Diamond Offshore Drilling, Inc., a contract oil and gas driller, Hawker Pacific Airservices, Limited, an aviation sales product support company, Era Group Inc., a helicopter leasing company and SEACOR Marine. In addition, he is President of Fabrikant International Corporation, a privately owned corporation engaged in marine investments. Fabrikant International Corporation may be deemed an affiliate of SEACOR.
Bruce Weins 51 Senior Vice President and Chief Financial Officer of SEACOR since June 1, 2017. From February 2015 to June 1, 2017, Mr. Weins was Senior Vice President and Chief Accounting Officer of SEACOR. From July 2005 to February 2015, Mr. Weins was Corporate Controller of SEACOR. Mr. Weins served as Controller of Seabulk International, Inc. (“Seabulk”) from January 2005 to July 2005 when it merged with SEACOR. Prior to joining Seabulk, Mr. Weins was an audit senior manager with Deloitte & Touche LLP, where he was employed from September 1995 to December 2004. In addition, Mr. Weins is an officer and director of certain SEACOR subsidiaries.
Eric Fabrikant 39 Chief Operating Officer of SEACOR since February 23, 2015. From May 2009 through February 2015, Mr. Fabrikant was a Vice President of SEACOR. From 2004 through May 2009, Mr. Fabrikant held various positions at Nabors Industries. In addition, Mr. Fabrikant is an officer and director of certain SEACOR subsidiaries.
Bill Long 53 Executive Vice President, Chief Legal Officer and Corporate Secretary of SEACOR since April 2016. From August 2015 to April 2016, Mr. Long served as Senior Vice President, General Counsel and Secretary of GulfMark Offshore, Inc. Mr. Long was employed by Diamond Offshore Drilling, Inc, from March 1997 through June 2014, last holding the position of Senior Vice President, General Counsel and Secretary from October 2006 until June 2014.

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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for the Company’s Common Stock
SEACOR’s Common Stock trades on the New York Stock Exchange (“NYSE”) under the trading symbol “CKH.” The closing share price on the NYSE on February 25, 2020 was $39.14 As of February 25, 2020, there were 193 holders of record of Common Stock.
The Company currently does not intend on paying any dividends for the foreseeable future. Any payment of future dividends will be at the discretion of SEACOR’s Board of Directors and will depend upon, among other factors, the Company’s earnings, financial condition, current and anticipated capital requirements, plans for expansion, level of indebtedness and contractual restrictions, including the provisions of the Company’s other then-existing indebtedness. The payment of future cash dividends, if any, would be made only from assets legally available.
On June 1, 2017, the Company completed the Spin-off of SEACOR Marine by means of a dividend of all of the issued and outstanding common stock of SEACOR Marine to SEACOR’s shareholders. In the Spin-off, holders of SEACOR Common Stock received approximately 1.005 shares of SEACOR Marine common stock for each share of SEACOR Common Stock held as of the record date for the Spin-off. On December 20, 2017, the Company distributed 3,977,135 shares of Dorian LPG Ltd. (“Dorian”) to its stockholders with each holder of Common Stock receiving approximately 0.2215 shares of Dorian common stock for each share of SEACOR Common Stock held as of the record date for such distribution.
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Performance Graph
Set forth in the graph below is a comparison of the cumulative total return that a hypothetical investor would have earned assuming the investment of $100 over the five-year period commencing on December 31, 2014 in (i) the Common Stock of the Company, (ii) the Standard & Poor’s 500 Stock Index (“S&P 500”) and (iii) Peer Issuers. The information set forth in the graph below shall be considered “furnished” but not “filed” for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934.
CKH-20191231_G1.JPG
Total Return Since December 31,(1)
2014 2015 2016 2017 2018 2019
Company 100    71    97    100    80    94   
S&P 500 100    101    113    138    132    174   
Peer Issuers(2)
100    77    84    82    77    106   
_____________________
(1)Assumes the reinvestment of dividends.
(2)The Peer Issuers group is comprised of publicly-traded firms participating in the U.S. Jones Act Marine Transportation and Project Markets. Such firms were selected on an industry and line-of-business basis. The Peer Issuers data is calculated as a simple average percentage in share prices and includes the following companies: SEACOR Holdings Inc., Kirby Corporation, Overseas Shipholding Group, Inc., Matson Inc. and Great Lakes Dredge & Dock Corporation.
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Issuer Repurchases of Equity Securities
SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire its Common Stock, 3.0% Convertible Senior Notes, 2.5% Convertible Senior Notes and 3.25% Convertible Senior Notes (collectively the "Securities") through open market purchases, privately negotiated transactions or otherwise, depending on market conditions.
During the year ended December 31, 2019, the Company acquired 3,912 shares of Common Stock for treasury under the Securities repurchase plan and acquired no shares during the years ended December 31, 2018 and 2017. As of December 31, 2019, SEACOR had remaining authorization for Securities repurchases of $129.9 million.
During the years ended December 31, 2019 and 2017, the Company acquired for treasury 8,338 and 212,659 shares of Common Stock, respectively, for aggregate purchase prices of $0.4 million and $12.3 million, respectively, from its employees to cover their tax withholding obligations related to share award transactions. These shares were purchased in accordance with the terms of the Company’s Share Incentive Plans and not pursuant to the repurchase authorizations granted by SEACOR’s Board of Directors.
The following table provides information with respect to purchases by the Company of shares of its Common Stock during the three months ended December 31, 2019:
Period Total Number of
Shares
Purchased 		Average Price
Paid Per Share 		Total Number of Shares
Purchased as Part of
Publicly  Announced
Plans or Programs
Maximum Value of
Shares that may Yet
be Purchased under
the Plans or Programs(1)
10/01/19 – 10/31/19 —    $ —    —    $ 129,925,243   
11/01/19 – 11/30/19 —    $ —    —    $ 129,925,243   
12/01/19 – 12/31/19 —    $ —    —    $ 129,925,243   
______________________
(1)During the three months ended December 31, 2019, the Company purchased $1.8 million in principal amount of its 3.0% Convertible Senior Notes thereby reducing the purchase authority under the plan. On December 23, 2019, the Company executed an agreement to purchase the 3.0% Convertible Senior Notes in compliance with the requirements of Rule 10b5-1(c)(1)(i) and 10b-18 for the period from January 2, 2020 through January 25, 2020. Subsequent to December 31, 2019, the Company purchased $2.2 million in principal amount of its 3.0% Convertible Senior Notes for total consideration of $2.2 million.
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ITEM 6. SELECTED FINANCIAL DATA
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth, for the periods indicated, selected historical consolidated financial data for the Company (in thousands, except per share data). Such financial data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” included in Parts II and IV, respectively, of this Annual Report on Form 10-K.
Years Ended December 31,
2019 2018 2017 2016 2015
Operating Revenues: (1)
As Adjusted As Adjusted As Adjusted
Ocean Services $ 423,288    $ 414,844    $ 352,876    $ 229,643    $ 227,142   
Inland Services 267,334    285,688    248,452    251,241    340,348   
Witt O’Brien’s
101,783    131,709    49,156    42,916    49,984   
Other 7,681    3,589    464    482    14,506   
Eliminations and Corporate (120)   (80)   (101)   (119)   (127)  
$ 799,966    $ 835,750    $ 650,847    $ 524,163    $ 631,853   
Operating Income (Loss) $ 45,155    $ 85,999    $ 50,483    $ (9,700)   $ 43,289   
Other Income (Expenses):
Net interest expense $ (11,762)   $ (22,953)   $ (32,983)   $ (24,163)   $ (19,885)  
Other (2)
15,704    28,643    17,705    (58,373)   (25,155)  
$ 3,942    $ 5,690    $ (15,278)   $ (82,536)   $ (45,040)  
Net Income (Loss) attributable to SEACOR Holdings Inc.:
Continuing operations $ 26,774    $ 58,148    $ 82,849    $ (94,091)   $ (53,839)  
Discontinued operations —    —    (21,206)   (121,806)   (14,943)  
$ 26,774    $ 58,148    $ 61,643    $ (215,897)   $ (68,782)  
Basic Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
Continuing operations $ 1.41    $ 3.22    $ 4.77    $ (5.56)   $ (3.09)  
Discontinued operations —    —    (1.22)   (7.20)   (0.85)  
$ 1.41    $ 3.22    $ 3.55    $ (12.76)   $ (3.94)  
Diluted Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
Continuing operations $ 1.38    $ 3.04    $ 4.24    $ (5.56)   $ (3.09)  
Discontinued operations —    —    (0.93)   (7.20)   (0.85)  
$ 1.38    $ 3.04    $ 3.31    $ (12.76)   $ (3.94)  
Statement of Cash Flows Data – provided by (used in):
Operating activities:
Continuing operations $ 119,273    $ 49,428    $ 107,575    $ 39,806    $ 131,812   
Discontinued operations —    —    12,811    41,206    (16,143)  
Investing activities:
Continuing operations (3)
(32,568)   80,492    115,866    (88,162)   (81,904)  
Discontinued operations —    —    2,720    (21,581)   (92,615)  
Financing activities:
Continuing operations (155,471)   (224,799)   (249,646)   (79,327)   (75,347)  
Discontinued operations —    —    (7,149)   12,290    160,513   
Effects of exchange rate changes on cash and cash equivalents:
Continuing operations (2)   (137)   956    (2,928)   (1,974)  
Discontinued operations —    —    208    437    (118)  
Capital expenditures of continuing operations
(included in investing activities) 		(37,786)   (50,272)   (114,595)   (252,806)   (203,453)  
Balance Sheet Data (at period end):
Cash, cash equivalents, restricted cash, restricted cash equivalents, marketable securities and construction reserve funds $ 86,380    $ 181,436    $ 336,328    $ 410,777    $ 582,633   
Total assets 1,512,972    1,471,024    1,613,336    2,862,321    3,185,419   
Long-term debt, less current portion 255,612    346,128    501,505    631,084    853,732   
Total SEACOR Holdings Inc. stockholders’ equity 811,726    704,154    623,683    1,060,892    1,270,820   
______________________
(1)On January 1, 2018, the Company adopted Financial Accounting Standard Board Topic 606, Revenues from Contracts with Customers ("Topic 606"). The only business segment impacted by the retrospective adoption of Topic 606 was Inland Services and all prior periods have been adjusted to reflect the adoption.
(2)Other principally includes unrealized and realized gains and losses from debt extinguishment, marketable securities, derivatives and foreign currency transactions.
(3)On January 1, 2018 the Company adopted a new accounting standard regarding the presentation of restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total cash amounts shown on the statement of cash flows. As a result, the Company reclassified previously reported amounts to conform with its new presentation.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations below presents the Company’s operating results for each of the three years in the period ended December 31, 2019, and its financial condition as of December 31, 2019. Certain statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations constitute forward looking statements. See “Forward Looking Statements” and “Risk Factors” included elsewhere in this Annual Report on Form 10-K.
Overview
The Company’s operations are divided into three main business segments – Ocean Transportation & Logistics Services (“Ocean Services”), Inland Transportation & Logistics Services (“Inland Services”) and Witt O’Brien’s. The Company also has activities that are referred to and described under Other that primarily includes CLEANCOR Energy Solutions LLC (“Cleancor”) and noncontrolling investments in various other businesses.
Discontinued Operations. On June 1, 2017, the Company completed the spin-off of SEACOR Marine Holdings Inc. (“SEACOR Marine”), the company that operated SEACOR’s Offshore Marine Services business segment, by means of a dividend of all the issued and outstanding common stock of SEACOR Marine to SEACOR’s shareholders (the “Spin-off”). Prior to the Spin-off, SEACOR and SEACOR Marine entered into a Distribution Agreement and other agreements that govern the post-Spin-off relationship between SEACOR and SEACOR Marine. For all periods presented herein, the Company has reported the historical financial position, results of operations and cash flows of SEACOR Marine as discontinued operations.
On July 3, 2017, the Company completed the sale of its 70% interest in Illinois Corn Processing LLC ("ICP"), the company that operated SEACOR’s Illinois Corn Processing business segment. For all periods presented herein, the Company has reported the historical financial position, results of operations and cash flows of ICP as discontinued operations.
Consolidated Results of Operations
Consolidating segment tables for each period presented below is included in Part IV “Note 18. Segment Information” of this Annual Report on Form 10-K.
Ocean Transportation & Logistics Services
Bulk Transportation Services.
Demand for and the margins earned from U.S.-flag bulk transportation services are dependent on several factors including the following:
•the volumes and location of domestic crude oil and petroleum production and associated refining activity levels in the United States;
•the volume and location of domestic retail consumption of petroleum products and commercial demand for crude oil, petroleum products and chemicals;
•the impact of competition from domestic pipelines and railroads;
•the delivered cost and competitiveness of foreign sourced crude oil, oil products and chemicals;
•the number of U.S.-flag oceangoing vessels eligible to participate in the U.S. domestic trade and capable of transporting crude, petroleum or chemical products;
•domestically sourced coal and petroleum coke volumes required for regional power utilities particularly in Florida; and
•demand for phosphate rock and finished fertilizers produced in Florida requiring waterborne transportation to the Mississippi River system.
The available supply of U.S.-flag vessels fluctuates when newly built vessels are placed into service or older vessels are removed from service. Older vessels are typically removed from service when margins are poor and the vessels face regulatory dockings, or when users insist on contracting for newer or more modern vessels. In some cases, loading installations may not accept vessels in excess of certain age requirements, typically 25 years. As of December 31, 2019, Ocean Services believes that third parties have contracted to build two U.S.-flag tank vessels with delivery dates in 2020 that could compete with Ocean Services’ U.S.-flag petroleum and chemical carriers currently in service. Additionally, Ocean Services believes that there are in excess of 13 U.S.-flag petroleum and chemical carriers capable of carrying 155,000 barrels or more still operating that are in excess of 20 years old, including four owned by Ocean Services. The supply of U.S.-flag bulk carriers which are eligible to operate in the Jones Act trade is currently 13 vessels which range from 14,000 short tons to 40,000 short tons of
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cargo carrying capacity, of which Ocean Services owns the two largest assets. As of December 31, 2019, the Company is not aware of any additional U.S.-flag bulk carriers under construction.
Port & Infrastructure Services.
The demand for harbor towing services is affected by the frequency, size and type of vessels calling within the U.S. ports where Ocean Services’ tugs are deployed. The total number of U.S.-flag harbor tugs in service is hard to ascertain. Operators continue to upgrade their fleets with newly built, larger horsepower azimuth drive tugs to service changing customer requirements. The demand for offshore towing activities is affected by the number of ocean barges, dead ships and other large floating equipment requiring auxiliary power. Bunkering equipment is deployed under long-term, fixed price contracts serving the Caribbean and the Bahamas.
Logistics Services.
The demand for logistics services is dependent on several factors. Demand for U.S.-flag PCTCs is generally dependent on global demand for automobiles, the operational policies and budgets of the U.S. military and demand for U.S. government cargo transportation. The U.S. government dictates the number and types of vessels enrolled in the U.S. Maritime Security Program ("MSP"), which provides a stipend to offset the higher cost of U.S. crews and operating standards required for U.S.-flag vessels. The U.S.-flag vessels, including Ocean Services’ PCTCs participating in the MSP program, are granted priority for U.S. government cargo over non-U.S.-flag vessels. Demand for liner and short-sea transportation is generally dependent on the volume of development and construction projects, demand for consumer and durable goods, manufacturing and industrial activity, and tourism trends within the Caribbean (including Puerto Rico), the Bahamas and Mexico.
Managed Services.
The demand for managed services is primarily dependent on the number of vessels owned by third parties who are unable to operate their own vessels and require the services of a third-party ship manager, such as financial institutions or owners without enough scale to manage in-house efficiently.
Results of Operations
The number and types of equipment operated, their contracted rates and utilization, and availability for service, taking into account dry-dock requirements and maintenance days, are the key determinants of Ocean Services’ operating results and cash flows. Unless a vessel is removed from operational service, there is little reduction in daily running costs and, consequently, operating margins are most sensitive to changes in contractual rates and utilization.
Ocean Services’ operating costs and expenses are grouped into the following categories:
•personnel (primarily wages, benefits, payroll taxes, savings plans and travel for marine personnel);
•repairs and maintenance (primarily routine repairs and maintenance and overhauls which are performed in accordance with planned maintenance programs);
•dry-docking (primarily the cost of regulatory dry-dockings performed in accordance with applicable regulations);
•insurance and loss reserves (primarily the cost of Hull and Machinery and Protection and Indemnity insurance premiums and loss deductibles);
•fuel, lubes and supplies;
•leased-in equipment (includes the cost of leasing equipment from lessors under bareboat charter arrangements); and
•other (port charges, freight, vessel inspection costs and other).
Vessel dry-dockings are performed in accordance with applicable regulations, or when necessary. Costs are expensed when incurred. If a disproportionate number of dry-dockings are undertaken (or not required) in a particular fiscal year or quarter, operating expenses can vary significantly in comparison with a prior year or prior quarter.
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For the years ended December 31, the results of operations for Ocean Services were as follows:
2019 2018 2017
Amount Percent Amount Percent Amount Percent
$ ’000 % $ ’000 % $ ’000 %
Operating Revenues:
United States 342,848    81    339,340    82    290,168    82   
Foreign 80,440    19    75,504    18    62,708    18   
423,288    100    414,844    100    352,876    100   
Costs and Expenses:
Operating:
Personnel 94,522    22    91,920    22    77,236    22   
Repairs and maintenance 22,829    5    24,267    6    14,296    4   
Dry-docking 21,336    5    18,183    4    10,704    3   
Insurance and loss reserves 8,165    2    6,833    2    6,757    2   
Fuel, lubes and supplies 33,189    8    34,559    8    18,632    5   
Leased-in equipment 45,246    11    40,099    10    31,092    9   
Other 55,522    13    53,433    13    36,568    10   
280,809    66    269,294    65    195,285    55   
Administrative and general 40,215    10    40,179    10    36,548    11   
Depreciation and amortization 40,986    10    46,270    11    46,073    13   
362,010    86    355,743    86    277,906    79   
Gains (Losses) on Asset Dispositions and Impairments, Net 1,291    1    12,887    3    (323)   —   
Operating Income 62,569    15    71,988    17    74,647    21   
Other Income (Expense):
Foreign currency losses, net (98)   —    (168)   —    (130)   —   
Other, net (112)   —    570    —    327    —   
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax (669)   —    3,632    1    7,664    2   
Segment Profit(1)
61,690    15    76,022    18    82,508    23   
______________________
(1)Includes amounts attributable to both SEACOR and noncontrolling interests. See Part IV “Note 13. Noncontrolling Interests in Subsidiaries” included in this Annual Report on Form 10-K.
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Operating Revenues by Line of Service. The table below sets forth, for the years indicated, the types of operating revenues earned by line of service.
2019 2018 2017
Amount Percent Amount Percent Amount Percent
$ ’000 % $ ’000 % $ ’000 %
Operating Revenues:
Bulk Transportation Services:
Petroleum and chemical:
Time charter 101,900    24    103,807    25    121,312    34   
Bareboat charter 29,514    6    36,704    9    34,339    10   
Voyage charter 7,126    2    14,928    3    7,722    2   
Dry bulk:
Contracts of affreightment 24,541    6    11,872    3    15,181    4   
Voyage charter 8,181    2    20,406    5    5,447    2   
Port & Infrastructure Services:
Tariff 79,757    19    74,157    18    68,266    19   
Time charter 6,902    2    4,988    1    3,231    1   
Bareboat charter 6,685    2    7,432    2    6,224    2   
Logistics Services:
Time charter(1)
60,344    14    40,311    10    18,129    5   
Voyage charter 31,074    7    38,645    9    20,453    6   
Unit freight 63,420    15    58,326    14    50,693    14   
Managed services 3,844    1    3,268    1    1,879    1   
423,288    100    414,844    100    352,876    100   
______________________
(1)Includes MSP revenues of $15.4 million, $19.3 million and $9.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.
International Shipholding Corporation Acquisition. On July 3, 2017, SEACOR acquired International Shipholding Corporation (“ISH”). ISH was renamed Waterman Logistics, Inc. in 2019. Its subsidiaries include: United Ocean Services, which operates Jones Act U.S.-flag bulk carriers supporting the cross-U.S. Gulf trade of fertilizer, phosphate rock, coal, and petroleum coke (the results of which are included in bulk transportation services in the table above); Central Gulf Lines, Inc., renamed Waterman Transport, Inc. in 2019 (“Waterman Transport”); and Waterman Steamship Corporation. The latter two entities are long-established U.S. based shipping lines that charter and operate vessels enrolled in the MSP. Waterman Transport time charters four U.S.-flag PCTCs, to a third-party when not moving U.S. military, commercial and U.S. government-impelled cargoes (the results of which are included in logistics services in the table above). See Part IV “Note 2. Business Acquisitions” of this Annual Report on Form 10-K.
2019 compared with 2018
Operating Revenues. Operating revenues were $8.4 million higher in 2019 compared with 2018.
Operating revenues from bulk transportation services were $16.5 million lower in 2019 compared with 2018.
Operating revenues from petroleum and chemical transportation were $16.9 million lower primarily due to the return of one previously leased-in U.S.-flag petroleum and chemical carrier in early 2019, the sale of another U.S.-flag petroleum and chemical carrier in March 2018, higher out-of-service time for regulatory dry-dockings and repairs, a reduction in the time charter rate for one U.S.-flag petroleum and chemical carrier in exchange for a multi-year extension of the charter and a change in contract status from time charter to bareboat charter for another U.S.-flag petroleum and chemical carrier.
Operating revenues from port and infrastructure services were $6.8 million higher primarily due to higher port traffic and time charter contract activities.
Operating revenues from logistics services were $17.6 million higher primarily due to higher military and commercial cargo activities and an increase in demand for containers and project cargoes for the movement of relief supplies to the Bahamas following Hurricane Dorian. Changes between time charter and voyage charter revenues were primarily the result of changes in contract status for military cargo activities.
Operating Expenses. Operating expenses were $11.5 million higher in 2019 compared with 2018 primarily due to:
•higher regulatory dry-docking costs for U.S-flag petroleum and chemical carriers and U.S.-flag PCTCs;
•higher leased-in equipment costs for short-sea container/RORO vessels in response to increased shipping demand and for U.S.-flag petroleum and chemical carriers due to the amortization of previously deferred gains in 2018;
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•higher personnel costs due to pre-negotiated rate increases under the terms of certain collective bargaining agreements;
•higher voyage costs for PCTCs as a result of higher military and commercial cargo activity; and
•higher insurance deductible claim costs.
Depreciation and Amortization. Depreciation and amortization expenses were $5.3 million lower primarily due to the U.S.-flag bulk carriers being fully depreciated during 2018.
Gains (Losses) on Asset Dispositions and Impairments, Net. During 2019, Ocean Services sold one short-sea container/RORO vessel and other equipment for net proceeds of $1.9 million and gains of $0.2 million. In addition, Ocean Services recognized $1.1 million of previously deferred gains following the repayment of notes receivable related to the sale of one harbor tug and certain real property. During 2018, Ocean Services sold one U.S.-flag petroleum and chemical carrier, one U.S.-flag harbor tug and other equipment for net proceeds of $5.1 million and gains of $1.9 million. In addition, Ocean Services recognized previously deferred gains of $11.0 million due to a change in the lease duration for one U.S.-flag petroleum and chemical carrier.
Operating Income. Excluding gains (losses) on asset dispositions and impairments, net, operating income as a percentage of operating revenues was 14% in 2019 and 2018. Higher personnel, dry-docking, leased-in equipment and voyage costs were offset by higher revenues.
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax. Ocean Services recognized equity in losses of 50% or less owned companies, net of tax, of $0.7 million in 2019 compared with equity in earnings of 50% or less owned companies, net of tax, of $3.6 million in 2018, primarily due to lower earnings from Trailer Bridge, Inc. ("Trailer Bridge") associated with increased capacity in the Puerto Rico liner trade. These decreases were partially offset by lower losses from Ocean Services’ 50% or less owned companies that own and operate rail ferries as a consequence of out-of-service time and associated dry-docking costs and repair and maintenance expenses for the rail ferries during 2018.
2018 compared with 2017
Operating Revenues. Operating revenues were $62.0 million higher in 2018 compared with 2017.
Operating revenues from bulk transportation were $3.7 million higher in 2018 compared with 2017.
Operating revenues from petroleum and chemical transportation were $7.9 million lower primarily due to the sale of one U.S.-flag petroleum and chemical carrier during 2018, higher out-of-service time for the regulatory dry-dockings of U.S.-flag petroleum and chemical carriers and lower charter rates for U.S.-flag petroleum and chemical carriers. These decreases were partially offset by operating revenues resulting from a full year of activity for newly built U.S.-flag petroleum and chemical carriers placed into service during March and August of 2017.
Operating revenues from dry bulk transportation were $11.7 million higher primarily due to a full year of operations for two U.S.-flag bulk carriers acquired in the ISH acquisition, partially offset by out-of-service time associated with the regulatory dry-docking of these two U.S.-flag bulk carriers during 2018.
Operating revenues from port and infrastructure services were $8.9 million higher primarily due to an increase in harbor towing tariff activities resulting from higher port traffic, a full year of operations for a U.S.-flag harbor tug under a time charter contract and the commencement of a bareboat charter contract for a U.S.-flag harbor tug.
Operating revenues from logistics services were $48.0 million higher primarily due to a full year of operations for four PCTCs associated with the ISH acquisition and an increase in unit freight shipping demand.
Operating revenues from managed services were $1.4 million higher primarily due to providing management services for two additional third-party vessels.
Operating Expenses. Operating expenses were $74.0 million higher in 2018 compared with 2017 primarily due to:
•the addition of the PCTCs and U.S.-flag bulk carriers acquired in the ISH acquisition;
•a full year of operations for newly built U.S.-flag petroleum and chemical carriers placed into service during March and August of 2017;
•placing two foreign-flag short-sea container/RORO vessels into service in January of 2018; and
•higher regulatory dry-docking costs for U.S.-flag petroleum and chemical carriers.
These increases were partially offset by the sale of one U.S.-flag petroleum and chemical carrier in March of 2018.
Administrative and General. Administrative and general expenses were $3.6 million higher in 2018 compared with 2017 primarily due to higher compensation costs associated with the ISH acquisition and higher legal fees. These increases were partially offset by the accelerated vesting of certain share awards in 2017 in advance of changes to the U.S. federal income tax code.
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Depreciation and Amortization. Depreciation and amortization expenses were $0.2 million higher in 2018 compared with 2017 primarily due to placing into service newly built U.S.-flag petroleum and chemical carriers during March and August of 2017 and two short-sea container/RORO vessels in January of 2018 and the acquisition of three U.S.-flag harbor tugs that were previously leased-in. These increases were partially offset by one U.S.-flag petroleum and chemical carrier being fully depreciated during 2018 and the impact of the sale-leaseback of another U.S.-flag petroleum and chemical carrier during 2017.
Gains (Losses) on Asset Dispositions and Impairments, Net. During 2018, Ocean Services sold one U.S.-flag petroleum and chemical carrier, one U.S.-flag harbor tug and other equipment for net proceeds of $5.1 million and gains of $1.9 million, all of which were recognized currently. Additionally, Ocean Services recognized previously deferred gains of $11.0 million due to a change in the lease duration for one U.S.-flag petroleum and chemical carrier. During 2017, Ocean Services recognized an impairment charge of $0.4 million due to the cancellation of an upgrade project for one U.S.-flag harbor tug, partially offset by gains of $0.1 million related to the sale of other equipment.
Operating Income. Excluding the impact of gains (losses) on asset dispositions and impairments, net operating income as a percentage of operating revenues was 14% in 2018 compared with 21% in 2017. The decrease was primarily due to the sale of one U.S.-flag petroleum and chemical carrier, dry-docking costs for two U.S.-flag bulk carriers and the associated out-of-service time in 2018 and higher operating costs for two foreign-flag short-sea container/RORO vessels placed into service in January of 2018, partially offset by the increase in harbor towing activities.
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax. Ocean Services recognized equity in earnings of 50% or less owned companies, net of tax, of $3.6 million in 2018 compared with $7.7 million in 2017. The reduction was primarily due to losses from Ocean Services’ 50% or less owned companies that own and operate rail ferries as a consequence of out-of-service time and associated dry-docking costs and repair expenses, and the sale of a U.S.-flag dry-bulk articulated tug-barge by SeaJon LLC (“SeaJon”) during 2017. These decreases were partially offset by improved results from Trailer Bridge and Kotug Seabulk Maritime LLC (“KSM”).
Inland Transportation & Logistics Services
Bulk Transportation.
The results of Inland Services are primarily driven by demand for inland river bulk transportation services. The balance between supply of equipment and demand for services determines prices, utilization and margins achieved. Factors that influence demand for services include:
•the level of domestic and international demand for agricultural commodities, iron ore, steel, steel by-products, coal, ethanol, petroleum and other bulk commodities;
•the level of domestic production of corn, soybeans and carryover stocks and the price of these commodities;
•the level of domestic and international consumption of agricultural products and the effect of these levels on the volumes of products that are physically moved into the export markets;
•the relative cost of transporting products on the inland waterways from the U.S. Midwest to the U.S. Gulf of Mexico for export compared with the cost via rail to the Pacific Northwest;
•the relative cost of ocean freight from other producing origins; and
•the strength or weakness of the U.S. dollar and its impact on the import and export markets.
Within the United States and international markets, utilization and margins are also significantly impacted by the following factors:
•the supply of barges available to move products;
•operating conditions on the inland waterways including operating status of locks and dams;
•the effect of river levels on the loading capacities of barges in terms of draft and boat tow size restrictions;
•the ability to position the barges to maximize efficiencies and utility in moving cargoes both northbound and southbound; and
•the availability of qualified wheelhouse personnel.
Extreme flooding throughout the U.S. Inland Waterways during the first half of the year combined with weaker grain export demand made 2019 a challenging year. Precipitation levels were the highest ever recorded for much of the Upper Midwest. The Upper Mississippi River would normally open for commercial navigation in March, but multiple river closures due to high water levels kept traffic limited on that river segment until late June. Prolonged high water levels increased operating costs and limited grain loadings through much of the first and second quarters. Planting delays led to a loss of twelve million acres of soybean production and reduced yields for both corn and soybeans. Abundant crops from other corn and
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soybean producing countries impacted the U.S. market share in world trade and led to Center Gulf grain exports declining 14% from 2018. While U.S. soybean exports have rebounded somewhat from the height of the trade dispute with China, they have not reached the levels of export prior to the dispute. Reduced demand for corn exports resulting from increased domestic prices and increased supply from other producing countries, had a much larger impact on barge freight demand in 2018, with exports from the Center Gulf dropping 39% from 2018.
U.S. Center Gulf barge based coal exports fell sharply in 2019 due to poor river operating conditions early in the year and falling world prices for steam coal. While rail volumes absorbed much of the 7 million metric ton ("mmt") decline in Center Gulf coal exports, barge volumes are estimated to have dropped by 1-1.5 mmt in 2019 from 2018. Barged volumes of domestic coal continue to decline as more coal based power plants adjacent to the river system close along with mines that service those plants. Imports into the Center Gulf have managed a modest increase in volumes year-over-year driven by increases in salt and raw aluminum imports. Finished steel imports continued to decline in 2019, but raw steel imports mostly offset that decline. The domestic barge based movement of frac sand also declined, particularly to the Texas Gulf Coast as drillers are sourcing cheaper local sand.
At the end of 2019, the average age of Inland Services’ covered dry-cargo barge fleet was eleven years, which Inland Services believes is among the youngest fleets operating on the U.S. Inland Waterways. Inland Services estimates that approximately 23% of the dry-cargo barge fleet operating on the U.S. Inland Waterways is over 20 years old. Inland Services believes the relatively young age of its dry-cargo barge fleet enhances its availability and reliability, reduces downtime for repairs and obviates, for the immediate future, the necessity of replacement capital expenditures to maintain its fleet size and revenue generating capacity.
Internationally, reduced demand for inland river bulk transportation services was primarily due to the U.S. trade war with China, lower demand for Bolivian iron ore in South America and longer loading wait times in Colombia, in addition to low water conditions on both the Magdalena River and Parana-Paraguay Waterway.
Port & Infrastructure Services.
Inland Services’ terminal operations were negatively impacted in 2019 by high water levels in the St. Louis harbor. Many facilities were closed for a month or more which caused throughput volume to decrease 28% compared with 2018.
Inland Services’ fleeting operations benefited from increased barge and boat activities in the St. Louis area, primarily attributable to higher demand for refinery products.
Logistics Services.
During 2019, SEACOR America’s Marine Highway (“AMH”) transported virtually the same amount of twenty-foot equivalent container units compared with 2018, helping to eliminate approximately 50,000 truck shipments off the interstate highway system. The lack of growth in volume was driven by plant downtime and expanded tariffs that reduced exports. The Company believes customers continue to support the container-on-barge operating model and AMH expects to expand to servicing a third container line in 2020. An increase in drayage revenues was driven by a full year of operations in Freeport, Texas.
Managed Services.
During 2019, Inland Services provided management services related to barge and towboat operations.
Results of Operations
Fleet size, equipment utilization levels from volumes of product moved and margins earned are the key determinants of Inland Services’ operating results and cash flows. Increased demand for inland river transportation services generally leads to higher barge freight rates. Adverse river conditions caused by severe weather can reduce volumes of product moved and increase barge logistics costs. Margins earned are also impacted by how efficiently Inland Services is able to coordinate cargo movements to minimize the repositioning costs of empty barges.
The aggregate cost of Inland Services’ operations depends primarily on the size and mix of its fleet and the level of barge activity. Inland Services’ operating costs and expenses are grouped into the following categories:
•barge logistics (primarily towing, switching, fleeting and cleaning costs);
•personnel (primarily wages, benefits, payroll taxes, savings plans and travel for marine personnel);
•repairs and maintenance (primarily repairs and maintenance on towboats and barges, which are performed in accordance with planned maintenance programs);
•insurance and loss reserves (primarily the cost of Hull and Machinery, Protection and Indemnity and cargo insurance premiums and loss deductibles);
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•fuel, lubes and supplies;
•leased-in equipment (the cost of leasing equipment, including bought-in freight and towboats); and
•other (rail car logistics, property taxes, project costs and other).
Adoption of Revenue Recognition Accounting Standard. On January 1, 2018, the Company adopted Financial Accounting Standard Board (“FASB”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). As a consequence of adopting Topic 606, Inland Services now recognizes all of the operating revenues and expenses associated with the dry-cargo barge pools it manages along with additional operating expenses reflective of barge pool earnings attributable to third-party barge owners and not Inland Services in its capacity as manager. Under Topic 606, Inland Services determined it was a principal with respect to the third-party barge owners. Previously, Inland Services recognized operating revenues and expenses only for its proportionate share of the barge pools in which it participated as it acted as an agent. All prior period results have been adjusted to reflect the retrospective adoption of Topic 606. The adoption of Topic 606 had no impact on previously reported operating income, net income or earnings per share. See “Item 1. Financial Statements—Note 1. Basis of Presentation and Accounting Policies” included in Part I of this Annual Report on Form 10-K.
For the years ended December 31, the results of operations for Inland Services were as follows:
2019 2018 2017
Amount Percent Amount Percent Amount Percent
$ ’000 % $ ’000 % $ ’000 %
As Adjusted
Operating Revenues:
United States 258,195    97    274,742    96    238,426    96   
Foreign 9,139    3    10,946    4    10,026    4   
267,334    100    285,688    100    248,452    100   
Costs and Expenses:
Operating:
Barge logistics 151,323    57    165,032    58    143,718    58   
Personnel 17,620    7    17,709    6    17,221    7   
Repairs and maintenance 5,798    2    5,747    2    4,437    2   
Insurance and loss reserves 4,808    2    2,734    1    2,706    1   
Fuel, lubes and supplies 6,982    2    7,835    3    6,624    3   
Leased-in equipment 14,102    5    9,649    3    7,613    3   
Other 15,733    6    16,784    6    14,072    5   
Net barge pool earnings attributable to third parties 13,052    5    11,520    4    10,445    4   
229,418    86    237,010    83    206,836    83   
Administrative and general 13,140    5    13,139    5    16,558    7   
Depreciation and amortization 23,262    9    24,164    8    25,852    10   
265,820    100    274,313    96    249,246    100   
Gains on Asset Dispositions, Net 1,602    1    6,659    2    11,960    5   
Operating Income 3,116    1    18,034    6    11,166    5   
Other Income (Expense):
Foreign currency gains (losses), net (212)   —    (2,002)   —    272    —   
Other, net —    —    51    —    —    —   
Equity in Losses of 50% or Less Owned Companies, Net of Tax (6,520)   (2)   (5,686)   (2)   (5,191)   (2)  
Segment Profit (Loss)(1)
(3,616)   (1)   10,397    4    6,247    3   
______________________
(1)Includes amounts attributable to both SEACOR and noncontrolling interests. See Part IV “Note 13. Noncontrolling Interests in Subsidiaries” included in this Annual Report on Form 10-K.
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Operating Revenues by Service Line. The following table presents, for the years indicated, operating revenues by service line.
2019 2018 2017
Amount Percent Amount Percent Amount Percent
$ ’000 % $ ’000 % $ ’000 %
As Adjusted
Operating Revenues:
Bulk Transportation Services:
Dry-cargo barge pools(1)
193,178    72    208,429    73    179,054    72   
Charter-out of dry-cargo barges —    —    5    —    2,164    1   
International liquid tank barge operations 9,139    3    10,946    4    10,026    4   
Boat, specialty barge and other operations 7,119    2    3,602    1    2,612    1   
Port & Infrastructure Services:
Terminal operations 17,878    7    22,991    8    23,159    9   
Fleeting operations 20,066    8    20,450    7    17,951    7   
Machine shop and shipyard 2,877    1    3,031    1    2,626    1   
Logistics services 15,155    6    14,309    5    8,868    4   
Managed services 1,922    1    1,925    1    1,992    1   
267,334    100    285,688    100    248,452    100   
______________________
(1)Operating revenues for the years ended December 31, 2019, 2018 and 2017, includes $82.7 million, $87.7 million and $73.0 million, respectively, attributable to third-party barge owners participating in dry-cargo barge pools managed by the Company.
2019 compared with 2018
Operating Revenues. Operating revenues were $18.4 million lower in 2019 compared with 2018 primarily due to prolonged flooding throughout the U.S. Inland Waterways resulting in severe disruption to Inland Services operations.
Operating revenues from bulk transportation services were $13.5 million lower in 2019 compared with 2018. Operating revenues from the dry-cargo barge pools were $15.3 million lower primarily due to severe disruptions related to river flooding during the summer and the impact of weaker export demand due to the placement of tariffs on certain goods, primarily grain exports. Operating revenues from international liquid tank barge operations were $1.8 million lower primarily due to reduced high sulfur fuel oil movements in anticipation of new environmental restrictions beginning in 2020. Operating revenues from boat, specialty barge and other operations were $3.5 million higher primarily due to the adoption of the new lease accounting standard and one newly built towboat being placed into service during the fourth quarter of 2019.
Operating revenues from port and infrastructure services were $5.7 million lower in 2019 compared with 2018. Prolonged flooding and a 45-day closure of the St. Louis harbor restricted terminal and fleeting operations. Volumes handled by the company’s terminal operations were 28% lower in 2019 compared with 2018.
Operating revenues from logistics services were $0.8 million higher primarily due to increased drayage activity.
Operating Expenses. Operating expenses were $7.6 million lower in 2019 compared with 2018.
Barge logistics expenses were $13.7 million lower, primarily due to lower towing and switching costs as a consequence of the severe disruption to bulk transportation services caused by river flooding and the impact of tariffs on certain goods. Insurance and loss reserves were $2.1 million higher primarily due to additional insurance claim deductibles in 2019 including costs incurred from damage in the St. Louis harbor caused by flooding. Fuel, lubes and supplies were $0.9 million lower primarily due to lower fuel usage from harbor boat activity as a consequence of the severe flooding noted above. Leased-in equipment expenses were $4.5 million higher primarily due to the adoption of the new lease accounting standard partially offset by lower bought-in freight expenses for Inland Services’ dry-cargo barge operations as a consequence of lower demand.
Depreciation and Amortization. Depreciation and amortization expenses were $0.9 million lower in 2019 compared with 2018 primarily due to certain liquid terminal assets being fully depreciating during 2018 partially offset by placing certain terminal equipment into service during 2019.
Gains on Asset Dispositions, Net. During 2019, Inland Services sold other equipment for net proceeds of $0.7 million and gains of $0.3 million. In addition, Inland Services recognized previously deferred gains of $1.3 million. During 2018, Inland Services sold 32 inland river dry-cargo barges, two specialty barges and other equipment for net proceeds of $10.9 million and gains of $4.7 million. In addition, Inland Services recognized previously deferred gains of $2.0 million.
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Operating Income. Excluding the impact of gains on asset dispositions, net, operating income as a percentage of operating revenues was 0% in 2019 compared with 4% in 2018. The decrease was primarily due to lower earnings from the dry-cargo barge pools and terminal and fleeting operations as a consequence of lower demand.
Foreign Currency Gains (Losses), Net. During 2019, Inland Services recognized $0.2 million in foreign currency losses, net primarily due to changes in the exchange rate between the Colombian peso and U.S. dollar underlying certain intercompany lease obligations.
Equity in Losses of 50% or Less Owned Companies, Net of Tax. During 2019 and 2018, Inland Services recognized $6.5 million and $5.7 million, respectively, of equity losses in 50% or less owned companies, net of tax. During 2019, operating results for SCF Bunge Marine LLC ("SCF Bunge Marine"), Inland Services' 50% or less owned company that operates towboats on the U.S. Inland Waterways, were $0.9 million lower primarily due to poor operating conditions as a result of river closures, flooding, and tow size restrictions. Operating results for Bunge-SCF Grain LLC ("Bunge-SCF Grain"), Inland Services' 50% or less owned company that operates grain elevators in Illinois, were $1.4 million higher due to higher grain volumes handled at its inland facilities. Operating results for SCFCo Holdings LLC ("SCFCo"), Inland Services' 50% or less owned company that operates on the Parana-Paraguay Waterway in South America, were $1.4 million lower primarily due to a reduction in volumes due to lower water levels and market demand.
2018 compared with 2017
Operating Revenues. Operating revenues were $37.2 million higher in 2018 compared with 2017.
Operating revenues from bulk transportation services were $29.1 million higher in 2018 compared with 2017. Operating revenues from the dry-cargo barge pools were $29.4 million higher primarily due to increased loadings and higher freight rates. Operating revenues from the charter-out of dry-cargo barges were $2.2 million lower primarily due to barges coming off charter and being placed in the dry-cargo barge pools or being sold. Operating revenues from international liquid tank barge operations were $0.9 million higher primarily due to an increase in volumes moved. Operating revenues from boat, specialty barge and other operations were $1.0 million higher primarily due to a full year of operation of one newly built towboat placed into service during the fourth quarter of 2017.
Operating revenues from port and infrastructure services were $2.7 million higher in 2018 compared with 2017. Operating revenues from fleeting operations were $2.5 million higher primarily due to higher activity levels in the St. Louis harbor.
Operating revenues from logistics services were $5.4 million higher primarily due to increased container movements.
Operating Expenses. Operating expenses were $30.2 million higher in 2018 compared with 2017. Barge logistics expenses were $21.3 million higher, primarily due to higher towing and switching costs as a consequence of higher activity levels and increased towing rates. Personnel costs were $0.5 million higher primarily due to higher activity levels at Inland Services’ terminal and fleeting locations in the St. Louis harbor. Repairs and maintenance costs were $1.3 million higher primarily due to scheduled maintenance for certain of Inland Services’ barges and harbor boats. Fuel, lubes and supplies were $1.2 million higher primarily due to increased activity in Inland Services’ fleeting locations and higher fuel prices. Leased-in equipment expense was $2.0 million higher primarily due to bought in barges needed to fill freight commitments in Inland Services’ dry-cargo barge operations. Other operating expenses were $3.8 million higher primarily due to the increase in container movements and higher terminal trucking expenses.
Administrative and General. Administrative and general expenses were $3.4 million lower in 2018 compared with 2017 primarily due to the acceleration of vesting of certain share awards in advance of changes to the U.S. federal income tax code in 2017.
Depreciation and Amortization. Depreciation and amortization expenses were $1.7 million lower in 2018 compared with 2017 primarily due to the sale of 32 inland river dry-cargo barges in the first quarter of 2018.
Gains on Asset Dispositions, Net. During 2018, Inland Services sold 32 inland river dry-cargo barges, two specialty barges and other equipment for net proceeds of $10.9 million and gains of $4.7 million. In addition, Inland Services recognized previously deferred gains of $2.0 million. During 2017, Inland Services sold two inland river towboats, 50 inland river dry-cargo barges, one specialty barge and other equipment for net proceeds of $27.6 million and gains of $17.7 million, of which $10.0 million were recognized currently and $7.7 million were deferred. Equipment dispositions included the sale-leaseback of 50 inland river dry-cargo barges for $12.5 million with leaseback terms of 84 months. In addition, Inland Services recognized losses of $0.3 million related to the total loss of an inland river liquid tank barge while being transported to Colombia and recognized previously deferred gains of $2.3 million.
Operating Income. Excluding the impact of gains on asset dispositions, net, operating income as a percentage of operating revenues was 4% in 2018 compared with 0% in 2017. The increase was primarily due to higher earnings from the dry-cargo barge pools.
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Foreign Currency Gains (Losses), Net. During 2018, Inland Services recognized $2.0 million in foreign currency losses primarily due to the weakening of the Colombian peso versus the U.S. dollar underlying certain intercompany lease obligations.
Equity in Losses of 50% or Less Owned Companies, Net of Tax. During 2018 and 2017, Inland Services recognized $5.7 million and $5.2 million, respectively, of equity losses in 50% or less owned companies, net of tax. During 2018, equity in losses of 50% or less owned companies, net of tax, increased by $0.5 million. Operating results for Bunge-SCF Grain were $3.5 million lower. Operating results for SCFCo were $2.4 million higher primarily due to higher demand for barge transportation and favorable operating conditions. Operating results for SCF Bunge Marine improved primarily due to favorable operating conditions, operating an additional towboat and higher towing rates.
Witt O’Brien’s
Witt O’Brien’s results declined in 2019. The majority of the decrease was driven by a reduction in recovery project volumes following the major natural disasters that struck the U.S. during 2017 and 2018, including the hurricanes causing significant damage in the Caribbean and Puerto Rico. Several of these projects have either been successfully completed or have reduced in scope as work has progressed. There was also comparatively little disaster activity in 2019, compared with 2017 and 2018, leading to a decline in new response and recovery projects. Witt O’Brien’s continues to serve territory, state and local governments in the U.S. Virgin Islands, Texas, North Carolina, Florida, New Jersey and California, as well as a wide variety of corporate customers. Many of Witt O’Brien’s public and private sector projects that were in progress at the end of 2019 continue into 2020.
Results of Operations
The number of retainer customers, private and public sector consulting engagements and the number, severity and location of natural and man-made disasters are the key determinants of Witt O’Brien’s operating results and cash flows.
For the years ended December 31, the results of operations for Witt O’Brien’s were as follows:
2019 2018 2017
Amount Percent Amount Percent Amount Percent
$ ’000 % $ ’000 % $ ’000 %
Operating Revenues:
United States 98,492    97    129,039    98    46,041    94   
Foreign 3,291    3    2,670    2    3,115    6   
101,783    100    131,709    100    49,156    100   
Costs and Expenses:
Operating 68,052    67    83,203    63    32,017    65   
Administrative and general 25,959    25    24,772    19    13,438    27   
Depreciation and amortization 835    1    1,944    1    819    2   
94,846    93    109,919    83    46,274    94   
Gains on Asset Dispositions 18    —    —    —    —    —   
Operating Income 6,955    7    21,790    17    2,882    6   
Other Income (Expense):
Foreign currency gains (losses), net (1)   —    (28)   —    50    —   
Other, net (463)   (1)   —    —    —    —   
Equity in Earnings of 50% or Less Owned Companies, Net of Tax 902    1    203    —    174    —   
Segment Profit 7,393    7    21,965    17    3,106    6   
2019 compared with 2018
Operating Revenues. Operating revenues were $29.9 million lower primarily due to the completion and stage of certain post-disaster response and recovery services that were provided to territory, state and local governments across the U.S. Virgin Islands, Texas, North Carolina, Florida and California. There was also comparatively less disaster activity in 2019 compared with 2018 and 2017, leading to a decline in new response and recovery projects.
Operating Expenses. Operating expenses were $15.2 million lower primarily due to decreased subcontracted labor costs consistent with the lower operating revenues discussed above.
Administrative and General. Administrative and general expenses were $1.2 million higher primarily due to expenses incurred in business development.
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Depreciation and Amortization. Depreciation and amortization expenses were $1.1 million lower primarily due to certain intangible assets becoming fully depreciated in 2018.
Operating Income. Operating income was 7% of operating revenues in 2019 compared with 17% in 2018. The decrease was primarily due to the mix of post-disaster response and recovery services provided to territory, state and local governments across the U.S. Virgin Islands, Texas, North Carolina, Florida and California and the related costs.
Equity in Earnings of 50% or Less Owned Companies, Net of Tax. Equity in earnings of 50% or less owned companies, net of tax was $0.7 million higher in 2019 compared with 2018 primarily due to increased emergency response services for O'Brien's do Brasil Consultoria em Emergencias e Meio Ambiente A/A ("O'Brien's do Brazil") in both the mining and energy sectors in Brazil.
2018 compared with 2017
Operating Revenues. Operating revenues were $82.6 million higher primarily due to post-disaster response and recovery services provided to territory, state and local governments across the U.S. Virgin Islands, Texas, North Carolina, Florida, California and Puerto Rico.
Operating Expenses. Operating expenses were $51.2 million higher primarily due to increased subcontracted labor costs consistent with the higher operating revenues discussed above.
Administrative and General. Administrative and general expenses were $11.3 million higher primarily due to expanded back-office functions required to support the increased operating activities discussed above.
Depreciation and Amortization. Depreciation and amortization expenses were $1.1 million higher primarily due to additional intangible assets resulting from the acquisition of Strategic Crisis Advisors LLC.
Operating Income. Operating income was 17% of operating revenues in 2018 compared with 6% in 2017. The improvement was primarily due to post-disaster response and recovery services provided to territory, state and local governments across the U.S. Virgin Islands, Texas, North Carolina, Florida, California and Puerto Rico.
Other
For the years ended December 31, segment loss for the Company’s Other activities was as follows:
2019 2018 2017
Amount Percent Amount Percent Amount Percent
$ ’000 % $ ’000 % $ ’000 %
Operating Revenues:
United States 7,681    100    3,446    96    —    —   
Foreign —    —    143    4    464    100   
7,681    100    3,589    100    464    100   
Costs and Expenses:
Operating 5,464    71    2,455    69    —    —   
Administrative and general 3,489    45    1,841    51    831    179   
Depreciation and amortization 1,982    26    501    14    —    —   
10,935    142    4,797    134    831    179   
Gains on Asset Dispositions, Net 32    —    37    1    —    —   
Operating Loss (3,222)   (42)   (1,171)   (33)   (367)   (79)  
Other Income (Expense):
Foreign currency gains (losses), net —    —    (3)   —    6    1   
Other, net
431    6    54,249    n/m    (301)   (65)  
Equity in Earnings of 50% or Less Owned Companies, Net of Tax 1,037    13    1,779    50    305    66   
Segment Profit (Loss)(1)
(1,754)   (23)   54,854    n/m    (357)   (77)  
______________________
(1)Includes amounts attributable to both SEACOR and noncontrolling interests. See Part IV “Note 13. Noncontrolling Interests in Subsidiaries” included in this Annual Report on Form 10-K.
“n/m” The balance as a percentage of operating revenues is not meaningful.
Operating Activities. Operating results primarily consist of the business activities of Cleancor, which the Company acquired on June 1, 2018. Operating results in 2019 were lower as a consequence of re-certification costs for certain equipment and the addition of personnel and equipment following an expansion of Cleancor's fleet and services.
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Other, Net. Other, net in 2018 primarily consists of a gain of $53.9 million on the sale of the Company’s 34.2% interest in Hawker Pacific Airservices Limited (“Hawker Pacific”).
Equity in Earnings of 50% or Less Owned Companies, Net of Tax. The Company’s 50% or less owned companies primarily consist of general aviation services businesses in Asia, including Hawker Pacific prior to its sale in 2018, and an agricultural commodity trading and logistics business.
Corporate and Eliminations
2019 2018 2017
$ ’000 $ ’000 $ ’000
Corporate Expenses (24,295)   (24,767)   (37,923)  
Eliminations 32    125    78   
Operating Loss (24,263)   (24,642)   (37,845)  
Other Income (Expense):
Derivative gains —    —    19,727   
Foreign currency gains (losses), net (1)   (63)   125   
Other, net 10    94    230   
Corporate Expenses. Corporate expenses in 2017 included $5.3 million and $6.4 million of share award expense as a consequence of the accelerated vesting of certain share awards in advance of changes to the U.S. federal income tax code and the Spin-off, respectively.
Derivative Gains. Derivative gains in 2017 were primarily due to the mark-to-market of the Company’s exchange option liability on subsidiary convertible senior notes. The exchange option liability on these notes terminated on June 1, 2017 as a consequence of the Spin-off.
Other Income (Expense) not included in Segment Profit
2019 2018 2017
$’000 $’000 $’000
Interest income 7,471    8,730    8,547   
Interest expense (19,233)   (31,683)   (41,530)  
Debt extinguishment losses, net (2,244)   (11,626)   (819)  
Marketable security gains (losses), net 18,394    (12,431)   (1,782)  
4,388    (47,010)   (35,584)  
Interest Income. Interest income in 2019 was $1.3 million lower compared with 2018 primarily due to lower invested cash balances and lower interest rates.
Interest Expense. Interest expense was $12.5 million lower in 2019 compared with 2018 primarily due to the redemption of the Company's 7.375% Senior Notes due 2019 (the “7.375% Senior Notes”) in October 2018, lower debt balances on the Company's 3.0% Convertible Senior Notes due 2028 (the “3.0% Convertible Senior Notes”) and lower balances on the SEA-Vista 2015 Credit Facility partially offset by interest on the Company's 3.25% Convertible Senior Notes due 2030 (the “3.25% Convertible Senior Notes”) issued in May 2018. Interest expense was $9.8 million lower in 2018 compared with 2017 primarily due to lower debt balances on the Company's 2.5% Convertible Senior Notes due 2027 (the “2.5% Convertible Senior Notes”) and 3.0% Convertible Senior Notes, lower balances on the SEA-Vista 2015 Credit Facility and the redemption of the 7.375% Senior Notes in October 2018, partially offset by interest on the 3.25% Convertible Senior Notes issued in May 2018 and lower capitalized interest.
Debt Extinguishment Losses, Net. During 2019, the Company purchased $57.2 million in principal amount of its 3.0% Convertible Senior Notes for total consideration of $56.2 million resulting in losses on debt extinguishment of $2.1 million.
During 2018, the Company exchanged $117.8 million aggregate principal amount of the Company’s outstanding 3.0% Convertible Senior Notes for a like principal amount of new 3.25% Convertible Senior Notes and purchased $4.9 million in principal amount of its 3.0% Convertible Senior Notes for total consideration of $4.7 million. In addition, prior to the redemption, the Company purchased $5.7 million in principal amount of its 7.375% Senior Notes for $5.9 million. On October 31, 2018, the Company redeemed the remaining $147.4 million in principal amount of its 7.375% Senior Notes for $153.0 million including a make-whole premium of $5.6 million calculated in accordance with the terms of the indenture.
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During 2017, the Company purchased $7.6 million in principal amount of its 7.375% Senior Notes for $7.7 million resulting in losses on debt extinguishment of $0.2 million and purchased $61.7 million in principal amount of its 2.5% Convertible Senior Notes for $61.9 million resulting in gains on debt extinguishment of $0.1 million. In addition, SEA-Vista made unscheduled payments of $133.6 million on the SEA-Vista 2015 Credit Facility following a sale-leaseback transaction for one of its vessels, which resulted in losses on debt extinguishment of $0.7 million.
Marketable Security Gains (Losses), Net. Marketable security gains (losses), net in all periods primarily relate to marking-to-market the Company's long marketable security position in Dorian LPG Ltd ("Dorian"), a publicly traded company listed on the New York Stock Exchange under the symbol “LPG.” During 2019, the Company sold the remainder of its Dorian common stock and its current marketable security portfolio primarily consists of investments in energy, marine, transportation and other related businesses.
Income Taxes
The Company’s effective income tax rate in 2019, 2018, and 2017 was 20.0%, 9.2% and (190.9)%, respectively. See Part IV “Note 9. Income Taxes” included in this Annual Report on Form 10-K.
Liquidity and Capital Resources
General
The Company’s ongoing liquidity requirements arise primarily from working capital needs, capital commitments and its obligations to repay debt. The Company may use its liquidity to fund acquisitions, repurchase shares of SEACOR common stock, par value $0.01 per share (“Common Stock”) for treasury, repurchase its outstanding notes or make other investments. Sources of liquidity are cash balances, marketable securities, cash flows from operations and availability under the Company's revolving credit facilities. From time to time, the Company may secure additional liquidity through asset sales or the issuance of debt, shares of Common Stock or common stock of its subsidiaries, preferred stock or a combination thereof.
The Company's capital commitments as of December 31, 2019 by year of expected payment were as follows (in thousands):
2020 2021 2022 Total
Ocean Services $ 22,394    $ 30,965    $ 2,636    $ 55,995   
Inland Services 5,663    —    —    5,663   
Other 582    —    —    582   
$ 28,639    $ 30,965    $ 2,636    $ 62,240   
Subsequent to December 31, 2019, the Company committed to purchase two inland river dry-cargo barges and other property and equipment for $2.5 million.
As of December 31, 2019, the Company had outstanding debt of $314.5 million, net of discounts and issue costs, and letters of credit totaling $1.2 million with various expiration dates through 2027. In addition, as of December 31, 2019, the Company guaranteed payments on behalf of SEACOR Marine totaling $22.9 million, under certain sale-leaseback transactions, equipment financing and multi-employer pension obligations. These guarantees continue to be contingent obligations of the Company because the beneficiary of the guarantees did not release the Company from its obligations in connection with the Spin-off and decline as payments are made by SEACOR Marine on the underlying obligations. The Company earns a fee from SEACOR Marine of 0.5% per annum on the amount of the obligations under these guarantees.
As of December 31, 2019, the holders of the Company’s 3.0% Convertible Senior Notes ($50.0 million outstanding), 2.5% Convertible Senior Notes ($64.5 million outstanding) and 3.25% Convertible Senior Notes ($117.8 million outstanding) may require the Company to repurchase such notes on November 19, 2020, December 19, 2022 and May 15, 2025, respectively, pursuant to the indentures governing such notes. The Company’s long-term debt maturities, assuming the holders of the aforementioned convertible senior notes require the Company to repurchase the notes on those dates, are as follows (in thousands):
2020 $ 60,630   
2021 10,499   
2022 74,958   
2023 10,368   
2024 60,244   
Years subsequent to 2024 123,536   
$ 340,235   
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SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire its Common Stock, 3.0% Convertible Senior Notes, 2.5% Convertible Senior Notes and 3.25% Convertible Senior Notes collectively the ("Securities"), through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. On June 5, 2019, SEACOR's Board of Directors increased the Company's repurchase authority for the Securities to $150.0 million. As of December 31, 2019, the Company’s remaining repurchase authority for the Securities was $129.9 million. Subsequent to December 31, 2019, the Company purchased an additional $2.2 million in principal amount of its 3.0% Convertible Senior Notes for total consideration of $2.2 million.
As of December 31, 2019, the Company held balances of cash, cash equivalents, restricted cash, restricted cash equivalents and marketable securities totaling $86.4 million. Additionally, the Company had $225.0 million available under its revolving credit facilities.
Summary of Cash Flows
2019 2018 2017
$ ’000 $ ’000 $ ’000
Cash provided by or (used in):
Operating Activities-Continuing Operations 119,273    49,428    107,575   
Operating Activities-Discontinued Operations —    —    12,811   
Investing Activities-Continuing Operations (32,568)   80,492    115,866   
Investing Activities-Discontinued Operations —    —    2,720   
Financing Activities-Continuing Operations (155,471)   (224,799)   (249,646)  
Financing Activities-Discontinued Operations —    —    (7,149)  
Effect of Exchange Rate Changes on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents-Continuing Operations (2)   (137)   956   
Effect of Exchange Rate Changes on Cash and Cash Equivalents-Discontinued Operations —    —    208   
Net Decrease in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents (68,768)   (95,016)   (16,659)  
Operating Activities
Cash flows provided by continuing and discontinued operating activities increased $69.8 million during 2019 compared with 2018 and decreased $71.0 million during 2018 compared with 2017. The components of cash flows provided by (used in) operating activities during the years ended December 31, were as follows:
2019 2018 2017
$ ’000 $ ’000 $ ’000
Operating income from continuing operations before depreciation, amortization and gains on asset dispositions and impairments, net 110,816    140,995    113,904   
Operating loss from discontinued operations before depreciation, amortization and gains on asset dispositions and impairments, net —    —    (33,509)  
Changes in operating assets and liabilities before interest and income taxes (37,318)   (46,574)   (46,869)  
Purchases of marketable securities (5,752)   —    (1,720)  
Proceeds from sales of marketable securities 46,526    14    52,551   
Cash settlements on derivative transactions, net —    —    1,267   
Dividends received from 50% or less owned companies 100    5,907    14,533   
Interest paid, excluding capitalized interest (1)
(12,903)   (26,880)   (32,341)  
Income taxes (paid) refunded, net 3,448    (27,166)   8,195   
Other(2)
14,356    3,132    44,375   
Total cash flows provided by continuing and discontinued operating activities 119,273    49,428    120,386   
_____________________
(1)During 2019, 2018 and 2017, capitalized interest paid and included in purchases of property and equipment for continuing and discontinued operations was $0.1 million, $0.2 million and $4.7 million, respectively.
(2)Primarily includes interest income, amortization of stock expense and amortization of previously deferred gains.
Operating income from continuing operations before depreciation, amortization and gains on asset dispositions and impairments, net decreased $30.2 million during 2019 compared with 2018 and increased $27.1 million during 2018 compared with 2017. See “Consolidated Results of Operations” included above for a discussion of the results for each of the Company’s business segments.
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During 2019, cash provided by operating activities of continuing and discontinued operations included $46.5 million received from the sale of marketable security long positions and $5.8 million of cash used to purchase long marketable securities. During 2017, cash provided by operating activities of continuing and discontinued operations included $52.6 million received from the sale of marketable security long positions and $1.7 million of cash used to cover marketable security short positions.
During 2017 other also includes an $18.2 million gain on the sale of ICP.
Investing Activities
During 2019, net cash used in investing activities of continuing operations was $32.6 million primarily as follows:
•Capital expenditures were $37.8 million including the delivery of one U.S.-flag harbor tug and two inland river towboats, the acquisition of real property, upgrades to inland river towboats and the construction of other Inland Services equipment.
•The Company sold one foreign-flag short-sea container/RORO vessel and other equipment for cash proceeds of $2.5 million.
•The Company made investments in, and advances to, 50% or less owned companies of $6.0 million including $4.7 million to Rail Ferry Vessel Holdings LLC (“RF Vessel Holdings”), $0.5 million to Golfo de Mexico Rail Ferry Holdings LLC (“Golfo de Mexico”), $0.5 million to VA&E Trading LLP (“VA&E”) and $0.3 million to SCF Bunge Marine.
•The Company received capital distributions of $3.7 million from its 50% or less owned company VA&E.
•The Company received net payments on third-party leases and notes receivables of $1.1 million.
During 2018, net cash provided by investing activities of continuing operations was $80.5 million primarily as follows:
•Capital expenditures were $50.3 million. Equipment deliveries included five U.S.-flag harbor tugs and two foreign-flag short-sea container/RORO vessels.
•The Company sold one U.S.-flag petroleum and chemical carrier, one U.S.-flag harbor tug, 32 inland river dry-cargo barges, two inland river specialty barges and other property and equipment for net proceeds of $16.1 million.
•The Company made investments in, and advances to, 50% or less owned companies of $20.6 million including $9.1 million to RF Vessel Holdings, $4.6 million to Golfo de Mexico, $5.4 million to VA&E, $1.0 million to KSM and $0.5 million to SCF Bunge Marine.
•The Company received $9.0 million from its 50% or less owned companies, including $5.4 million from VA&E, $2.6 million from SCFCo and $0.6 million from an industrial aviation business.
•On April 30, 2018, the Company sold its interest in Hawker Pacific for $78.0 million.
•The Company received payments on third-party leases and notes receivables of $0.5 million.
During 2017, net cash provided by investing activities of continuing operations was $115.9 million primarily as follows:
•Capital expenditures were $114.6 million. Equipment deliveries included three U.S.-flag petroleum and chemical carriers, one U.S.-flag harbor tug, two foreign-flag harbor tugs, two inland river liquid tank barges and three inland river towboats.
•The Company sold one U.S.-flag petroleum and chemical carrier, two inland river towboats, 50 inland river dry-cargo barges, two inland river specialty barges and other property and equipment for net proceeds of $164.8 million. Equipment dispositions included the sale-leaseback of one U.S.-flag petroleum and chemical carrier for $134.9 million with a leaseback term of 104 months and 50 inland river dry-cargo barges for $12.5 million with leaseback terms of 84 months.
•The Company made investments in, and advances to, 50% or less owned companies of $9.7 million including $2.0 million to Trailer Bridge, $2.9 million to SCFCo, $3.5 million to VA&E and $1.0 million to Avion Pacific Limited (“Avion”).
•The Company received $12.1 million from its 50% or less owned companies, including $6.0 million from Trailer Bridge, $1.7 million from SCFCo and $4.0 million from Avion.
•The Company received capital distributions of $3.5 million from SeaJon.
•The Company received $5.0 million from the sale of a controlling interest in a subsidiary.
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•The Company received payments on third-party leases and notes receivables of $24.5 million.
•On July 3, 2017, the Company acquired all of the equity of ISH for a net purchase price of ($5.9) million, net of cash acquired of $16.4 million.
During 2017, net cash provided by investing activities of discontinued operations was $2.7 million primarily as follows:
•Offshore Marine Services used net cash of $17.3 million related to the purchase and sale of equipment.
•Illinois Corn Processing used net cash of $1.2 million for the purchase of equipment.
•Offshore Marine Services received net cash of $4.1 million from construction reserve funds and restricted cash.
•Offshore Marine Services received net distributions of $5.0 million from its 50% or less owned companies.
•Offshore Marine Services used $7.8 million for business consolidations and acquisitions.
•The Company received $19.9 million from the sale of its controlling interest in Illinois Corn Processing.
Financing Activities
During 2019, net cash used in financing activities of continuing operations was $155.5 million. The Company:
•purchased $57.2 million in principal amount of its 3.0% Convertible Senior Notes for total consideration of $56.2 million of which $56.0 million was allocated to the debt and $0.1 million was allocated to the conversion option embedded in the 3.0% Convertible Senior Notes;
•borrowed $25.0 million and repaid $25.0 million under the SEACOR Revolving Credit Facility and incurred issuance costs of $2.2 million;
•repaid $88.0 million under the SEA-Vista 2015 Credit Facility;
•borrowed $100.0 million under the SEA-Vista 2019 Credit Facility and incurred issuance costs of $2.1 million;
•made other scheduled payments on long-term debt of $0.6 million;
•paid dividends to noncontrolling interests in subsidiaries of $5.2 million;
•acquired 3,912 shares of Common Stock for treasury for an aggregate purchase price of $0.1 million;
•acquired 8,338 shares of Common Stock for treasury for an aggregate purchase price of $0.4 million from its employees to cover their tax withholding obligations related to the vesting of equity awards. These shares were purchased in accordance with the terms of the Company’s Share Incentive Plans and not pursuant to the repurchase authorizations granted by SEACOR’s Board of Directors;
•received $6.9 million from share award plans; and
•paid $107.7 million in cash and issued 1,500,000 shares of Common Stock in exchange for subsidiary shares from noncontrolling interests.
During 2018, net cash used in financing activities of continuing operations was $224.8 million. The Company:
•purchased $5.7 million in principal amount of its 7.375% Senior Notes for $5.9 million. On October 31, 2018, the Company redeemed the remaining $147.4 million in principal amount of its 7.375% Senior Notes for $153.0 million including a make-whole premium of $5.6 million;
•purchased $4.9 million in principal amount of its 3.0% Convertible Senior Notes for total consideration of $4.7 million;
•repaid $47.7 million under the SEA-Vista 2015 Credit Facility;
•repaid the outstanding balance of $12.2 million under the ISH Term Loan;
•repaid the outstanding balance of $1.4 million of other debt assumed in the ISH acquisition;
•made other scheduled payments on long-term debt of $0.6 million;
•incurred costs of $2.5 million related to the exchange of $117.8 million aggregate principal amount of the Company’s outstanding 3.0% Convertible Senior Notes for a like principal amount of new 3.25% Convertible Senior Notes;
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•paid dividends to noncontrolling interests in subsidiaries of $5.1 million; and
•received $8.4 million from share award plans.
During 2017, net cash used in financing activities of continuing operations was $249.6 million. The Company:
•purchased $7.6 million in principal amount of its 7.375% Senior Notes for $7.7 million;
•purchased $61.7 million in principal amount of its 2.5% Convertible Senior Notes for total consideration of $61.9 million. Consideration of $60.5 million was allocated to the settlement of the long-term debt and $1.4 million was allocated to the purchase of the conversion option embedded in the 2.5% Convertible Senior Notes. In addition, the Company purchased $31.0 million in principal amount of its 2.5% Convertible Senior Notes that were validly surrendered in the Company’s offer to purchase such notes for total consideration of $31.0 million;
•borrowed $44.9 million and repaid $188.4 million under the SEA-Vista 2015 Credit Facility;
•repaid $12.8 million under the ISH Credit Facility;
•made other scheduled payments on long-term debt and capital lease obligations of $3.0 million;
•acquired 212,659 shares of Common Stock for treasury for an aggregate purchase price of $12.3 million from its employees to cover their tax withholding obligations related to share award transactions. These shares were purchased in accordance with the terms of the Company’s Share Incentive Plans and not pursuant to the repurchase authorizations granted by SEACOR’s Board of Directors; and
•received $22.6 million from share award plans.
During 2017, net cash used in financing activities of discontinued operations was $7.1 million primarily due to a $7.4 million dividend payment to noncontrolling interests made by ICP.
Short and Long-Term Liquidity Requirements
The Company anticipates it will continue to generate positive cash flows from operations and that these cash flows will be adequate to meet the Company’s working capital requirements. In support of the Company’s capital expenditure program and debt service requirements, the Company believes that a combination of cash balances on hand, cash generated from operating activities, funding under the Company's revolving credit facilities and access to the credit and capital markets will provide sufficient liquidity to meet its obligations. The Company continually evaluates possible acquisitions and dispositions of certain businesses and assets. The Company’s sources of liquidity may be impacted by the general condition of the markets in which it operates and the broader economy as a whole, which may limit its access to the credit and capital markets on acceptable terms. Management will continue to closely monitor the Company’s liquidity and the credit and capital markets.
Off-Balance Sheet Arrangements
On occasion, the Company and its partners will guarantee certain obligations on behalf of their 50% or less owned companies. As of December 31, 2019, the Company guaranteed payments on behalf of SEACOR Marine totaling $22.9 million, under certain sale-leaseback transactions, equipment financing and multi-employer pension obligations. These guarantees continue to be contingent obligations of the Company because the beneficiary of the guarantees did not release the Company from its obligations in connection with the Spin-off and decline as payments are made by SEACOR Marine on the underlying obligations. The Company earns a fee from SEACOR Marine of 0.5% per annum on the amount of the obligations under these guarantees.
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Contractual Obligations and Commercial Commitments
The following table summarizes the Company’s contractual obligations and other commercial commitments and their aggregate maturities as of December 31, 2019 (in thousands):
Payments Due By Period
Total Less than
1 Year 		1-3 Years 3-5 Years After
5 Years
$ ’000 $ ’000 $ ’000 $ ’000 $ ’000
Contractual Obligations:
Long-term Debt (including principal and interest)(1)
422,750    21,621    41,827    89,806    269,496   
Capital Purchase Obligations(2)
62,240    28,639    33,601    —    —   
Operating Leases(3)
163,285    41,914    65,171    29,134    27,066   
Purchase Obligations(4)
6,863    6,863    —    —    —   
Other(5)
800    185    392    87    136   
655,938    99,222    140,991    119,027    296,698   
Other Commercial Commitments:
Letters of Credit 1,242    842    —    —    400   
657,180    100,064    140,991    119,027    297,098   
______________________
(1)Estimated interest payments of the Company’s borrowings are based on contractual terms and maturities. As of December 31, 2019, the holders of the Company’s 3.0% Convertible Senior Notes ($50.0 million outstanding), 2.5% Convertible Senior Notes ($64.5 million outstanding) and 3.25% Convertible Senior Notes ($117.8 million outstanding) may require the Company to repurchase the notes on November 19, 2020, December 19, 2022 and May 15, 2025, respectively. For purposes of this table, the Company has assumed holders of these notes will not exercise this option. See table in “General” above for the Company’s long-term debt principal maturities assuming the holders of the aforementioned convertible notes require the Company to repurchase the notes on those dates.
(2)Capital purchase obligations represent commitments for the purchase of property and equipment. These commitments are not recorded as liabilities on the Company’s consolidated balance sheet as of December 31, 2019 as the Company has not yet received the goods or taken title to the property.
(3)Operating leases include leases of petroleum and chemical carriers, inland river towboats, harbor tugs, barges, and other property with an initial term in excess of one year.
(4)These commitments are for goods and services to be acquired in the ordinary course of business and are fulfilled by the Company’s vendors within a short period of time.
(5)Other primarily includes deferred compensation arrangements.
Debt Securities and Credit Agreements
For a discussion of the Company’s debt securities and credit agreements see “Note 7. Long-Term Debt” in the Company’s “Notes to Consolidated Financial Statements.”
Effects of Inflation
The Company’s operations expose it to the effects of inflation. In the event that inflation becomes a significant factor in the world economy, inflationary pressures could result in increased operating and financing costs.
Contingencies
During 2012, the Company sold National Response Corporation (“NRC”), NRC Environmental Services Inc., SEACOR Response Ltd., and certain other subsidiaries to J.F. Lehman & Company, a private equity firm (the “SES Business Transaction”).
On December 15, 2010, O’Brien’s Response Management L.L.C. (“ORM”) and NRC were named as defendants in several “master complaints” filed in the overall multi-district litigation relating to the Deepwater Horizon oil spill response and clean-up in the Gulf of Mexico (the "DWH Response"), which is currently pending in the U.S. District Court for the Eastern District of Louisiana (the “MDL”). The “B3” master complaint naming ORM and NRC asserted various claims on behalf of a putative class against multiple defendants concerning the clean-up activities generally and the use of dispersants specifically. Both prior to and following the filing of the aforementioned “B3” master complaint, individual civil actions naming the Company, ORM, and/or NRC alleging B3 exposure-based injuries and/or damages were consolidated with the MDL and stayed pursuant to court order. On February 16, 2016, all but eleven “B3” claims against ORM and NRC were dismissed with prejudice (the “B3 Dismissal Order”). On August 2, 2016, the Court granted an omnibus motion for summary judgment as it concerns ORM and NRC in its entirety, dismissing the remaining eleven plaintiffs’ claims against ORM and NRC with prejudice (the “Remaining Eleven Plaintiffs’ Dismissal Order”). The deadline to appeal both of these orders has expired. The last remaining claim against the Company in connection with the "B3" master complaint was dismissed with prejudice, by an order of the Court granted on July 25, 2019.
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On February 18, 2011, Triton Asset Leasing GmbH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., and Transocean Deepwater Inc. (collectively “Transocean”) named ORM and NRC as third-party defendants in a Rule 14(c) Third-Party Complaint in Transocean’s own Limitation of Liability Act action, which is part of the overall MDL, tendering to ORM and NRC the claims in the “B3” master complaint that have already been asserted against ORM and NRC. Various contribution and indemnity cross-claims and counterclaims involving ORM and NRC were subsequently filed. The Company believes that the potential exposure, if any, resulting therefrom has been reduced as a result of the various developments in the MDL, including the B3 Dismissal Order and Remaining Eleven Plaintiffs’ Dismissal Order, and does not expect that these matters will have a material effect on its consolidated financial position, results of operations or cash flows.
Separately, on March 2, 2012, the Court announced that BP Exploration and Production Inc. (“BPXP”) and BP America Production Company (“BP America,” and with BPXP, “BP”) and the Plaintiffs had reached an agreement on the terms of two proposed class action settlements that will resolve, among other things, Plaintiffs’ economic loss and property damage claims and clean-up related claims against BP. The Company, ORM, and NRC had no involvement in negotiating or agreeing to the terms of either settlement, nor are they parties or signatories thereto. The BP settlement pertaining to personal injury claims (the “Medical Settlement”) purported to resolve the “B3” claims asserted against BP and also established a right for class members to pursue individual claims against BP (but not ORM or NRC) for “later-manifested physical conditions,” defined in the Medical Settlement to be physical conditions that were “first diagnosed” after April 16, 2012 and which are claimed to have resulted from exposure during the DWH Response. The back-end litigation-option (“BELO”) provision of the Medical Settlement has specifically-delineated procedures and limitations, should any “B3” class member seek to invoke their BELO right. For example, there are limitations on the claims and defenses that can be asserted, as well as on the issues, elements, and proofs that may be litigated at any trial and the potential recovery for any Plaintiff. Notwithstanding that the Company, ORM, and NRC are listed on the Medical Settlement’s release as to claims asserted by Plaintiffs, the Medical Settlement still permits BP to seek indemnity from any party, to the extent BP has a valid indemnity right. The Medical Settlement was approved by the Court on January 11, 2013 and made effective on February 12, 2014.
As of mid-January 2020, BP has tendered approximately 2,380 claims pursuant to the Medical Settlement’s BELO provision for indemnity to ORM and approximately 230 of such claims to NRC. Recently, approximately 450 of the claims that were tendered by BP to ORM and approximately 35 of the claims tendered to NRC have been dismissed with prejudice. ORM and NRC have rejected all of BP’s indemnity demands relating to the Medical Settlement’s BELO provision and on February 14, 2019 commenced a legal action against BPXP and BP America with respect to same. That action, captioned O’Brien’s Response Management, L.L.C. et al. v. BP Exploration & Production Inc. et al., Case No. 2:19-CV-01418-CJB-JCW (E.D. La.) (the “Declaratory Judgment Action”), seeks declaratory relief that neither ORM nor NRC have any indemnity obligation to BP with respect to the exposure-based claims expressly contemplated by the Medical Settlement’s BELO provision, nor any contribution, in light of BP’s own actions and conduct over the past nine years (including its complete failure to even seek indemnity) and the resultant prejudice to ORM and NRC; that any indemnity or contribution rights BP may have once had with respect to these personal injury and exposure claims were extinguished once the Medical Settlement was approved by the MDL Court in 2013; and that the immunity already afforded to ORM and NRC via the B3 Dismissal Order and the Remaining Eleven Plaintiffs’ Dismissal Order operates to bar any indemnity or contribution claims against them by BP. BP subsequently proceeded to begin tendering personal injury claims to ORM and NRC that are being pursued by plaintiffs who opted out of the Medical Settlement and who are thus proceeding with their “B3” claims in their ordinary course (as opposed to pursuant to the Medical Settlement’s BELO provision). ORM and NRC also rejected these demands, and amended its Declaratory Judgment Action on December 11, 2019 to cover BP’s indemnity demands for these opt out claims as well.
On October 16, 2019, BP asserted four amended counterclaims against ORM and NRC, as well as two claims against ORM’s insurer (Navigators). Those amended counterclaims are breach of contract against ORM for failing to indemnify BP or name BP as an additional insured on the Navigators policy, declaratory judgment that NRC must indemnify BP under certain circumstances, and unjust enrichment against ORM and NRC. ORM and NRC moved to dismiss the last three of those counterclaims. That motion to dismiss was fully briefed as of January 10, 2020, and remains pending. The Court also ordered the parties to file simultaneous judgment on the pleadings briefs by February 14, 2020, and any oppositions by March 16, 2020.
Generally, the Company, ORM, and NRC believe that BP’s indemnity demands with respect to any “B3” claims, including those involving Medical Settlement class members invoking BELO rights and those involving Medical Settlement opt-out Plaintiffs, are untimely and improper, and intend to vigorously defend their interests. Moreover, ORM has contractual indemnity coverage for the above-referenced claims through its separate agreements with sub-contractors that worked for ORM during the DWH Response and has preserved their rights in that regard while the Declaratory Judgment Action is pending. Overall, however, the Company believes that both of BP’s settlements have reduced the potential exposure in connection with the various cases relating to the DWH Response. The Company is unable to estimate the potential exposure, if any, resulting from these claims, but does not expect that they will have a material effect on its consolidated financial position, results of operations or cash flows.
In the ordinary course of the Company’s business, it may agree to indemnify its counterparty to an agreement. If the indemnified party makes a successful claim for indemnification, the Company would be required to reimburse that party in
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accordance with the terms of the indemnification agreement. Indemnification agreements generally, but not always, are subject to threshold amounts, specified claim periods and other restrictions and limitations.
In connection with the SES Business Transaction, the Company remains contingently liable for work performed in connection with the DWH Response. Pursuant to the agreement governing the sale, the Company’s potential liability to the purchaser may not exceed the consideration received by the Company for the SES Business Transaction. The Company is currently indemnified under contractual agreements with BP for the potential “B3” liabilities relating to the DWH Response; this indemnification is unrelated to, and thus not impacted by, the indemnification BP has demanded and discussed above.
In the ordinary course of its business, the Company becomes involved in various other litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company’s estimates of that exposure could occur, but the Company does not expect such changes in estimated costs would have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
Related Party Transactions
The Company manages barge pools as part of its Inland Services segment. Pursuant to the pooling agreements, operating revenues and expenses of participating barges are combined and the net results are allocated on a pro-rata basis based on the number of barge days contributed by each participant. Companies controlled by Mr. Fabrikant, the Executive Chairman and Chief Executive Officer of SEACOR, and trusts established for the benefit of Mr. Fabrikant’s children own barges that participate in the barge pools managed by the Company. Mr. Fabrikant and his affiliates were participants in the barge pools prior to the acquisition of SCF Marine Inc. by SEACOR in 2000. During the years ended December 31, 2019, 2018 and 2017, Mr. Fabrikant and his affiliates earned $0.5 million, $0.9 million and $0.6 million, respectively, of net barge pool results (after payment of $0.1 million, $0.1 million and $0.1 million, respectively, in management fees to the Company). As of December 31, 2019 and 2018, the Company owed Mr. Fabrikant and his affiliates $0.1 million and $0.5 million, respectively, for undistributed net barge pool results.
Mr. Fabrikant is a director of SEACOR Marine. The Company has provided certain transition services to SEACOR Marine related to the Spin-off and the total amount earned from these transition services during the years ended December 31, 2019, 2018 and 2017 was $0.6 million, $4.6 million and $3.5 million, respectively.
Critical Accounting Policies and Estimates
Basis of Consolidation. The consolidated financial statements include the accounts of SEACOR and its controlled subsidiaries. Control is generally deemed to exist if the Company has greater than 50% of the voting rights of a subsidiary. All significant intercompany accounts and transactions are eliminated in consolidation.
Noncontrolling interests in consolidated subsidiaries are included in the consolidated balance sheets as a separate component of equity. The Company reports consolidated net income inclusive of both the Company’s and the noncontrolling interests’ share, as well as the amounts of consolidated net income attributable to each of the Company and the noncontrolling interests. If a subsidiary is deconsolidated upon a change in control, any retained noncontrolled equity investment in the former controlled subsidiary is measured at fair value and a gain or loss is recognized in net income based on such fair value. If a subsidiary is consolidated upon a change in control, any previous noncontrolled equity investment in the subsidiary is measured at fair value and a gain or loss is recognized based on such fair value.
The Company employs the equity method of accounting for investments in 50% or less owned companies that it does not control but has the ability to exercise significant influence over the operating and financial policies of the business venture. Significant influence is generally deemed to exist if the Company has between 20% and 50% of the voting rights of a business venture but may exist when the Company’s ownership percentage is less than 20%. In certain circumstances, the Company may have an economic interest in excess of 50% but may not control and consolidate the business venture. Conversely, the Company may have an economic interest less than 50% but may control and consolidate the business venture. The Company reports its investments in and advances to these business ventures in the accompanying consolidated balance sheets as investments, at equity, and advances to 50% or less owned companies. The Company reports its share of earnings or losses from investments in 50% or less owned companies in the accompanying consolidated statements of income as equity in earnings (losses) of 50% or less owned companies, net of tax.
The Company employs the cost method of accounting for investments in 50% or less owned companies it does not control or exercise significant influence. These investments in private companies are carried at cost and are adjusted only for capital distributions and other-than-temporary declines in fair value.
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and
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liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include those related to allowance for doubtful accounts, useful lives of property and equipment, impairments, income tax provisions and certain accrued liabilities. Actual results could differ from those estimates and those differences may be material.
Revenue Recognition. The Company earns revenues from contracts with customers and from lease contracts.
Revenue from Contracts with Customers. Revenue is recognized when (or as) the Company transfers promised goods or services to its customers in amounts that reflect the consideration to which the Company expects to be entitled to in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers control of the promised goods or services to its customers. Costs to obtain or fulfill a contract are expensed as incurred.
Ocean Services' revenues from contracts with customers primarily arise from voyage charters, contracts of affreightment, tariff based port and infrastructure services, unit freight logistics services, and technical ship management agreements with vessel owners. Ocean Services transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred. Voyage charters are contracts to carry cargoes on a single voyage basis for a predetermined price, regardless of time to complete. Contracts of affreightment are contracts for cargoes that are committed on a multi-voyage basis for various periods of time, with minimum and maximum cargo tonnages specified over the period at a fixed or escalating rate per ton. Tariff based port and infrastructure services typically include operating harbor tugs alongside oceangoing vessels to escort them to their berth, assisting with the docking and undocking of these oceangoing vessels and escorting them back out to sea. They are contracted using prevailing port tariff terms on a per-use basis. In the unit freight logistics trade, transportation services typically include transporting shipping containers, rail cars, project cargoes, automobiles and U.S. military vehicles and are generally contracted on a per unit basis for the specified cargo and destination, typically in accordance with a publicly available tariff rate or based on a negotiated rate when moving larger volumes over an extended period. Managed services include technical ship and crew management agreements whereby Ocean Services provides technical ship and crew management services to third-party customers for a predetermined price over a specified period of time, typically a year or more.
Inland Services' revenues from contracts with customers primarily arise from contracts of affreightment, terminal operations, fleeting operations and repair and maintenance services. Inland Services transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred. Contracts of affreightment are contracts whereby customers are charged an established rate per ton to transport cargo from point-to-point. Terminal operations includes tank farms and dry bulk and container handling facilities that are marketed under contractual rates and terms driven by throughput volume. Fleeting operations includes fleeting services whereby barges are held in fleeting areas for an agreed-upon day rate and shifting services whereby harbor boats are used to pick up and drop off barges to assist in assembling tows and to move barges to and from the dock for loading and unloading at predetermined per-shift fees. Other operations primarily include a machine shop specializing in towboat and barge cleaning, repair and maintenance services that are charged on an hourly or a fixed fee basis depending on the scope and nature of the work.
Witt O’Brien’s revenues from contracts with customers primarily arise from time and material and retainer contracts. Witt O’Brien’s transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred. Time and material contracts primarily relate to emergency response, debris management or consulting services that Witt O’Brien’s performs for a predetermined fee. Retainer contracts, which are nearly all with vessel services operators and oil companies, are contracted based on agreed-upon rates.
The Company’s Other business segment includes Cleancor, which primarily earns revenues from the sale of liquefied natural gas. Under these arrangements, control of the goods are transferred to the customer and performance obligations are satisfied at a point in time, and therefore revenue is recognized upon delivery while any related costs are expensed as incurred.
Lease Revenues. The Company’s lease revenues are primarily from time charters, bareboat charters and non-vessel rental agreements that are recognized ratably over the lease term as services are provided, typically on a per day basis. Under a time charter, the Company provides a vessel to a customer for a set term and is responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, the Company provides a vessel to a customer for a set term and the customer assumes responsibility for all operating expenses and risks of operation. Under a non-vessel rental agreement, the Company provides non-vessel property or equipment to a customer for a set term and the customer assumes responsibility for all operating expenses and risks of operation.
Marketable Securities. Marketable equity securities and debt securities with readily determinable fair values are reported in the accompanying consolidated balance sheets as marketable securities. These investments are stated at fair value, as determined by their market observable prices, with both realized and unrealized gains and losses reported in the accompanying consolidated statements of income as marketable security gains (losses), net. Short sales of marketable
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securities are stated at fair value in the accompanying consolidated balance sheets with both realized and unrealized gains and losses reported in the accompanying consolidated statements of income as marketable security gains (losses), net. Long and short marketable security positions are primarily in energy, marine, transportation and other related businesses. Marketable securities are classified as trading securities for financial reporting purposes with gains and losses reported as operating activities in the accompanying consolidated statements of cash flows.
Trade Receivables. Customers of Ocean Services are primarily multinational oil companies, refining companies, oil trading companies, major gasoline retailers, large industrial consumers of crude, petroleum and chemicals, trading houses, pools, major automobile manufacturers and shippers, the U.S. Government and regional power utilities. Customers of Inland Services are primarily major agricultural companies, fertilizer companies, trading companies and industrial companies. Customers of Witt O’Brien’s are primarily governments, energy companies, ship managers and owners, healthcare providers, universities and school systems. Customers of the Company’s other business activities primarily include agricultural and feed companies, asphalt producers and municipalities and government agencies. All customers are granted credit on a short-term basis and related credit risks are considered minimal. The Company routinely reviews its trade receivables and makes provisions for probable doubtful accounts; however, those provisions are estimates and actual results could differ from those estimates and those differences may be material. Trade receivables are deemed uncollectible and removed from accounts receivable and the allowance for doubtful accounts when collection efforts have been exhausted.
Property and Equipment. Equipment, stated at cost, is depreciated using the straight line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is typically based upon a newly built asset being placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets that have already exceeded their useful life as set forth in the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.
As of December 31, 2019, the estimated useful life (in years) of each of the Company’s major classes of new equipment was as follows:
Petroleum and chemical carriers - U.S.-flag 25
Bulk carriers - U.S.-flag 25
Harbor and offshore tugs 25
Ocean liquid tank barges 25
Short-sea container/RORO(1) vessels
20
Inland river dry-cargo and specialty barges 20
Inland river liquid tank barges 25
Inland river towboats and harbor boats 25
Terminal and fleeting facilities 20
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(1)Roll On/Roll Off.
Impairment of Long-Lived Assets. The Company performs an impairment analysis of long-lived assets used in operations, including intangible assets, when indicators of impairment are present. These indicators may include a significant decrease in the market price of a long-lived asset or asset group, a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition, or a current period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group. If the carrying values of the assets are not recoverable, as determined by the estimated undiscounted cash flows, the estimated fair value of the assets or asset groups are compared to their current carrying values and impairment charges are recorded if the carrying value exceeds fair value. The Company performs its testing on an asset or asset group basis. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate.
Impairment of 50% or Less Owned Companies. Investments in 50% or less owned companies are reviewed periodically to assess whether there is an other-than-temporary decline in the carrying value of the investment. In its evaluation, the Company considers, among other items, recent and expected financial performance and returns, impairments recorded by the investee and the capital structure of the investee. When the Company determines the estimated fair value of an investment is below carrying value and the decline is other-than-temporary, the investment is written down to its estimated fair value. Actual results may vary from the Company’s estimates due to the uncertainty regarding projected financial performance, the severity and expected duration of declines in value, and the available liquidity in the capital markets to support the continuing operations of the investee, among other factors. Although the Company believes its assumptions and estimates are reasonable, the investee’s actual performance compared with the estimates could produce different results and lead to additional impairment charges in future periods.
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Goodwill. Goodwill is recorded when the purchase price paid for an acquisition exceeds the fair value of net identified tangible and intangible assets acquired. As of December 31, 2019, substantially all of the Company’s goodwill is related to Witt O’Brien’s. The Company performs an annual impairment test of goodwill on October 1 of each year and further periodic tests to the extent indicators of impairment develop between annual impairment tests. The Company’s impairment review process compares the fair value of the reporting unit to its carrying value, including the goodwill, related to the reporting unit. To determine the fair value of the reporting unit, the Company may use various approaches including an asset or cost approach, market approach or income approach or any combination thereof. These approaches may require the Company to make certain estimates and assumptions including projections of future cash flows, revenues and expenses. These estimates and assumptions are reviewed each time the Company tests goodwill for impairment and are typically developed as part of the Company’s routine business planning and forecasting process. Although the Company believes its assumptions and estimates are reasonable, the Company’s actual performance against its estimates could produce different results and lead to impairment charges in future periods.
Business Combinations. The Company recognizes 100% of the fair value of assets acquired, liabilities assumed, and noncontrolling interests when the acquisition constitutes a change in control of the acquired entity. Shares issued in consideration for a business combination, contingent consideration arrangements and pre-acquisition loss and gain contingencies are all measured and recorded at their acquisition-date fair value. Subsequent changes to fair value of contingent consideration arrangements are generally reflected in earnings. Any in-process research and development assets acquired are capitalized as are certain acquisition-related restructuring costs if the criteria related to exit or disposal cost obligations are met as of the acquisition date. Acquisition-related transaction costs are expensed as incurred and any changes in income tax valuation allowances and tax uncertainty accruals are recorded as an adjustment to income tax expense (benefit). The operating results of entities acquired are included in the accompanying consolidated statements of income from the date of acquisition.
Self-insurance Liabilities. The Company maintains hull, liability and war risk, general liability, workers compensation and other insurance customary in the industries in which it operates. Certain excess and property insurance policies are obtained through SEACOR sponsored programs, with premiums charged to participating businesses based on management’s risk assessment or insured asset values. The marine hull and liability policies have significant annual aggregate deductibles that are accrued based on actual claims incurred. The Company also maintains self-insured health benefit plans for its participating employees. Exposure to the health benefit plans are limited by maintaining stop-loss and aggregate liability coverage. To the extent that estimated self-insurance losses, including the accrual of annual aggregate deductibles, differ from actual losses realized, the Company’s insurance reserves could differ significantly and may result in either higher or lower insurance expense in future periods.
Income Taxes. Deferred income tax assets and liabilities have been provided in recognition of the income tax effect attributable to the book and tax basis differences of assets and liabilities reported in the accompanying consolidated financial statements. Deferred tax assets or liabilities are provided using the enacted tax rates expected to apply to taxable income in the periods in which they are expected to be settled or realized. Interest and penalties relating to uncertain tax positions are recognized in interest expense and administrative and general, respectively, in the accompanying consolidated statements of income. The Company records a valuation allowance to reduce its deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company records any liability associated with global intangible low-taxed income (GILTI) in the period it is incurred.
In the normal course of business, the Company may be subject to challenges from tax authorities regarding the amount of taxes due. These challenges may alter the timing or amount of taxable income or deductions. As part of the calculation of income tax expense (benefit), the Company determines whether the benefits of its tax positions are at least more likely than not of being sustained based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained, the Company accrues the largest amount of the tax benefit that is more likely than not of being sustained. Such accruals require management to make estimates and judgments with respect to the ultimate outcome of its tax benefits and actual results could vary materially from these estimates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2019, a subsidiary of the Company whose functional currency is the Colombian peso had intercompany capital lease obligations of $21.4 million (70.2 billion Colombian pesos). A 10% weakening in the exchange rate of the Colombian peso against the U.S. dollar as of December 31, 2019 would result in foreign currency losses of $1.7 million, net of tax.
The Company has foreign currency exchange risks related to its barge operations conducted on rivers located in Colombia where its functional currency is the Colombian peso. Net consolidated assets of 16.0 billion Colombian pesos ($4.9 million) are included in the Company’s consolidated balance sheets as of December 31, 2019. A 10% strengthening in the exchange rate of the Colombian peso against the U.S. dollar as of December 31, 2019, would increase other comprehensive loss by $0.4 million, net of tax, due to translation.
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As of December 31, 2019, the Company held marketable securities with a fair value of $7.9 million consisting of equity securities. A 10% decline in the value of the Company’s investments in marketable securities as of December 31, 2019 would result in marketable securities losses of $0.6 million, net of tax.
The Company’s outstanding debt is primarily in fixed interest rate instruments. Although the fair value of these debt instruments will vary with changes in interest rates, the Company’s operations are not significantly affected by interest rate fluctuations. As of December 31, 2019, the Company had variable rate debt instruments (due 2023 through 2024) totaling $100.7 million that calls for the Company to pay interest based on LIBOR plus applicable margins. The interest rates reset either monthly or quarterly. As of December 31, 2019, the average interest rate on these variable rate borrowings was 3.9%.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and related notes are included in Part IV of this Form 10-K and incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
With the participation of the Company’s principal executive officer and principal financial officer, management evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of December 31, 2019. Based on their evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2019.
The Company’s disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company in the reports it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosures. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those internal control systems determined to be effective can provide only a level of reasonable assurance with respect to financial statement preparation and presentation.
Management’s Annual Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles in the United States. Because of the inherent limitations in any internal control system, no matter how well designed, misstatements may occur and not be prevented or detected. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation.
Management conducted an evaluation of the effectiveness of the Company’s system of internal control over financial reporting as of December 31, 2019 based on the updated framework set forth in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on its evaluation, management concluded that, as of December 31, 2019, the Company’s internal control over financial reporting was effective based on the specified criteria.
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The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 has been audited by the Company’s independent auditor, Grant Thornton LLP, a registered certified public accounting firm, and its attestation report thereon is included in Part IV of this Annual Report on Form 10-K and incorporated herein by reference. Grant Thornton LLP also audited the Company’s consolidated financial statements, as stated in its report accompanying the consolidated financial statements included in Part IV of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) that occurred during the three months ended December 31, 2019 that have materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required to be disclosed pursuant to this Item 10 is incorporated in its entirety herein by reference to the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.
NYSE Annual Certification. The Chief Executive Officer of the Company has previously submitted to the NYSE the annual certification required by Section 303A.12(a) of the NYSE Listed Company Manual and there were no qualifications to such certification. SEACOR Holdings Inc. has filed the certifications of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 with the SEC as exhibits to this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required to be disclosed pursuant to this Item 11 is incorporated in its entirety herein by reference to the “Compensation Disclosure and Analysis” and “Information Relating to the Board of Directors and Committees Thereof” portions of the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
The information required to be disclosed pursuant to this Item 12 is incorporated in its entirety herein by reference to the “Security Ownership of Certain Beneficial Owners and Management” portion of the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required to be disclosed pursuant to this Item 13 is incorporated in its entirety herein by reference to the “Certain Relationships and Related Transactions” portion of the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required to be disclosed pursuant to this Item 14 is incorporated in its entirety herein by reference to the “Ratification or Appointment of Independent Auditors” portion of the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.
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PART IV
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Page
SEACOR HOLDINGS INC.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
65
66
Consolidated Financial Statements:
68
69
70
71
73
75
Financial Statement Schedule:
118
TRAILER BRIDGE, INC.
AUDITED FINANCIAL STATEMENTS
Report of Independent Registered Certified Public Accounting Firm
123
Audited Financial Statements:
124
125
126
127
129
Except for the Financial Statement Schedule set forth above, all other required schedules have been omitted since the information is either included in the consolidated financial statements, not applicable or not required.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
SEACOR Holdings Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of SEACOR Holdings Inc., a Delaware corporation, and subsidiaries (the “Company”) as of December 31, 2019, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2019, and our report dated February 28, 2020 expressed unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP
Fort Lauderdale, Florida
February 28, 2020
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
SEACOR Holdings Inc.


Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of SEACOR Holdings Inc., a Delaware corporation, and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, based on our audits and the report of the other auditors, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
We did not audit the financial statements of Trailer Bridge, Inc., a joint venture, the investment in which is accounted for by the equity method of accounting. The investment in Trailer Bridge, Inc. was $56,770,417 and $56,363,546, respectively, of consolidated total assets as of December 31, 2019 and 2018, and the equity in its net income was $321,428 and $7,141,529, respectively, of consolidated net income for the years then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Trailer Bridge, Inc., is based solely on the report of other auditors.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 28, 2020 expressed an unqualified opinion.
Change in accounting principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019, due to the adoption of FASB Accounting Standards Codification (Topic 842), Leases.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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Investment in 50% or less owned company
As described in Notes 1 and 4 to the consolidated financial statements, the Company has an investment in a 50% or less owned company in the amount of approximately $34 million. This investment is reviewed at least quarterly by the Company to assess whether there is an other-than-temporary decline in the carrying value of the investment. The Company considers recent and projected financial performance and returns as well as the value of underlying collateral in determining the estimated fair value of the investment. We identified that the recoverability of one investment included within investments in 50% or less owned companies as a critical audit matter.
The principal considerations for our determination that this investment being recoverable was a critical audit matter is that the company is located in a foreign jurisdiction and has had significant losses in the current period. The determination of recoverability of the investment requires management to utilize subjective assumptions to estimate the fair value of the investment. This estimation process required a high degree of auditor judgment and an increased extent of effort, including the need to involve valuation specialists.
Our audit procedures related to this investment being recoverable included the following, among others. We tested the design and operating effectiveness of key controls relating to management’s impairment assessment process. We visited the foreign location of the investment. We reviewed forecasts prepared by management to support the valuation. We reviewed a valuation prepared by a specialist of the underlying collateral for the investment and tested the assumptions utilized. We involved valuation professionals with the specialized skills and knowledge to review the valuation models used by management as well as key assumptions.







/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2017.
Fort Lauderdale, Florida
February 28, 2020
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SEACOR HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
  December 31,
  2019 2018
ASSETS
Current Assets:
Cash and cash equivalents $ 77,222    $ 144,221   
Restricted cash and restricted cash equivalents 1,222    2,991   
Marketable securities 7,936    30,316   
Receivables:
Trade, net of allowance for doubtful accounts of $2,871 and $3,481 in 2019 and 2018, respectively
194,022    171,828   
Other 38,881    38,881   
Inventories 5,255    4,530   
Prepaid expenses and other 6,971    5,382   
Total current assets 331,509    398,149   
Property and Equipment:
Historical cost 1,442,382    1,407,329   
Accumulated depreciation (624,024)   (560,819)  
Net property and equipment 818,358    846,510   
Operating Lease Right-of-Use Assets 144,539    —   
Investments, at Equity, and Advances to 50% or Less Owned Companies 157,108    156,886   
Construction Reserve Funds —    3,908   
Goodwill 32,701    32,708   
Intangible Assets, Net 20,996    24,551   
Other Assets 7,761    8,312   
$ 1,512,972    $ 1,471,024   
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt $ 58,854    $ 8,497   
Current portion of long-term operating lease liabilities 36,011    —   
Accounts payable and accrued expenses 57,595    59,607   
Accrued wages and benefits 20,730    21,203   
Accrued interest 1,030    1,184   
Accrued capital, repair and maintenance expenditures 3,213    3,254   
Other current liabilities 32,528    30,018   
Total current liabilities 209,961    123,763   
Long-Term Debt 255,612    346,128   
Long-Term Operating Lease Liabilities 108,295    —   
Deferred Income Taxes 105,661    94,420   
Deferred Gains and Other Liabilities 20,929    52,871   
Total liabilities 700,458    617,182   
Equity:
SEACOR Holdings Inc. stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized; none issued nor outstanding
—    —   
Common stock, $0.01 par value, 60,000,000 shares authorized; 40,819,892 and 39,001,924 shares issued in 2019 and 2018, respectively
408    390   
Additional paid-in capital 1,661,002    1,596,642   
Retained earnings 517,106    474,809   
Shares held in treasury of 20,643,724 and 20,671,627 in 2019 and 2018, respectively, at cost
(1,365,792)   (1,366,773)  
Accumulated other comprehensive loss, net of tax (998)   (914)  
811,726    704,154   
Noncontrolling interests in subsidiaries 788    149,688   
Total equity 812,514    853,842   
$ 1,512,972    $ 1,471,024   




The accompanying notes are an integral part of these consolidated financial statements
and should be read in conjunction herewith.
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SEACOR HOLDINGS INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
For the years ended December 31,
2019 2018 2017
As Adjusted
Operating Revenues $ 799,966    $ 835,750    $ 650,847   
Costs and Expenses:
Operating 583,633    591,848    433,837   
Administrative and general 105,517    102,907    103,106   
Depreciation and amortization 68,571    74,579    75,058   
757,721    769,334    612,001   
Gains on Asset Dispositions and Impairments, Net 2,910    19,583    11,637   
Operating Income 45,155    85,999    50,483   
Other Income (Expense):
Interest income 7,471    8,730    8,547   
Interest expense (19,233)   (31,683)   (41,530)  
Debt extinguishment losses, net (2,244)   (11,626)   (819)  
Marketable security gains (losses), net 18,394    (12,431)   (1,782)  
Derivative gains —    —    19,727   
Foreign currency gains (losses), net (312)   (2,264)   323   
Other, net (134)   54,964    256   
3,942    5,690    (15,278)  
Income from Continuing Operations Before Income Tax Expense (Benefit) and Equity in Earnings (Losses) of 50% or Less Owned Companies 49,097    91,689    35,205   
Income Tax Expense (Benefit):
Current 1,660    23,928    (15,712)  
Deferred 8,169    (15,513)   (51,477)  
9,829    8,415    (67,189)  
Income from Continuing Operations Before Equity in Earnings (Losses) of 50% or Less Owned Companies 39,268    83,274    102,394   
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax (5,250)   (72)   2,952   
Income from Continuing Operations 34,018    83,202    105,346   
Loss from Discontinued Operations, Net of Tax —    —    (23,637)  
Net Income 34,018    83,202    81,709   
Net Income attributable to Noncontrolling Interests in Subsidiaries 7,244    25,054    20,066   
Net Income attributable to SEACOR Holdings Inc. $ 26,774    $ 58,148    $ 61,643   
Net Income (Loss) attributable to SEACOR Holdings Inc.:
Continuing Operations $ 26,774    $ 58,148    $ 82,849   
Discontinued Operations —    —    (21,206)  
$ 26,774    $ 58,148    $ 61,643   
Basic Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
Continuing Operations $ 1.41    $ 3.22    $ 4.77   
Discontinued Operations —    —    (1.22)  
$ 1.41    $ 3.22    $ 3.55   
Diluted Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
Continuing Operations $ 1.38    $ 3.04    $ 4.24   
Discontinued Operations —    —    (0.93)  
$ 1.38    $ 3.04    $ 3.31   
Weighted Average Common Shares Outstanding:
Basic 18,949,981    18,080,778    17,368,081   
Diluted 20,306,332    19,575,689    22,934,158   

The accompanying notes are an integral part of these consolidated financial statements
and should be read in conjunction herewith.
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SEACOR HOLDINGS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
For the years ended December 31,
2019 2018 2017
Net Income $ 34,018    $ 83,202    $ 81,709   
Other Comprehensive Income (Loss):
Foreign currency translation gains (losses), net (83)   (406)   1,965   
Reclassification of foreign currency translation losses to foreign currency gains (losses), net —    15    —   
Derivative gains (losses) on cash flow hedges 67    —    (389)  
Reclassification of derivative losses on cash flow hedges to interest expense —    —    33   
Reclassification of derivative losses on cash flow hedges to equity in earnings (losses) of 50% or less owned companies —    —    109   
Other —    —    (11)  
(16)   (391)   1,707   
Income tax (expense) benefit (68)   22    (702)  
(84)   (369)   1,005   
Comprehensive Income 33,934    82,833    82,714   
Comprehensive Income attributable to Noncontrolling Interests in Subsidiaries 7,244    25,054    20,227   
Comprehensive Income attributable to SEACOR Holdings Inc. $ 26,690    $ 57,779    $ 62,487   

































The accompanying notes are an integral part of these consolidated financial statements
and should be read in conjunction herewith.
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SEACOR HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands)
SEACOR Holdings Inc. Stockholders’ Equity
Common
Stock 		Additional
Paid-in
Capital 		Retained
Earnings 		Treasury
Stock 		Accumulated
Other
Comprehensive
Loss 		Non -
controlling
Interests in
Subsidiaries 		Total
Equity
Year Ended December 31, 2016 $ 379    $ 1,518,635    $ 910,723    $ (1,357,331)   $ (11,514)   $ 135,376    $ 1,196,268   
Issuance of common stock:
Employee Stock Purchase Plan —    —    —    1,443    —    —    1,443   
Exercise of stock options 6    21,148    —    —    —    —    21,154   
Director stock awards —    83    —    —    —    —    83   
Restricted stock 2    (2)   —    —    —    —    —   
Exercise of conversion option in convertible debt —    3    —    —    —    —    3   
Distribution of SEACOR Marine stock to shareholders —    2,656    (521,859)   —    10,125    (18,613)   (527,691)  
Distribution of Dorian shares to shareholders —    —    (31,379)   —    —    —    (31,379)  
Purchase of conversion option in convertible debt, net of tax —    (927)   —    —    —    —    (927)  
Purchase of treasury shares —    —    —    (12,300)   —    —    (12,300)  
Amortization of share awards —    32,419    —    —    —    —    32,419   
Cancellation of restricted stock —    112    —    (112)   —    —    —   
Purchase of subsidiary shares from noncontrolling interests, net of tax —    (1,114)   —    —    —    (2,579)   (3,693)  
Acquisition of a subsidiary with noncontrolling interests —    —    —    —    —    17,374    17,374   
Disposition of subsidiary with noncontrolling interests —    —    —    —    —    (14,673)   (14,673)  
Distributions to noncontrolling interests —    —    —    —    —    (7,434)   (7,434)  
Net Income —    —    61,643    —    —    20,066    81,709   
Other comprehensive income —    —    —    —    844    161    1,005   
Year Ended December 31, 2017 387    1,573,013    419,128    (1,368,300)   (545)   129,678    753,361   
Impact of adoption of accounting principle —    —    (2,467)   —    —    —    (2,467)  
December 31, 2017, As adjusted 387    1,573,013    416,661    (1,368,300)   (545)   129,678    750,894   
Issuance of common stock:
Employee Stock Purchase Plan —    —    —    1,527    —    —    1,527   
Exercise of stock options 2    6,881    —    —    —    —    6,883   
Director stock awards —    140    —    —    —    —    140   
Restricted stock 1    (1)   —    —    —    —    —   
Net issuance of conversion option on exchange of convertible debt, net of tax —    12,735    —    —    —    —    12,735   
Purchase of conversion option in convertible debt, net of tax —    (33)   —    —    —    —    (33)  
Amortization of share awards —    3,907    —    —    —    —    3,907   
Purchase of subsidiary shares from noncontrolling interests, net of tax —    —    —    —    —    (29)   (29)  
Acquisition of a subsidiary with noncontrolling interests —    —    —    —    —    96    96   
Distributions to noncontrolling interests —    —    —    —    —    (5,111)   (5,111)  
Net Income —    —    58,148    —    —    25,054    83,202   
Other comprehensive loss —    —    —    —    (369)   —    (369)  
Year Ended December 31, 2018 390    1,596,642    474,809    (1,366,773)   (914)   149,688    853,842   
Impact of adoption of accounting principle, net of tax —    —    15,523    —    —    9,836    25,359   
December 31, 2018, As adjusted 390    1,596,642    490,332    (1,366,773)   (914)   159,524    879,201   
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SEACOR HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)
(in thousands)
SEACOR Holdings Inc. Stockholders’ Equity
Common
Stock 		Additional
Paid-in
Capital 		Retained
Earnings 		Treasury
Stock 		Accumulated
Other
Comprehensive
Loss 		Non -
controlling
Interests in
Subsidiaries 		Total
Equity
Issuance of common stock:
Employee Stock Purchase Plan —    —    —    1,695    —    —    1,695   
Exercise of stock options 1    5,243    —    —    —    —    5,244   
Director stock awards —    97    —    —    —    —    97   
Restricted stock 2    (2)   —    —    —    —    —   
Purchase of conversion option in convertible debt, net of tax —    (115)   —    —    —    —    (115)  
Purchase of treasury shares —    —    —    (525)   —    —    (525)  
Amortization of share awards —    5,134    —    —    —    —    5,134   
Cancellation of restricted stock —    189    —    (189)   —    —    —   
Purchase of subsidiary shares from noncontrolling interests, net of tax 15    53,814    —    —    —    (160,818)   (106,989)  
Distributions to noncontrolling interests —    —    —    —    —    (5,162)   (5,162)  
Net Income —    —    26,774    —    —    7,244    34,018   
Other comprehensive loss —    —    —    —    (84)   —    (84)  
Year Ended December 31, 2019 $ 408    $ 1,661,002    $ 517,106    $ (1,365,792)   $ (998)   $ 788    $ 812,514   


































The accompanying notes are an integral part of these consolidated financial statements
and should be read in conjunction herewith.
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SEACOR HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the years ended December 31,
2019 2018 2017
Cash Flows from Operating Activities of Continuing Operations:
Income from Continuing Operations $ 34,018    $ 83,202    $ 105,346   
Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations:
Depreciation and amortization 68,571    74,579    75,058   
Amortization of operating lease right-of-use assets 42,863    —    —   
Amortization of deferred gains on sale leaseback transactions —    (12,774)   (15,035)  
Debt discount and issuance cost amortization, net 6,484    7,829    12,997   
Amortization of share awards 5,134    3,907    32,419   
Director stock awards 97    140    83   
Bad debt expense (income) 2,021    2,067    (175)  
Gains on asset dispositions and impairments, net (2,910)   (19,583)   (11,637)  
Debt extinguishment losses, net 2,244    11,626    819   
Marketable security (gains) losses, net (18,394)   12,431    1,782   
Purchases of marketable securities (5,752)   —    (1,720)  
Proceeds from sale of marketable securities 46,526    14    674   
Derivative gains —    —    (19,727)  
Cash settlements on derivative transactions, net —    —    255   
Foreign currency (gains) losses, net 312    2,264    (323)  
Deferred income tax expense (benefit) 8,169    (15,513)   (51,477)  
Equity in (earnings) losses of 50% or less owned companies, net of tax 5,250    72    (2,952)  
Dividends received from 50% or less owned companies 100    5,907    12,891   
Other, net —    (53,902)   —   
Changes in operating assets and liabilities:
(Increase) decrease in receivables (30,385)   (63,764)   2,195   
Increase in prepaid expenses and other assets (6,698)   (1,577)   (8,174)  
Increase (decrease) in accounts payable, accrued expenses and other liabilities (38,377)   12,503    (25,724)  
Net cash provided by operating activities of continuing operations 119,273    49,428    107,575   
Cash Flows from Investing Activities of Continuing Operations:
Purchases of property and equipment (37,786)   (50,272)   (114,595)  
Proceeds from disposition of property and equipment 2,452    16,100    164,789   
Investments in and advances to 50% or less owned companies (5,960)   (20,586)   (9,663)  
Return of investments and advances from 50% or less owned companies 3,677    8,988    15,568   
Proceeds on sale of 50% or less owned companies —    78,015    —   
Proceeds on sale of a controlling interest in a subsidiary —    —    5,000   
Payments received on third party leases and notes receivable, net 1,141    506    24,485   
Deposits into construction reserve funds —    —    (13,807)  
Withdrawals from construction reserve funds 3,908    47,431    38,221   
Business acquisitions, net of cash acquired —    310    5,868   
Net cash provided by (used in) investing activities of continuing operations (32,568)   80,492    115,866   
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SEACOR HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
For the years ended December 31,
2019 2018 2017
Cash Flows from Financing Activities of Continuing Operations:
Payments on long-term debt (169,625)   (225,541)   (303,485)  
Proceeds from issuance of long-term debt, net of offering costs 120,740    (2,495)   44,900   
Purchase of conversion option in convertible debt (146)   (33)   (1,354)  
Common stock acquired for treasury (525)   —    (12,300)  
Proceeds and tax benefits from share award plans 6,939    8,410    22,597   
Purchase of subsidiary shares from noncontrolling interests (107,692)   (29)   —   
Distributions to noncontrolling interests (5,162)   (5,111)   (4)  
Net cash used in financing activities of continuing operations (155,471)   (224,799)   (249,646)  
Effects of Exchange Rate Changes on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents (2)   (137)   956   
Net Decrease in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents from Continuing Operations (68,768)   (95,016)   (25,249)  
Cash Flows from Discontinued Operations:
Operating Activities —    —    12,811   
Investing Activities —    —    2,720   
Financing Activities —    —    (7,149)  
Effect of Exchange Rate Changes on Cash and Cash Equivalents —    —    208   
Net Increase in Cash and Cash Equivalents from Discontinued Operations —    —    8,590   
Net Decrease in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents (68,768)   (95,016)   (16,659)  
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Year 147,212    242,228    258,887   
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Year 78,444    147,212    242,228   
Restricted Cash and Restricted Cash Equivalents, End of Year 1,222    2,991    2,982   
Cash and Cash Equivalents, End of Year $ 77,222    $ 144,221    $ 239,246   






























The accompanying notes are an integral part of these consolidated financial statements
and should be read in conjunction herewith.
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SEACOR HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES
Nature of Operations and Segmentation. SEACOR Holdings Inc. (“SEACOR”) and its subsidiaries (collectively referred to as the “Company”) are a diversified holding company with interests in domestic and international transportation and logistics, risk management consultancy and other businesses. Accounting standards require public business enterprises to report information about each of their operating business segments that exceed certain quantitative thresholds or meet certain other reporting requirements. Operating business segments have been defined as a component of an enterprise about which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company has identified the following reporting segments:
Ocean Transportation & Logistics Services (“Ocean Services”). Ocean Services owns and operates a diversified fleet of bulk transportation, port and infrastructure, and logistics assets, including U.S. coastwise eligible vessels and vessels trading internationally. Ocean Services owns and operates U.S.-flag petroleum and chemical carriers servicing the U.S. coastwise crude oil, petroleum products and chemical trades. Ocean Services’ dry bulk vessels also operate in the U.S. coastwise trade. Ocean Services’ port and infrastructure services assist deep-sea vessels docking in U.S. Gulf and East Coast ports, providing ocean towing services between U.S. ports and providing oil terminal support and bunkering operations in St. Eustatius and the Bahamas. Ocean Services’ logistics services include U.S.-flag Pure Car/Truck Carriers (“PCTCs”) operating globally under the U.S. Maritime Security Program (“MSP”) and liner, short-sea, rail car and project cargo transportation and logistics solutions to and from ports in the Southeastern United States, the Caribbean (including Puerto Rico), the Bahamas and Mexico. Ocean Services also provides technical ship management services for third-party vessel owners. Ocean Services contributed 53%, 50% and 54% of the Company's consolidated operating revenues during the years ended December 31, 2019, 2018 and 2017, respectively. During the year ended December 31, 2019, one Ocean Services (U.S. Federal Government) customer accounted for $79.6 million, or 10%, of the Company's consolidated operating revenues.
Inland Transportation & Logistics Services (“Inland Services”). Inland Services markets and operates domestic river transportation equipment, and owns fleeting and high-speed multi-modal terminal locations adjacent to and along the U.S. Inland Waterways, primarily in the St. Louis, Memphis and Baton Rouge areas. Inland Services’ barges are primarily used for moving agricultural and industrial commodities and containers on the U.S. Inland Waterways, the Mississippi River, Illinois River, Tennessee River, Ohio River and their tributaries and the Gulf Intracoastal Waterways. Internationally, Inland Services also owns inland river liquid tank barges that operate on the Magdalena River in Colombia. These barges primarily transport petroleum products. Inland Services also has a 50% interest in dry-cargo barge operations on the Parana-Paraguay Waterway in Brazil, Bolivia, Paraguay, Argentina and Uruguay primarily transporting agricultural and industrial commodities, a 63% interest in towboat operations on the U.S. Inland Waterways and a 50% interest in grain terminals/elevators along the U.S. Inland waterways. Inland Services contributed 33%, 34% and 38% of the Company's consolidated operating revenues during the years ended December 31, 2019, 2018 and 2017, respectively.
Witt O’Brien’s. Witt O’Brien’s provides crisis and emergency management services for both the public and private sectors. These services strengthen clients’ resilience and assist their response to natural and man-made disasters by enhancing their ability to prepare for, respond to and recover from such disasters, while mitigating the impact of future disruptions on operations and helping communities build back stronger. Witt O’Brien’s contributed 13%, 16% and 8% of the Company's consolidated operating revenues during the years ended December 31, 2019, 2018 and 2017, respectively.
Other. The Company’s Other business segment includes CLEANCOR Energy Solutions LLC (“Cleancor”), a full service provider that designs, develops and maintains alternative energy and power solutions for end users looking to displace legacy petroleum-based fuels and adopt energy supplies that have a favorable environmental footprint. Cleancor provides liquefied natural gas (“LNG”) and compressed natural gas (“CNG”) fuel supply and logistics to commercial, industrial, agricultural and transportation customers and provides natural gas during pipeline supply interruptions due to planned maintenance or other curtailments (see Note 2). Other also has activities that primarily include noncontrolling investments in various other businesses, primarily sales, storage, and maintenance support for general aviation in Asia and an agricultural commodity trading and logistics business that is primarily focused on the global origination, and trading and merchandising of sugar and other commodities.
Discontinued Operations. The Company reports the historical financial position, results of operations and cash flows of disposed businesses as discontinued operations when it has no continuing interest in the business. On June 1, 2017, the Company completed the spin-off of SEACOR Marine Holdings Inc. (“SEACOR Marine”), the company that operated SEACOR’s Offshore Marine Services business segment, by means of a dividend of all the issued and outstanding common stock of SEACOR Marine to SEACOR’s shareholders (the “Spin-off”). SEACOR Marine is now an independent company
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whose common stock is listed on the New York Stock Exchange under the symbol “SMHI.” For all periods presented herein, the Company has reported the historical results of operations and cash flows of SEACOR Marine as discontinued operations (see Note 19).
On July 3, 2017, the Company completed the sale of its 70% interest in Illinois Corn Processing LLC (“ICP”), the company that operated SEACOR’s Illinois Corn Processing business segment. The Company received $21.0 million in cash and a note from the buyer for $32.8 million, after working capital adjustments, resulting in a gain of $10.9 million, net of tax. On September 15, 2017, the Company received payment of the outstanding balance of the note, including accrued and unpaid interest. For all periods presented herein, the Company has reported the historical results of operations and cash flows of ICP as discontinued operations (see Note 19).
Basis of Consolidation. The consolidated financial statements include the accounts of SEACOR and its controlled subsidiaries. Control is generally deemed to exist if the Company has greater than 50% of the voting rights of a subsidiary. All significant intercompany accounts and transactions are eliminated in consolidation.
Noncontrolling interests in consolidated subsidiaries are included in the consolidated balance sheets as a separate component of equity. The Company reports consolidated net income inclusive of both the Company’s and the noncontrolling interests’ share, as well as the amounts of consolidated net income attributable to each of the Company and the noncontrolling interests. If a subsidiary is deconsolidated upon a change in control, any retained noncontrolled equity investment in the former controlled subsidiary is measured at fair value and a gain or loss is recognized in net income based on such fair value. If a subsidiary is consolidated upon a change in control, any previous noncontrolled equity investment in the subsidiary is measured at fair value and a gain or loss is recognized based on such fair value.
The Company employs the equity method of accounting for investments in 50% or less owned companies that it does not control but has the ability to exercise significant influence over the operating and financial policies of the business venture. Significant influence is generally deemed to exist if the Company has between 20% and 50% of the voting rights of a business venture but may exist when the Company’s ownership percentage is less than 20%. In certain circumstances, the Company may have an economic interest in excess of 50% but may not control and consolidate the business venture. Conversely, the Company may have an economic interest less than 50% but may control and consolidate the business venture. The Company reports its investments in and advances to these business ventures in the accompanying consolidated balance sheets as investments, at equity, and advances to 50% or less owned companies. The Company reports its share of earnings or losses from investments in 50% or less owned companies in the accompanying consolidated statements of income as equity in earnings (losses) of 50% or less owned companies, net of tax.
The Company employs the cost method of accounting for investments in 50% or less owned companies it does not control or exercise significant influence. These investments in private companies are carried at cost and are adjusted only for capital distributions and other-than-temporary declines in fair value.
Acquisition of Noncontrolling Interest. On August 2, 2019, the Company, through certain subsidiaries, became the sole owner of the SEA-Vista joint venture by acquiring the 49% interest (the “Remaining SEA-Vista Interest”) that had been owned by ACP III Tankers, LLC (the "Seller"), an affiliate of Avista Capital Partners. As consideration for the Remaining SEA-Vista Interest, SEACOR issued 1,500,000 shares of Common Stock to the Seller (the "Consideration Shares"), in a noncash transaction, and the Company paid $107.7 million  in cash, inclusive of expenses related to the transaction (see Notes 12 and 13).
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include those related to allowance for doubtful accounts, useful lives of property and equipment, impairments, income tax provisions and certain accrued liabilities. Actual results could differ from those estimates and those differences may be material.
Adoption of New Accounting Standards. On January 1, 2019, the Company adopted Financial Accounting Standards Board (“FASB”) Topic 842, Leases (“Topic 842”) using a modified prospective approach and implemented internal controls and systems to enable the preparation of financial information upon adoption. The Company elected the available practical expedients permitted under the guidance including the option to not separate lease and nonlease components in calculating the right-of-use assets and corresponding lease liabilities and to not apply the recognition requirements of Topic 842 to short-term leases (leases that have a duration of twelve months or less at lease inception). Generally, it was not possible for the Company to determine the interest rate implicit in each of its operating leases and therefore used its incremental borrowing rate in calculating operating lease right-of-use assets and lease liabilities. The Company assigned its leases to portfolios based on the remaining term at the time of adoption and applied a single rate to each portfolio of leases as the result was not materially different than using a specific discount rate for each individual lease. The Company included renewal options that were reasonably certain of being exercised in determining the lease term. Upon adoption, the Company recorded operating lease right-of-use assets and lease liabilities of $175.0 million for certain of its equipment, offices, real property and land leases (see
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Note 8). In addition, the Company recognized a cumulative-effect adjustment of $25.4 million, net of tax, to the opening balance of retained earnings primarily for previously deferred gains related to sale-leaseback transactions.
On January 1, 2018, the Company adopted Financial Accounting Standard Board (“FASB”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). As a consequence of adopting Topic 606, the Company now recognizes all of the operating revenues and expenses associated with the dry-cargo barge pools it manages along with additional operating expenses reflective of barge pool earnings attributable to third-party barge owners and not the Company in its capacity as manager. Under Topic 606, the Company determined it was a principal with respect to the third-party barge owners. Previously, the Company recognized operating revenues and expenses only for its proportionate share of the barge pools in which it participated, as it acted as an agent. All prior periods have been adjusted to reflect the retrospective adoption of Topic 606, which resulted in additional revenues and operating expenses of $73.0 million for the year ended December 31, 2017. The adoption of Topic 606 had no impact on previously reported balance sheets, operating income, net income or earnings (loss) per share.
On January 1, 2018, the Company adopted ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which eliminates the deferral of the tax effects of intercompany asset sales other than inventory until the transferred assets are sold to a third party or recovered through use. As a result of the adoption of the standard, the deferred tax charges previously recognized from those sales resulted in a decrease in deferred tax assets and a cumulative adjustment to retained earnings of $2.5 million in the consolidated balance sheets and statements of changes in equity as of January 1, 2018.
Revenue Recognition. The Company earns revenues from contracts with customers and from lease contracts.
Revenue from Contracts with Customers. Revenue is recognized when (or as) the Company transfers promised goods or services to its customers in amounts that reflect the consideration to which the Company expects to be entitled to in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers control of the promised goods or services to its customers. Costs to obtain or fulfill a contract are expensed as incurred.
Ocean Services' revenues from contracts with customers primarily arise from voyage charters, contracts of affreightment, tariff based port and infrastructure services, unit freight logistics services, and technical ship management agreements with vessel owners (see Note 18). Ocean Services transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred. Voyage charters are contracts to carry cargoes on a single voyage basis for a predetermined price, regardless of time to complete. Contracts of affreightment are contracts for cargoes that are committed on a multi-voyage basis for various periods of time, with minimum and maximum cargo tonnages specified over the period at a fixed or escalating rate per ton. Tariff based port and infrastructure services typically include operating harbor tugs alongside oceangoing vessels to escort them to their berth, assisting with the docking and undocking of these oceangoing vessels and escorting them back out to sea. They are contracted using prevailing port tariff terms on a per-use basis. In the unit freight logistics trade, transportation services typically include transporting shipping containers, rail cars, project cargoes, automobiles and U.S. military vehicles and are generally contracted on a per unit basis for the specified cargo and destination, typically in accordance with a publicly available tariff rate or based on a negotiated rate when moving larger volumes over an extended period. Managed services include technical ship and crew management agreements whereby Ocean Services provides technical ship and crew management services to third-party customers for a predetermined price over a specified period of time, typically a year or more.
Inland Services' revenues from contracts with customers primarily arise from contracts of affreightment, terminal operations, fleeting operations and repair and maintenance services (see Note 18). Inland Services transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred. Contracts of affreightment are contracts whereby customers are charged an established rate per ton to transport cargo from point-to-point. Terminal operations includes tank farms and dry bulk and container handling facilities that are marketed under contractual rates and terms driven by throughput volume. Fleeting operations includes fleeting services whereby barges are held in fleeting areas for an agreed-upon day rate and shifting services whereby harbor boats are used to pick up and drop off barges to assist in assembling tows and to move barges to and from the dock for loading and unloading at predetermined per-shift fees. Other operations primarily include a machine shop specializing in towboat and barge cleaning, repair and maintenance services that are charged on an hourly or a fixed fee basis depending on the scope and nature of the work.
Witt O’Brien’s revenues from contracts with customers primarily arise from time and material and retainer contracts (see Note 18). Witt O’Brien’s transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred. Time and material contracts primarily relate to emergency response, debris management or consulting services that Witt O’Brien’s performs for a predetermined fee. Retainer contracts, which are nearly all with vessel services operators and oil companies, are contracted based on agreed-upon rates.
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The Company’s Other business segment includes Cleancor, which primarily earns revenues from the sale of liquefied natural gas (see Note 18). Under these arrangements, control of the goods are transferred to the customer and performance obligations are satisfied at a point in time, and therefore revenue is recognized upon delivery while any related costs are expensed as incurred.
Contract liabilities from contracts with customers arise when the Company has received consideration prior to performance and are included in other current liabilities in the accompanying consolidated balance sheets. The Company’s contract liability activity for the years ended December 31, were as follows (in thousands):
2019 2018
Balance at beginning of period $ 968    $ 983   
Previously deferred revenues recognized upon completion of performance obligations during the period (968)   (983)  
Net contract liabilities arising during the period 794    968   
Balance at end of period $ 794    $ 968   
Lease Revenues. The Company’s lease revenues are primarily from time charters, bareboat charters and non-vessel rental agreements that are recognized ratably over the lease term as services are provided, typically on a per day basis. Under a time charter, the Company provides a vessel to a customer for a set term and is responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, the Company provides a vessel to a customer for a set term and the customer assumes responsibility for all operating expenses and risks of operation. Under a non-vessel rental agreement, the Company provides non-vessel property or equipment to a customer for a set term and the customer assumes responsibility for all operating expenses and risks of operation.
Cash Equivalents. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist of U.S. treasury securities, money market instruments, time deposits and overnight investments.
Restricted Cash and Restricted Cash Equivalents. Restricted cash and restricted cash equivalents primarily relates to cash collateral for letters of credit and banking facility requirements.
Marketable Securities. Marketable equity securities and debt securities with readily determinable fair values are reported in the accompanying consolidated balance sheets as marketable securities. These investments are stated at fair value, as determined by their observable market prices, with both realized and unrealized gains and losses reported in the accompanying consolidated statements of income as marketable security gains (losses), net. Short sales of marketable securities are stated at fair value in the accompanying consolidated balance sheets with both realized and unrealized gains and losses reported in the accompanying consolidated statements of income as marketable security gains (losses), net. Long and short marketable security positions are primarily in energy, marine, transportation and other related businesses. Marketable securities are classified as trading securities for financial reporting purposes with gains and losses reported as operating activities in the accompanying consolidated statements of cash flows.
Trade Receivables. Customers of Ocean Services are primarily multinational oil companies, refining companies, oil trading companies, major gasoline retailers, large industrial consumers of crude, petroleum and chemicals, trading houses, pools, major automobile manufacturers and shippers, the U.S. government and regional power utilities. Customers of Inland Services are primarily major agricultural companies, fertilizer companies, trading companies and industrial companies. Customers of Witt O’Brien’s are primarily governments, energy companies, ship managers and owners, healthcare providers, universities and school systems. Customers of the Company’s other business activities primarily include agricultural and feed companies, asphalt producers and municipalities and government agencies. All customers are granted credit on a short-term basis and related credit risks are considered minimal. The Company routinely reviews its trade receivables and makes provisions for probable doubtful accounts; however, those provisions are estimates and actual results could differ from those estimates and those differences may be material. Trade receivables are deemed uncollectible and removed from accounts receivable and the allowance for doubtful accounts when collection efforts have been exhausted.
Other Receivables. Other receivables primarily consists of income tax and insurance claim receivables. Other receivables also includes amounts due from certain of the Company’s 50% or less owned companies for working capital in excess of working capital advances, which are typically settled monthly in arrears.
Derivative Instruments. The Company accounts for derivatives through the use of a fair value concept whereby all of the Company’s derivative positions are stated at fair value in the accompanying consolidated balance sheets. Realized and unrealized gains and losses on derivatives not designated as hedges are reported in the accompanying consolidated statements of income as derivative gains. Realized and unrealized gains and losses on derivatives designated as fair value hedges are recognized as corresponding increases or decreases in the fair value of the underlying hedged item to the extent they are effective, with any ineffective portion reported in the accompanying consolidated statements of income as derivative gains. Realized and unrealized gains and losses on derivatives designated as cash flow hedges are reported as a component of other
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comprehensive income (loss) in the accompanying consolidated statements of comprehensive income to the extent they are effective and reclassified into earnings on the same line item associated with the hedged transaction and in the same period the hedged transaction affects earnings. Any ineffective portions of cash flow hedges are reported in the accompanying consolidated statements of income as derivative gains. Realized and unrealized gains and losses on derivatives designated as cash flow hedges that are entered into by the Company’s 50% or less owned companies are also reported as a component of the Company’s other comprehensive income (loss) in proportion to the Company’s ownership percentage, with reclassifications and ineffective portions being included in equity in earnings (losses) of 50% or less owned companies, net of tax, in the accompanying consolidated statements of income.
Concentrations of Credit Risk. The Company is exposed to concentrations of credit risk associated with its cash, cash equivalents, restricted cash and restricted cash equivalents, construction reserve funds and derivative instruments. The Company minimizes its credit risk relating to these positions by monitoring the financial condition of the financial institutions and counterparties involved and by primarily conducting business with large, well-established financial institutions and diversifying its counterparties. The Company does not currently anticipate nonperformance of its significant counterparties. The Company is also exposed to concentrations of credit risk relating to its receivables due from customers in the industries described above. The Company does not generally require collateral or other security to support its outstanding receivables. The Company minimizes its credit risk relating to receivables by performing ongoing credit evaluations and, to date, credit losses have not been material.
Inventories. Inventories are stated at the lower of cost (using the first-in, first-out method) or market. Inventories consist primarily of fuel and fuel oil consumed by the Company’s vessels in its Ocean Services and Inland Services business segments. The Company records write-downs, as needed, to adjust the carrying amount of inventories to the lower of cost or market. During the years ended December 31, 2019, 2018 and 2017, the Company had no market write-downs of inventory.
Property and Equipment. Equipment, stated at cost, is depreciated using the straight line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is typically based upon a newly built asset being placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets that have already exceeded their useful life as set forth in the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.
As of December 31, 2019, the estimated useful life (in years) of each of the Company’s major classes of new equipment was as follows:
Petroleum and chemical carriers - U.S.-flag 25
Bulk carriers - U.S.-flag 25
Harbor and offshore tugs 25
Ocean liquid tank barges 25
Short-sea container/RORO(1) vessels
20
Inland river dry-cargo and specialty barges 20
Inland river liquid tank barges 25
Inland river towboats and harbor boats 25
Terminal and fleeting facilities 20
______________________
(1)Roll On/Roll Off.

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The Company’s major classes of property and equipment as of December 31, were as follows (in thousands):
Historical
Cost(1)
Accumulated
Depreciation 		Net Book
Value
2019
Ocean Services:
Petroleum and chemical carriers - U.S.-flag $ 649,795    $ (267,894)   $ 381,901   
Harbor and offshore tugs - U.S.-flag 133,419    (47,637)   85,782   
Harbor tugs - Foreign-flag 45,379    (16,067)   29,312   
Ocean liquid tank barges - U.S.-flag 39,238    (16,171)   23,067   
Short-sea container/RORO - Foreign-flag 27,073    (11,990)   15,083   
Bulk carriers - U.S.-flag 13,000    (9,800)   3,200   
Other(2)
21,516    (10,994)   10,522   
Construction in Progress 2,847    —    2,847   
932,267    (380,553)   551,714   
Inland Services:
Dry-cargo barges 225,278    (118,615)   106,663   
Specialty barges 3,828    (2,344)   1,484   
Liquid tank barges 19,784    (3,684)   16,100   
Towboats 62,207    (4,981)   57,226   
Harbor boats 19,296    (9,324)   9,972   
Terminal and fleeting facilities 103,455    (65,960)   37,495   
Other(2)
27,536    (11,388)   16,148   
Construction in Progress 7,736    —    7,736   
469,120    (216,296)   252,824   
Witt O’Brien’s:
Other(2)
1,134    (993)   141   
Other:
Other(3)
8,897    (2,450)   6,447   
Corporate and Eliminations:
Other(2)
30,964    (23,732)   7,232   
$ 1,442,382    $ (624,024)   $ 818,358   
______________________
(1)Includes property and equipment acquired in business acquisitions at acquisition date fair value.
(2)Includes land and buildings, leasehold improvements, fixed-wing aircraft, vehicles and other property and equipment.
(3)Includes LNG Equipment and other property and equipment.
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Historical
Cost(1)
Accumulated
Depreciation 		Net Book
Value
2018
Ocean Services:
Petroleum and chemical carriers - U.S.-flag $ 649,795    $ (241,604)   $ 408,191   
Harbor and offshore tugs - U.S.-flag 132,697    (41,764)   90,933   
Harbor tugs - Foreign-flag 45,379    (13,822)   31,557   
Ocean liquid tank barges - U.S.-flag 39,238    (14,649)   24,589   
Short-sea container/RORO - Foreign-flag 29,846    (10,644)   19,202   
Bulk carriers - U.S.-flag 13,000    (9,800)   3,200   
Other(2)
20,073    (9,716)   10,357   
Construction in Progress 202    —    202   
930,230    (341,999)   588,231   
Inland Services:
Dry-cargo barges 222,539    (106,157)   116,382   
Specialty barges 3,828    (1,904)   1,924   
Liquid tank barges 20,011    (3,054)   16,957   
Towboats 43,998    (3,294)   40,704   
Harbor boats 18,695    (8,047)   10,648   
Terminal and fleeting facilities 99,696    (62,274)   37,422   
Other(2)
22,213    (10,364)   11,849   
Construction in Progress 7,868    —    7,868   
438,848    (195,094)   243,754   
Witt O’Brien’s:
Other(2)
1,227    (1,031)   196   
Other:
Other(3)
6,892    (490)   6,402   
Corporate and Eliminations:
Other(2)
30,132    (22,205)   7,927   
$ 1,407,329    $ (560,819)   $ 846,510   
______________________
(1)Includes property and equipment acquired in business acquisitions at acquisition date fair value.
(2)Includes land and buildings, leasehold improvements, fixed-wing aircraft, vehicles and other property and equipment.
(3)Includes LNG Equipment and other property and equipment.
During the years ended December 31, 2019, 2018 and 2017, depreciation expense totaled $65.0 million, $69.9 million and $72.1 million, respectively.
Equipment maintenance and repair costs and the costs of routine overhauls, dry-dockings and inspections performed on vessels and equipment are charged to operating expense as incurred. Expenditures that extend the useful life or improve the marketing and commercial characteristics of equipment as well as major renewals and improvements to other properties are capitalized.
Certain interest costs incurred during the construction of equipment are capitalized as part of the assets’ carrying values and are amortized over such assets’ estimated useful lives. During the years ended December 31, 2019, 2018 and 2017, capitalized interest totaled $0.1 million, $0.2 million and $2.7 million, respectively.
As of December 31, 2019, the Company’s construction in progress totaling $12.5 million primarily consisted of the construction of harbor tugs, inland river towboats and other Inland Services equipment, and is included in historical cost in the accompanying consolidated balance sheets.
Intangible Assets. The Company’s intangible assets primarily arose from business acquisitions (see Note 2) and consist of trademarks and tradenames, customer relationships and acquired contractual rights. These intangible assets are amortized over their estimated useful lives generally ranging from one to 15 years. During the years ended December 31, 2019, 2018 and 2017, the Company recognized amortization expense of $3.6 million, $4.7 million and $2.9 million, respectively.
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The Company’s intangible assets by type were as follows (in thousands):
Trademark/
Tradenames 		Customer
Relationships 		Acquired
Contractual
Rights 		Total
Gross Carrying Value
Year Ended December 31, 2017 $ 3,324    $ 15,365    $ 18,358    $ 37,047   
Acquired intangible assets —    1,120    —    1,120   
Fully amortized intangible assets —    (1,120)   —    (1,120)  
Year Ended December 31, 2018 3,324    15,365    18,358    37,047   
Acquired intangible assets —    —    —    —   
Year Ended December 31, 2019 $ 3,324    $ 15,365    $ 18,358    $ 37,047   
Accumulated Amortization   
Year Ended December 31, 2017 $ (1,980)   $ (5,146)   $ (1,815)   $ (8,941)  
Amortization expense (332)   (2,402)   (1,941)   (4,675)  
Fully amortized intangible assets —    1,120    —    1,120   
Year Ended December 31, 2018 (2,312)   (6,428)   (3,756)   (12,496)  
Amortization expense (332)   (1,282)   (1,941)   (3,555)  
Year Ended December 31, 2019 $ (2,644)   $ (7,710)   $ (5,697)   $ (16,051)  
Weighted average remaining contractual life, in years 2.0 7.1 7.1 6.9
Future amortization expense of intangible assets for each of the years ended December 31, is as follows (in thousands):
2020 $ 3,555   
2021 3,571   
2022 2,866   
2023 2,852   
2024 2,833   
Years subsequent to 2024 5,319   
$ 20,996   
Impairment of Long-Lived Assets. The Company performs an impairment analysis of long-lived assets used in operations, including intangible assets, when indicators of impairment are present. These indicators may include a significant decrease in the market price of a long-lived asset or asset group, a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition, or a current period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group. If the carrying values of the assets are not recoverable, as determined by the estimated undiscounted cash flows, the estimated fair value of the assets or asset groups are compared to their current carrying values and impairment charges are recorded if the carrying value exceeds fair value. The Company performs its testing on an asset or asset group basis. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. During the years ended December 31, 2019 and 2018, the Company did not recognize any impairment charges related to its property and equipment held for use. During the year ended December 31, 2017, the Company recognized impairment charges of $0.4 million related to property and equipment held for use, which are included in gains (losses) on asset dispositions and impairments, net in the accompanying consolidated statements of income.
Impairment of 50% or Less Owned Companies. Investments in 50% or less owned companies are reviewed periodically to assess whether there is an other-than-temporary decline in the carrying value of the investment. In its evaluation, the Company considers, among other items, recent and expected financial performance and returns, impairments recorded by the investee and the capital structure of the investee. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. When the Company determines the estimated fair value of an investment is below carrying value and the decline is other-than-temporary, the investment is written down to its estimated fair value. Actual results may vary from the Company’s estimates due to the uncertainty regarding projected financial performance, the severity and expected duration of declines in value, and the available liquidity in the capital markets to support the continuing operations of the investee, among other factors. Although the Company believes its assumptions and estimates are reasonable, the investee’s actual performance compared with the estimates could produce different results and lead to additional impairment charges in future periods. During the year ended December 31, 2019, the Company did not recognize any impairment charges related to its 50% or less owned companies. During the years ended December 31, 2018 and
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2017, the Company recognized impairment charges of $0.1 million and $0.9 million, respectively, related to its 50% or less owned companies, which are included in equity in earnings (losses) of 50% or less owned companies, net of tax in the accompanying consolidated statements of income (see Note 4).
Goodwill. Goodwill is recorded when the purchase price paid for an acquisition exceeds the fair value of net identified tangible and intangible assets acquired. As of December 31, 2019, substantially all of the Company’s goodwill is related to Witt O’Brien’s. The Company performs an annual impairment test of goodwill on October 1 of each year and further periodic tests to the extent indicators of impairment develop between annual impairment tests. The Company’s impairment review process compares the fair value of the reporting unit to its carrying value, including the goodwill, related to the reporting unit. To determine the fair value of the reporting unit, the Company may use various approaches including an asset or cost approach, market approach or income approach or any combination thereof. These approaches may require the Company to make certain estimates and assumptions including projections of future cash flows, revenues and expenses. These estimates and assumptions are reviewed each time the Company tests goodwill for impairment and are typically developed as part of the Company’s routine business planning and forecasting process. Although the Company believes its assumptions and estimates are reasonable, the Company’s actual performance against its estimates could produce different results and lead to impairment charges in future periods. During the years ended December 31, 2019, 2018 and 2017, the Company did not recognize any impairment charges related to its goodwill.
Business Combinations. The Company recognizes 100% of the fair value of assets acquired, liabilities assumed, and noncontrolling interests when the acquisition constitutes a change in control of the acquired entity. Shares issued in consideration for a business combination, contingent consideration arrangements and pre-acquisition loss and gain contingencies are all measured and recorded at their acquisition-date fair value. Subsequent changes to fair value of contingent consideration arrangements are generally reflected in earnings. Any in-process research and development assets acquired are capitalized as are certain acquisition-related restructuring costs if the criteria related to exit or disposal cost obligations are met as of the acquisition date. Acquisition-related transaction costs are expensed as incurred and any changes in income tax valuation allowances and tax uncertainty accruals are recorded as an adjustment to income tax expense (benefit). The operating results of entities acquired are included in the accompanying consolidated statements of income from the date of acquisition (see Note 2).
Debt Discount and Issuance Costs. Debt discounts and costs incurred in connection with the issuance of debt are amortized over the life of the related debt using the effective interest rate method for term loans and straight line method for revolving credit facilities and is included in interest expense in the accompanying consolidated statements of income.
Self-insurance Liabilities. The Company maintains hull, liability and war risk, general liability, workers compensation and other insurance customary in the industries in which it operates. Certain excess and property insurance policies are obtained through SEACOR sponsored programs, with premiums charged to participating businesses based on management’s risk assessment or insured asset values. The marine hull and liability policies have significant annual aggregate deductibles that are accrued based on actual claims incurred. The Company also maintains self-insured health benefit plans for its participating employees. Exposure to the health benefit plans are limited by maintaining stop-loss and aggregate liability coverage. To the extent that estimated self-insurance losses, including the accrual of annual aggregate deductibles, differ from actual losses realized, the Company’s insurance reserves could differ significantly and may result in either higher or lower insurance expense in future periods.
Income Taxes. Deferred income tax assets and liabilities have been provided in recognition of the income tax effect attributable to the book and tax basis differences of assets and liabilities reported in the accompanying consolidated financial statements. Deferred tax assets or liabilities are provided using the enacted tax rates expected to apply to taxable income in the periods in which they are expected to be settled or realized. Interest and penalties relating to uncertain tax positions are recognized in interest expense and administrative and general, respectively, in the accompanying consolidated statements of income. The Company records a valuation allowance to reduce its deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company records any liability associated with global intangible low-taxed income (GILTI) in the period it is incurred.
In the normal course of business, the Company may be subject to challenges from tax authorities regarding the amount of taxes due. These challenges may alter the timing or amount of taxable income or deductions. As part of the calculation of income tax expense (benefit), the Company determines whether the benefits of its tax positions are at least more likely than not of being sustained based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained, the Company accrues the largest amount of the tax benefit that is more likely than not of being sustained. Such accruals require management to make estimates and judgments with respect to the ultimate outcome of its tax benefits and actual results could vary materially from these estimates.
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Deferred Gains – Equipment Sale-Leaseback Transactions and Financed Equipment Sales. From time to time, the Company enters into equipment sale-leaseback transactions with finance companies or provides seller financing on sales of its equipment to third parties or 50% or less owned companies. A portion of the gains realized from these transactions is not immediately recognized in income and has been recorded in the accompanying consolidated balance sheets in deferred gains and other liabilities. In sale-leaseback transactions (see Note 3), gains are deferred to the extent of the present value of future minimum lease payments and are amortized as reductions to rental expense over the applicable lease terms. In financed equipment sales (see Note 3), gains are deferred to the extent that the repayment of purchase notes is dependent on the future operations of the sold equipment and are amortized based on cash received from the buyers. Deferred gain activity related to these transactions for the years ended December 31, was as follows (in thousands):
2019 2018 2017
Balance at beginning of year $ 39,102    $ 66,519    $ 74,774   
Impact of adoption of accounting principle(1)
(29,207)   —    —   
Deferred gains arising from equipment sales —    —    13,336   
Amortization of deferred gains included in operating expenses as a reduction to rental expense —    (12,774)   (15,035)  
Amortization of deferred gains included in gains on asset dispositions and impairments, net (1,127)   (11,591)   (602)  
Reclassification of deferred gains into historical cost on reacquired property and equipment —    (3,052)   (5,954)  
Balance at end of year
$ 8,768    $ 39,102    $ 66,519   
______________________
(1)On January 1, 2019 the Company adopted Topic 842 and reduced deferred gains associated with sale-leaseback transactions through a beginning period retained earnings adjustment.
Deferred Gains – Equipment Sales to the Company’s 50% or Less Owned Companies. A portion of the gains realized from non-financed sales of the Company’s vessels and barges to its 50% or less owned companies is not immediately recognized in income and has been recorded in the accompanying consolidated balance sheets in deferred gains and other liabilities. Effective January 1, 2009, the Company adopted new accounting rules related to the sale of its vessels and barges to its 50% or less owned companies. In most instances, these sale transactions are now considered a sale of a business in which the Company relinquishes control to its 50% or less owned companies. Subsequent to the adoption of the new accounting rules, gains are deferred only to the extent of the Company’s uncalled capital commitments and are amortized as those commitments lapse or funded amounts are returned. For transactions occurring prior to the adoption of the new accounting rules, gains were deferred and are being amortized based on the Company’s ownership interest, cash received and the applicable equipment’s useful lives. Deferred gain activity related to these transactions for the years ended December 31, was as follows (in thousands):
2019 2018 2017
Balance at beginning of year $ 4,562    $ 5,934    $ 7,649   
Amortization of deferred gains included in gains on asset dispositions and impairments, net (1,322)   (1,372)   (1,715)  
Balance at end of year
$ 3,240    $ 4,562    $ 5,934   
Stock Based Compensation. Stock based compensation is amortized to compensation expense on a straight line basis over the requisite service period of the grants using the Black-Scholes valuation model. The Company does not estimate forfeitures in its expense calculations as forfeiture history has been minor. The Company presents the excess tax benefits from the exercise of stock options as a financing cash flow in the accompanying consolidated statements of cash flows.
Foreign Currency Translation. The assets, liabilities and results of operations of certain SEACOR subsidiaries are measured using their functional currency, which is the currency of the primary foreign economic environment in which they operate. Upon consolidating these subsidiaries with SEACOR, their assets and liabilities are translated to U.S. dollars at currency exchange rates as of the balance sheet dates and their revenues and expenses are translated at the weighted average currency exchange rates during the applicable reporting periods. Translation adjustments resulting from the process of translating these subsidiaries’ financial statements are reported in other comprehensive income (loss) in the accompanying consolidated statements of comprehensive income.
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Accumulated Other Comprehensive Loss. The components of accumulated other comprehensive loss were as follows (in thousands):
SEACOR Holdings Inc. Stockholders’ Equity Noncontrolling
Interests
Foreign
Currency
Translation
Adjustments 		Derivative Gains
(Losses) on
Cash Flow
Hedges, net 		Other Total Foreign
Currency
Translation
Adjustments 		Derivative
Losses on
Cash Flow
Hedges, net 		Other Other
Comprehensive
Income (Loss)
Year ended December 31, 2016 $ (11,593)   $ 75    $ 4    $ (11,514)   $ (1,613)   $ (17)   $ 3   
Discontinued Operations 10,031    94    —    10,125    1,460    4    2   
Other comprehensive income (loss) 1,812    (260)   (6)   1,546    153    13    (5)   $ 1,707   
Income tax (expense) benefit (795)   91    2    (702)   —    —    —    (702)  
Year ended December 31, 2017 (545)   —    —    (545)   —    —    —    $ 1,005   
Other comprehensive loss (391)   —    —    (391)   —    —    —    $ (391)  
Income tax benefit 22    —    —    22    —    —    —    22   
Year ended December 31, 2018 (914)   —    —    (914)   —    —    —    $ (369)  
Other comprehensive income (loss) (83)   67    —    (16)   —    —    —    $ (16)  
Income tax expense (68)   —    —    (68)   —    —    —    (68)  
Year ended December 31, 2019 $ (1,065)   $ 67    $ —    $ (998)   $ —    $ —    $ —    $ (84)  
Foreign Currency Transactions. Certain SEACOR subsidiaries enter into transactions denominated in currencies other than their functional currency. Gains and losses resulting from changes in currency exchange rates between the functional currency and the currency in which a transaction is denominated are included in foreign currency gains (losses), net in the accompanying consolidated statements of income in the period in which the currency exchange rates change.
Earnings Per Share. Basic earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding plus the effect of potentially dilutive securities through the application of the treasury stock and if-converted methods. Dilutive securities for this purpose assumes restricted stock grants have vested, common shares have been issued pursuant to the exercise of outstanding stock options and common shares have been issued pursuant to the conversion of all outstanding convertible notes.
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Computations of basic and diluted earnings per common share of SEACOR for the years ended December 31, were as follows (in thousands, except share data):
Net Income Average o/s Shares Per Share
2019
Basic Weighted Average Common Shares Outstanding $ 26,774    18,949,981    $ 1.41   
Effect of Dilutive Securities:
Options and Restricted Stock(1)
—    129,250   
Convertible Securities(2)(3)
1,273    1,227,101   
Diluted Weighted Average Common Shares Outstanding $ 28,047    20,306,332    $ 1.38   
2018
Basic Weighted Average Common Shares Outstanding $ 58,148    18,080,778    $ 3.22   
Effect of Dilutive Securities:
Options and Restricted Stock(1)
—    267,810   
Convertible Securities(2)(3)
1,273    1,227,101   
Diluted Weighted Average Common Shares Outstanding $ 59,421    19,575,689    $ 3.04   
2017
Basic Weighted Average Common Shares Outstanding $ 61,643    17,368,081    $ 3.55   
Effect of Dilutive Securities:
Options and Restricted Stock(1)
—    308,012   
Convertible Securities
14,346    5,258,065   
Diluted Weighted Average Common Shares Outstanding $ 75,989    22,934,158    $ 3.31   
______________________
(1)For the years ended December 31, 2019, 2018 and 2017, diluted earnings per common share of SEACOR excluded 827,222, 333,510 and 1,924,217, respectively, of certain share awards as the effect of their inclusion in the computation would be anti-dilutive.
(2)For the years ended December 31, 2019 and 2018 diluted earnings per common share of SEACOR excluded 928,464 and 1,946,917 shares, respectively, issuable pursuant to the Company’s 3.0% Convertible Senior Notes (see Note 7) as the effect of their inclusion in the computation would be anti-dilutive.
(3)For the years ended December 31, 2019 and 2018 diluted earnings per share of SEACOR excluded 1,553,780 and 983,351 shares, respectively, issuable pursuant to the Company’s 3.25% Convertible Senior Notes (see Note 7) as the effect of their inclusion in the computation would be anti-dilutive.
New Accounting Pronouncements. On June 16, 2016, the FASB issued an amendment to the accounting standards, which replaces the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. The new standard is effective for interim and annual periods beginning after December 15, 2019. The Company does not expect the adoption of the new standard will have a material impact on its consolidated financial position, results of operations or cash flows.
On January 26, 2017, the FASB issued an amendment to the accounting standards, which simplified wording and removed step two of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step two of the goodwill test. The new standard is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2020, with early adoption permitted for interim or annual goodwill impairment tests on testing dates after January 1, 2017. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.
On August 29, 2018, the FASB issued an amendment to the accounting standards, which requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customers in a software licensing arrangement. The guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company does not expect the new standard to have a material impact on its consolidated financial position, results of operations or cash flows.
On December 18, 2019, the FASB issued an amendment to the accounting standards, which enhances and simplifies various aspects of the income tax accounting guidance including the elimination of certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and
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enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.
2. BUSINESS ACQUISITIONS
Cleancor. On June 1, 2018, the Company acquired a controlling interest in Cleancor, a full service solution provider that delivers clean fuel to end users displacing legacy petroleum-based fuels, through the acquisition of its partners’ 50% equity interest for $3.2 million in cash. In addition, immediately prior to consolidation, the Company contributed as capital $1.9 million of notes receivable due from Cleancor. The Company performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair value resulting in no goodwill being recorded.
SCA. On March 1, 2018, the Company acquired Strategic Crisis Advisors LLC (“SCA”) for $1.5 million to be paid in two installments. The purchase price includes $0.9 million in contingent consideration that is dependent upon SCA meeting predetermined revenue targets for the twelve months following the acquisition date. The Company performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair value resulting in no goodwill being recorded.
ISH. On July 3, 2017, International Shipholding Corporation (“ISH”) emerged from bankruptcy pursuant to its chapter 11 plan of reorganization (the “Plan”) confirmed by the U.S. Bankruptcy Court for the Southern District of New York (the “ISH Acquisition”). Pursuant to the Plan, SEACOR Ocean Transport Inc., a wholly-owned subsidiary of SEACOR, acquired all of the equity of the reorganized ISH. Under the terms of the Plan, the Company paid consideration consisting of $10.5 million in cash, converted $18.1 million of debtor-in-possession financing into equity and assumed $28.7 million of debt primarily from a new credit facility that was secured by the assets and equity of ISH and was non-recourse to SEACOR and its subsidiaries other than ISH (see Note 7). ISH was renamed Waterman Logistics, Inc. in 2019 ("Waterman"). Waterman, through its subsidiaries, operates a diversified fleet of U.S. and foreign-flag vessels including four leased-in PCTCs and two owned U.S.-flag bulk carriers that provide worldwide and domestic maritime transportation services to commercial and governmental customers. In addition, Waterman has investments in two 50% or less owned companies that operate two foreign-flag rail ferries and a railcar repair and maintenance facility. The Company performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair value resulting in no goodwill being recorded.
Purchase Price Allocation. The allocation of the purchase price for the Company’s acquisitions for the years ended December 31, was as follows (in thousands):
2018 2017
Restricted cash and restricted cash equivalents $ —    $ 13   
Trade and other receivables 1,264    15,823   
Other current assets 170    2,054   
Investments, at Equity, and Advances to 50% or Less Owned Companies (5,123)   10,000   
Property and Equipment 4,382    15,190   
Intangible Assets 1,120    10,957   
Other Assets(1)
7    (17,863)  
Accounts payable and other accrued liabilities(2)
(1,609)   —   
Other current liabilities (439)   (17,214)  
Long-Term Debt —    (28,725)  
Deferred Income Taxes —    3,939   
Other Liabilities —    (42)  
Noncontrolling interests in subsidiaries (82)   —   
Purchase price(3)
$ (310)   $ (5,868)  
______________________
(1)Net of debtor-in-possession financing converted into equity of $18.1 million, in 2017.
(2)Includes $1.5 million of consideration to be paid in two installments.
(3)Purchase price is net of cash acquired totaling $3.6 million and $16.4 million in 2018 and 2017, respectively.
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3. EQUIPMENT ACQUISITIONS AND DISPOSITIONS
Equipment Additions. The Company’s capital expenditures were $37.8 million, $50.3 million and $114.6 million during the years ended December 31, 2019, 2018, and 2017, respectively. Major owned equipment placed in service for the years ended December 31, were as follows:
2019 2018
2017(1)
Petroleum and chemical carriers - U.S.-flag —    —    3   
Harbor tugs - U.S.-flag 1    5    1   
Harbor tugs - Foreign-flag —    —    2   
Short-sea container/RORO - Foreign-flag —    2    —   
Inland river liquid tank barges —    —    2   
Inland river towboats 2    —    3   
______________________
(1)Excludes two U.S.-flag bulk carriers acquired in the ISH acquisition (see Note 2).
Equipment Dispositions. During the year ended December 31, 2019, the Company sold property and equipment for net proceeds of $2.5 million and gains of $0.5 million. In addition, the Company recognized previously deferred gains of $2.4 million.
During the year ended December 31, 2018, the Company sold property and equipment for net proceeds of $16.1 million and gains of $6.6 million. In addition, the Company recognized previously deferred gains of $13.0 million.
During the year ended December 31, 2017, the Company sold property and equipment for net proceeds of $164.8 million and gains of $23.3 million, of which $10.0 million were recognized currently and $13.3 million were deferred (see Note 1). Equipment dispositions included the sale-leaseback of one U.S.-flag petroleum and chemical carrier for $134.9 million, with leaseback terms of 104 months and 50 dry-cargo barges for $12.5 million with leaseback terms of 84 months. Gains of $13.3 million related to the sale-leasebacks were deferred and were being amortized over the respective minimum lease periods until January 1, 2019, when the Company adopted Topic 842 (see Note 1). In addition, the Company recognized previously deferred gains of $2.3 million. The Company also recognized a loss of $0.3 million related to the total loss of one inland river specialty barge.
Major equipment dispositions for the years ended December 31, were as follows:
2019 2018 2017
Petroleum and chemical carriers - U.S.-flag —    1    1   
Harbor tugs - U.S.-flag —    1    —   
Short-sea container/RORO - Foreign-flag 1    —    —   
Inland river dry-cargo barges —    32    50   
Inland river specialty barges —    2    2   
Inland river towboats —    —    2   

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4. INVESTMENTS, AT EQUITY, AND ADVANCES TO 50% OR LESS OWNED COMPANIES
Investments, at equity, and advances to 50% or less owned companies as of December 31, were as follows (in thousands):
Ownership 2019 2018
Ocean Services:
Trailer Bridge(1)
55.3%    $ 56,770    $ 56,364   
RF Vessel Holdings 50.0%    15,878    10,826   
Golfo de Mexico 50.0%    3,485    5,272   
KSM 50.0%    1,916    1,478   
78,049    73,940   
Inland Services:
SCFCo 50.0%    33,705    37,219   
Bunge-SCF Grain 50.0%    15,112    14,738   
SCF Bunge Marine(1)
62.5%    3,990    3,144   
Other 50.0%    2,285    2,796   
55,092    57,897   
Witt O’Brien’s:
O’Brien’s do Brazil 50.0%    1,274    472   
Other:
VA&E 23.8%    10,448    13,073   
Avion 39.1%    10,706    10,290   
Other 40.0%    – 47.5%    1,539    1,214   
22,693    24,577   
$ 157,108    $ 156,886   
______________________
(1)The Company’s ownership percentage represents its economic interest in the 50% or less owned company.
Combined Condensed Financial Information. Summarized financial information for the Company’s investments, at equity, excluding SCFCo and Trailer Bridge, as of and for the years ended December 31, was as follows (in thousands):
2019 2018
Current assets $ 228,420    $ 184,704   
Noncurrent assets 101,292    77,929   
Current liabilities 160,688    113,784   
Noncurrent liabilities 58,413    46,503   

2019 2018 2017
Operating Revenues $ 1,015,627    $ 786,717    $ 1,068,190   
Costs and Expenses:
Operating and administrative 1,005,757    771,324    1,035,952   
Depreciation 4,968    7,216    11,810   
1,010,725    778,540    1,047,762   
Gains on Asset Dispositions and Impairments, Net —    38    16,115   
Operating Income $ 4,902    $ 8,215    $ 36,543   
Net Income $ 2,922    $ 3,967    $ 23,383   
As of December 31, 2019 and 2018, cumulative undistributed net losses of 50% or less owned companies accounted for by the equity method and included in the Company’s consolidated retained earnings were $69.8 million and $65.0 million, respectively.
Trailer Bridge. Trailer Bridge, Inc. (“Trailer Bridge”), an operator of U.S.-flag RORO and deck barges, provides marine transportation services between Jacksonville, Florida, San Juan, Puerto Rico and Puerto Plata, Dominican Republic. The Company provided secured financing to Trailer Bridge and during the year ended December 31, 2017, the Company provided advances of $2.0 million and received repayments of $6.0 million on the secured financing. As of December 31,
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2017, there was no outstanding balance on the secured financing. During the years ended December 31, 2019, 2018 and 2017, the Company earned revenues of $4.0 million, $3.5 million and $3.1 million, respectively, from the time charter of one U.S.-flag offshore tug to Trailer Bridge.
RF Vessel Holdings. On July 3, 2017, as part of the ISH Acquisition (see Note 2), the Company acquired a 100% interest in Rail Ferry Vessel Holdings LLC (“RF Vessel Holdings”), which owns two foreign-flag rail ferries. On September 1, 2017, the Company sold a 50% interest in RF Vessel Holdings to G&W Agave Holdings (MI) Inc. for $1.9 million and retained a 50% ownership interest in the newly-formed joint venture. During the years ended December 31, 2019 and 2018, the Company and its partner each contributed capital of $4.7 million and $9.1 million, respectively, to RF Vessel Holdings primarily related to the construction of two new foreign-flag rail ferries with scheduled deliveries during 2021.
Golfo de Mexico. On July 3, 2017, as part of the ISH Acquisition (see Note 2), the Company acquired a 100% interest in Golfo de Mexico Rail Ferry Holdings LLC (“Golfo de Mexico”), which operates the two foreign-flag rail ferries owned by RF Vessel Holdings. On September 1, 2017, the Company sold a 50% interest in Golfo de Mexico to G&W Agave Holdings (MI) Inc. for $3.1 million and retained a 50% ownership interest in the newly-formed joint venture. During the years ended December 31, 2019 and 2018, the Company and its partner each contributed capital of $0.5 million and $4.6 million, respectively, to Golfo de Mexico. During the year ended December 31, 2017, the Company received dividends of $0.3 million from Golfo de Mexico. The Company provides Golfo de Mexico with technical, commercial, administrative and construction management services, and during the years ended December 31, 2019, 2018 and 2017, the Company received $1.8 million, $1.1 million and $0.3 million, respectively, for these services.
KSM. On April 1, 2017, the Company and Kotug Caribbean Holdings LLC formed Kotug Seabulk Maritime LLC (“KSM”). KSM operates four foreign-flag harbor tugs, two foreign-flag specialty vessels and one foreign-flag ocean liquid tank barge in Freeport, Grand Bahama, supporting terminal operations. During the years ended December 31, 2018 and 2017, the Company and its partner each contributed capital of $1.0 million and $0.3 million, respectively, to KSM. The Company provides KSM with technical, commercial and administrative management services and during the years ended December 31, 2019, 2018 and 2017, received $0.4 million, $0.4 million and $0.3 million, respectively, for these services. During the years ended December 31, 2019, 2018 and 2017, the Company earned revenues of $1.4 million, $1.3 million and $1.1 million, respectively, from the bareboat charter of two foreign-flag harbor tugs to KSM.
SeaJon. SeaJon LLC (“SeaJon”) owned an articulated tug-barge operating in the Great Lakes trade that was sold to a third party in June 2017 and, as of December 31, 2017, SeaJon had been liquidated. During the year ended December 31, 2017, the Company received capital distributions of $3.5 million and dividends of $12.5 million from SeaJon.
SCFCo. SCFCo Holdings LLC (“SCFCo”) was established to operate inland river dry-cargo barges and inland river towboats on the Parana-Paraguay Waterway and a terminal facility at Port Ibicuy, Argentina. During the year ended December 31, 2017, the Company contributed capital of $0.4 million to SCFCo. During the year ended December 31, 2017, the Company provided working capital advances and loans of $2.5 million to SCFCo and received repayments on working capital advances and loans of $1.7 million from SCFCo. During the year ended December 31, 2018, the Company received repayments on working capital advances and loans of $2.6 million from SCFCo. As of December 31, 2019, $34.3 million of working capital advances and loans remained outstanding. The Company also provides SCFCo with certain information technology services and received $0.1 million, $0.1 million and $0.1 million, respectively, for these services during the years ended December 31, 2019, 2018 and 2017. As of December 31, 2019, the Company’s carrying value of its investment in SCFCo was $20.2 million lower than its proportionate share of the underlying equity in SCFCo.
Summarized financial information for SCFCo as of and for the years ended December 31, was as follows (in thousands):
2019 2018
Current assets $ 5,878    $ 8,322   
Noncurrent assets 113,638    121,001   
Current liabilities 11,077    12,958   
Noncurrent liabilities 59,717    56,078   

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2019 2018 2017
Operating Revenues $ 45,049    $ 54,486    $ 44,177   
Costs and Expenses:
Operating and administrative 39,375    45,911    40,106   
Depreciation 10,027    17,901    17,803   
49,402    63,812    57,909   
Operating Loss (4,353)   (9,326)   (13,732)  
Interest expense (6,971)   (6,573)   (6,120)  
Other expense, net (241)   (2,229)   (961)  
Net Loss $ (11,565)   $ (18,128)   $ (20,813)  
Bunge-SCF Grain. Bunge-SCF Grain LLC (“Bunge-SCF Grain”) operates terminal grain elevators in Illinois. The Company has provided Bunge-SCF Grain with working capital advances. As of December 31, 2019, the total outstanding balance of working capital advances was $7.0 million. Bunge-SCF Grain also operates and manages the Company’s grain storage and handling facility in McLeansboro, Illinois. During the years ended December 31, 2019, 2018 and 2017, the Company earned revenues of $0.7 million, $0.9 million and $1.1 million, respectively, from the lease of this terminal facility to Bunge-SCF Grain. Certain dry-cargo barge pools managed by the Company provide freight transportation to Bunge-SCF Grain and those pools received $24.9 million, $10.7 million and $7.2 million for these services during the years ended December 31, 2019, 2018 and 2017, respectively.
SCF Bunge Marine. SCF Bunge Marine LLC (“SCF Bunge Marine”) provides towing services on the U.S. Inland Waterways, primarily the Mississippi River, Illinois River, Tennessee River and Ohio River. The Company time charters eight inland river towboats to SCF Bunge Marine, of which four are bareboat chartered-in by the Company from a third-party leasing entity. The Company and its partner are required to fund SCF Bunge Marine, if necessary, to support the payment of its time charter obligations to the Company. During the years ended December 31, 2019, 2018 and 2017, the Company earned revenues of $6.8 million, $3.3 million, and $2.1 million, respectively, from the time charter of these inland river towboats to SCF Bunge Marine. During the years ended December 31, 2019 and 2018, the Company contributed capital of $0.3 million and $0.5 million, respectively, to SCF Bunge Marine. During the years ended December 31, 2018 and 2017, the Company received dividends of $4.6 million and $0.1 million, respectively, from SCF Bunge Marine. Certain dry-cargo barge pools managed by the Company obtain towing services from SCF Bunge Marine and those pools paid $53.3 million, $54.5 million and $41.4 million to SCF Bunge Marine for these services during the years ended December 31, 2019, 2018 and 2017, respectively.
Other Inland Services. The Company’s other Inland Services 50% or less owned company operates a fabrication facility. During the year ended December 31, 2019, the Company and its partner each received a noncash dividend of one specialty barge valued at $0.6 million.
O’Brien’s do Brazil. O’Brien’s do Brasil Consultoria em Emergencias e Meio Ambiente A/A (“O’Brien’s do Brazil”) is an emergency consulting organization providing preparedness, response and recovery services in Brazil. During the years ended December 31, 2019, 2018 and 2017, the Company received dividends of $0.1 million $0.2 million and $0.1 million, respectively from O’Brien’s do Brazil.
Hawker Pacific. Hawker Pacific Airservices Limited (“Hawker Pacific”) is an aviation sales and support organization and a distributor of aviation components from leading manufacturers. On April 30, 2018, the Company sold its 34.2% interest in Hawker Pacific for $78.0 million in cash and recognized a gain of $53.9 million, which is included in other, net in the accompanying consolidated statements of income. During the years ended December 31, 2018 and 2017, the Company received management fees of $0.1 million and $0.3 million respectively, from Hawker Pacific.
VA&E. VA&E Trading LLP (“VA&E”), was formed to focus on the global origination, trading and merchandising of sugar and other commodities, pairing producers and buyers and arranging for the transportation and logistics of the product. During the year ended December 31, 2019, the Company received capital distributions of $3.7 million from VA&E, which reduced the Company’s noncontrolling interest in VA&E to 23.8%. The Company provides VA&E an uncommitted credit facility of up to $3.5 million and a subordinated loan of $4.4 million. During the year ended December 31, 2017, the Company advanced $3.5 million on the uncommitted credit facility. During the year ended December 31, 2018, the Company received repayments of $5.4 million and advanced $5.4 million on the uncommitted credit facility. During the year ended December 31, 2019, the Company advanced $0.5 million to VA&E on the subordinated loan. As of December 31, 2019, outstanding advances to VA&E were $8.3 million, inclusive of accrued and unpaid interest. During the year ended December 31, 2018, the Company received dividends of $0.4 million from VA&E.
Avion. Avion Pacific Limited (“Avion”) is a distributor of aircraft and aircraft related parts. During the year ended December 31, 2017, the Company made advances of $1.0 million and received repayments on advances of $4.0 million from
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Avion. As of December 31, 2019 and 2018, the Company had no outstanding advances to Avion. During the year ended December 31, 2018, the Company received dividends of $0.8 million from Avion.
Other. The Company’s other 50% or less owned companies are primarily industrial aviation businesses in Asia. During the year ended December 31, 2018, the Company received repayments on working capital advances of $0.4 million and received capital distributions of $0.6 million from these 50% or less owned companies. During the year ended December 31, 2017, the Company received repayments on working capital advances of $0.4 million from these 50% or less owned companies. As of December 31, 2019, total advances outstanding to these 50% or less owned companies were $2.0 million.
5. CONSTRUCTION RESERVE FUNDS
The Company has established, pursuant to Section 511 of the Merchant Marine Act, 1936, as amended, construction reserve fund accounts subject to agreements with the Maritime Administration. In accordance with this statute, the Company is permitted to deposit proceeds from the sale of certain vessels into the construction reserve fund accounts and defer the taxable gains realized from the sale of those vessels. Qualified withdrawals from the construction reserve fund accounts are only permitted for the purpose of acquiring qualified U.S.-flag vessels as defined in the statute and approved by the Maritime Administration. To the extent that sales proceeds are reinvested in replacement vessels, the carryover depreciable tax basis of the vessels originally sold is attributed to the U.S.-flag vessels acquired using such qualified withdrawals. The construction reserve funds must be committed for expenditure within three years of the date of sale of the equipment, subject to two one-year extensions that can be granted at the discretion of the Maritime Administration, or be released for the Company’s general use as nonqualified withdrawals. For nonqualified withdrawals, the Company is obligated to pay taxes on the previously deferred gains at the prevailing statutory tax rate plus penalties and interest thereon for the period such taxes were deferred.
6. NOTES RECEIVABLE FROM THIRD PARTIES
From time to time, the Company engages in lending activities involving various types of businesses or equipment. The Company recognizes interest income as payments are due, typically monthly, and expenses all costs associated with its lending activities as incurred. These notes receivable are typically collateralized by the underlying equity or equipment and require scheduled or periodic principal and interest payments. As of December 31, 2019 and 2018, the outstanding balance of notes receivable from third parties was $1.1 million and $2.2 million, respectively, and is included in other long-term assets in the accompanying consolidated balance sheets. During the years ended December 31, 2019, 2018 and 2017, the Company made advances on notes receivable from third parties of $1.0 million, $0.1 million and $10.1 million, respectively, and received repayments on notes receivable from third parties of $2.1 million, $0.6 million and $34.5 million, respectively.
7. LONG-TERM DEBT
The Company’s borrowings as of December 31, were as follows (in thousands):
2019 2018
3.0% Convertible Senior Notes(1)
$ 50,041    $ 107,284   
2.5% Convertible Senior Notes 64,455    64,455   
3.25% Convertible Senior Notes(2)
117,782    117,782   
SEA-Vista 2015 Credit Facility(3)
—    87,977   
SEA-Vista 2019 Credit Facility(4)
100,000    —   
Other(5)
7,957    8,561   
340,235    386,059   
Portion due within one year, net of unamortized discount and issue costs (58,854)   (8,497)  
Debt discount included in long-term debt (19,990)   (28,334)  
Debt issuance costs included in long-term debt (5,779)   (3,100)  
$ 255,612    $ 346,128   
______________________
(1)Excludes unamortized discount and unamortized issue costs of $1.6 million and $0.2 million, respectively, as of December 31, 2019 and $7.2 million and $0.7 million, respectively, as of December 31, 2018.
(2)Excludes unamortized discount and unamortized issue costs of $18.4 million and $1.6 million, respectively, as of December 31, 2019 and $21.1 million and $1.9 million, respectively, as of December 31, 2018.
(3)Excludes unamortized issue costs of $0.4 million as of December 31, 2018.
(4)Excludes unamortized issue costs of $2.1 million as of December 31, 2019.
(5)Excludes unamortized issue costs of $0.1 million and $0.1 million as of December 31, 2019 and December 31, 2018, respectively.
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The Company’s contractual long-term debt maturities for the years ended December 31, are as follows (in thousands):
2020(1)
$ 60,630   
2021 10,499   
2022 10,503   
2023 10,368   
2024 60,244   
Years subsequent to 2024 187,991   
$ 340,235   
______________________
(1)Includes the aggregate principal amount outstanding of the Company's 3.0% Convertible Senior Notes with a contractual maturity date of November 15, 2028 as the holders may require the Company to repurchase the notes on November 19, 2020.
3.0% Convertible Senior Notes. On November 13, 2013, SEACOR issued $230.0 million aggregate principal amount of its 3.0% Convertible Senior Notes due November 15, 2028 (the “3.0% Convertible Senior Notes”). Interest on the 3.0% Convertible Senior Notes is payable semi-annually on May 15 and November 15 of each year. Beginning November 15, 2020, contingent interest is payable during any subsequent semi-annual interest period if the average trading price of the 3.0% Convertible Senior Notes for a defined period is greater than or equal to $1,200 per bond ($1,000 face value). The amount of contingent interest payable for any such period will be equal to 0.45% per annum of such average trading price of the 3.0% Convertible Senior Notes. Prior to August 15, 2028, the 3.0% Convertible Senior Notes are convertible into shares of SEACOR common stock, par value $0.01 per share (“Common Stock”), at a conversion rate (“Conversion Rate”) of 12.5892 shares per bond ($1,000 face value) only if certain conditions are met, as more fully described in the indenture. After August 15, 2028, holders may elect to convert at any time. The Company has reserved the maximum number of shares of Common Stock needed upon conversion, or 629,976 shares as of December 31, 2019. Subsequent to November 19, 2018, the 3.0% Convertible Senior Notes may be redeemed at the Company's option, in whole or in part, at a price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of redemption. On November 19, 2020, November 20, 2023 or if the Company undergoes a fundamental change, as more fully described in the indenture, the holders of the 3.0% Convertible Senior Notes may require SEACOR to purchase for cash all or part of the notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of purchase.
The Company accounts separately for the liability and equity components of the 3.0% Convertible Senior Notes and the associated underwriting fees in a manner that reflects the Company’s non-convertible borrowing rate. The resulting debt discount and offering costs associated with the liability component are amortized as additional non-cash interest expense over the seven year period for which the debt is expected to be outstanding (November 19, 2020) for an overall effective annual interest rate of 7.4%.
On May 15, 2018, the Company exchanged $117.8 million aggregate principal amount of its outstanding 3.0% Convertible Senior Notes for a like principal amount of new 3.25% Convertible Senior Notes (see "—3.25% Convertible Senior Notes"). During the year ended December 31, 2018, the Company purchased $4.9 million in principal amount of its 3.0% Convertible Senior Notes for total consideration of $4.7 million. These transactions resulted in debt extinguishment losses of $5.4 million included in the accompanying consolidated statements of income.
During the year ended December 31, 2019, the Company purchased $57.2 million in principal amount of its 3.0% Convertible Senior Notes for total consideration of $56.2 million resulting in losses on debt extinguishment of $2.1 million included in the accompanying consolidated statements of income. Subsequent to December 31, 2019, the Company purchased $2.2 million in principal amount of its 3.0% Convertible Senior Notes for total consideration of $2.2 million.
2.5% Convertible Senior Notes. On December 11, 2012, SEACOR issued $350.0 million aggregate principal amount of its 2.5% Convertible Senior Notes due December 15, 2027 (the “2.5% Convertible Senior Notes”). Interest on the 2.5% Convertible Senior Notes is payable semi-annually on June 15 and December 15 of each year. Beginning December 15, 2017, contingent interest is payable during any subsequent semi-annual interest period if the average trading price of the 2.5% Convertible Senior Notes for a defined period is greater than or equal to $1,200 per bond ($1,000 face value). The amount of contingent interest payable for any such period will be equal to 0.25% per annum of such average trading price of the 2.5% Convertible Senior Notes. Prior to September 15, 2027, the 2.5% Convertible Senior Notes are convertible into shares of Common Stock at a conversion rate of 19.0381 shares per bond ($1,000 face value) only if certain conditions are met, as more fully described in the indenture. After September 15, 2027, holders may elect to convert at any time. The Company has reserved the maximum number of shares of Common Stock needed upon conversion, or 1,227,101 shares as of December 31, 2019. On December 12, 2017, the Company entered into a supplemental indenture, which amended the indenture to provide holders with an additional put right for their Notes on May 31, 2018. In addition, the Company surrendered and waived its right to redeem the Notes until May 31, 2018. Subsequent to May 31, 2018, the 2.5% Convertible Senior Notes may be redeemed at the Company's option, in whole or in part, at a price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of redemption. On December 19, 2022, or if the Company undergoes a fundamental change, as more
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fully described in the indenture as amended by the first supplemental indenture dated as of December 12, 2017, the holders of the 2.5% Convertible Senior Notes may require SEACOR to purchase for cash all or part of the notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of purchase.
The Company accounts separately for the liability and equity components of the 2.5% Convertible Senior Notes and the associated underwriting fees in a manner that reflects the Company’s non-convertible borrowing rate. The resulting debt discount and offering costs associated with the liability component was amortized as additional non-cash interest expense over the five year period for which the debt was expected to be outstanding (December 19, 2017) for an overall effective annual interest rate of 6.5%. Beginning December 19, 2017, the effective annual interest rate is equal to the stated coupon rate of 2.5%.
During the year ended December 31, 2017, the Company purchased $61.7 million in principal amount of its 2.5% Convertible Senior Notes for total consideration of $61.9 million. Consideration of $60.5 million was allocated to the settlement of the long-term debt resulting in gains on debt extinguishment of $0.1 million included in the accompanying consolidated statements of income. Consideration of $1.4 million was allocated to the purchase of the conversion option embedded in the 2.5% Convertible Senior Notes as included in the accompanying consolidated statements of changes in equity. Pursuant to the put option set forth in the indenture and governing the 2.5% Convertible Senior Notes, the Company completed a tender offer for the 2.5% Convertible Senior Notes in which, on December 19, 2017, the Company purchased $31.0 million in principal amount of its 2.5% Convertible Senior Notes that were validly surrendered for purchase for total consideration of $31.0 million.
3.25% Convertible Senior Notes. On May 15, 2018, SEACOR issued $117.8 million aggregate principal amount of its 3.25% Convertible Senior Notes due May 15, 2030 (the “3.25% Convertible Senior Notes”). Interest on the 3.25% Convertible Senior Notes is payable semi-annually on May 15 and November 15 of each year. Beginning May 15, 2025, contingent interest is payable during any subsequent semi-annual interest period if the average trading price of the 3.25% Convertible Senior Notes for a defined period is greater than or equal to $1,200 per bond ($1,000 face value). The amount of contingent interest payable for any such period will be equal to 0.45% per annum of such average trading price of the 3.25% Convertible Senior Notes. Prior to February 15, 2030, the 3.25% Convertible Senior Notes are convertible into shares of Common Stock, at a Conversion Rate of 13.1920 shares per bond ($1,000 face value) only if certain conditions are met, as more fully described in the indenture. After February 15, 2030, holders may elect to convert at any time. The Company has reserved the maximum number of shares of Common Stock needed upon conversion, or 1,553,780 shares as of December 31, 2019. On or after May 15, 2022, the 3.25% Convertible Senior Notes may be redeemed at the Company's option, in whole or in part, at a price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of redemption. On May 15, 2025, or if the Company undergoes a fundamental change, as more fully described in the indenture, the holders of the 3.25% Convertible Senior Notes may require SEACOR to purchase for cash all or part of the notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of purchase.
The Company accounts separately for the liability and equity components of the 3.25% Convertible Senior Notes and the associated underwriting fees in a manner that reflects the Company’s non-convertible borrowing rate. Of the total issued amount of $117.8 million and offering costs of $2.5 million, the Company allocated $95.1 million and $2.0 million, respectively, to the liability component and $22.7 million and $0.5 million, respectively, to the equity component. The resulting debt discount and offering costs associated with the liability component are amortized as additional non-cash interest expense over the seven year period for which the debt is expected to be outstanding (May 15, 2025) for an overall effective annual interest rate of 7.2%.
7.375% Senior Notes. On September 24, 2009, SEACOR issued $250.0 million aggregate principal amount of its 7.375% Senior Notes due October 1, 2019 (the “7.375% Senior Notes”). The 7.375% Senior Notes were issued under a supplemental indenture dated as of September 24, 2009 (the “2009 Supplemental Indenture”) to the base indenture relating to SEACOR’s senior debt securities, dated as of January 10, 2001, between SEACOR and U.S. Bank National Association, as trustee. Interest on the 7.375% Senior Notes was payable semi-annually on April 1 and October 1 of each year. The 7.375% Senior Notes were redeemed at a price equal to the principal amount, plus accrued and unpaid interest to the date of redemption, plus a specified “make-whole” premium in October of 2018.
During the year ended December 31, 2017, the Company purchased $7.6 million in principal amount of its 7.375% Senior Notes for $7.7 million resulting in losses on debt extinguishment of $0.2 million included in the accompanying consolidated statements of income.
During the year ended December 31, 2018, and prior to their redemption, the Company purchased $5.7 million in principal amount of its 7.375% Senior Notes for $5.9 million. On October 31, 2018, the Company redeemed the remaining $147.4 million in principal amount of its 7.375% Senior Notes for $153.0 million including a make-whole premium of $5.6 million calculated in accordance with the terms of the indenture. These transactions resulted in losses on debt extinguishment of $6.1 million included in the accompanying consolidated statements of income.
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SEACOR Revolving Credit Facility. On March 19, 2019, the Company entered into a $125.0 million credit agreement with a syndicate of lenders (the “SEACOR Revolving Credit Facility”) that matures March 19, 2024 and is secured by a pledge over all of SEACOR’s assets and certain of its subsidiaries’ assets, subject to certain exceptions. The SEACOR Revolving Credit Facility permits the Company to borrow up to $125.0 million, from time to time as revolving loans, as such amounts may increase or decrease in accordance with the terms of the Credit Agreement. The loans will bear interest at either (i) a Base Rate plus a margin ranging from 0.75% to 2.00% depending on the Company’s maximum net funded debt ratio, as determined in accordance with the SEACOR Revolving Credit Facility, or (ii) interest periods of one, two, three or six months at an annual rate equal to London Interbank Offered Rate (“LIBOR”) for the corresponding deposits of U.S. dollars, plus a margin ranging from 1.75% to 3.00% based on the Company’s maximum net funded debt ratio, as determined in accordance with the SEACOR Revolving Credit Facility. A fee of 0.5% is payable on the unused commitment quarterly. The Company incurred $2.2 million of issuance costs related to the SEACOR Revolving Credit Facility.
The SEACOR Revolving Credit Facility contains various financial and restrictive covenants including fixed charge coverage ratio, a net funded debt ratio, a collateral coverage ratio and restrictions limiting the Company’s ability to pay dividends or make certain investments, as well as other customary covenants, representations and warranties, and events of default as set forth in the agreement. During the year ended December 31, 2019, the Company drew $25.0 million and repaid $25.0 million under the SEACOR Revolving Credit Facility. As of December 31, 2019, the Company had $125.0 million of borrowing capacity.
SEA-Vista 2015 Credit Facility. On April 15, 2015, SEA-Vista entered into a $300.0 million credit agreement with a syndicate of lenders that was scheduled to mature in 2020 (the “SEA-Vista 2015 Credit Facility”) and was secured by substantially all of SEA-Vista’s tangible and intangible assets, including its fleet of U.S.-flag petroleum and chemical carriers (See Note 1), with no recourse to SEACOR or its other subsidiaries. The SEA-Vista 2015 Credit Facility was comprised of three tranches: (i) a $100.0 million revolving credit facility (the “Revolving Loan”); (ii) an $80.0 million term loan (the “Term A-1 Loan”); and (iii) a $120.0 million delayed draw term loan (the “Term A-2 Loan”). The proceeds from the SEA-Vista 2015 Credit Facility were used to fund SEA-Vista’s working capital, general corporate purposes, capital commitments and the redemption of its Title XI Bonds. All three loans bore interest at a variable rate determined by reference to the London Interbank Offered Rate (“LIBOR”) plus a margin of between 2.00% and 2.75% as determined in accordance with the SEA-Vista 2015 Credit Facility or, at the election of SEA-Vista, a Base Rate plus a margin of between 1.25% and 1.75% as determined in accordance with the SEA-Vista 2015 Credit Facility. A quarterly fee was payable on the unused commitments of all three tranches. SEA-Vista incurred $3.1 million of issuance costs related to the SEA-Vista 2015 Credit Facility.
During the year ended December 31, 2017, SEA-Vista drew $44.9 million and repaid $85.9 million on the Revolving Loan, $39.4 million on the Term A-1 Loan and $63.1 million on the Term A-2 Loan resulting in debt extinguishment losses of $0.7 million.
During the year ended December 31, 2018, SEA-Vista repaid $39.0 million on the Revolving Loan, $3.3 million on the Term A-1 Loan and $5.5 million on the Term A-2 Loan.
On December 20, 2019, SEA-Vista entered into an amended and restated $200.0 million credit agreement (see "—SEA-Vista 2019 Credit Facility"). Proceeds of $76.0 million from the SEA-Vista 2019 Credit Facility were used to repay the remaining balances on that date under the SEA-Vista 2015 Credit Facility, resulting in losses on debt extinguishment of $0.1 million included in the accompanying consolidated statements of income. During the year ended December 31, 2019, including the final repayment, SEA-Vista repaid $6.0 million on the Revolving Loan, $30.6 million on the Term A-1 Loan and $51.4 million on the Term A-2 Loan.
SEA-Vista 2019 Credit Facility. On December 20, 2019, SEA-Vista entered into an amended and restated $200.0 million credit agreement with a syndicate of lenders (the “SEA-Vista 2019 Credit Facility”) and is secured by substantially all of SEA-Vista’s tangible and intangible assets, including its fleet of U.S.-flag petroleum and chemical carriers (See Note 1), with no recourse to SEACOR or its other subsidiaries. The agreement provides for a $100.0 million revolving credit facility (the "SEA-Vista Revolving Loan") and a $100.0 million term loan facility (the "Term Loan") both of which mature in December 2024. Each of the SEA-Vista Revolving Loan and the Term Loan has an accordion feature allowing for potential increases in principal amount. The SEA-Vista Revolving Loan allows for borrowings and reborrowings from time to time until maturity. The Term Loan is a single draw facility that was drawn in full on December 20, 2019. The proceeds of the Term Loan were used to repay $76.0 million outstanding under the SEA-Vista 2015 Credit Facility (see "—SEA-Vista 2015 Credit Facility") and $24.0 million was used by SEA-Vista for working capital needs and general corporate purposes. As of December 31, 2019, SEA-Vista had $100.0 million of borrowing capacity under the SEA-Vista 2019 Credit Facility.
Both the SEA-Vista Revolving Loan and the Term Loan bear interest at a variable rate determined by reference to the London Interbank Offered Rate (“LIBOR”) plus a margin of between 2.00% and 2.75% or, at the election of SEA-Vista, a Base Rate plus a margin of between 1.00% and 1.75% each as determined in accordance with the SEA-Vista 2019 Credit Facility. A fee of 0.5% is payable on the unused SEA-Vista Revolving Loan commitment. SEA-Vista incurred $2.1 million of issuance costs related to the SEA-Vista 2019 Credit Facility.
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The principal of the Term Loan is repayable in quarterly installments of 2.50%, with the remaining principal balance, interest and all other amounts outstanding for all loans, including the SEA-Vista Revolving Loan, due and payable on the Maturity Date, December 20, 2024. In addition, SEA-Vista has the right to make optional prepayments on each of the loans without penalty in minimum amounts of $1.0 million.
The SEA-Vista Credit Facility contains various financial maintenance and restrictive covenants including: funded debt to adjusted EBITDA; adjusted EBITDA to interest expense plus amortization; and aggregate collateral vessel value to the sum of funded debt and unused and unexpired commitments.
ISH Credit Facility. On July 3, 2017, ISH emerged from bankruptcy pursuant to the Plan (see Note 2). In conjunction with the emergence under the Plan, ISH assumed debt of $25.0 million under a credit facility with a maturity date of July 2020. The facility consisted of two tranches: (i) a $5.0 million revolving credit facility (the “ISH Revolving Loan”) and (ii) a $20.0 million term loan (the “ISH Term Loan”) (collectively the “ISH Credit Facility”). ISH incurred $0.1 million of issuance costs in connection with the ISH Credit Facility. The proceeds from this facility were used for general working capital purposes and payments to ISH’s creditors in accordance with the Plan.
Interest on both loans were based on a variable rate of either LIBOR multiplied by the Statutory Reserve Rate or Prime Rate plus an applicable margin, as defined in the ISH Credit Facility. A quarterly fee of 0.5% was payable on the unused commitment of the ISH Revolving Loan. Beginning September 30, 2017, ISH was required to make quarterly prepayments on the ISH Term Loan of $0.7 million. Commencing with the calendar year ending December 31, 2018, ISH was required to make annual prepayments on the ISH Term Loan in an amount equal to 50% of excess cash flow as defined in the credit agreement.
The ISH Credit Facility contained various financial and restrictive covenants applicable to ISH and its subsidiaries including indebtedness to EBITDA and adjusted EBITDA to interest expense maintenance, as defined in the ISH Credit Facility. The ISH Credit Facility was non-recourse to SEACOR and its subsidiaries other than ISH. The ISH Credit Facility was secured by substantially all of ISH’s assets, including its fleet of U.S.-flag bulk carriers (See Notes 1 and 2).
During the year ended December 31, 2017, ISH repaid $7.8 million on the ISH Term Loan and $5.0 million on the ISH Revolving Loan. During the year ended December 31, 2018, ISH repaid the outstanding balance of $12.2 million on the ISH Term Loan and terminated the credit facility resulting in debt extinguishment losses of $0.1 million included in the accompanying consolidated statements of income.
Other. During 2017, the Company acquired $3.9 million of other debt related to the ISH acquisition (see Note 2). This debt bore interest at 7.0% and was collateralized by certain acquired assets. As of December 31, 2018, this debt was fully repaid. In addition, the Company has various other obligations including equipment and facility mortgages. As of December 31, 2019, these obligations have maturities ranging from 2020 through 2026, have interest rates ranging from 3.4% to 6.0% and require periodic payments of interest and principal. During the years ended December 31, 2019, 2018 and 2017, repayments on other debt was $0.6 million, $2.1 million (including the repayment and termination of the debt related to the ISH acquisition) and $3.0 million, respectively.
Letters of Credit. As of December 31, 2019, the Company had outstanding letters of credit totaling $1.2 million with various expiration dates through 2027.
Guarantees. The Company has guaranteed the payments of amounts owned under certain sale-leaseback transactions, equipment financing and multi-employer pension obligations on behalf of SEACOR Marine. As of December 31, 2019, these guarantees on behalf of SEACOR Marine totaled $22.9 million and the amount declines as payments are made on the outstanding obligations through 2023. The Company earns a fee from SEACOR Marine of 0.5% per annum on these guarantees. For the years ended December 31, 2019, 2018, and 2017 the Company earned $0.2 million, $0.3 million and $0.6 million, respectively, in guarantee fees from SEACOR Marine.
Repurchase Authority. SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire SEACOR Common Stock, par value $0.01 per share ("Common stock") 3.0% Convertible Senior Notes, 2.5% Convertible Senior Notes and 3.25% Convertible Senior Notes (collectively the “Securities”), through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. On June 5, 2019, SEACOR's Board of Directors increased the Company's repurchase authority for the Securities to $150.0 million. As of December 31, 2019, SEACOR had remaining authorization for Securities repurchases of $129.9 million.
8. OPERATING LEASES
Lessee. As of December 31, 2019, the Company leased in two U.S.-flag petroleum and chemical carriers, four U.S.-flag harbor tugs, four U.S.-flag PCTCs, 50 inland river dry-cargo barges, four inland river towboats, six inland river harbor boats and certain facilities and other equipment. The leases generally contain purchase and renewal options or rights of first refusal with respect to the sale or lease of the equipment. As of December 31, 2019, the lease terms of the U.S.-flag petroleum
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and chemical carriers, which are subject to subleases, have remaining durations of 33 and 80 months. The lease terms of the other vessels, facilities and equipment range in duration from 4 to 195 months.
For operating leases as of December 31, 2019, the future minimum payments in the years ended December 31, were as follows (in thousands):
2020 $ 41,914   
2021 37,711   
2022 27,460   
2023 15,531   
2024 13,603   
Years subsequent to 2024 27,066   
163,285   
Interest component (18,979)  
144,306   
Current portion of long-term operating lease liabilities (36,011)  
Long-term operating lease liabilities $ 108,295   
The components of lease expense for the year ended December 31, were as follows (in thousands):
2019
Operating lease expense $ 42,863   
Short-term lease expense (lease duration of twelve months or less at lease commencement) 22,992   
Sublease income (33,428)  
$ 32,427   
Other information related to operating leases for the year ended December 31, was as follows (in thousands except weighted average data):
2019
Operating cash outflows from operating leases $ 43,096   
Right-of-use assets obtained in exchange for operating lease liabilities $ 179,944   
Weighted average remaining lease term, in years 5.2
Weighted average discount rate 4.9  %
Lessor. As of December 31, 2019, arrangements in which the Company acted as a lessor with remaining terms in excess of one year included the bareboat charter of four U.S.-flag petroleum and chemical carriers, five U.S.-flag ocean liquid tank barges and six foreign-flag harbor tugs, the time charter of four U.S.-flag petroleum and chemical carriers, four U.S.-flag PCTCs, eight inland river towboats and one U.S.-flag offshore tug, and other non-vessel rental arrangements of certain property and equipment. Future minimum lease revenues from these arrangements for the years ended December 31, were as follows (in thousands):
Total Minimum Lease Revenues
Leased-in Obligations(1)
Net Minimum Lease Income
2020 $ 160,324    $ (31,572)   $ 128,752   
2021 114,395    (29,683)   84,712   
2022 55,990    (22,942)   33,048   
2023 34,701    (11,315)   23,386   
2024 27,205    (11,346)   15,859   
Years subsequent to 2024 55,102    (18,662)   36,440   
____________________
(1)The total payments to be made under existing non-cancelable leases for the property and equipment subject to these future minimum lease revenues.
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The major classes of owned property and equipment earning lease revenues as of December 31, were as follows (in thousands):
Historical
Cost 		Accumulated
Depreciation 		Net Book
Value
2019
Ocean Services:
Petroleum and chemical carriers - U.S.-flag $ 544,549    $ (258,153)   $ 286,396   
Harbor and offshore tugs - U.S.-flag & foreign-flag 51,129    (17,363)   33,766   
Ocean liquid tank barges - U.S.-flag 39,238    (16,171)   23,067   
634,916    (291,687)   343,229   
Inland Services:
Towboats 50,615    (3,498)   47,117   
$ 685,531    $ (295,185)   $ 390,346   

9. INCOME TAXES
Income before income tax expense (benefit) and equity in earnings (losses) of 50% or less owned companies derived from U.S. and foreign companies for the years ended December 31, were as follows (in thousands):
2019 2018 2017
United States $ 41,398    $ 33,563    $ 28,546   
Foreign 6,182    56,558    4,748   
Eliminations and other 1,517    1,568    1,911   
$ 49,097    $ 91,689    $ 35,205   
The Company files a consolidated U.S. federal tax return. The components of income tax expense (benefit) for the years ended December 31, were as follows (in thousands):
2019 2018 2017
Current:
State $ 739    $ 253    $ 1,136   
Federal (244)   20,776    (17,181)  
Foreign 1,165    2,899    333   
1,660    23,928    (15,712)  
Deferred:
State 404    (3,001)   12   
Federal 7,765    (12,512)   (51,489)  
8,169    (15,513)   (51,477)  
$ 9,829    $ 8,415    $ (67,189)  
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The following table reconciles the difference between the statutory federal income tax rate for the Company and the effective income tax rate for the years ended December 31,:
2019 2018 2017
Statutory rate 21.0  % 21.0  % 35.0  %
Income subject to tonnage tax (2.3) % (1.3) % (5.9) %
Dorian distribution —  % —  % 22.8  %
Reversal of uncertain tax position —  % —  % (28.7) %
U.S. federal income tax statutory changes —  % —  % (190.2) %
Non-deductible expenses 1.6  % 0.2  % 0.8  %
Noncontrolling interests (3.1) % (5.7) % (22.4) %
Foreign earnings not subject to U.S. income tax (4.1) % (16.2) % —  %
Foreign taxes not creditable against U.S. income tax 1.4  % 3.2  % —  %
Losses of foreign subsidiaries not benefited —  % —  % (6.6) %
Subpart F income 1.5  % 12.1  % —  %
State taxes 2.0  % (3.1) % 1.2  %
Share award plans 0.6  % (0.3) % 2.0  %
Other 1.4  % (0.7) % 1.1  %
20.0  % 9.2  % (190.9) %
On December 22, 2017, the U.S. enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%, eliminating or capping certain deductions, imposing a mandatory one-time tax on accumulated earnings in foreign subsidiaries, introducing new tax regimes and changing how foreign earnings are subject to U.S. taxation. The statutory corporate tax rate reduction is effective for tax years beginning on or after January 1, 2018. During the year ended December 31, 2017, the Company recorded a net income tax benefit of $66.9 million as a consequence of reducing its net deferred tax liabilities to reflect the change in the statutory tax rate.
During the year ended December 31, 2013, the Company provided for income taxes of $10.1 million relating to potential tax exposures surrounding the spin-off of Era Group Inc. (“Era Group”) by means of a dividend to SEACOR’s shareholders of all the issued and outstanding common stock of Era Group. During the year ended December 31, 2017, the Company reversed this provision as the statute of limitations expired. In addition, the Company reversed accumulated accrued interest of $2.0 million related to this provision, included as a reduction in interest expense in the accompanying consolidated statements of income.
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The components of the net deferred income tax liabilities for the years ended December 31, were as follows (in thousands):
2019 2018
Deferred tax liabilities:
Property and equipment $ 121,840    $ 93,049   
Long-term debt 15,395    18,355   
Gains on marketable securities 459    —   
Investments in 50% or less owned companies 1,541    1,934   
Intangible assets 706    614   
Deductible goodwill 1,002    344   
Other —    31   
Total deferred tax liabilities 140,943    114,327   
Deferred tax assets:
Net operating loss carryforwards 21,385    —   
Capital loss carryforwards 5,192    —   
Share award plans 3,686    3,711   
Losses on marketable securities —    8,596   
Debt and equity issuance costs 515    379   
Other 8,721    11,178   
Total deferred tax assets 39,499    23,864   
Valuation allowance (4,217)   (3,957)  
Net deferred tax assets 35,282    19,907   
Net deferred tax liabilities $ 105,661    $ 94,420   
During the year ended December 31, 2019, the Company increased its valuation allowance for state net operating loss carryforwards from $4.0 million to $4.2 million. The Company's capital loss carryforwards expire in 2024.
10. DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES
Cash Flow Hedges. One of the Company’s 50% or less owned companies has subsidiaries with interest rate swap agreements designated as cash flow hedges, with an aggregate amortizing notional value of $48.0 million that mature in March 2028. These interest rate swaps call for the subsidiaries to pay a fixed rate of 1.74% on the aggregate amortizing notional value and receive a variable interest rate based on LIBOR. Another one of the Company’s 50% or less owned companies, had an interest rate swap agreement designated as a cash flow hedge that matured in April 2017. This interest rate swap called for this company to pay a fixed interest rate of 2.79% on the amortized notional value and receive a variable interest rate based on LIBOR. By entering into these interest rate swap agreements, the Company's 50% or less owned companies converted the variable LIBOR component of certain of its outstanding borrowings to a fixed interest rate. During the year ended December 31, 2019, the Company recognized gains on the fair value of these contracts of $0.1 million which is included as a component of other comprehensive income (loss).
Other Derivative Instruments. The Company recognized gains on derivative instruments not designated as hedging instruments for the years ended December 31, as follows (in thousands):
Derivative gains
2017
Exchange option liability on subsidiary convertible senior notes $ 19,436   
Forward currency exchange, option and future contracts 291   
$ 19,727   
The exchange option liability on subsidiary convertible senior notes terminated on June 1, 2017 as a consequence of the Spin-Off.
The Company enters and settles forward currency exchange, option and future contracts with respect to various foreign currencies. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in currency exchange rates with respect to the Company’s business conducted outside of the United States. As of December 31, 2019, there were no outstanding forward currency exchange contracts.
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11. FAIR VALUE MEASUREMENTS
The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
The Company’s financial assets and liabilities as of December 31, that are measured at fair value on a recurring basis were as follows (in thousands):
Level 1 Level 2 Level 3
2019
ASSETS
Cash, cash equivalents, restricted cash and restricted cash equivalents $ 78,444    $ —    $ —   
Marketable securities(1)
7,936    —    —   
2018
ASSETS
Cash, cash equivalents, restricted cash and restricted cash equivalents $ 147,212    $ —    $ —   
Marketable securities(1)
30,316    —    —   
Construction reserve funds 3,908    —    —   
______________________
(1)Marketable security gains (losses), net include gains of $2.2 million for the year ended December 31, 2019 related to marketable security positions held by the Company as of December 31, 2019. Marketable security gains (losses), net include losses of $12.4 million and gains of $0.1 million for the years ended December 31, 2018 and 2017, respectively, related to marketable security positions held by the Company as of December 31, 2018.
The estimated fair value of the Company’s other financial assets and liabilities as of December 31, were as follows (in thousands):
Carrying
Amount 		Level 1 Level 2 Level 3
2019
ASSETS
Notes receivable from third parties (included in other receivables and other assets) $ 1,119    $ —    $ 1,082    $ —   
Investments, at cost, in 50% or less owned companies (included in other assets) 4,201    see below
LIABILITIES
Long-term debt, including current portion(1)
314,466    —    330,088    —   
2018
ASSETS
Notes receivable from third parties (included in other receivables and other assets) $ 2,182    $ —    $ 2,159    $ —   
Investments, at cost, in 50% or less owned companies (included in other assets) 4,300    see below   
LIABILITIES
Long-term debt, including current portion(1)
354,625    —    353,929    —   
______________________
(1)The estimated fair value includes the embedded conversion options on the Company’s 3.0% and 3.25% Convertible Senior Notes.
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The fair value of the Company’s long-term debt and notes receivable from third parties was estimated based upon quoted market prices or by using discounted cash flow analyses based on estimated current rates for similar types of arrangements. It was not practicable to estimate the fair value of certain of the Company’s investments, at cost, in 50% or less owned companies because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. Considerable judgment was required in developing certain of the estimates of fair value and, accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
The Company’s non-financial assets that were measured at fair value during the years ended December 31, were as follows (in thousands):
Level 1 Level 2 Level 3
2018
ASSETS
Investments, at equity, and advances in 50% or less owned companies $ —    $ 3,219    $ —   
Investments, at equity, and advances in 50% or less owned companies. During the year ended December 31, 2018, the Company marked its investment in Cleancor to fair value as a consequence of the Company acquiring its partners’ 50% interest, resulting in a gain of $0.1 million, net of tax, based on the fair value of the acquired interest (see Note 2). In addition, During the year ended December 31, 2018, the company identified indicators of impairment in one of the Company’s other 50% or less owned companies and, as a consequence, recognized an impairment charge of $0.1 million for an other-than-temporary decline in fair value. The investment was determined to have an immaterial value.
12. EQUITY TRANSACTIONS
Stock Repurchases. SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire its Securities, which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions (see Note 7).
During the year ended December 31, 2019, the Company acquired 3,912, shares of Common Stock for treasury under the Securities repurchase plan for an aggregate purchase price of $0.1 million. As of December 31, 2019, the Company's repurchase authority for the Securities was $129.9 million. During the years ended December 31, 2018 and 2017, the Company acquired no shares of Common Stock for treasury under the Securities repurchase plan.
During the years ended December 31, 2019 and 2017, the Company acquired for treasury 8,338 and 212,659 shares of Common Stock, respectively, for aggregate purchase prices of $0.4 million and $12.3 million, respectively, from its employees to cover their tax withholding obligations related to share award transactions. These shares were purchased in accordance with the terms of the Company’s Share Incentive Plans and not pursuant to the repurchase authorizations granted by SEACOR’s Board of Directors.
Stock Issuances. On June 1, 2017, the Company completed the Spin-off of SEACOR Marine by means of a dividend of all of the issued and outstanding common stock of SEACOR Marine to SEACOR’s shareholders. In the Spin-off, holders of SEACOR Common Stock received approximately 1.005 shares of SEACOR Marine common stock for each share of SEACOR Common Stock held as of the record date for the Spin-off.
On December 20, 2017, the Company distributed 3,977,135 shares of Dorian common stock with a value of $31.4 million (based on the closing share price on that date) to its stockholders with each holder of Common Stock receiving approximately 0.2215 shares of Dorian common stock for each share of SEACOR Common Stock held as of the record date for such distribution. The Compensation Committee of the Board of Directors elected, at its discretion, to distribute shares of Dorian on the Company’s restricted shares outstanding on the record date rather than depositing the shares in escrow pending the lapsing of restrictions.
On August 2, 2019, the Company acquired the Remaining SEA-Vista Interest (See Note 1). As part of the consideration for the Remaining SEA-Vista Interest, the Company issued the Consideration Shares in a private placement exempt from registration under the Securities Act of 1933, as amended.
In connection with the issuance of the Consideration Shares, the Seller agreed to certain restrictions on its ability to dispose of the Consideration Shares pursuant to a Lock-Up Agreement, dated August 2, 2019, between the Company and the Seller (the “Lock-Up Agreement”). Pursuant to the Lock-Up Agreement, the Seller was prohibited from distributing the Consideration Shares to its limited partners prior to November 1, 2019 and from otherwise transferring or disposing of the Consideration Shares in any other manner on or prior to February 2, 2020. On November 15, 2019, the Seller distributed the shares to its partners, effectively terminating the Lock-Up Agreement.
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13. NONCONTROLLING INTERESTS IN SUBSIDIARIES
Noncontrolling interests in the Company’s consolidated subsidiaries as of December 31, were as follows (in thousands):
Noncontrolling Interests 2019 2018
Ocean Services:
SEA-Vista 49.0%    $ —    $ 148,665   
Inland Services:
Other 3.0  % –    51.8%    785    862   
Other 5.0%    3    161   
$ 788    $ 149,688   
SEA-Vista. SEA-Vista owns and operates the Company’s fleet of U.S.-flag petroleum and chemical carriers used in the U.S. coastwise trade of crude oil, petroleum and specialty chemical products. On August 2, 2019, the Company acquired the Remaining SEA-Vista Interest (See Notes 1 and 12). During the seven months ended July 31, 2019, the net income of SEA-Vista was $14.8 million, of which $7.2 million was attributable to noncontrolling interests. During the year ended December 31, 2018, the net income of SEA-Vista was $51.2 million, of which $25.1 million was attributable to noncontrolling interests. During the year ended December 31, 2017, the net income of SEA-Vista was $45.9 million, of which $22.5 million was attributable to noncontrolling interests.
14. SAVINGS, MULTI-EMPLOYER AND DEFINED BENEFIT PENSION PLANS
SEACOR Savings Plan. The Company provides a defined contribution plan (the “Savings Plan”) for its eligible U.S.-based employees. The Company’s contribution to the Savings Plan is limited to 3.5% of an employee’s wages depending upon the employee’s level of voluntary wage deferral into the Savings Plan and is subject to annual review by the Board of Directors. The Company’s Savings Plan costs were $2.2 million, $2.0 million and $1.8 million for the years ended December 31, 2019, 2018 and 2017, respectively.
SEACOR Deferred Compensation Plan. In 2005, the Company established a non-qualified deferred compensation plan, as amended (the “Deferred Compensation Plan”) to provide certain highly compensated executives and non-employee directors the ability to defer receipt of up to 75% of their cash base salary and up to 100% of their cash bonus. Each participant’s compensation deferrals are credited to a bookkeeping account and, subject to certain restrictions, each participant may elect to have their cash deferrals in such account indexed against one or more investment options, solely for purposes of determining amounts payable under the Deferred Compensation Plan (the Company is not obligated to actually invest any deferred amounts in the selected investment options).
Participants may receive a distribution of deferred amounts, plus any earnings thereon (or less any losses), on a date specified by the participant or, if earlier, upon a separation from service or upon a change of control (as defined). All distributions to participants following a separation from service shall be in the form of a lump sum, except if such separation qualifies as “retirement” under the terms of the plan, in which case it may be paid in installments if previously elected by the participant. Distributions to “Key Employees” upon a separation from service (other than due to death) will not commence until at least six months after the separation from service. Participants are always 100% vested in the amounts they contribute to their Deferred Compensation Plan accounts. The Company, at its option, may contribute amounts to participants’ accounts, which may be subject to vesting requirements.
The obligations of the Company to pay deferred compensation under the Deferred Compensation Plan are general unsecured obligations of the Company and rank equally with other unsecured indebtedness of the Company that is outstanding from time to time. As of December 31, 2019 and 2018 the Company had obligations of $0.8 million and $0.6 million, respectively, related to the Deferred Compensation Plan that are included in the accompanying consolidated balance sheets as deferred gains and other liabilities. The total amount of the Company’s obligation under the Deferred Compensation Plan will vary depending upon the level of participation by participants and the amount of compensation that participants elect to defer under the plan. The duration of the Deferred Compensation Plan is indefinite (subject to the Board of Directors’ discretion to amend or terminate the plan).
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AMOPP and SPP. Certain subsidiaries of the Company are participating employers in two industry-wide, multi-employer defined benefit pension plans, the American Maritime Officers Pension Plan (the “AMOPP” - EIN: 13-1936709) and the Seafarers Pension Plan (the “SPP” - EIN: 13-6100329). The Company’s participation in these plans relates to certain employees of the Company’s Ocean Services business segment. During the years ended December 31, 2019, 2018 and 2017, the Company made contributions of $2.6 million, $2.5 million and $2.4 million, respectively in the aggregate to the AMOPP and SPP.
Under federal pension law, a plan is in "endangered" status if the funded percentage (plan assets divided by its liabilities) is less than 80% and in "critical" status if the funded percentage is less than 65% (other factors may also apply). For the 2019 plan year, the AMOPP was neither in endangered status nor critical status. The Company received notification from the AMOPP that the Company's withdrawal liability as of September 30, 2018, the latest period for which an actuarial valuation is available, would have been $28.1 million. That liability may change in future years based on various factors, primarily employee census. As of December 31, 2019, the Company had no intention to withdraw from the AMOPP and no deficit amounts have been invoiced. Depending upon the results of the future actuarial valuations, it is possible that the AMOPP will experience further funding deficits, requiring the Company to recognize additional payroll related operating expenses in the periods invoices are received or contribution levels are increased.
The SPP was neither in endangered nor critical status for the 2018 plan year, the latest period for which a report is available, as the SPP was fully funded.
Multi-Employer Defined Contribution Plans. In accordance with collective bargaining agreements between the Company and the American Maritime Officers Union, the latest of which expires on August 31, 2022, the Seafarers International Union, the latest of which expires on July 31, 2022, the Masters Mates and Pilots Union, which expires July 2, 2022 and the Marine Engineer Benefit Association, which expires July 2, 2022, the Company makes periodic contributions to various defined contribution and 401(k) plans for the benefit of the participants. The contributions to these plans are expensed as incurred and are included in operating expenses in the accompanying consolidated statements of income. During the years ended December 31, 2019, 2018 and 2017, the Company made contributions of $1.1 million, $1.0 million and $1.0 million, respectively, in the aggregate to these plans. During the years ended December 31, 2019, 2018 and 2017, none of the Company’s contributions to any of these plans exceeded 5% of total contributions to each plan and the Company did not pay any material surcharges. As of December 31, 2019, there is no required minimum future contributions to these plans. The Company’s obligations for future contributions are based upon the number of employees subject to the collective bargaining agreements, their rates of pay and the number of days worked. Future negotiations of collective bargaining agreements between the Company and the participating unions, including the contribution levels for these plans or any additional plans that may come into existence, may result in increases to the Company’s wage and benefit costs and those increases may be material.
ISH Retirement Plan. ISH sponsored a defined benefit pension plan (the “ISH Retirement Plan”) covering non-union employees prior to its acquisition by the Company on July 3, 2017 (see Note 2). The ISH Retirement Plan generally provided participants with benefits based on years of service and compensation levels for participants hired prior to September 1, 2006. From that date forward, the benefit was calculated prospectively under a cash balance formula with pay credits based on age plus service years and interest credits based on an as defined U.S. treasury rate. Effective July 3, 2017, in conjunction with the Plan, an amendment was made to the ISH Retirement Plan that fully vested all active participants as of January 1, 2017 and froze the retirement benefits effective August 31, 2017. As of August 31, 2017, all retirement benefits earned were fully preserved and will be paid in accordance with the ISH Retirement Plan and legal requirements.
The funded status of the ISH Retirement Plan as of December 31, was as follows (in thousands):
2019 2018
Fair Value of Assets $ 37,723    $ 34,923   
Projected Benefit Obligation (37,583)   (34,299)  
Funded Status(1)
$ 140    $ 624   
_____________________
(1)Included in other assets in the accompanying consolidated balance sheets.
During the years ended December 31, 2019 and 2018, pension expense was $0.5 million and $0.9 million, respectively. During the period July 3, 2017 through December 31, 2017, pension income was $1.3 million.
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The significant assumptions used in determining the projected benefit obligation as of December 31, and pension expense for the years ended December 31, were as follows:
2019 2018
Discount rate 3.10  % 4.05  %
Rate of increase in compensations levels(1)
N/A    N/A   
CPI 2.25  % 2.25  %
Cash balance interest credits (compounded annually) 4.00  % 4.00  %
Expected long-term rate of return on plan assets 6.00  % 6.75  %
_____________________
(1)Retirement benefits were frozen as of August 31, 2017.
The future benefit payments expected to be paid in each of the next five fiscal years are as follows (in thousands):
2020 2,250   
2021 2,120   
2022 2,200   
2023 2,180   
2024 2,160   

15. SHARE BASED COMPENSATION
Share Incentive Plans. SEACOR’s stockholders approved the 2014 Share Incentive Plan to provide for the grant of options to purchase shares of Common Stock, stock appreciation rights, restricted stock, stock awards, performance awards and restricted stock units to non-employee directors, key officers and employees of the Company. The 2014 Share Incentive Plan superseded the 2007 Share Incentive Plan (collectively including all predecessor plans, the “Share Incentive Plans”). The Compensation Committee of the Board of Directors administers the Share Incentive Plans. A total of 6,650,000 shares of Common Stock have been authorized for grant under the Share Incentive Plans. All shares issued pursuant to such grants are newly issued shares of Common Stock. The exercise price per share of options granted cannot be less than 100% of the fair market value of Common Stock at the date of grant under the Share Incentive Plans. Grants to date have been limited to stock awards, restricted stock, restricted stock units and options to purchase shares of Common Stock.
Restricted stock typically vests from one to five years after date of grant and options to purchase shares of Common Stock typically vest and become exercisable from one to five years after date of grant. Options to purchase shares of Common Stock granted under the Share Incentive Plans expire no later than the tenth anniversary of the date of grant. In the event of a participant’s death, retirement, termination by the Company without cause or a change in control of the Company, as defined in the Share Incentive Plans, restricted stock vests immediately and options to purchase shares of Common Stock vest and become immediately exercisable.
Employee Stock Purchase Plans. SEACOR’s stockholders approved an amendment to the 2009 Employee Stock Purchase Plan (collectively including all predecessor plans, the “Employee Stock Purchase Plans”) increasing the shares of Common Stock available for issuance under the plan by 300,000 and extending the term to ten years from the date of the Company’s 2018 annual meeting of stockholders. The Employee Stock Purchase Plans permit the Company to offer Common Stock for purchase by eligible employees at a price equal to 85% of the lesser of (i) the fair market value of Common Stock on the first day of the offering period or (ii) the fair market value of Common Stock on the last day of the offering period. Common Stock is made available for purchase under the Employee Stock Purchase Plans for six-month offering periods. The Employee Stock Purchase Plans are intended to comply with Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”), but is not intended to be subject to Section 401(a) of the Code or the Employee Retirement Income Security Act of 1974. The Board of Directors of SEACOR may amend or terminate the Employee Stock Purchase Plans at any time; however, no increase in the number of shares of Common Stock reserved for issuance under the Employee Stock Purchase Plans may be made without stockholder approval. A total of 900,000 shares of Common Stock have been approved for purchase under the Employee Stock Purchase Plans with all shares issued from those held in treasury.
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Share Award Transactions. The following transactions have occurred in connection with the Company’s share based compensation plans during the years ended December 31,:
2019 2018 2017
Restricted stock awards granted 149,950    121,850    153,100   
Restricted stock awards forfeited (4,230)   —    (2,444)  
Director stock awards granted 2,125    2,875    1,750   
Stock Option Activities:
Outstanding as of the beginning of year 1,467,391    1,546,014    1,639,865   
Granted(1)
165,650    142,550    1,013,893   
Exercised (165,893)   (220,694)   (562,587)  
Forfeited (5,200)   —    (3,374)  
Expired (7,874)   (479)   (541,783)  
Outstanding as of the end of year 1,454,074    1,467,391    1,546,014   
Employee Stock Purchase Plans shares issued 44,383    45,251    36,552   
Shares available for issuance under Share Incentive and Employee Stock Purchase Plans as of the end of year(2)
539,414    884,218    896,265   
______________________
(1)On June 2, 2017, the Company granted 846,353 stock options to existing option holders under make-whole provisions upon the Spin-off.
(2)Shares available for future grants and ESPP purchases were adjusted on June 2, 2017 to reflect the Spin-off in accordance with make-whole provisions of the plans.
During the years ended December 31, 2019, 2018 and 2017, the Company recognized $5.2 million, $4.0 million and $32.5 million, respectively, of compensation expense related to stock awards, stock options, employee stock purchase plans purchases and restricted stock (collectively referred to as “share awards”). During 2017, compensation expense related to stock awards included $16.6 million associated with the Spin-off and the accelerated vesting of incentive share awards in advance of changes in the U.S. federal income tax code. As of December 31, 2019, the Company had approximately $12.8 million in total unrecognized compensation costs of which $4.5 million and $3.5 million are expected to be recognized in 2020 and 2021, respectively, with the remaining balance recognized through 2024.
The weighted average values of grants under the Company’s Share Incentive Plans were $27.67, $29.72 and $37.20 for the years ended December 31, 2019, 2018 and 2017, respectively. The fair value of each option granted during the years ended December 31, 2019, 2018 and 2017, is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: (a) no dividend yield, (b) weighted average expected volatility of 28.2%, 26.6% and 25.5%, respectively, (c) weighted average discount rates of 1.88%, 2.78% and 1.92%, respectively, and (d) expected lives of 5.75 years, 5.58 years and 5.59 years, respectively.
During the year ended December 31, 2019, the number of shares and the weighted average grant price of restricted stock transactions were as follows:
Restricted Stock
Number of
Shares 		Weighted
Average
Grant Price
Nonvested as of December 31, 2018 121,850    $ 46.66   
Granted 149,950    $ 43.20   
Vested (26,390)   $ 46.58   
Forfeited (4,230)   $ 44.66   
Nonvested as of December 31, 2019 241,180    $ 44.55   
During the years ended December 31, 2019 and 2017, the total grant date fair value of restricted stock that vested was $1.2 million and $26.1 million, respectively. During the year ended December 31, 2018, no restricted stock vested.
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During the year ended December 31, 2019, the number of shares and the weighted average exercise price on stock option transactions were as follows:
Total Options
Number of
Shares 		Weighted
Average
Exercise Price
Outstanding, as of December 31, 2018 1,467,391    $ 41.72   
Granted 165,650    $ 43.77   
Exercised (165,893)   $ 31.61   
Forfeited (5,200)   $ 43.47   
Expired (7,874)   $ 48.84   
Outstanding, as of December 31, 2019 1,454,074    $ 43.19   
Outstanding and Exercisable, as of December 31, 2019 1,013,705    $ 43.60   
During the years ended December 31, 2019, 2018 and 2017, the aggregate intrinsic value of exercised stock options was $2.5 million, $3.9 million and $5.6 million, respectively. As of December 31, 2019, the weighted average remaining contractual term for total outstanding stock options and vested/exercisable stock options was 5.10 and 3.90 years, respectively. As of December 31, 2019, the aggregate intrinsic value of all options outstanding and all vested/exercisable options outstanding was $3.8 million and $2.7 million, respectively.
16. RELATED PARTY TRANSACTIONS
The Company manages barge pools as part of its Inland Services segment. Pursuant to the pooling agreements, operating revenues and expenses of participating barges are combined and the net results are allocated on a pro-rata basis based on the number of barge days contributed by each participant. Companies controlled by Mr. Fabrikant, the Executive Chairman and Chief Executive Officer of SEACOR, and trusts established for the benefit of Mr. Fabrikant’s children, own barges that participate in the barge pools managed by the Company. Mr. Fabrikant and his affiliates were participants in the barge pools prior to the acquisition of SCF Marine Inc. by SEACOR in 2000. During the years ended December 31, 2019, 2018 and 2017, Mr. Fabrikant and his affiliates earned $0.5 million, $0.9 million and $0.6 million, respectively, of net barge pool results (after payment of $0.1 million, $0.1 million and $0.1 million, respectively, in management fees to the Company). As of December 31, 2019 and 2018, the Company owed Mr. Fabrikant and his affiliates $0.1 million and $0.5 million, respectively, for undistributed net barge pool results.
Mr. Fabrikant is a director of SEACOR Marine. The Company has provided certain transition services to SEACOR Marine related to the Spin-off and the total amount earned from these transition services during the years ended December 31, 2019, 2018 and 2017 was $0.6 million, $4.6 million and $3.5 million, respectively.
17. COMMITMENTS AND CONTINGENCIES
The Company's capital commitments as of December 31, 2019 by year of expected payment were as follows (in thousands):
2020 2021 2022 Total
Ocean Services $ 22,394    $ 30,965    $ 2,636    $ 55,995   
Inland Services 5,663    —    —    5,663   
Other 582    —    —    582   
$ 28,639    $ 30,965    $ 2,636    $ 62,240   
Ocean Services' capital commitments included four U.S.-flag harbor tugs and an interest in two foreign-flag rail ferries. Inland Services’ capital commitments included four inland river dry-cargo barges, two inland river towboats, other equipment, and vessel and terminal improvements. Subsequent to December 31, 2019, the Company committed to purchase two inland river dry-cargo barges and other property and equipment for $2.5 million.
During 2012, the Company sold National Response Corporation (“NRC”), NRC Environmental Services Inc., SEACOR Response Ltd., and certain other subsidiaries to J.F. Lehman & Company, a private equity firm (the “SES Business Transaction”).
On December 15, 2010, O’Brien’s Response Management L.L.C. (“ORM”) and NRC were named as defendants in several “master complaints” filed in the overall multi-district litigation relating to the Deepwater Horizon oil spill response and clean-up in the Gulf of Mexico (the "DWH Response"), which is currently pending in the U.S. District Court for the Eastern District of Louisiana (the “MDL”). The “B3” master complaint naming ORM and NRC asserted various claims on behalf of a
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putative class against multiple defendants concerning the clean-up activities generally and the use of dispersants specifically. Both prior to and following the filing of the aforementioned “B3” master complaint, individual civil actions naming the Company, ORM, and/or NRC alleging B3 exposure-based injuries and/or damages were consolidated with the MDL and stayed pursuant to court order. On February 16, 2016, all but eleven “B3” claims against ORM and NRC were dismissed with prejudice (the “B3 Dismissal Order”). On August 2, 2016, the Court granted an omnibus motion for summary judgment as it concerns ORM and NRC in its entirety, dismissing the remaining eleven plaintiffs’ claims against ORM and NRC with prejudice (the “Remaining Eleven Plaintiffs’ Dismissal Order”). The deadline to appeal both of these orders has expired. The last remaining claim against the Company in connection with the "B3" master complaint was dismissed with prejudice, by an order of the Court granted on July 25, 2019.
On February 18, 2011, Triton Asset Leasing GmbH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., and Transocean Deepwater Inc. (collectively “Transocean”) named ORM and NRC as third-party defendants in a Rule 14(c) Third-Party Complaint in Transocean’s own Limitation of Liability Act action, which is part of the overall MDL, tendering to ORM and NRC the claims in the “B3” master complaint that have already been asserted against ORM and NRC. Various contribution and indemnity cross-claims and counterclaims involving ORM and NRC were subsequently filed. The Company believes that the potential exposure, if any, resulting therefrom has been reduced as a result of the various developments in the MDL, including the B3 Dismissal Order and Remaining Eleven Plaintiffs’ Dismissal Order, and does not expect that these matters will have a material effect on its consolidated financial position, results of operations or cash flows.
Separately, on March 2, 2012, the Court announced that BP Exploration and Production Inc. (“BPXP”) and BP America Production Company (“BP America,” and with BPXP, “BP”) and the Plaintiffs had reached an agreement on the terms of two proposed class action settlements that will resolve, among other things, Plaintiffs’ economic loss and property damage claims and clean-up related claims against BP. The Company, ORM, and NRC had no involvement in negotiating or agreeing to the terms of either settlement, nor are they parties or signatories thereto. The BP settlement pertaining to personal injury claims (the “Medical Settlement”) purported to resolve the “B3” claims asserted against BP and also established a right for class members to pursue individual claims against BP (but not ORM or NRC) for “later-manifested physical conditions,” defined in the Medical Settlement to be physical conditions that were “first diagnosed” after April 16, 2012 and which are claimed to have resulted from exposure during the DWH Response. The back-end litigation-option (“BELO”) provision of the Medical Settlement has specifically-delineated procedures and limitations, should any “B3” class member seek to invoke their BELO right. For example, there are limitations on the claims and defenses that can be asserted, as well as on the issues, elements, and proofs that may be litigated at any trial and the potential recovery for any Plaintiff. Notwithstanding that the Company, ORM, and NRC are listed on the Medical Settlement’s release as to claims asserted by Plaintiffs, the Medical Settlement still permits BP to seek indemnity from any party, to the extent BP has a valid indemnity right. The Medical Settlement was approved by the Court on January 11, 2013 and made effective on February 12, 2014.
As of mid-January 2020, BP has tendered approximately 2,380 claims pursuant to the Medical Settlement’s BELO provision for indemnity to ORM and approximately 230 of such claims to NRC. Recently, approximately 450 of the claims that were tendered by BP to ORM and approximately 35 of the claims tendered to NRC have been dismissed with prejudice. ORM and NRC have rejected all of BP’s indemnity demands relating to the Medical Settlement’s BELO provision and on February 14, 2019 commenced a legal action against BPXP and BP America with respect to same. That action, captioned O’Brien’s Response Management, L.L.C. et al. v. BP Exploration & Production Inc. et al., Case No. 2:19-CV-01418-CJB-JCW (E.D. La.) (the “Declaratory Judgment Action”), seeks declaratory relief that neither ORM nor NRC have any indemnity obligation to BP with respect to the exposure-based claims expressly contemplated by the Medical Settlement’s BELO provision, nor any contribution, in light of BP’s own actions and conduct over the past nine years (including its complete failure to even seek indemnity) and the resultant prejudice to ORM and NRC; that any indemnity or contribution rights BP may have once had with respect to these personal injury and exposure claims were extinguished once the Medical Settlement was approved by the MDL Court in 2013; and that the immunity already afforded to ORM and NRC via the B3 Dismissal Order and the Remaining Eleven Plaintiffs’ Dismissal Order operates to bar any indemnity or contribution claims against them by BP. BP subsequently proceeded to begin tendering personal injury claims to ORM and NRC that are being pursued by plaintiffs who opted out of the Medical Settlement and who are thus proceeding with their “B3” claims in their ordinary course (as opposed to pursuant to the Medical Settlement’s BELO provision). ORM and NRC also rejected these demands, and amended its Declaratory Judgment Action on December 11, 2019 to cover BP’s indemnity demands for these opt out claims as well.
On October 16, 2019, BP asserted four amended counterclaims against ORM and NRC, as well as two claims against ORM’s insurer (Navigators). Those amended counterclaims are breach of contract against ORM for failing to indemnify BP or name BP as an additional insured on the Navigators policy, declaratory judgment that NRC must indemnify BP under certain circumstances, and unjust enrichment against ORM and NRC. ORM and NRC moved to dismiss the last three of those counterclaims. That motion to dismiss was fully briefed as of January 10, 2020, and remains pending. The Court also ordered the parties to file simultaneous judgment on the pleadings briefs by February 14, 2020, and any oppositions by March 16, 2020.

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Generally, the Company, ORM, and NRC believe that BP’s indemnity demands with respect to any “B3” claims, including those involving Medical Settlement class members invoking BELO rights and those involving Medical Settlement opt-out Plaintiffs, are untimely and improper, and intend to vigorously defend their interests. Moreover, ORM has contractual indemnity coverage for the above-referenced claims through its separate agreements with sub-contractors that worked for ORM during the DWH Response and has preserved their rights in that regard while the Declaratory Judgment Action is pending. Overall, however, the Company believes that both of BP’s settlements have reduced the potential exposure in connection with the various cases relating to the DWH Response. The Company is unable to estimate the potential exposure, if any, resulting from these claims, but does not expect that they will have a material effect on its consolidated financial position, results of operations or cash flows.
In the ordinary course of the Company’s business, it may agree to indemnify its counterparty to an agreement. If the indemnified party makes a successful claim for indemnification, the Company would be required to reimburse that party in accordance with the terms of the indemnification agreement. Indemnification agreements generally, but not always, are subject to threshold amounts, specified claim periods and other restrictions and limitations.
In connection with the SES Business Transaction, the Company remains contingently liable for work performed in connection with the DWH Response. Pursuant to the agreement governing the sale, the Company’s potential liability to the purchaser may not exceed the consideration received by the Company for the SES Business Transaction. The Company is currently indemnified under contractual agreements with BP for the potential “B3” liabilities relating to the DWH Response; this indemnification is unrelated to, and thus not impacted by, the indemnification BP has demanded and discussed above.
In the ordinary course of its business, the Company becomes involved in various other litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company’s estimates of that exposure could occur, but the Company does not expect such changes in estimated costs would have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
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18. SEGMENT INFORMATION
The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments.
Ocean
Services
$’000 		Inland
Services
$’000 		Witt
O’Brien’s
$’000 		Other
$’000 		Corporate
and
Eliminations
$’000 		Total
$’000
For the year ended December 31, 2019
Operating Revenues:
External customers 423,288    267,334    101,663    7,681    —    799,966   
Intersegment —    —    120    —    (120)   —   
423,288    267,334    101,783    7,681    (120)   799,966   
Costs and Expenses:
Operating    280,809    229,418    68,052    5,464    (110)   583,633   
Administrative and general    40,215    13,140    25,959    3,489    22,714    105,517   
Depreciation and amortization 40,986    23,262    835    1,982    1,506    68,571   
362,010    265,820    94,846    10,935    24,110    757,721   
Gains (Losses) on Asset Dispositions, Net 1,291    1,602    18    32    (33)   2,910   
Operating Income (Loss) 62,569    3,116    6,955    (3,222)   (24,263)   45,155   
Other Income (Expense):
Foreign currency losses, net (98)   (212)   (1)   —    (1)   (312)  
Other, net (112)   —    (463)   431    10    (134)  
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax (669)   (6,520)   902    1,037    —    (5,250)  
Segment Profit (Loss) 61,690    (3,616)   7,393    (1,754)  
Other Income (Expense) not included in Segment Profit 4,388   
Plus Equity in Losses included in Segment Profit 5,250   
Income Before Taxes and Equity in Losses 49,097   
Capital Expenditures 4,859    30,040    47    1,997    843    37,786   
As of December 31, 2019
Property and Equipment:
Historical cost 932,267    469,120    1,134    8,897    30,964    1,442,382   
Accumulated depreciation (380,553)   (216,296)   (993)   (2,450)   (23,732)   (624,024)  
Net property and equipment 551,714    252,824    141    6,447    7,232    818,358   
Operating Lease Right-of-Use Assets 109,460    31,338    3,045    —    696    144,539   
Investments, at Equity, and Advances to 50% or Less Owned Companies 78,049    55,092    1,274    22,693    —    157,108   
Inventories 2,233    2,510    266    246    —    5,255   
Goodwill 1,852    2,343    28,506    —    —    32,701   
Intangible Assets 7,637    7,497    5,862    —    —    20,996   
Other current and long-term assets, excluding cash and near cash assets(1)
54,842    71,043    108,373    4,760    8,617    247,635   
Segment Assets 805,787    422,647    147,467    34,146   
Cash and near cash assets(1)
86,380   
Total Assets 1,512,972   
______________________
(1)Cash and near cash assets includes cash, cash equivalents, restricted cash, restricted cash equivalents and marketable securities
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Ocean
Services
$’000 		Inland
Services
$’000 		Witt
O’Brien’s
$’000 		Other
$’000 		Corporate
and
Eliminations
$’000 		Total
$’000
For the year ended December 31, 2019
Revenues from Contracts with Customers:
Voyage charters 46,381    —    —    —    —    46,381   
Contracts of affreightment 24,540    202,317    —    —    —    226,857   
Tariff 79,757    —    —    —    —    79,757   
Unit freight 63,420    —    —    —    —    63,420   
Terminal operations —    16,562    —    —    —    16,562   
Fleeting operations —    17,264    —    —    —    17,264   
Logistics services —    15,155    —    —    —    15,155   
Time and material contracts —    —    87,167    —    —    87,167   
Retainer contracts —    —    9,874    —    —    9,874   
Product sales(1)
—    —    —    5,555    —    5,555   
Other 3,844    5,134    4,742    1,144    (120)   14,744   
Lease Revenues:
Time charter, bareboat charter and rental income 205,346    10,902    —    982    —    217,230   
423,288    267,334    101,783    7,681    (120)   799,966   
______________________
(1)Costs of goods sold related to product sales was $4.5 million.
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Ocean
Services
$’000 		Inland
Services
$’000 		Witt
O’Brien’s
$’000 		Other
$’000 		Corporate
and
Eliminations
$’000 		Total
$’000
For the year ended December 31, 2018
Operating Revenues:
External customers 414,844    285,688    131,629    3,589    —    835,750   
Intersegment —    —    80    —    (80)   —   
414,844    285,688    131,709    3,589    (80)   835,750   
Costs and Expenses:
Operating 269,294    237,010    83,203    2,455    (114)   591,848   
Administrative and general 40,179    13,139    24,772    1,841    22,976    102,907   
Depreciation and amortization 46,270    24,164    1,944    501    1,700    74,579   
355,743    274,313    109,919    4,797    24,562    769,334   
Gains on Asset Dispositions 12,887    6,659    —    37    —    19,583   
Operating Income (Loss) 71,988    18,034    21,790    (1,171)   (24,642)   85,999   
Other Income (Expense):
Foreign currency losses, net (168)   (2,002)   (28)   (3)   (63)   (2,264)  
Other, net 570    51    —    54,249    94    54,964   
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax 3,632    (5,686)   203    1,779    —    (72)  
Segment Profit 76,022    10,397    21,965    54,854   
Other Income (Expense) not included in Segment Profit (47,010)  
Plus Equity in Losses included in Segment Profit 72   
Income Before Taxes and Equity in Losses 91,689   
Capital Expenditures 39,207    8,298    —    2,639    128    50,272   
As of December 31, 2018
Property and Equipment:
Historical cost 930,230    438,848    1,227    6,892    30,132    1,407,329   
Accumulated depreciation (341,999)   (195,094)   (1,031)   (490)   (22,205)   (560,819)  
Net property and equipment 588,231    243,754    196    6,402    7,927    846,510   
Investments, at Equity, and Advances to 50% or Less Owned Companies 73,939    57,899    471    24,577    —    156,886   
Inventories 2,196    1,997    179    158    —    4,530   
Goodwill 1,852    2,350    28,506    —    —    32,708   
Intangible Assets 8,965    8,991    6,595    —    —    24,551   
Other current and long-term assets, excluding cash and near cash assets(1)
48,770    78,903    81,410    2,142    13,178    224,403   
Segment Assets 723,953    393,894    117,357    33,279   
Cash and near cash assets(1)
181,436   
Total Assets 1,471,024   
______________________
(1)Cash and near cash assets includes cash, cash equivalents, restricted cash, restricted cash equivalents, marketable securities and construction reserve funds.
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Ocean
Services
$’000 		Inland
Services
$’000 		Witt
O’Brien’s
$’000 		Other
$’000 		Corporate
and
Eliminations
$’000 		Total
$’000
For the year ended December 31, 2018
Revenues from Contracts with Customers:
Voyage charters 73,979    —    —    —    —    73,979   
Contracts of affreightment 11,872    219,375    —    —    —    231,247   
Tariff 74,157    —    —    —    —    74,157   
Unit freight 58,326    —    —    —    —    58,326   
Terminal operations —    21,501    —    —    —    21,501   
Fleeting operations —    17,888    —    —    —    17,888   
Logistics services —    14,309    —    —    —    14,309   
Time and material contracts —    —    119,196    —    —    119,196   
Retainer contracts —    —    10,124    —    —    10,124   
Product sales(1)
—    —    —    2,686    —    2,686   
Other 3,268    5,223    2,389    425    (80)   11,225   
Lease Revenues:
Time charter, bareboat charter and rental income 193,242    7,392    —    478    —    201,112   
414,844    285,688    131,709    3,589    (80)   835,750   
______________________
(1)Costs of goods sold related to product sales was $2.1 million.
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Ocean
Services
$’000 		Inland
Services
$’000 		Witt
O’Brien’s
$’000 		Other
$’000 		Corporate
and
Eliminations
$’000 		Total
$’000
As Adjusted As Adjusted
For the year ended December 31, 2017
Operating Revenues:
External customers 352,876    248,452    49,055    464    —    650,847   
Intersegment —    —    101    —    (101)   —   
352,876    248,452    49,156    464    (101)   650,847   
Costs and Expenses:
Operating 195,285    206,836    32,017    —    (301)   433,837   
Administrative and general 36,548    16,558    13,438    831    35,731    103,106   
Depreciation and amortization 46,073    25,852    819    —    2,314    75,058   
277,906    249,246    46,274    831    37,744    612,001   
Gains (Losses) on Asset Dispositions and Impairments, Net (323)   11,960    —    —    —    11,637   
Operating Income (Loss) 74,647    11,166    2,882    (367)   (37,845)   50,483   
Other Income (Expense):
Derivative gains, net —    —    —    —    19,727    19,727   
Foreign currency gains (losses), net (130)   272    50    6    125    323   
Other, net 327    —    —    (301)   230    256   
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax 7,664    (5,191)   174    305    —    2,952   
Segment Profit (Loss) 82,508    6,247    3,106    (357)  
Other Income (Expense) not included in Segment Profit (35,584)  
Less Equity in Earnings included in Segment Profit (2,952)  
Income Before Taxes and Equity in Earnings 35,205   
Capital Expenditures 80,006    34,322    60    —    207    114,595   
As of December 31, 2017
Property and Equipment:
Historical cost 901,076    448,035    1,227    —    30,131    1,380,469   
Accumulated depreciation (299,528)   (181,573)   (938)   —    (20,505)   (502,544)  
Net property and equipment 601,548    266,462    289    —    9,626    877,925   
Investments, at Equity, and Advances to 50% or Less Owned Companies 52,003    66,479    777    54,182    —    173,441   
Inventories 2,352    1,934    91    —    —    4,377   
Goodwill 1,852    2,403    28,506    —    —    32,761   
Intangible Assets 10,293    10,486    7,327    —    —    28,106   
Other current and long-term assets, excluding cash and near cash assets(1)
49,498    71,500    28,398    1,391    9,611    160,398   
Segment Assets 717,546    419,264    65,388    55,573   
Cash and near cash assets(1)
336,328   
Total Assets 1,613,336   
______________________
(1)Cash and near cash assets includes cash, cash equivalents, restricted cash, restricted cash equivalents, marketable securities and construction reserve funds.
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Ocean
Services
$’000 		Inland
Services
$’000 		Witt
O’Brien’s
$’000 		Other
$’000 		Corporate
and
Eliminations
$’000 		Total
$’000
As Adjusted As Adjusted
For the year ended December 31, 2017
Revenues from Contracts with Customers:
Voyage charters 33,623    —    —    —    —    33,623   
Contracts of affreightment 15,181    189,080    —    —    —    204,261   
Tariff 68,266    —    —    —    —    68,266   
Unit freight 50,693    —    —    —    —    50,693   
Terminal operations —    21,488    —    —    —    21,488   
Fleeting operations —    15,561    —    —    —    15,561   
Logistics services —    8,868    —    —    —    8,868   
Time and material contracts —    —    33,352    —    —    33,352   
Retainer contracts —    —    10,192    —    —    10,192   
Other 1,879    5,163    5,612    464    (101)   13,017   
Lease Revenues:
Time charter, bareboat charter and rental income 183,234    8,292    —    —    —    191,526   
352,876    248,452    49,156    464    (101)   650,847   

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19. DISCONTINUED OPERATIONS
The Company’s discontinued operations consist of SEACOR Marine and ICP, as following the Spin-off and sale, respectively, the Company has no continuing involvement in either of these businesses (see Note 1). Summarized selected operating results of the Company’s discontinued operations for the years ended December 31, were as follows (in thousands):
2017
SEACOR Marine
Operating Revenues $ 62,291   
Costs and Expenses:
Operating 65,888   
Administrative and general 29,682   
Depreciation and amortization 22,181   
117,751   
Gains on Asset Dispositions, Net 4,219   
Operating Loss (51,241)  
Other Income, Net 1,780   
Income Tax Benefit (12,931)  
Equity in Earnings of 50% or Less Owned Companies, Net of Tax 1,663   
Net Loss $ (34,867)  
Net Loss Attributable to Noncontrolling Interests $ (1,892)  
ICP
Operating Revenues $ 78,061   
Costs and Expenses:
Operating 76,306   
Administrative and general 2,140   
Depreciation and amortization 2,354   
80,800   
Operating Loss (2,739)  
Other Income, Net (including gain on sale of business) 20,557   
Income Tax Expense 7,818   
Net Income $ 10,000   
Net Loss Attributable to Noncontrolling Interests $ (539)  
Eliminations
Operating Revenues $ (1,176)  
Costs and Expenses:
Operating (1,289)  
Administrative and general (42)  
(1,331)  
Operating Income 155   
Other Income, Net 1,738   
Income Tax Expense 663   
Net Income $ 1,230   
Loss from Discontinued Operations, Net of Tax $ (23,637)  

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20. SUPPLEMENTAL INFORMATION FOR STATEMENTS OF CASH FLOWS
Supplemental information for the years ended December 31, was as follows (in thousands):
2019 2018 2017
Income taxes paid $ 7,708    $ 27,465    $ 6,152   
Income taxes refunded 11,156    299    14,347   
Interest paid, excluding capitalized interest 12,903    26,880    32,341   
Schedule of Non-Cash Investing and Financing Activities:
Right-of-use assets obtained in exchange for operating lease liabilities 179,944    —    —   
Net issuance of conversion option on exchange of convertible debt —    16,120    —   
Distribution of Dorian shares to shareholders —    —    31,379   
Reclassification of deferred gains to property and equipment —    3,052    5,954   
Equipment received as a dividend from 50% or less owned companies 589    —    —   

21. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Selected financial information for interim quarterly periods is presented below (in thousands, except share data). Earnings per common share of SEACOR Holdings Inc. are computed independently for each of the quarters presented and the sum of the quarterly earnings per share may not necessarily equal the total for the year.
Three Months Ended
Dec. 31, Sept. 30, June 30, March 31,
2019
Operating Revenues $ 192,761    $ 200,658    $ 197,023    $ 209,524   
Operating Income 2,562    12,519    11,106    18,968   
Net Income (Loss) (1,912)   5,861    17,001    13,068   
Net Income (Loss) attributable to SEACOR Holdings Inc. (1,917)   6,405    14,553    7,733   
Basic Earnings (Loss) Per Common Share of SEACOR Holdings Inc. $ (0.10)   $ 0.33    $ 0.80    $ 0.42   
Diluted Earnings (Loss) Per Common Share of SEACOR Holdings Inc. $ (0.10)   $ 0.32    $ 0.76    $ 0.41   
2018
Operating Revenues $ 213,838    $ 220,257    $ 216,831    $ 184,824   
Operating Income 25,250    34,047    12,014    14,688   
Net Income 4,434    27,203    46,007    5,558   
Net Income (Loss) attributable to SEACOR Holdings Inc. (4,686)   17,067    45,126    641   
Basic Earnings (Loss) Per Common Share of SEACOR Holdings Inc. $ (0.26)   $ 0.94    $ 2.50    $ 0.04   
Diluted Earnings (Loss) Per Common Share of SEACOR Holdings Inc. $ (0.26)   $ 0.88    $ 2.14    $ 0.04   

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SEACOR HOLDINGS INC.
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2019, 2018 and 2017
(in thousands)
Description Balance
Beginning
of Year 		Charges
(Credits)
to Cost and
Expenses
Deductions(1)
Balance
End
of Year
Year Ended December 31, 2019
Allowance for doubtful accounts (deducted from trade and notes receivable) $ 3,481    $ 2,021    $ (2,631)   $ 2,871   
Year Ended December 31, 2018
Allowance for doubtful accounts (deducted from trade and notes receivable) $ 2,390    $ 2,067    $ (976)   $ 3,481   
Year Ended December 31, 2017
Allowance for doubtful accounts (deducted from trade and notes receivable) $ 2,989    $ (175)   $ (424)   $ 2,390   
______________________
(1)Trade receivable amounts deemed uncollectible that were removed from accounts receivable and allowance for doubtful accounts.
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ITEM 15. FINANCIAL STATEMENT SCHEDULES, EXHIBITS
(a)Documents filed as part of this report:
1., 2. and audited financial statements for Trailer Bridge, Inc. as of and for three years in the period ended December 31, 2019. Financial Statements and Financial Statement Schedules – See Index to Consolidated Financial Statements and Financial Statement Schedule of this Form 10-K.
3. Exhibits
Exhibit
Number 		Description
3.1*
3.2*
3.3*
3.4*
4.1*
4.2*
4.3*
4.4*
4.5*
4.6**
10.1*+
10.2*+
10.3*+
10.4*+
10.5*+
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Exhibit
Number 		Description
10.6*+
10.8*+
10.9*+
10.10*
10.11*+
SEACOR Holdings Inc. Management Incentive Plan (incorporated herein by reference to Appendix A of the Company’s Proxy Statement on DEF 14-A filed with the Commission on April 10, 2014 (File No. 001-12289)).
10.12*+
SEACOR Holdings Inc. 2014 Share Incentive Plan (incorporated herein by reference to Appendix B of the Company’s Proxy Statement on DEF 14-A filed with the Commission on April 10, 2014 (File No. 001-12289)).
10.13*+
10.14*+
10.15*+
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
10.22**
21.1
23.1
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Exhibit
Number 		Description
23.2
31.1
31.2
32.1
32.2
101
The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2019, formatted in Inline XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104
The cover page from the Company's Annual Report on Form 10-K for the year ended December 31, 2019, formatted in Inline XBRL (included as Exhibit 101).
* Incorporated herein by reference as indicated.
** Filed herewith.
+ Management contracts or compensatory plans or arrangements required to be filed as an Exhibit pursuant to Item 15 (b) of the rules governing the preparation of this Annual Report on Form 10-K.

ITEM 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K for the fiscal year ended December 31, 2019, to be signed on its behalf by the undersigned, and in the capacities indicated, thereunto duly authorized.
SEACOR Holdings Inc. (Registrant)
By: /s/ BRUCE WEINS
Bruce Weins, Senior Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: February 28, 2020
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.
Signer Title Date
/s/ BRUCE WEINS Senior Vice President and February 28, 2020
Bruce Weins Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ CHARLES FABRIKANT Executive Chairman, Chief Executive Officer and Director February 28, 2020
Charles Fabrikant (Principal Executive Officer)
/s/ OIVIND LORENTZEN Vice Chairman and Director February 28, 2020
Oivind Lorentzen
/s/ DAVID BERZ Director February 28, 2020
David Berz
/s/ CHRISTOPHER PAPOURAS Director February 28, 2020
Christopher Papouras
/s/ DAVID SCHIZER Director February 28, 2020
David Schizer

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Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of Trailer Bridge, Inc.
Jacksonville, Florida


Opinion on the Financial Statements
We have audited the accompanying balance sheet of Trailer Bridge, Inc., (the “Company”), as of December 31, 2019 and 2018, the related statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively, referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.



/s/ Pivot CPAs

We have served as the Company’s auditor since 2012.
Ponte Vedra Beach, Florida
February 21, 2020
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TRAILER BRIDGE, INC.
BALANCE SHEETS
(in thousands, except for share data)
December 31,
2019 2018
ASSETS
Current Assets:
Cash and cash equivalents $ 22,880    $ 19,137   
Trade receivables, less allowance for doubtful accounts of $607 and $1,787 18,761    19,434   
Prepaid and other current assets 2,356    2,012   
Total current assets 43,997    40,583   
Property and equipment, net 74,921    76,415   
Deferred tax assets 2,621    —   
Other assets 473    312   
TOTAL ASSETS $ 122,012    $ 117,310   
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 6,140    $ 5,902   
Accrued liabilities 10,029    9,138   
Unearned revenue 214    447   
Total current liabilities 16,383    15,487   
Commitments and contingencies (Note 10)
Stockholders’ Equity:
Common stock, $.01 par value, 1,120,000 authorized 10    10   
Additional paid-in capital 137,940    137,940   
Capital deficit (32,321)   (36,127)  
TOTAL STOCKHOLDERS’ EQUITY 105,629    101,823   
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 122,012    $ 117,310   













The accompanying notes are an integral part of these financial statements
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TRAILER BRIDGE, INC.
STATEMENTS OF OPERATIONS
(in thousands)
Years Ended December 31,
2019 2018 2017
OPERATING REVENUES:   
Ocean shipping    $ 119,322    $ 145,553    $ 123,463   
Domestic logistics brokerage    38,294    25,331    19,049   
Vessel charter    675    2,611    1,814   
158,291    173,495    144,326   
OPERATING EXPENSES:
Salaries, wages and benefits 17,486    14,582    11,609   
Purchased transportation and other rent 80,849    75,693    62,105   
Fuel 14,170    14,781    12,877   
Operating and maintenance 23,157    30,008    25,245   
Dry-docking 1,239    1,755    408   
Taxes and licenses 288    287    224   
Insurance and claims 2,440    2,186    2,358   
Communications and utilities 866    795    529   
Depreciation and amortization 7,934    7,546    7,375   
Loss (gain) on sale of property and equipment (563)   6    (10)  
Other general and administrative expenses 9,171    8,865    6,775   
157,037    156,504    129,495   
OPERATING INCOME 1,254    16,991    14,831   
NONOPERATING (EXPENSE) INCOME:
Interest expense (109)   (106)   (1,302)  
Interest income 49    —    —   
INCOME BEFORE INCOME TAXES 1,194    16,885    13,529   
INCOME TAX (BENEFIT) PROVISION (2,612)   382    307   
NET INCOME $ 3,806    $ 16,503    $ 13,222   










The accompanying notes are an integral part of these financial statements
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TRAILER BRIDGE, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except for share data)
Common Stock
Shares Amount Warrants Paid-In Capital Capital Deficit Total
JANUARY 1, 2017 966,961    $ 10    $ 1,417    $ 136,523    $ (65,852)   $ 72,098   
Expiration of warrants —    —    (1,417)   1,417    —    —   
Net loss —    —    —    —    13,222    13,222   
DECEMBER 31, 2017 966,961    10    —    137,940    (52,630)   85,320   
Net income —    —    —    —    16,503    16,503   
DECEMBER 31, 2018 966,961    10    —    137,940    (36,127)   101,823   
Net income —    —    —    —    3,806    3,806   
DECEMBER 31, 2019 966,961    $ 10    $ —    $ 137,940    $ (32,321)   $ 105,629   



























The accompanying notes are an integral part of these financial statements
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TRAILER BRIDGE, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
2019 2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,806    $ 16,503    $ 13,222   
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,934    7,522    7,353   
Provision for doubtful accounts (1,180)   182    788   
Loss (gain) on sale of property and equipment (563)   6    (9)  
PIK interest on secured notes —    —    43   
(Increase) decrease in:
Trade receivables 1,853    5,889    (9,632)  
Prepaid and other current assets (344)   310    (772)  
Other assets (184)   (33)   (72)  
Deferred tax assets (2,621)   —    —   
(Decrease) increase in:
Accounts payable 240    (765)   229   
Accrued liabilities 891    (177)   5,098   
Unearned revenue (234)   (491)   (976)  
Net cash provided by operating activities 9,598    28,946    15,272   
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,825)   (11,716)   (894)  
Proceeds from refund of equipment 1,152    —    —   
Proceeds from sale of property and equipment 818    1,226    57   
Net cash used in investing activities (5,855)   (10,490)   (837)  
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit —    —    4,000   
Payments on revolving line of credit —    (4,000)   (6,696)  
Proceeds from term loan credit facility —    —    3,715   
Repayments on term loan credit facility —    —    (11,471)  
Repurchase of secured notes —    —    (3,642)  
Net cash used in financing activities —    (4,000)   (14,094)  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,743    14,456    341   
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR 19,137    4,681    4,340   
CASH AND CASH EQUIVALENTS, END OF YEAR $ 22,880    $ 19,137    $ 4,681   






The accompanying notes are an integral part of these financial statements
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TRAILER BRIDGE, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
(in thousands, except for share data)
Years Ended December 31,
2019 2018 2017
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 110    $ 106    $ 1,250   
Cash paid for income taxes 360    300    100   
































The accompanying notes are an integral part of these financial statements
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TRAILER BRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Trailer Bridge, Inc. (the "Company") is a domestic trucking and marine transportation company with contract and common carrier authority. Highway transportation services are offered in the continental United States, while marine transportation is offered between Jacksonville, Florida, San Juan, Puerto Rico, Puerto Plata, Dominican Republic and other Caribbean islands. The Company also earns revenue from chartering its vessels that are not in liner service to third party operators
Cash and Cash Equivalents
The Company considers cash on hand and all highly liquid amounts on deposit with financial institutions with original maturities of three months or less to be cash equivalents. At times, such amounts on deposit may be in excess of the F.D.I.C. insurance limits of $250,000 per depositor at each financial institution. The Company had cash in excess of federally insured limits at December 31, 2019 of approximately $24.5 million.
Trade Receivables
The Company performs periodic credit evaluations of its customer’s financial condition and as a condition of the extension of credit customers agree that the Company shall have the right to exercise a lien against any shipment tendered. Receivables are generally due within 30 days. Credit losses have been within management’s expectations. The Company records a monthly provision based on specific known collectability problems, historical losses, and current economic information. It is the Company’s policy to write off receivables once it is determined that additional efforts of collection will not result in the collection of the receivable.
Property and Equipment
Property and equipment were restated as of April 1, 2012 to their estimated fair value in accordance with reorganization. Property and equipment acquired after April 1, 2012 are recorded at cost. Property and equipment are depreciated to their estimated salvage values on a straight-line method based on the following estimated useful lives:
Years
Buildings and structures 30-40
Office furniture and equipment 6-10
Leasehold improvements 2-12
Freight equipment: 7-40
Vessels 20-40
Containers, Chassis and Vehicle Transport Modules ® (“VTM’s”) 7-20
Trailers 12   
Leasehold improvements and equipment under capital leases are amortized over the lesser of the estimated lives of the asset or the lease terms.
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by net undiscounted cash flows expected to be generated by the assets. An impairment loss is recognized if the carrying value exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
The Company had approximately $3 million and $8.8 million in acquisitions in progress at December 31, 2019 and 2018, which includes approximately $2.7 million and $5.5 million related to the purchase of new chassis and containers not yet placed in service at the end of the year.
Revenue Recognition from Contracts with Customers
Ocean shipping revenue consists of fees earned for the transportation of containerized and noncontainerized freight primarily between locations within the southeast United States and Puerto Rico, the Dominican Republic and the US Virgin Islands. The Company recognizes ocean shipping revenue ratably over the duration of a voyage based on the relative transit time in each reporting period commonly referred to as the percentage of completion method. Voyage expenses are charged to operating expenses as incurred. Unearned revenue is primarily a result of invoicing customers at the commencement of ocean shipping transportation services.
The Company charges fuel surcharge fees based on amounts that are stipulated in the Company’s tariff or a quarterly fluctuating fuel scale at predetermined levels based upon the price of fuel. Fuel surcharge revenue is included in the
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Company’s ocean shipping revenue and is recognized on the percentage of completion method consistent with ocean shipping revenue. Demurrage is a charge based on negotiated fees included in the contracts of ocean shipping customers and is assessed for failure to return empty shipping equipment on time, net of a related demurrage allowance. Net demurrage revenue is recognized monthly based on current delinquent equipment returns.
Revenue included in ocean shipping is as follows (in thousands):
Years ending December 31, 2019 2018 2017
Ocean shipping $ 94,447    $ 111,135    $ 96,478   
Fuel surcharge 23,003    27,646    24,796   
Demurrage 1,872    6,772    2,189   
$ 119,322    $ 145,553    $ 123,463   
The Company recognizes domestic logistics brokerage revenue for coordinating the transportation of freight between customers and third-party trucking providers throughout the United States. The Company acts as the principal in logistics brokerage transactions and reports related revenue on a gross basis because it has primary responsibility for fulfilling the transportation service and also has discretion in establishing prices with customers. Logistics brokerage revenue is recognized over the freight transit period as the performance obligation to the customer is completed.
Vessel charter revenue consists of rental income charged to customers for the use of vessels not in use by the Company in a liner service. The Company recognizes vessel charter revenue based on negotiated fees included in the contracts with its customers which are computed daily and recognized as incurred.
Income Taxes
ASC 740-10 Accounting for Uncertainty in Income Taxes, prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position that an entity takes or expects to take in a tax return. Under ASC 740-10, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. In the ordinary course of business there is inherent uncertainty in quantifying the Company’s income tax positions. The Company assesses its income tax positions and records tax benefits for all years subject to examination based on management’s evaluation of the facts, circumstances and information available at the reporting date.
For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company recognizes the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the Company’s financial statements.
Dry-docking Costs
The Company expenses maintenance and repair costs, including regulatory dry-docking of its vessels, as incurred.
Advertising Costs
The Company’s advertising costs are expensed as incurred and recorded as part of other operating expenses in the statements of income. Advertising costs for the years ended December 31, 2019, 2018, and 2017 were $391,601, $278,490, and $92,214, respectively.
Rent Expense
Rent expense for non-cancelable operating leases with scheduled rent increases or incentives is recognized on a straight-line basis over the lease term, beginning with the lease commencement date, or the date the Company takes control of the leased asset, whichever is earlier. The excess of straight-line rent expense over scheduled payment amounts and incentives is recorded as a deferred rent liability. Deferred rent of $35,644 was classified within accrued liabilities in the accompanying balance sheet as of December 31, 2019.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Standards – Recently Adopted
Revenue from Contracts with Customers (Topic 606 or ASC 606). The Company adopted the requirements of ASC 606 effective January 1, 2019. The Company determined that prior accounting policies and procedures for recognizing revenue were consistent with ASC 606. Generally, revenue is recognized over time as the service is performed and all services are
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completed within a short period of time. Accordingly, there was no impact on the financial statements of the Company from the adoption of ASC 606.
New Accounting Standards – Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The amendment requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms of more than 12 months. ASU 2016-02 will also require disclosures to clarify the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for fiscal years beginning after December 15, 2020 and the standard will be adopted using a modified retrospective transition method. The Company is currently assessing the impact that this standard will have on its financial statements.
In June 2016, the FASB issued Accounting Standards Update 2016-13– Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected versus incurred credit losses for financial assets held. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of ASU 2016-13 on its financial statements.
2. RESTRICTED CASH
During October 2013, legislation was passed in Puerto Rico prohibiting the Puerto Rico Port Authority from charging a shipping company an enhanced security scan fee for scanning inbound cargo containers at the ports of Puerto Rico if the containers are not actually scanned. The Puerto Rico Port Authority appealed this ruling and a final decision from the appellate court upheld the original ruling. In accordance with an agreement with Puerto Rico, the Company agreed to deposit all payments made by its customers for scan fees on containers never scanned into an enhanced security escrow account. At December 31, 2016, the Company had recorded a scan fee liability of approximately $1.1 million for scan fee surcharges billed to customers for inbound containers that were never scanned. Approximately $0.9 million of the billed scan fee surcharges had been collected and deposited in an escrow account and recorded as restricted cash on the balance sheet at December 31, 2016. During 2017, the Company recognized the remaining $1.1 million liability in revenue.
3. WARRANTS
In connection with a reorganization during 2012, the Company authorized 12,098 and issued 8,590 Series A warrants and authorized 8,972 and issued 6,370 Series B warrants to certain holders of prepetition common stock. The fair value of the Series A and Series B warrants was $115.19 and $67.25 respectively. The warrants were attached to the new common stock of the successor company. The Series A warrants entitled the holders to purchase, in the aggregate, up to 8,590 common shares at an exercise price of $747.66 per common share. The Series B warrants entitled the holders to purchase, in the aggregate, up to 6,370 shares of common stock at an exercise price of $1,424.07 per common share.
On April 2, 2017, all outstanding warrants expired without exercise and the balance of $1.4 million was transferred to Additional Paid In Capital.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, (in thousands):
December 31, 2019 2018
Vessels $ 76,477    $ 76,477   
Containers 20,487    17,146   
Chassis 15,720    10,755   
Leasehold improvements 6,305    5,297   
Buildings and structures 2,675    2,584   
Land 2,200    2,200   
Office furniture and equipment 5,381    3,965   
Construction in process 2,974    8,838   
132,219    127,262   
Less: accumulated depreciation and amortization (57,298)   (50,847)  
$ 74,921    $ 76,415   
Depreciation and amortization expense on property and equipment was approximately $8.0 million, $7.6 million, and $7.4 million for the years ended December 31, 2019, 2018 and 2017, respectively.
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5. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31 (in thousands):
December 31, 2019 2018
Purchased transportation $ 4,922    $ 3,451   
Accrued trade payables 1,193    1,673   
Marine expense 1,739    1,477   
Salaries and wages 1,288    1,399   
Fringe benefits 367    336   
Director fees 300    300   
Taxes 70    365   
Rent 150    137   
$ 10,029    $ 9,138   

6. LONG TERM DEBT
Term Loan Credit Facility
The Company entered into a term loan credit facility with certain stockholders in an aggregate principal amount not to exceed $16.1 million. The credit facility, as amended October 10, 2016, included interest at a fixed rate of 12%. On November 21, 2017 the Company repaid the credit facility in full and the facility was extinguished.
Wells Fargo Credit Agreement
The Company entered into a credit agreement (the “Revolver”) with a total credit facility of $30 million. Generally, interest is at the LIBOR rate plus an applicable rate margin of from 3% to 3.50%. The Revolver is secured by a first lien on all Company assets excluding barges. Debt covenants as defined in the agreement include certain compliance, financial, and equipment covenants. The Revolver matures May 29, 2020.
7. INCOME TAXES
The American Jobs Creation Act of 2004 instituted an elective tonnage tax regime whereby a corporation may elect to pay an alternate tax on qualifying shipping activities of its U.S. flag vessels rather than the traditional federal corporate income tax on the taxable income from such vessels. The Company made a Section 1354 election to be taxed under this alternate tonnage tax regime on its 2007 federal tax return. This election applies to all subsequent federal income tax returns unless the Company revokes this tax treatment.
As a result of the Section 1354 election, the Company is not able to utilize its Federal net operating losses (“NOL’s”) for qualifying taxable income under the alternate tonnage tax regime, however NOL’s may be utilized for taxable income from other services not generated from qualifying shipping activities and reported as traditional federal taxable income. As of December 31, 2019, the Company has available federal NOL’s related to non-tonnage tax eligible activities of approximately $70.5 million.
Taking into consideration continuing operating losses related to non-tonnage tax eligible activities, the Company determined that it is not more likely than not that available federal NOL’s and other net deferred tax assets will be utilized and therefore has fully reserved its net deferred tax assets, including Federal NOL’s as of December 31, 2019 and 2018.
States do not recognize the alternate tonnage tax election and therefore the Company files traditional state corporate income tax returns. The Company had state NOL’s of approximately $33.5 million and $36.7 million at December 31, 2019 and 2018, respectively, which began expiring in 2015 and will continue expiring through 2036. At December 31, 2018, the Company determined that it was not more likely than not that available state NOL’s would be utilized and therefore fully reserved its state deferred tax assets. During 2019, Company determined that based on taxable income projections and recent utilizations of state NOL’s, it is more likely than not that it will utilize approximately $20.9 million of its state NOL’s, therefore the Company adjusted its valuation allowance for state deferred tax assets at December 31, 2019.
On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was enacted into law by President Trump. The Tax Reform Act significantly revised the U.S. corporate income tax system, including a Federal corporate rate reduction from 35% to 21%, and changes in business-related exclusions, and deductions and credits. During 2017 as a result of the rate change, the Company reduced its net deferred income tax assets by approximately $8.7 million with an offsetting reduction to its net deferred income tax reserve.
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Puerto Rico
On June 30, 2013, Puerto Rico enacted the Tax Burden Adjustment and Redistribution Act (“TBARA”). TBARA impacted income tax and imposed a new tax on gross income as part of the alternative minimum tax (AMT) regime. On February 18, 2014, the Company submitted a request to the Puerto Rico Treasury Department for relief from the new AMT regime. In January 2015, the Company entered into a Closing Agreement with the Puerto Rico Treasury Department in which partial relief was granted from the new AMT regime for tax years through 2015. During 2016, certain provisions of TBARA were held to be unconstitutional by the First Circuit Court of Appeals of Puerto Rico and the Company calculated its 2019 and 2018 Puerto Rico tax liability after adjusting for the portions of the TBARA Act that were found to be unconstitutional.
The Company had Puerto Rico NOL’s of approximately $84 million and $81 million at December 31, 2019 and 2018, respectively, which begin expiring in 2023 through 2024. The effective Puerto Rico tax rate at December 31, 2019 and 2018 was 37.5%. During 2019 the Company determined that based on Puerto Rico taxable income projections, it is more likely than not that approximately $6.3 million of Puerto Rico NOL’s will be utilized and approximately $77.5 million of Puerto Rico NOL’s will expire unutilized. Therefore, the Company adjusted its valuation allowance for Puerto Rico deferred tax assets at December 31, 2019.
The provision for income taxes is comprised of the following for the years ended December 31, (in thousands):
Years ended December 31, 2019 2018 2017
Current:
Federal tonnage tax $ 16    $ 16    $ 27   
State income tax (benefit) (7)   7    2   
Foreign —    359    278   
9    382    307   
Deferred:
State (benefit) (259)   —    —   
Foreign (benefit) (2,362)   —    —   
(2,621)   —    —   
Total income tax (benefit) provision $ (2,612)   $ 382    $ 307   
The Company files U.S. federal and certain applicable U.S. state income tax returns. The Company also files an income tax return in the Commonwealth of Puerto Rico. Generally, the Company is no longer subject to U.S. federal tax examinations for years before the Company’s 2015 tax year. Management has reviewed and evaluated the relevant technical merits of each of its tax positions and determined that there are no uncertain tax positions that would have a material impact on these financial statements.
Deferred income taxes reflect the net tax effect of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income taxes. Under the tonnage tax method, temporary differences do not apply.
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Significant components of U.S. federal and state deferred tax assets and liabilities as of December 31, are as follows (in thousands):
December 31, 2019 2018
Deferred tax assets:
Federal:
Net operating loss carryforwards $ 14,815    $ 15,179   
Allowance for bad debts 29    63   
Accrued Salaries and vacation 26    16   
AMT credit 75    151   
Other 47    35   
14,992 15,444
State:
Net operating loss carryforwards 1,461    1,602   
Allowance for bad debts 11    35   
Accrued vacation and other 13    11   
1,485    1,648   
Foreign:
Puerto Rico net operating loss carryforward 31,430    30,375   
Total deferred tax assets 47,907    47,467   
Deferred tax liabilities:
Federal:
Fixed assets 2,388    1,989   
State:
Fixed assets 980    1,102   
Net deferred tax assets 44,539    44,376   
Valuation allowances:
Federal valuation allowance (12,604)   (13,455)  
State valuation allowance (246)   (546)  
Foreign (29,068)   (30,375)  
Net deferred tax assets $ 2,621    $ —   

8. EMPLOYEE BENEFITS
The Company has a 401(k) Plan, which covers substantially all employees in the United States. Participants are permitted to make contributions of up to 25% of their compensation not to exceed certain limitations. The Company may make discretionary matching contributions to the Plan. In addition, the Company has a 165(e) Plan that covers substantially all employees in Puerto Rico. The Company contributed $276,364 during the year ended December 31, 2019.
The Company has an unqualified incentive bonus program and expensed bonuses of $2,124,274, $2,087,217, and $1,266,581 during the years ended December 31, 2019, 2018, and 2017, respectively, which was included in salaries, wages, and benefits in the accompanying statements of income. Bonuses are based on employee performance as determined by the Board of Directors.
9. RELATED PARTY TRANSACTIONS
The Company incurred in aggregate, approximately $4.0 million, $3.7 million, and $3.0 million during the years ended December 31, 2019, 2018 and 2017, respectively, for tug charter-hire from Seabulk Towing and Seabulk Tankers, divisions of a stockholder of the Company and considered related parties.
The Company paid management fees to a related party of $0.2 million during the year ended December 31, 2017.
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10. COMMITMENTS AND CONTINGENCIES
Contingencies
The Company is involved in routine litigation and is subject to certain claims which arise in the normal course of business, none of which, in the opinion of management, are expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Operating Leases
The Company has various operating lease agreements principally for land leases, office facilities, charter-hire, tug charter and equipment.
The Company has a long-term lease agreement with the Port Authority of Jacksonville for premise and ramp usage expiring in 2023 with two renewal options of five years each. Annual rent is approximately $1.2 million with additional rent if the Company does not achieve minimum tonnage throughput at the port. During the years ended December 31, 2019, 2018 and 2017, the Company exceeded the minimum tonnage requirement under this lease agreement.
The Company leases for tug charter-hire include the use of the tug and labor associated with tug charters. In addition, the Company is responsible for all fuel costs associated with its tug charter-hire agreements.
Future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2018, are as follows (in thousands):
Years ending December 31,
2020 $ 9,603   
2021 3,951   
2022 2,228   
2023 1,868   
2024 175   
Thereafter 31   
$ 17,856   
Included in the amounts in the table above is tug charter-hire of approximately $7.3 million during 2020.
Rent expense for all operating leases, including leases with terms of less than one year, was approximately $19.1 million, $18.5 million, and $18.2 million for the years ended December 31, 2019, 2018 and 2017, respectively, and is recorded as a part of purchased transportation and other rent in the accompanying statements of income.
Included in rent expense was approximately $15.2 million, $14.8 million, and $15.1 million related to tug charter-hire for the years ended December 31, 2019, 2018 and 2017, respectively, including related party expense as follows (in thousands):
Years ending December 31, 2019 2018 2017
Seabulk Towing - related party $ 4,094    $ 3,561    $ 3,022   
All other rent 11,081    11,185    12,038   
$ 15,175    $ 14,746    $ 15,060   

11. CONCENTRATION OF GEOGRAPHIC AND MARKET RISK
The Jones Act provides that all vessels operating between ports in the United States, including the noncontiguous areas of Puerto Rico, Alaska and Hawaii, must be built, owned, operated and crewed substantially by U.S. citizens. The Company cannot assure that the Jones Act will not be repealed or amended in the future. If the Jones Act were repealed or substantially amended and, as a consequence, competition was to increase in the Caribbean market, the Company’s business and cash flow could be adversely affected.
12. SUBSEQUENT EVENTS
The Company evaluated the accounting and disclosure requirements for subsequent events through February 21, 2020, the date of this report.
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EXHIBIT 4.6
DESCRIPTION OF SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
The following description sets forth material terms and provisions of our securities that are registered under Section 12 of the Securities Exchange Act of 1934, as amended. The following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the applicable provisions of our Restated Certificate of Incorporation (as amended, our “Certificate of Incorporation”) and our Fifth Amended and Restated By-Laws (as amended, our “By-laws”), each of which is incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.6 is a part. We encourage you to read our Certificate of Incorporation and our By-Laws for additional information.
Description of Capital Stock
General
Our authorized capital stock consists of 60,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. As of December 31, 2019, 20,176,168 shares of our common stock were issued and outstanding and there were no shares of our preferred stock issued or outstanding.
Common Stock
Voting Rights
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, and do not have cumulative voting rights. The common stock votes together as a single class. Directors will be elected by a plurality of the votes of the shares of common stock present in person or by proxy at a meeting of stockholders and voting for nominees in the election of directors. Our By-Laws, however, require each nominee who is a current director to submit an irrevocable resignation as a director, which resignation would become effective upon (1) that person not receiving a majority of the votes cast in favor of his or her election in an uncontested election (i.e., the number of votes “for” such director’s election constitutes less than the number of votes “withheld” with respect to such director’s election) and (2) acceptance by our Board of Directors (the “Board”) of that resignation in accordance with the policies and procedures adopted by the Board for such purpose. The Board, acting on the recommendation of the Nominating and Corporate Governance Committee, no later than 90 days following certification of the shareholder vote, must determine whether to accept the resignation. The Nominating and Corporate Governance Committee, in making its recommendation, and the Board, in acting on such recommendation, may consider any factors or other information that they determine to be appropriate and relevant.
Except as otherwise provided in our Certificate of Incorporation or required by law, all matters to be voted on by our stockholders must be approved by a majority of the shares present in person or by proxy at a meeting of stockholders and entitled to vote on the subject matter.
Dividend Rights
Subject to the provisions of our Certificate of Incorporation and applicable law, holders of common stock, as of a record date fixed by the Board of Directors, are entitled to receive proportionately any dividends as may be declared by our Board of Directors, subject to any preferential dividend rights of outstanding preferred stock.
Liquidation Rights
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Upon our liquidation, dissolution or winding up, the holders of common stock are entitled to receive proportionately our net assets available after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock.
Other Rights
Holders of common stock have no preemptive, subscription, redemption or other conversion rights and do not have any sinking fund provisions. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which we may designate and issue in the future. Shares of our common stock are not convertible into any other shares of our capital stock.
Preferred Stock
Pursuant to our Certificate of Incorporation, our Board of Directors has the authority, without further action by the stockholders (unless such stockholder action is required by applicable law or stock exchange listing rules), to designate and issue up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the designations, powers, preferences, privileges and relative participating, optional or special rights and the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of the common stock, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.
Our Board, without stockholder approval, can issue preferred stock with conversion or other rights that could adversely affect the voting power and other rights of the holders of common stock. Preferred stock could be issued quickly with terms designed to delay or prevent a change in control of our company or make removal of management more difficult. Additionally, the issuance of preferred stock may have the effect of decreasing the market price of the common stock and may adversely affect the voting power of holders of common stock and reduce the likelihood that common stockholders will receive dividend payments and payments upon liquidation.
Our Board of Directors will fix the designations, preferences and rights of each series, as well as the qualifications, limitations or restrictions thereof, of the preferred stock of each series that we offer.
Jones Act Restrictions on Ownership by Non-U.S. Citizens
The U.S. cabotage laws impose certain restrictions on the ownership and operation of vessels in the U.S. coastwise trade (i.e., trade between points in the United States), including the transportation of cargo and passengers. These laws are principally contained in 46 U.S.C. § 50501 and 46 U.S.C. Chapter 551 and related regulations and are commonly referred to collectively as the “Jones Act.” Subject to limited exceptions, the Jones Act requires that vessels engaged in U.S. coastwise trade be built in the United States, registered under the U.S. flag, manned by predominantly U.S. crews, and owned and operated by U.S. citizens within the meaning of the Jones Act. For purposes of the Jones Act, a corporation, for example, must satisfy the following requirement to be deemed a U.S. citizen: (i) the corporation must be organized under the laws of the United States or of a state, territory or possession thereof; (ii) each of the chief executive officer and the chairman of the board of directors of such corporation must be a U.S. citizen; (iii) no more than a minority of the number of directors of such corporation necessary to constitute a quorum for the transaction of business may be non-U.S. citizens; and (iv) at least 75% of each class or series of stock in such corporation must be owned by U.S. citizens within the meaning of the Jones Act.
Should the Company fail to comply with the U.S. citizenship requirements of the Jones Act, it would be prohibited from operating its U.S.-flag vessels in the U.S. coastwise trade during the period of such non-compliance. In addition, the Company could be subject to fines and its vessels could be subject to seizure and forfeiture for violations of the Jones Act and the related U.S. vessel documentation laws.
To facilitate compliance with the Jones Act, our Certificate of Incorporation and By-laws:
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•limit ownership by non-U.S. citizens (within the meaning of the Jones Act) of any class of our capital stock (including our common stock) to the Permitted Percentage (as defined below), so that ownership by non-U.S. citizens will not exceed the 25% permitted by the Jones Act;

•provide that any issuance or transfer of shares in excess of the Permitted Percentage shall be ineffective as against the Company and that neither the Company nor its transfer agent shall register such purported issuance or transfer of shares or be required to recognize the purported transferee or owner as a stockholder of the Company for any purpose whatsoever except to exercise the Company’s remedies;

•permit withholding of dividends and suspends voting rights with respect to any shares held by non-U.S. citizens that exceed the Permitted Percentage;

•require a stock certification system with two types of certificates to aid determination of the percentage ownership of the Company’s capital stock by non-U.S. citizens;

•permit our Board to authorize the Company to redeem any shares held by non-U.S. citizens that exceeds the Permitted Percentage; and

•permit our Board to make all such reasonable determinations in accordance with applicable law and the Certificate of Incorporation to ascertain ownership and implement such limitations.
For purposes of these provisions, “Permitted Percentage” means 22.5% of the outstanding shares of stock of any class of the Company, provided that the Board may increase the foregoing percentage by not more than 1.5% in the event that the Board determines that a higher percentage is appropriate, in which case “Permitted Percentage” shall mean such percentage as so increased.
In addition, the Company’s By-laws provide that the number of non-U.S. citizen directors shall not exceed a minority of the number necessary to constitute a quorum for the transaction of business and restrict any non-U.S. citizen officer from acting in the absence or disability of the chairman of the Board, the chief executive officer or the president of the Company.
Anti-Takeover Effects of Certain Provisions of the DGCL and of Our Certificate of Incorporation and By-laws
We are subject to the provisions of Section 203 of the DGCL (“Section 203”). In general. Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who owns 15% or more of the corporation’s outstanding stock, or an affiliate or associate of the corporation who did own 15% or more of the corporation’s voting stock within three years prior to the determination of interested stockholder status. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:
•before the stockholder became interested, the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

•upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the
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voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances; or

•at or after the time the stockholder became interested, the business combination was approved by the board of directors of the corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
A Delaware corporation may opt out of Section 203 either with an express provision in its original certificate of incorporation or in an amendment to its certificate of incorporation or bylaws approved by its stockholders. However, we have not opted out, and do not currently intend to opt out, of this provision. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us.
Certain provisions of our Certificate of Incorporation and By-laws, which we summarize in the following paragraphs, may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by stockholders.
Our Certificate of Incorporation requires the affirmative vote of the holders of not less than 66 2/3% of the voting power of our outstanding shares of common stock to approve any merger, consolidation or similar business combination transaction involving the Company in which we are not the surviving corporation or in which our shares are exchanged for or changed into other securities, cash or other property, or any combination thereof.
Filling Vacancies on the Board of Directors
In accordance with Article II, Section 12 of our By-laws, any vacancy on our Board of Directors, however occurring, including a vacancy resulting from an increase in the size of our Board of Directors, may only be filled by the affirmative vote of a majority of our directors then in office even if less than a quorum. Any director appointed to fill a vacancy will hold office until the next election of directors or until their successors are duly elected and qualified.
Meetings of Stockholders
Our By-laws provide that only a majority of the members of our Board of Directors then in office or the Chairman of the Board of Directors or the President may call special meetings of the stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our By-laws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.
Advance Notice Requirements
Our By-laws establish an advance notice procedure for stockholders to make nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders. The By-laws provide that any stockholder wishing to nominate persons for election as directors at, or bring other business before, an annual meeting must deliver to our secretary a written notice of the stockholder’s intention to do so. To be timely, the stockholder’s notice must be delivered to us not later than the 120th day nor earlier than the 150th day prior to the anniversary date of the preceding annual meeting. If there was no such prior annual meeting, then a stockholder’s notice must be delivered not earlier than the close of business on the 150th day nor later than the 120th day prior to the date which represents the second Tuesday in May of the current year. In the event that the date of the annual meeting is more than 25 days before or after such anniversary date, then, to be considered timely, notice by the stockholders must be received not later than the close of business on the 10th day following the date on which public announcement of the date of such meeting is first made by us.
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Our Certificate of Incorporation and our By-laws require the affirmative vote of the holders of not less than 66 2/3% of the voting power of our outstanding shares to amend or adopt provisions inconsistent with several of the provisions described above that may have an anti-takeover effect.
The DGCL provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation or bylaws, unless a corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Except as otherwise set forth therein, to be amended, our Certificate of Incorporation requires the affirmative vote of a majority of the shares entitled to vote on any matter or, if acting by written consent, the affirmative vote of the holders of at least 66 2/3% in voting power of the shares entitled to vote on any matter. Except as otherwise set forth therein, to be amended, our By-laws require the affirmative vote of a majority of the shares entitled to vote on any matter or the affirmative vote of a majority of the Board of Directors.
The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval. We may use these additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of our company by means of a proxy contest, tender offer, merger or otherwise.
Limitation of Liability and Indemnification Matters
As permitted by applicable Delaware law, our Certificate of Incorporation includes a provision to eliminate the personal liability of our directors for monetary damages for breach or alleged breach of their fiduciary duties as directors, subject to limited exceptions. In addition, our By-laws provide that we are required to indemnify our officers and directors under a variety of circumstances, including those circumstances in which indemnification would otherwise be discretionary, and we are required to advance expenses to our officers and directors as incurred in connection with proceedings against them for which they may be indemnified. We have also obtained insurance in amounts commensurate with similar public companies covering our directors and officers from claims made in connection with their serving as our directors and officers.
The Company has entered into indemnification agreements with each of its directors and executive officers. These agreements, among other things, require us to indemnify, either fully or partially, each director and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer. The agreements also permit us to assume the defense of these directors and officers. We believe that these indemnification provisions are necessary to attract and retain qualified persons as directors and officers.
At present, we are not aware of any pending or threatened litigation or proceeding involving a director, officer, employee or agent of ours in which indemnification would be required or permitted.
Insofar as indemnification for liabilities arising under the Securities Act may be granted to directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, 6201 15th Avenue, Brooklyn, NY 11219.


4820-8425-1571
- 5 -

PR
Execution Version
EXHIBIT 10.22




AMENDED AND RESTATED
CREDIT AGREEMENT

Dated as of
December 20, 2019
among

SEA-VISTA I LLC,

THE LENDERS AND ISSUING BANKS PARTIES HERETO,
and

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent and Security Trustee

______________________________________________



JPMORGAN CHASE BANK, N.A., DNB MARKETS, INC. AND REGIONS BANK,
as Joint Lead Arrangers and Joint Lead Bookrunners







TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; INTERPRETATION
Section 1.1 Definitions........................................................................................................................ 1
Section 1.2 Time of Day................................................................................................................... 34
Section 1.3 Accounting Terms; GAAP; Pro Forma Calculations..................................................... 34
Section 1.4 Terms and Interpretations Generally.............................................................................. 35
Section 1.5 Divisions........................................................................................................................ 36
Section 1.6 LIBOR Notification....................................................................................................... 36
ARTICLE II
THE CREDIT FACILITIES
Section 2.1 Loans.............................................................................................................................. 36
Section 2.2 Types of Loans and Minimum Borrowing Amounts..................................................... 37
Section 2.3 Manner of Loan Borrowings; Continuations and Conversions of Borrowings............. 37
Section 2.4 Interest Periods............................................................................................................... 39
Section 2.5 Funding of Loans........................................................................................................... 39
Section 2.6 Applicable Interest Rates............................................................................................... 40
Section 2.7 Default Rate................................................................................................................... 41
Section 2.8 Repayment of Loans; Evidence of Debt........................................................................ 42
Section 2.9 Optional Prepayments of Loans..................................................................................... 43
Section 2.10 Mandatory Prepayments of Loans.................................................................................. 43
Section 2.11 Breakage Fees................................................................................................................. 44
Section 2.12 Letters of Credit.............................................................................................................. 44
Section 2.13 Reductions and Terminations of the Commitments and the Swingline Commitment.... 49
Section 2.14 Increase of Revolving Commitments.............................................................................. 50
Section 2.15 Swingline Loans.............................................................................................................. 50
Section 2.16 Defaulting Lenders.......................................................................................................... 52
Section 2.17 Alternate Rate of Interest................................................................................................ 53
ARTICLE III
FEES AND PAYMENTS
Section 3.1 Fees................................................................................................................................ 55
Section 3.2 Place and Application of Payments................................................................................ 55
Section 3.3 Withholding Taxes......................................................................................................... 56
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Closing Date................................................................................................................... 59
Section 4.2 All Credit Extensions..................................................................................................... 62
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1 Corporate Organization.................................................................................................. 63
Section 5.2 Power and Authority; Validity....................................................................................... 63
Section 5.3 No Violation................................................................................................................... 63
Section 5.4 Litigation........................................................................................................................ 63
Section 5.5 Use of Proceeds; Margin Regulations............................................................................ 64
Section 5.6 Investment Company Act............................................................................................... 64
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Section 5.7 Anti-Corruption Laws; Sanctions Laws and Regulations.............................................. 64
Section 5.8 True and Complete Disclosure....................................................................................... 64
Section 5.9 Financial Statements...................................................................................................... 65
Section 5.10 No Material Adverse Change.......................................................................................... 65
Section 5.11 Taxes............................................................................................................................... 65
Section 5.12 Consents.......................................................................................................................... 65
Section 5.13 Insurance......................................................................................................................... 65
Section 5.14 Intellectual Property........................................................................................................ 65
Section 5.15 Ownership of Property.................................................................................................... 65
Section 5.16 Collateral Documents...................................................................................................... 65
Section 5.17 Legal Names of Borrower and Subsidiaries.................................................................... 66
Section 5.18 Vessels............................................................................................................................. 66
Section 5.19 Form of Documentation.................................................................................................. 66
Section 5.20 Pari Passu or Priority Status............................................................................................ 66
Section 5.21 No Immunity................................................................................................................... 67
Section 5.22 Solvency.......................................................................................................................... 67
Section 5.23 Compliance With Laws................................................................................................... 67
ARTICLE VI
AFFIRMATIVE COVENANTS
Section 6.1 Corporate Existence....................................................................................................... 67
Section 6.2 Maintenance of Properties, including Vessels; Vessel Contracts.................................. 67
Section 6.3 Taxes.............................................................................................................................. 68
Section 6.4 ERISA............................................................................................................................ 68
Section 6.5 Insurance........................................................................................................................ 69
Section 6.6 Financial Reports and Other Information...................................................................... 72
Section 6.7 Lender Inspection rights................................................................................................ 74
Section 6.8 Conduct of Business...................................................................................................... 74
Section 6.9 Use of Proceeds............................................................................................................. 74
Section 6.10 Compliance with Laws................................................................................................... 74
Section 6.11 Use of Property and Facilities; Environmental Laws..................................................... 75
Section 6.12 Further Assurances; Additional Collateral and Additional Guarantors.......................... 75
Section 6.13 Change of Ownership; Registry; Management; Legal Names; Type of Organization (and whether a Registered Organization); Jurisdiction of Organization; etc.................................................. 76
ARTICLE VII
NEGATIVE COVENANTS
Section 7.1 Restrictions on Fundamental Changes........................................................................... 76
Section 7.2 Liens............................................................................................................................... 77
Section 7.3 Indebtedness................................................................................................................... 79
Section 7.4 Transactions with Affiliates........................................................................................... 80
Section 7.5 Limitation on Restricted Payments................................................................................ 80
Section 7.6 Limitation on Asset Sales............................................................................................... 82
Section 7.7 Financial Covenants....................................................................................................... 82
Section 7.8 Restrictive and Negative Pledge Agreements................................................................ 83
Section 7.9 Unrestricted Subsidiaries............................................................................................... 83
Section 7.10 Sanctions Laws and Regulations.................................................................................... 84
Section 7.11 Ring-fenced Subsidiaries................................................................................................ 84
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
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Section 8.1 Events of Default............................................................................................................ 85
Section 8.2 Non-Bankruptcy Defaults.............................................................................................. 87
Section 8.3 Bankruptcy Defaults....................................................................................................... 87
Section 8.4 Collateral for Undrawn Letters of Credit....................................................................... 88
Section 8.5 Notice of Default............................................................................................................ 88
Section 8.6 Expenses......................................................................................................................... 88
Section 8.7 Distribution and Application of Proceeds...................................................................... 88
Section 8.8 Enforcement rights......................................................................................................... 90
Section 8.9 Equity Cure.................................................................................................................... 90
ARTICLE IX
CHANGE IN CIRCUMSTANCES
Section 9.1 Change in Law............................................................................................................... 91
Section 9.2 [Reserved]...................................................................................................................... 91
Section 9.3 Increased Cost and Reduced Return.............................................................................. 91
Section 9.4 Lending Offices.............................................................................................................. 93
Section 9.5 Discretion of Lender as to Manner of Funding.............................................................. 93
Section 9.6 Substitution of Lender or Issuing Bank......................................................................... 93
ARTICLE X
THE ADMINISTRATIVE AGENT, THE SECURITY TRUSTEE AND ISSUING BANKS
Section 10.1 Appointment and Authorization of Administrative Agent.............................................. 94
Section 10.2 Rights and Powers as a Lender....................................................................................... 94
Section 10.3 Action by Administrative Agent and the Other Agents.................................................. 94
Section 10.4 Consultation with Experts............................................................................................... 95
Section 10.5 Indemnification Provisions; Credit Decision.................................................................. 95
Section 10.6 Indemnity........................................................................................................................ 95
Section 10.7 Resignation..................................................................................................................... 96
Section 10.8 Sub-Agent....................................................................................................................... 96
Section 10.9 Collateral and Guaranty Matters..................................................................................... 97
Section 10.10 Certain ERISA Matters................................................................................................... 97
Section 10.11 Credit Bidding................................................................................................................. 98
ARTICLE XI
MISCELLANEOUS
Section 11.1 No Waiver; etc................................................................................................................ 99
Section 11.2 Non-Business Day........................................................................................................... 99
Section 11.3 Documentary Taxes...................................................................................................... 100
Section 11.4 Survival of Representations.......................................................................................... 100
Section 11.5 Survival of Indemnities................................................................................................. 100
Section 11.6 Setoff; Pro Rata Sharing................................................................................................ 100
Section 11.7 Notices........................................................................................................................... 101
Section 11.8 Counterparts.................................................................................................................. 103
Section 11.9 Successors and Assigns................................................................................................. 104
Section 11.10 Participations in Loans and Notes; Sales and Transfers of Loans and Notes............... 104
Section 11.11 Amendments, Waivers and Consents............................................................................ 109
Section 11.12 Headings........................................................................................................................ 109
Section 11.13 Legal Fees, Other Costs and Indemnification............................................................... 109
Section 11.14 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.............................. 111
Section 11.15 Confidentiality.............................................................................................................. 112
Section 11.16 Severability................................................................................................................... 113

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Section 11.17 Currency Conversion.................................................................................................... 113
Section 11.18 [Reserved]..................................................................................................................... 113
Section 11.19 Final Agreement............................................................................................................ 113
Section 11.20 Officer’s Certificates..................................................................................................... 113
Section 11.21 Release of Collateral and Guarantors............................................................................ 113
Section 11.22 Patriot Act Notice.......................................................................................................... 114
Section 11.23 No Advisory or Fiduciary Responsibility..................................................................... 114
Section 11.24 Acknowledgment and Consent to Bail-In of EEA Financial Institutions..................... 115
Section 11.25 Acknowledgment Regarding Any Supported QFCs..................................................... 115

Annexes:
Annex I Revolving Commitments
Annex II Pricing Schedule
Annex III 2019 Term Loan Commitments
Exhibits:
Exhibit 1.1 Form of Collateral Vessel Mortgage
Exhibit 2.3 Form of Borrowing Request
Exhibit 2.8A Form of Revolving Note
Exhibit 2.8B Form of Swingline Note
Exhibit 2.8C Form of Term Loan Note
Exhibit 2.15 Form of Swingline Request
Exhibit 3.3A Form of U.S. Tax Compliance Certificate For Non-U.S. Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes
Exhibit 3.3B Form of U.S. Tax Compliance Certificate For Non-U.S. Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes
Exhibit 3.3C Form of U.S. Tax Compliance Certificate For Non-U.S. Participants That Are Partnerships For U.S. Federal Income Tax Purposes
Exhibit 3.3D Form of U.S. Tax Compliance Certificate For Non-U.S. Lenders That Are Partnerships For U.S. Federal Income Tax Purposes
Exhibit 4.1 Form of Amendment to Collateral Vessel Mortgages
Exhibit 6.6 Form of Compliance Certificate
Exhibit 11.10 Form of Assignment Agreement
Schedules:
Schedule 2.12(a) L/C Sublimits
Schedule 5.15A Closing Date Guarantors
Schedule 5.15B Closing Date Collateral Vessels
Schedule 5.17 Subsidiaries
Schedule 6.2 Approved Appraisers
Schedule 7.2 Existing Liens
Schedule 7.3 Existing Indebtedness
Schedule 7.4 Existing Transactions with Affiliates
Schedule 7.5 Existing Investments

iv

AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 20, 2019, is among SEA-VISTA I LLC, a limited liability company duly formed and existing under the laws of the State of Delaware (the “Borrower”), the lenders from time to time parties hereto (each a “Lender” and collectively, the “Lenders” but those terms shall not include the Swingline Lender in its capacity as the Swingline Lender), JPMORGAN CHASE BANK, N.A., as swingline lender (in such capacity, together with its successors and permitted assigns in such capacity, the “Swingline Lender”), JPMORGAN CHASE BANK, N.A., as Administrative Agent and Security Trustee for the Lenders, and JPMORGAN CHASE BANK, N.A., as issuing bank of the Letters of Credit hereunder (such Persons in such capacity, together with any other Lender that agrees to issue a Letter of Credit hereunder and their respective successors and assigns in such capacity, the “Issuing Bank”).
WITNESSETH:
WHEREAS, the Borrower, the lenders party thereto and the Administrative Agent entered into that certain Credit Agreement dated as of April 15, 2015 (as amended by that certain Amendment No. 1 to Credit Agreement and Guaranty and Collateral Agreement, Waiver and Extension Agreement, dated as of December 18, 2017, the “Prior Credit Agreement”), whereby, upon the terms and conditions therein stated, such lenders agreed to establish (a) a revolving credit facility in the aggregate principal amount of $100,000,000, pursuant to which, among other things, revolving loans were made to the Borrower and letters of credit were issued for the account of the Borrower and its Subsidiaries, and (b) term loan credit facilities in the aggregate principal amount of $200,000,000; and
WHEREAS, the Borrower has requested that the Lenders amend certain aspects of the Prior Credit Agreement to establish (a) a revolving credit facility in the aggregate principal amount of $100,000,000 (as such amount may decrease in accordance with the terms hereof), pursuant to which, among other things, revolving loans may be made to the Borrower and letters of credit may be issued for the account of the Borrower and its Subsidiaries, and (b) a term loan credit facility in the aggregate principal amount of $100,000,000; and
WHEREAS, the Borrower, the Lenders and the Administrative Agent mutually desire to amend certain provisions of the Prior Credit Agreement to provide for such credit facilities for the Borrower on the terms and subject to the conditions and requirements hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
Section 1.1 Definitions.. Unless otherwise defined herein, the following terms shall have the following meanings, which meanings shall be equally applicable to both the singular and plural forms of such terms:
“2019 Term Loan” means a Loan made pursuant to Section 2.1(b).
“2019 Term Loan Commitment” means, with respect to each 2019 Term Loan Lender, the commitment of such Lender to make a 2019 Term Loan hereunder in an amount set forth on Annex III. The aggregate amount of the 2019 Term Loan Commitments is $100,000,000.
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“2019 Term Loan Commitment Termination Date” means 5:00 P.M. (New York time) on the Closing Date.
“2019 Term Loan Lender” means a Lender with a 2019 Term Loan Commitment or 2019 Term Loan.
“Additional Vessel Date” has the meaning set forth in Section 6.12(b).
“Adequate CRF Security” means the pledge and assignment of a CRF Account to the Security Trustee for the benefit of the Lenders with the consent of the Maritime Administration, Department of Transportation pursuant to Chapter II, Subchapter C, Part 287 of Title 46 of the Code of Federal Regulations.
“Adjusted EBITDA” means, for any fiscal period, the Consolidated Net Income of the Borrower plus, without duplication, to the extent deducted in determining Consolidated Net Income, (a) Interest Expense (after giving effect to all amounts associated with Interest Rate Protection Agreements), (b) Income Taxes and franchise tax expense, (c) depreciation expense, (d) amortization expense, (e) other non-cash charges, (f) extraordinary non-cash losses, (g) repair, maintenance and dry-docking expenses, (h) fees, costs and expenses that are directly incurred or required to be reimbursed in connection with the Transactions (i) any Administrative Fees, (j) losses on any Vessel sales minus, to the extent included in determining Consolidated Net Income, extraordinary gains, amortization of deferred gains on Sale-Leaseback Transactions, gains on Vessel sales and other non-cash items which would increase Consolidated Net Income, all calculated on a consolidated basis in accordance with GAAP; provided, however, that, for the purposes of Section 7.7, if the sale proceeds of assets or any recovery from casualty events are deposited in a CRF Account, Adjusted EBITDA for a given testing period shall be adjusted to exclude (without duplication) the Consolidated Net Income generated by such assets, as if such sale took place on the first day of such testing period; and provided further that, for any fiscal period in which a Triggering Acquisition has occurred, Adjusted EBITDA for such period shall be adjusted on a pro forma basis to include the EBITDA associated with the assets or Vessel that is the target of such Triggering Acquisition to the extent such pro forma adjustments are evidenced in a manner satisfactory to the Administrative Agent and to the extent that, where the asset that is the target of a Triggering Acquisition consists of the Capital Stock of any Person, such Person has become a Guarantor party to the Guaranty and Collateral Agreement.
“Adjusted LIBO Rate” means, for any Borrowing of Eurodollar Loans for any Interest Period, a rate per annum determined in accordance with the following formula:
Adjusted LIBO Rate = LIBO Rate for such Interest Period


1.00 - Statutory Reserve Rate
“Administrative Agent” means JPMorgan Chase Bank, N.A., acting in its capacity as administrative agent for the Lenders, and any successor Administrative Agent appointed hereunder pursuant to Section 10.7.
“Administrative Agent’s Account” means the account of the Administrative Agent maintained by the Administrative Agent as is designated in writing from time to time by the Administrative Agent to the Borrower and the Lenders.
“Administrative Fees” means any permitted administrative fees paid and/or accrued to SEACOR, not to exceed $1,500,000 in any calendar year pursuant to the Sea-Vista Agreements, deducted for the purposes of determining the Consolidated Net Income of the Borrower for such period.
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“Administrative Questionnaire” means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent duly completed by such Lender.
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under direct or indirect common control with, such Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling” and “controlled”), when used with respect to any Person, means the power, directly or indirectly, to direct or cause the direction of management or policies of a Person (through the ownership of voting Capital Stock, by contract or otherwise).
“Agent Parties” has the meaning set forth in Section 11.7(b).
“Aggregate Collateral Vessel Value” means the aggregate appraised value without charter of (a) all Collateral Vessels and any Vessel under construction, in each case, as set forth in the most recent annual desktop appraisal report delivered pursuant to Section 6.6(d) and (b) the value of the deposits in any CRF Account, if any, which are subject to Adequate CRF Security; provided that, in connection with any Event of Loss, Asset Sale involving a Collateral Vessel, addition of a Collateral Vessel in accordance with Section 6.12 or release of a Collateral Vessel in accordance with Section 11.21, such aggregate appraised value shall be adjusted as of the relevant date of determination to add or subtract, as applicable, the Fair Market Value as of such date of the relevant Vessel, as determined in good faith by the Borrower and reasonably acceptable to the Security Trustee.
“Agreement” means this Amended and Restated Credit Agreement (including the Exhibits and Schedules), as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its Subsidiaries from time to time concerning or relating to bribery or corruption.
“Applicable Commitment Fee Rate” means, at any time, the percentage rate per annum at which commitment fees are accruing on the unused portion of the aggregate Revolving Commitments (which excludes, for the avoidance of doubt, the face amount of any issued and outstanding Letters of Credit) at such time as set forth in the Pricing Schedule.
“Applicable Letter of Credit Fee Rate” means, at any time, with respect to Letters of Credit, the percentage rate per annum which is applicable at such time as set forth in the Pricing Schedule.
“Applicable Margin” means, with respect to Loans of any Type at any time, the percentage rate per annum which is applicable at such time with respect to Loans of such Type as set forth in the Pricing Schedule.
“Application” has the meaning set forth in Section 2.12(b).
“Approved Appraiser” means any of the appraisal firms identified on Schedule 6.2, or such other independent appraisal firm nominated by the Borrower and reasonably acceptable to the Administrative Agent.
“Approved Fund” means any Person (other than a natural Person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the
3

ordinary course of its business and that is controlled by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that controls a Lender.
“Arrangers” means collectively, JPMorgan Chase Bank, N.A., DNB Markets, Inc. and Regions Bank as joint lead arrangers and joint lead bookrunners, acting in their capacities as joint lead arrangers and joint lead bookrunners; provided, however, that no Arranger shall have duties, responsibilities, or obligations hereunder in such capacity.
“Asset Sale” means the Disposition of any asset constituting Collateral; provided that none of the following shall be an “Asset Sale”:
(a) Dispositions of equipment and other personal property and fixtures that are either (i) obsolete, worn-out or no longer used or useable for their intended purposes and Disposed of in the ordinary course of business, or (ii) replaced by equipment, personal property or fixtures of comparable suitability within six (6) months of such Disposition, including but not limited to the Disposition of any boilers, engines, machinery, masts, spars, boats, anchors, cables, chains, rigging, tackle, capstans, outfit, tools, pumps, pumping equipment, apparel, furniture, fittings, equipment, spare parts or any other appurtenances of any Collateral Vessel that are no longer useful, necessary, profitable or advantageous in the operation of such Collateral Vessel, replaced by new boilers, engines, machinery, masts, spars, boats, anchors, cables, chains, rigging, tackle, capstans, outfit, tools, pumps, pumping equipment, apparel, furniture, fittings, equipment, spare parts or any appurtenances of comparable suitability to the relevant Collateral Vessel Owner;
(b) Dispositions of inventory which is sold in the ordinary course of business;
(c) Dispositions by any Credit Party to any other Credit Party;
(d) Dispositions of property sold to comply with any divestment requirement imposed in connection with the approval of an acquisition under Hart-Scott-Rodino Act of 1976 and Dispositions that are governed by, and made in accordance with, Section 7.1;
(e) Restricted Payments permitted by Section 7.5 and Investments not prohibited by Section 7.5, in each case, constituting Dispositions;
(f) the demise, bareboat, time, voyage, other charter, lease or right to use of a Collateral Vessel in the ordinary course of business;
(g) sales or grants of licenses or sublicenses of intellectual property rights in the ordinary course of business and not interfering, individually or in the aggregate, in any material respect with the conduct of the business of the Borrower and its Restricted Subsidiaries;
(h) the sale or discount, in each case without recourse and in the ordinary course of business, of overdue accounts receivable and similar obligations arising in the ordinary course of business, but only in connection with the compromise or collection thereof consistent with customary industry practice (and not as part of any bulk sale or financing transaction);
(i) Dispositions of cash and Cash Equivalents;
(j) any issuance of Capital Stock of a Collateral Vessel Owner to any Pledgor;
(k) the creation of any Permitted Lien; and
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(l) transfers of property subject to casualty or condemnation proceedings, including an Event of Loss.
“Assignment Agreement” means an agreement in substantially the form of Exhibit 11.10 whereby a Lender conveys part or all of its Commitment, Loans and participations in Letters of Credit and Swingline Loans to another Person that is, or thereupon becomes, a Lender, or increases its Commitments, outstanding Loans, outstanding participations in Letters of Credit and/or Swingline Loans, pursuant to Section 11.10.
“Attributable Indebtedness” in respect of a Sale-Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate implicit in the transaction) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale-Leaseback Transaction (including any period for which such lease has been extended), determined in accordance with GAAP; provided, however, that if such Sale-Leaseback Transaction results in a Capitalized Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of “Capitalized Lease Obligations”.
“Authorized Officer” means, in respect of any Credit Party, a duly authorized officer, member, manager or director of such Credit Party (or, in respect of any Credit Party that is a limited partnership, of its general partner acting on behalf of such limited partnership).
“Auto-Extension Letter of Credit” has the meaning set forth in Section 2.12(b)(ii).
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.
“Bankruptcy Plan” means a reorganization or plan of liquidation pursuant to any Debtor Relief Laws.
“Base Rate” means for any day the greatest of:
(a) the fluctuating commercial loan rate announced by the Administrative Agent from time to time at its New York, New York office (or other corresponding office, in the case of any successor Administrative Agent) as its prime rate or base rate for Dollar loans in the United States of America in effect on such day (which base rate may not be the lowest rate charged by such Lender on loans to any of its customers), with any change in the Base Rate resulting from a change in such announced rate to be effective on the date of the relevant change;
(b) the sum of (x) the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the next Business Day, provided that (A) if such day is not a Business Day, the rate on such transactions on the immediately preceding Business Day as so published on the next Business Day shall apply, and (B) if no such rate is published on such next Business Day, the rate for such day shall be the average of the offered rates quoted to the
5

Administrative Agent by two (2) federal funds brokers of recognized standing on such day for such transactions as selected by the Administrative Agent, plus (y) a percentage per annum equal to one-half of one percent (½%) per annum; and
(c) the sum of (x) the LIBO Market Index Rate plus (y) a percentage per annum equal to one percent (1%) per annum.
“Base Rate Loan” means a Loan bearing interest based on the Base Rate, as provided in Section 2.6(a).
“Benchmark Replacement” means the sum of: (a) the alternate benchmark rate (which may be a SOFR-Based Rate) that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body and/or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to the LIBO Rate for U.S. dollar-denominated syndicated credit facilities and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined would be less than zero, the Benchmark Replacement will be deemed to be zero for the purposes of this Agreement; provided further that any such Benchmark Replacement shall be administratively feasible as determined by the Administrative Agent in its sole discretion.
“Benchmark Replacement Adjustment” means the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the LIBO Rate with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body and/or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the LIBO Rate with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities at such time.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Interest Period”, timing and frequency of determining rates and making payments of interest and other administrative matters) that the Administrative Agent decides in its reasonable discretion may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement).
“Benchmark Replacement Date” means the earlier to occur of the following events with respect to the LIBO Rate:
(a) in the case of clause (a) or (b) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the LIBO Screen Rate permanently or indefinitely ceases to provide the LIBO Screen Rate;
6

(b) in the case of clause (c) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein; or
(c) in the case of an Early Opt-in Election, the fifth (5th) Business Day after the Rate Election Notice is provided to the Borrower, so long as the Administrative Agent has not received, but such date, written notice of objection to such Early Opt-In Election from the Borrower.
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the LIBO Rate:
(a)a public statement or publication of information by or on behalf of the administrator of the LIBO Screen Rate announcing that such administrator has ceased or will cease to provide the LIBO Screen Rate, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the LIBO Screen Rate;
(b)a public statement or publication of information by the regulatory supervisor for the administrator of the LIBO Screen Rate, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for the LIBO Screen Rate, a resolution authority with jurisdiction over the administrator for the LIBO Screen Rate or a court or an entity with similar insolvency or resolution authority over the administrator for the LIBO Screen Rate, in each case which states that the administrator of the LIBO Screen Rate has ceased or will cease to provide the LIBO Screen Rate permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the LIBO Screen Rate; and/or
(c)a public statement or publication of information by the regulatory supervisor for the administrator of the LIBO Screen Rate announcing that the LIBO Screen Rate is no longer representative.
“Benchmark Transition Start Date” means (a) in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than ninety (90) days after such statement or publication, the date of such statement or publication) and (b) in the case of an Early Opt-in Election, the date specified by the Administrative Agent or the Required Lenders, as applicable, by notice to the Borrower, the Administrative Agent and the Borrower (in the case of such notice by the Required Lenders) and the Lenders, so long as the Administrative Agent has not received, by such date, written notice of objection to such Early Opt-In Election from the Borrower.
“Benchmark Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the LIBO Rate and solely to the extent that the LIBO Rate has not been replaced with a Benchmark Replacement, the period (x) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the LIBO Rate for all purposes hereunder in accordance with Section 2.17 and (y) ending at the time that a Benchmark Replacement has replaced the LIBO Rate for all purposes hereunder pursuant to Section 2.17.
“Beneficial Ownership Regulation” has the meaning set forth in Section 4.1(f).
“BHC Act Affiliate” of a party means an “affiliate’ (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
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“Board of Directors” means:
(a) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;
(b) with respect to a partnership, the Board of Directors of the general partner of the partnership;
(c) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and
(d) with respect to any other Person, the board or committee of such Person serving a similar function.
“Borrower” is defined in the preamble to this Agreement.
“Borrowing” means Loans of the same Type made, converted or continued on the same date and, in respect of Eurodollar Loans, having a single Interest Period. A Borrowing is “advanced” on the day the Lenders advance their respective Loans comprising such Borrowing to the Borrower, is “continued” (in the case of Eurodollar Loans) on the date a new Interest Period commences for such Borrowing, and is “converted” (in the case of Eurodollar Loans or Base Rate Loans) when such Borrowing is changed from one Type of Loan to the other, all as requested by the Borrower pursuant to Section 2.3.
“Borrowing Request” means a request for an advance, a continuation, or a conversion of a Borrowing pursuant to Section 2.3(a) or (b), as applicable, which, if in writing, shall be substantially the form of Exhibit 2.3 or otherwise include the information requested in such form.
“Business Day” means (a) any day other than a Saturday or Sunday on which banks are not authorized or required to close in New York, New York and (b) if the applicable Business Day relates to the advance or continuation of, conversion into, or payment on a Eurodollar Borrowing, any day other than a Saturday or Sunday on which banks are open for dealings in Dollar deposits in the applicable interbank Eurodollar market in London, England.
“Capital Stock” means (a) in the case of a corporation, share capital or capital stock, (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (c) in the case of a partnership, partnership interests (whether general or limited), (d) in the case of a limited liability company, membership interests, (e) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person and (f) any and all warrants, rights or options to purchase any of the foregoing (other than any debt security which by its terms is convertible at the option of the holder into Capital Stock, to the extent such holder has not so converted such debt security).
“Capitalized Lease Obligations” means, for any Person, the aggregate amount of such Person’s liabilities under all leases of real or personal property (or any interest therein) which is required to be capitalized on the balance sheet of such Person as determined in accordance with GAAP. Notwithstanding anything to the contrary in this Agreement or any other Credit Documents, for purposes of calculating Capitalized Lease Obligations pursuant to the terms of this Agreement or any other Credit Document, GAAP will be deemed to treat leases that would have been classified as operating leases in accordance with generally accepted accounting principles in the United States of America as in effect on December 31, 2014 in a manner consistent with the treatment of such leases under generally accepted accounting principles in
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the United States of America on December 31, 2014, notwithstanding any modifications or interpretive changes thereto that may occur thereafter.
“Cash Equivalents” means:
(a) U.S. dollars, euros, pound sterling or any national currency of any participating member state in the European Union held from time to time;
(b) securities issued or directly and fully guaranteed or insured by (i) the U.S. government or any agency or instrumentality of the U.S. government (provided that the full faith and credit of the United States is pledged in support of those securities), (ii) any country that is a member state of the European Union or any agency or instrumentality thereof or (iii) any foreign country whose sovereign debt has a rating of at least “A1” from Moody’s or at least “A+” from S&P or any agency or instrumentality of such foreign country (or, in either case, the equivalent of such rating by such organization or, if no rating of Moody’s or S&P then exists, the equivalent of such rating by any nationally recognized rating organization) (provided that the full faith and credit of such foreign country is pledged in support of those securities), in each case having maturities of not more than one year from the date of acquisition;
(c) certificates of deposit, demand deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any Lender or with any commercial bank having capital and surplus in excess of $500,000,000 (or its equivalent in any other currency) and a Thomson Bank Watch Rating of “B” or better;
(d) readily marketable general obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition thereof, having a credit rating of “A” or better from either S&P or Moody’s;
(e) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (b) and (c) above entered into with any financial institution meeting the qualifications specified in clause (c) above;
(f) commercial paper having one of the two highest ratings obtainable from Moody’s or S&P and, in each case, maturing within one year after the date of acquisition; and
(g) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (f) of this definition.
“Change in Law” means the adoption of or any change in, on or after the date hereof (or, if later, on or after the date the Administrative Agent or any Lender becomes the Administrative Agent or a Lender), any applicable law, treaty, order, policy, rule or regulation or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case, pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
“Change of Control” means and will be deemed to have occurred if:
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(a) SEACOR shall cease to own, directly or indirectly, in a combined basis a majority of all of the issued and outstanding Capital Stock of the Borrower; or
(b) any Person, entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act, but excluding any employee benefit plan of such Person, entity or “group” and their respective Subsidiaries and any Person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), shall at any time have acquired direct or indirect beneficial ownership (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act) of voting power of the outstanding Capital Stock of the Borrower having more than 50% of the ordinary voting power for the election of directors of the Borrower.
“Closing Date” means the date on which the conditions set forth in Section 4.1 and Section 4.2 are satisfied (or waived in accordance with Section 11.11).
“Closing Date Collateral Vessel” means each Vessel listed on Schedule 5.15B.
“Closing Date Guarantor” means each entity listed on Schedule 5.15A.
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Collateral” means (a) the Collateral Vessels, (b) the Pledged Equity, (c) the items described in the Guaranty and Collateral Agreement as “Collateral” including, without limitation, each Satisfactory Long-Term Contract and any Vessel construction or refurbishment contract, subject to any exceptions set forth in the Collateral Documents and (d) with respect to any Letter of Credit, all cash and Cash Equivalents of the Borrower in which the Administrative Agent is granted a Lien for the benefit of the Lenders, the Issuing Banks and the Administrative Agent under the terms of Section 8.4.
“Collateral Account” has the meaning set forth in Section 8.4(b).
“Collateral and Guaranty Requirements” means the requirements set forth in clauses (b) and (c) of Section 6.12.
“Collateral Coverage Ratio” means, as of any date of determination, (a) the Aggregate Collateral Vessel Value to (b) the sum (without duplication) of (i) the Consolidated Funded Debt and (ii) the aggregate unused and unexpired Commitments in effect, as of such date.
“Collateral Documents” means, collectively, the Guaranty and Collateral Agreement, the Collateral Vessel Mortgages and any and all other security agreements, vessel mortgages or assignments executed and delivered by any Credit Party and creating security interests, liens, or encumbrances in connection with the Collateral in favor of the Security Trustee and/or the Administrative Agent, to secure the Secured Obligations, entered into pursuant to the terms hereof.
“Collateral Vessel” means, as of the Closing Date, each Closing Date Collateral Vessel, and thereafter, each Vessel owned by any Credit Party that becomes a Collateral Vessel in accordance with Section 6.12 and is subject to a Collateral Vessel Mortgage, other than any Vessel that ceases to be a Collateral Vessel as the result of an Asset Sale permitted hereby or consented to by the Administrative Agent (acting at the instructions of the Required Lenders) or a release of the Lien on such Vessel in accordance with Section 11.21.
“Collateral Vessel Mortgages” means any of the preferred ship mortgages, substantially in the form of Exhibit 1.1 attached hereto, or such other form as may be agreed between the Security Trustee and the
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Borrower, as each such mortgage may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Collateral Vessel Owner” means any Person that owns a Collateral Vessel.
“Collateralized Obligations” has the meaning set forth in Section 8.4(b).
“Commitment” means, with respect to any Lender, such Lender’s obligations to make Revolving Loans, participate in Letters of Credit and participate in Swingline Loans, pursuant to Sections 2.1, 2.12 and 2.15, respectively, initially in the amount set forth opposite its name on Annex I, and to make 2019 Term Loans in the amount set forth opposite its name on Annex III, or as later set forth on an Assignment Agreement pursuant to Section 11.10, as such obligations may be increased by any Incremental Commitment pursuant to Section 2.14 or reduced from time to time as expressly provided pursuant to this Agreement. For avoidance of doubt, “Commitment” does not include the Swingline Commitment.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“Communications” has the meaning set forth in Section 11.7(b).
“Compliance Certificate” means a certificate substantially in the form of Exhibit 6.6.
“Compounded SOFR” means the compounded average of SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and conventions for this rate (which may include compounding in arrears with a lookback and/or suspension period as a mechanism to determine the interest amount payable prior to the end of each Interest Period) being established by the Administrative Agent in accordance with:
(a) the rate, or methodology for this rate, and conventions for this rate selected or recommended by the Relevant Governmental Body for determining compounded SOFR; provided that:
(b) if, and to the extent that, the Administrative Agent determines that Compounded SOFR cannot be determined in accordance with clause (a) above, then the rate, or methodology for this rate, and conventions for this rate that the Administrative Agent determines in its reasonable discretion are substantially consistent with at least five (5) currently outstanding U.S. dollar-denominated syndicated credit facilities at such time that are publicly available for review;
provided, further, that if the Administrative Agent decides that any such rate, methodology or convention determined in accordance with clause (a) or clause (b) is not administratively feasible for the Administrative Agent, then Compounded SOFR will be deemed unable to be determined for purposes of the definition of “Benchmark Replacement.”
“Consolidated Funded Debt” means, for Borrower and its Restricted Subsidiaries on a consolidated basis, (a) (i) obligations of such Person for borrowed money which, in accordance with GAAP, would be shown as short-term debt on their consolidated balance sheet, including obligations under notes, acceptances and other short-term instruments and (ii) obligations of such Person for borrowed money which, in accordance with GAAP, would be shown as long-term debt (including current maturities) on their consolidated balance sheet minus (b) the net obligations of such Person under Interest Rate Protection Agreements and Currency Rate Protection Agreements that have been cancelled or otherwise terminated before their scheduled expiration or are otherwise due and payable.
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“Consolidated Net Income” means, for any period, the consolidated net income (or loss) of the Borrower and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Borrower or any of its Restricted Subsidiaries, (b) the income (or deficit) of any Person (other than a Restricted Subsidiary of the Borrower) in which the Borrower or any of its Restricted Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Restricted Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Restricted Subsidiary (other than a Guarantor) to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is not at the time permitted by the terms of any contractual obligation (other than under any Credit Document) or requirement of law applicable to such Restricted Subsidiary.
“Controlling Affiliate” means, any Person that directly or indirectly through one or more intermediaries controls, or is under common control with, the Borrower (other than Persons controlled by the Borrower). As used in this definition, “control” means the power, directly or indirectly, to direct or cause the direction of management or policies of a Person (through ownership of voting securities or other Capital Stock, by contract or otherwise).
“Corresponding Tenor” with respect to a Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding business day adjustment) as the applicable tenor for the applicable Interest Period with respect to the LIBO Rate.
“Covered Entity” means any of the following:
(a) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
(b) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(c) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Covered Party” has the meaning set forth in Section 11.25.
“Credit Documents” means this Agreement, the Notes, the Applications, the written Borrowing Requests, the Swingline Requests and the Collateral Documents.
“Credit Party” means the Borrower and each Guarantor.
“CRF Account” means a construction reserve fund account governed by Chapter II, Subchapter C, Part 287 of Title 46 of the Code of Federal Regulations.
“CRF Deposit Notice” means, with respect to any Asset Sale or Event of Loss, a certificate of an Officer who is the chief executive officer, the chief financial officer, the treasurer or the principal accounting officer of the Borrower to the Administrative Agent after the date of receipt of Net Cash Proceeds from an Asset Sale or Event of Loss but before the date of deposit of such Net Cash Proceeds in a CRF Account, setting forth (a) the Borrower’s or such Restricted Subsidiary’s intent to deposit such Net Cash Proceeds in a CRF Account and (b) certifying that the Borrower is in compliance on a Pro Forma Basis with the covenants set forth in Section 7.7 and no Default or Event of Default has occurred and is continuing at the time of such certificate.
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“CRF Deposit Period” means, with respect to a CRF Account, the period allowed for the maintenance of a CRF Account under Chapter II, Subchapter C, Part 287 of Title 46 of the Code of Federal Regulations; provided that (a) the Security Trustee has been granted and maintains a security interest in 100% of the Capital Stock of the Special Purpose Vehicle holding such CRF Account, (b)(i) the Borrower and such Special Purpose Vehicle has exercised reasonable efforts to obtain consent from MarAd to grant Adequate CRF Security in such CRF Account to the Security Trustee for the benefit of the Lenders within thirty (30) Business Days from the date of such deposit and Adequate CRF Security has been granted on such CRF Account to the Security Trustee for the benefit of the Lenders immediately after such consent is obtained or (ii) the aggregate amount of Net Cash Proceeds deposited in one or more CRF Accounts does not exceed $100,000,000 and (c) no Event of Default has occurred and is continuing.
“Cure Amount” has the meaning set forth in Section 8.9(a).
“Cure Deadline” has the meaning set forth in Section 8.9(a).
“Cure Right” has the meaning set forth in Section 8.9(a).
“Currency Rate Protection Agreement” means any foreign currency exchange and future agreements, arrangements and options designed to protect against or benefit from fluctuations in currency exchange rates, regardless of whether such agreements are subject to hedge accounting.
“Debt Service Coverage Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (a) Adjusted EBITDA for the period of four (4) consecutive Fiscal Quarters ending on such date to (b) the sum of (i) Interest Expense plus (ii) scheduled amortization payments during such four (4) Fiscal Quarter period.
“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.
“Default” means any event or condition the occurrence of which would, with the passage of time or the giving of notice, or both, constitute an Event of Default.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“Defaulting Lender” means, subject to Section 2.16(b), any Lender that (a) has failed to perform any of its funding obligations hereunder, including in respect of its Loans or participations in respect of Letters of Credit or Swingline Loans, within three (3) Business Days of the date required to be funded by it hereunder, unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, (b) has notified the Borrower (verbally or in writing), any Issuing Bank or the Administrative Agent that it does not intend or is unable to comply with its funding obligations or has made a public statement to that effect with respect to its funding obligations hereunder or under other agreements generally in which it commits to extend credit (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three (3) Business Days after request by the Administrative Agent to confirm in writing that it will comply with its funding obligations (provided that such Lender shall cease to be a
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Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, (ii) had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or a custodian appointed for it, or (iii) taken any action in furtherance of, or indicated its consent to, approval of or acquiescence in any such proceeding or appointment; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any Capital Stock in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.
“Designated Non-cash Consideration” means the non-cash consideration received by the Borrower or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to certificate of an Officer who is the chief executive officer, the chief financial officer, the treasurer or the principal accounting officer of the Borrower, setting forth the Fair Market Value of such Designated Non-cash Consideration and the basis of such valuation, less the amount of cash and Cash Equivalents received in connection with a subsequent sale, redemption or payment of, on, or with respect to, such Designated Non-cash Consideration.
“Designated Persons” means a person or entity: (i) listed in the annex to, or otherwise the subject of the provisions of, any executive order administered by OFAC or the U.S. Department of State or (ii) named as a “Specially Designated National and Blocked Person” or a “Foreign Sanctions Evaders” on the most current list published by OFAC at its official website or any replacement website or other replacement official publication of such list; or is otherwise the subject of any Sanctions Laws and Regulations.
“Dispose” means, with respect to any property, to sell, transfer, lease, assign, convey, transfer, exchange, alienate or dispose thereof. The term “Disposition” shall have a correlative meaning.
“Disqualified Institution” means, on any date, (a) any Person designated by the Borrower as a “Disqualified Institution” by written notice delivered to the Administrative Agent on or prior to the date hereof and (b) any other Person that is a competitor of the Borrower or any of its Subsidiaries, which Person has been designated by the Borrower as a “Disqualified Institution” by written notice to the Administrative Agent and the Lenders not less than ten (10) Business Days prior to such date; provided that “Disqualified Institutions” shall exclude any Person that the Borrower has designated as no longer being a “Disqualified Institution” by written notice delivered to the Administrative Agent from time to time.
“Disqualified Stock” means, with respect to any Person, any Equity Interest of such Person that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Equity Interest), or, upon the happening of any event, matures or is mandatorily redeemable (other than solely for Qualified Equity Interests) pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the Maturity Date hereunder as in effect at the time of issuance. Notwithstanding the preceding sentence, any Capital Stock will not constitute Disqualified Stock because (a) the holders of the Capital Stock have the right to require the Borrower to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale, (b) with respect to any Capital Stock issued pursuant to any plan for the benefit of employees of the Borrower or its Subsidiaries or by any such plan to such employees, the Borrower or its Subsidiaries may be required to repurchase it in order to satisfy applicable statutory or regulatory obligations or (c) with respect to any Capital Stock held by any future, present or former employee, director, manager or consultant of the Borrower, any of its Subsidiaries or any
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of its Parent Entities or any other entity in which the Borrower or a Restricted Subsidiary has an Investment and is designated in good faith as an “affiliate” by the board of directors or managers of the Borrower, in each case pursuant to any equity holders’ agreement, management equity plan or stock incentive plan or any other management or employee benefit plan or agreement, the Borrower or its Subsidiaries may be required to repurchase it. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Agreement will be the maximum amount that the Borrower and its Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends.
“Dollar”, “U.S. Dollar” and the sign “$” mean lawful money of the United States of America.
“DQ List” has the meaning set forth in Section 11.10(f).
“Early Opt-in Election” means the occurrence of:
(a) (i) a determination by the Administrative Agent or (ii) a notification by the Required Lenders to the Administrative Agent (with a copy to the Borrower) that the Required Lenders have determined that, in each case, at least five (5) U.S. dollar-denominated syndicated credit facilities being executed at such time, or that include language similar to that contained in Section 2.17, are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace the LIBO Rate (and such credit facilities are identified in the applicable Rate Election Notice and are publicly available for review), and
(b) (i) the election by the Administrative Agent or (ii) the election by the Required Lenders to declare that an Early Opt-in Election has occurred and, in each case, the provision by the Administrative Agent of written notice of such election to the Borrower and the Lenders or by the Required Lenders of written notice of such election to the Administrative Agent and the Borrower (in each case, the “Rate Election Notice”).
“EEA Financial Institution” means (a) any institution established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member County” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Eligible Assignee” means (a) any commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $1,000,000,000; (b) any commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, so long as such bank is acting through a branch or agency located in the United States or in the country in which it is organized or another country that is described in this clause (b); (c) the central bank of any country that is a member of the OECD and (d) any Affiliate of a person described under clauses (a) through (c) or an entity that would qualify as an Approved Fund with respect to such person if such person were a
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Lender; provided that “Eligible Assignee” shall not include (a) the Borrower or any of the Borrower’s affiliates or subsidiaries, (b) a Defaulting Lender or any of its subsidiaries, or any person who, upon becoming a Lender, would constitute a Defaulting Lender or a Subsidiary thereof or (c) a natural Person.
“Environmental Claims” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations or proceedings relating to any Environmental Law (“Claims”) or any permit issued under any Environmental Law, including (i) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (ii) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to the environment.
“Environmental Law” means any federal, state or local statute, law, rule, regulation, ordinance, code, policy or rule of common law now or hereafter in effect, including any judicial or administrative order, consent, decree or judgment, relating to the environment.
“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means, with respect to any Person, any trade or business (whether or not incorporated) that, together with such Person, is treated as a single employer under Section 414(b) or (c) of the Code.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.
“Eurodollar”, when used in reference to any Loan or Borrowing, means that such Loan, or the Loans comprising such Borrowing, shall bear interest at a rate determined by reference to Adjusted LIBO Rate, as provided in Section 2.6(b).
“Event of Default” means any of the events or circumstances specified in Section 8.1.
“Event of Loss” means any of the following events: (a) the actual or constructive total loss of a Collateral Vessel or the agreed or compromised total loss of a Collateral Vessel; or (b) the capture, condemnation, confiscation, requisition, purchase, seizure or forfeiture of, or any taking of title to, a Collateral Vessel unless such Collateral Vessel is released from confiscation or seizure within thirty (30) days of such occurrence. An Event of Loss shall be deemed to have occurred (i) in the event of an actual loss of a Collateral Vessel, at the time and on the date of such loss or if that is not known at noon Greenwich Mean Time on the date which such Collateral Vessel was last heard from; (ii) in the event of damage which results in a constructive or compromised or arranged total loss of a Collateral Vessel, at the time and on the date of the event giving rise to such damage; or (iii) in the case of an event referred to in clause (b) above, at the time and on the date on which such event is expressed to take effect by the Person making the same.
“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
“Excluded Swap Obligations” means, with respect to any Guarantor, (x) as it relates to all or a portion of any Guaranty of such Guarantor, any Rate Management and Currency Protection Obligation if, and to the extent that, such Rate Management and Currency Protection Obligation (or any Guaranty in
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respect thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the guarantee of such Guarantor becomes effective with respect to such Rate Management and Currency Protection Obligation or (y) as it relates to all or a portion of the grant by such Guarantor of a security interest, any Rate Management and Currency Protection Obligation if, and to the extent that, such Rate Management and Currency Protection Obligation (or such security interest in respect thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the security interest of such Guarantor becomes effective with respect to such Rate Management and Currency Protection Obligation. If a Rate Management and Currency Protection Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Rate Management and Currency Protection Obligation that is attributable to swaps for which such guarantee or security interest is or becomes illegal.
“Facility” means each of the Term Facilities and the Revolving Facility (and collectively, the “Facilities”).
“Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party; provided that, in the case of any determination of Fair Market Value in an amount in excess of $7,500,000 or any determination made in connection with the definition of “Asset Sale”, Section 6.5(c) and Section 7.5, this determination shall be made in good faith by the Board of Directors of the Borrower, unless such determination is based on a desktop appraisal report by an Approved Appraiser in the manner described in Section 6.6(d) and each such determination will be conclusive for all purposes under this Agreement.
“FATCA” means Sections 1471 through 1474 of the Code and any associated regulations.
“Federal Reserve Bank of New York’s Website” means the website of the NYFRB at http://www.newyorkfed.org, or any successor source.
“Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Fiscal Quarter” means a three-month period ending on March 31, June 30, September 30 or December 31 of any year.
“Financial Performance Covenants” means the covenants of the Borrower set forth in Section 7.7.
“Financial Covenant Default” has the meaning set forth in Section 8.1(c).
“Fronting Exposure” means, at any time there is a Defaulting Lender, an amount (if any) equal to (a) with respect to Letters of Credit, such Defaulting Lender’s Revolving Percentage of the outstanding L/C Obligations, other than L/C Obligations as to which such Defaulting Lender’s participation obligation therein has been (i) reallocated to other non-Defaulting Lenders in accordance with Section 2.16 or (ii) secured by cash or Cash Equivalent Collateral or as to which other arrangements satisfactory to the applicable Issuing Bank (in such Issuing Bank’s sole discretion, including pursuant to Section 9.6) have been made in accordance with Section 2.12(g), and (b) with respect to the Swingline Loans, such Defaulting Lender’s Revolving Percentage of the outstanding Swingline Exposure other than Swingline Exposure as to
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which such Defaulting Lender’s participation obligation therein has been reallocated to other Lenders in accordance with Section 2.16.
“GAAP” means generally accepted accounting principles in the United States from time to time in effect as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board or in such other statements, opinions and pronouncements by such other entity as may be approved by a significant segment of the United States accounting profession.
“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, including for the avoidance of doubt any supranational bodies such as the European Union.
“Guarantor” means each Closing Date Guarantor that is a party to the Guaranty and Collateral Agreement on the Closing Date and any other Wholly-Owned Subsidiary of the Borrower (other than at any time when SEA-Vista Newbuild II LLC, Seabulk Energy Transport LLC, Lightship Tankers I LLC and Lightship Tankers II LLC are not required to comply with the covenants set forth in Sections 6.12(a) and Section 6.12(b), SEA-Vista Newbuild II LLC, Seabulk Energy Transport LLC, Lightship Tankers I LLC and Lightship Tankers II LLC) and each Special Purpose Vehicle that provides a Guaranty of the Secured Obligations by becoming a party to the Guaranty and Collateral Agreement pursuant to Section 6.12, unless and until such party is released from such Guaranty under the Guaranty and Collateral Agreement pursuant to Section 11.21.
“Guaranty” by any Person means all contractual obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business) of such Person guaranteeing any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise) of any other Person (the “primary obligor”) in any manner (including, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof), whether directly or indirectly, including all obligations Incurred through an agreement, contingent or otherwise, by such Person: (i) to purchase such Indebtedness or to purchase any property or assets constituting security therefor, primarily for the purpose of assuring the owner of such Indebtedness of the ability of the primary obligor to make payment of such Indebtedness; or (ii) to advance or supply funds (x) for the purchase or payment of such Indebtedness, or (y) to maintain working capital or other balance sheet condition, or otherwise to advance or make available funds for the purchase or payment of such Indebtedness, in each case primarily for the purpose of assuring the owner of such Indebtedness of the ability of the primary obligor to make payment of such Indebtedness; or (iii) to lease property, or to purchase securities or other property or services, of the primary obligor, primarily for the purpose of assuring the owner of such Indebtedness of the ability of the primary obligor to make payment of such Indebtedness; or (iv) otherwise to assure the owner of such Indebtedness of the primary obligor against loss in respect thereof. For the purpose of all computations made under this Agreement, the amount of a Guaranty in respect of any Indebtedness shall be deemed to be equal to the amount that would apply if such Indebtedness was the direct obligation of such Person rather than the primary obligor or, if less, the maximum aggregate potential liability of such Person under the terms of the Guaranty.
“Guaranty and Collateral Agreement” means that certain Guaranty and Collateral Agreement, dated as of April 15, 2015, executed by the Credit Parties in favor of the Security Trustee for the benefit of the Secured Parties, as ratified and confirmed by that certain Ratification Agreement, dated on or about the Closing Date, executed by the Credit Parties in favor of the Security Trustee for the benefit of the Secured
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Parties, and as amended, restated, amended and restated, supplemented or otherwise modified from time to time (including by any joinders thereto).
“Hazardous Material” means “hazardous substances”, as such term is defined in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Acts of 1986, and shall also include petroleum, including crude oil or any fraction thereof, or any other substance defined as “hazardous” or “toxic” or words with similar meaning and effect under any Environmental Law applicable to the Borrower or any of its Restricted Subsidiaries.
“Highest Lawful Rate” means the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on any Loans, under laws applicable to any of the Lenders which are presently in effect or, to the extent allowed by applicable law, under such laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. Determination of the rate of interest for the purpose of determining whether any Loans are usurious under all applicable laws shall be made by amortizing, prorating, allocating, and spreading, in equal parts during the period of the full stated term of the Loans, all interest at any time contracted for, taken, reserved, charged or received from the Borrower in connection with the Loans.
“IBA” has the meaning set forth in Section 1.6.
“Income Taxes” means, with reference to any period, all foreign, federal, state and local income tax expense imposed by any Governmental Authority with respect to the income of the Borrower or any Restricted Subsidiaries.
“Income Tax Advance” means for any period, the product of the Presumed Tax Rate and the taxable income of the Borrower for such Period.
“Incremental Amendment” means an amendment to this Agreement among the Borrower, the Administrative Agent, the Incremental Lenders providing for Incremental Commitments and/or the Incremental Loans on a particular Increase Effective Date which shall comply with the provisions of Section 2.14 and containing such terms as may be required by such Incremental Lenders as conditions precedent for such Incremental Loans and/or Incremental Commitments. Each Incremental Amendment shall be binding on the Lenders providing Incremental Commitments and/or making Incremental Loans pursuant thereto, the Guarantors and the other parties hereto and thereto.
“Incremental Commitment” means an Incremental Revolving Commitment or Incremental Term Loan Commitment, as the case may be.
“Incremental Lender” means any Lender or Eligible Assignee that has agreed to make an Incremental Revolving Commitment or Incremental Term Loan Commitment pursuant to an Incremental Amendment.
“Incremental Loan” has the meaning set forth in Section 2.14(b)(ii).
“Incremental Revolving Commitment” means the commitment of an Incremental Lender to make a Revolving Loan in such amount and in accordance with such conditions as set out in an Incremental Amendment.
“Incremental Term Loan” has the meaning set forth in Section 2.14(a).
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“Incremental Term Loan Commitment” means the commitment of an Incremental Lender to make an Incremental Term Loan in such amount and in accordance with such conditions as set out in an Incremental Amendment.
“Increase Effective Date” has the meaning set forth in Section 2.14(a).
“Incur” means issue, create, assume, guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition or otherwise) will be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary; and the terms “Incurred” and “Incurrence” have meanings correlative to the foregoing.
“Indebtedness” means, for any Person, the following obligations of such Person, without duplication: (i) obligations of such Person for borrowed money; (ii) obligations of such Person representing the deferred purchase price of property or services other than accounts payable, deferred compensation, and accrued liabilities arising in the ordinary course of business and other than amounts which are being contested in good faith and for which reserves in conformity with GAAP have been provided; (iii) obligations of such Person evidenced by bonds, notes, bankers acceptances, debentures or other similar instruments of such Person, or obligations of such Person arising out of drawn letters of credit issued for such Person’s account or pursuant to such Person’s application securing Indebtedness; (iv) obligations of other Persons, assumed by such Person, secured by Liens upon property or payable out of the proceeds from property now or hereafter owned or acquired by such Person, but only to the extent of such property’s Fair Market Value; (v) Capitalized Lease Obligations and Attributable Indebtedness of such Person; (vi) net obligations under Interest Rate Protection Agreements and Currency Rate Protection Agreements that have been cancelled or otherwise terminated before their scheduled expiration or are otherwise due and payable; and (vii) obligations of such Person pursuant to a Guaranty of any of the foregoing obligations of another Person. For purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture to the extent such Indebtedness is recourse to such Person.
“Indemnified Parties” has the meaning set forth in Section 11.13(a).
“Indemnified Taxes” has the meaning set forth in Section 3.3(a).
“Information” has the meaning set forth in Section 11.15.
“Interest Expense” means, with reference to any period, the cash interest expense (including commitment fees) of the Borrower and its Restricted Subsidiaries calculated on a consolidated basis for such period.
“Interest Payment Date” means (a) with respect to any Base Rate Loan or any Swingline Loan, the last day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Eurodollar Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.
“Interest Period” means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter (or with the consent of each Lender making a Loan as part of such Borrowing, any other period), in each case as the Borrower may elect. For purposes hereof, the date of a
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Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the Closing Date of the most recent conversion or continuation of such Borrowing.
“Interest Rate Protection Agreement” means any interest rate swap, interest rate cap, interest rate collar, or other interest rate hedging agreement or arrangement designed to protect against or benefit from fluctuations in interest rates, regardless of whether such agreements are subject to hedge accounting.
“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the LIBO Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period for which the LIBO Screen Rate is available for Dollars) that is shorter than the Impacted Interest Period; and (b) the LIBO Screen Rate for the shortest period (for which that Screen Rate is available for Dollars) that exceeds the Impacted Interest Period, in each case, at such time.
“Investment” means, to directly or indirectly, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or to hold any cash or Cash Equivalents.
“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance of such Letter of Credit).
“Issuing Bank” is defined in the preamble to this Agreement.
“Joint Venture” means any Person that is not a direct or indirect Subsidiary of the Borrower in which the Borrower or any of its Restricted Subsidiaries makes any Investment.
“L/C Documents” means the Letters of Credit and Applications with respect thereto, any draft or other document presented in connection with a drawing thereunder, and this Agreement.
“L/C Exposure” means, with respect to any Lender at any time, such Lender’s applicable Revolving Percentage of the L/C Obligations.
“L/C Limit” means $5,000,000.
“L/C Obligations” means as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate amount of all unpaid Reimbursement Obligations. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 2.12(e). For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.13 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.
“L/C Sublimit” means, as to each Lender, in its capacity as an Issuing Bank, the amount set forth under the heading “L/C Sublimit” opposite such Lender’s name on Schedule 2.12(a).
“Lender” is defined in the preamble to this Agreement.
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“Lending Office” means the “Lending Office” of such Lender (or an Affiliate of such Lender) designated for each Type and/or currency of Loan or Letter of Credit in the Administrative Questionnaire submitted by such Lender or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office by which its Loans and Letters of Credit of such Type and/or currency are to be made and maintained.
“Letter(s) of Credit” has the meaning set forth in Section 2.12(a).
“Leverage Ratio” means, as of any date of determination, the ratio of (i) Consolidated Funded Debt on such date to (ii) Adjusted EBITDA for the four (4) consecutive Fiscal Quarters ending on or immediately prior to such date for which financial statements have been delivered.
“LIBO Market Index Rate” means, for any day, with respect to any interest calculation for Base Rate Loans, the rate per annum quoted at approximately 11:00 A.M. (London time) on such day on that page of the Reuters or Bloomberg reporting service (as then being used by the Administrative Agent to obtain such interest rate quotes) that displays interest settlement rates for deposits in Dollars in the amount of $5,000,000 for a period of one month, or if such page or such service shall cease to be available, such other page or other service (as the case may be) for the purpose of displaying interest settlement rates as reasonably determined by the Administrative Agent after consultation with the Borrower as to the use of any such other service. If for any reason any such settlement interest rate for such one-month period is not available through any such interest rate reporting service, then the “LIBO Market Index Rate” for such day will be the rate at which the Administrative Agent is offered deposits in Dollars in the amount of $5,000,000 for a period of one month in the London interbank market at 10:00 A.M. (New York time) on such day.
“LIBO Rate” means, for any Interest Period for each Eurodollar Loan, the London interbank offered rate as administered by Intercontinental Exchange Benchmark Administration Ltd (or any other Person that takes over the administration of such rate for Dollars) for a period equal in length to such Interest Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent after consultation with the Borrower as to the use of any such other service; in each case the “LIBO Screen Rate”) at approximately 11:00 A.M. (London time) two (2) Business Days prior to the first day of such Interest Period; provided that, if the LIBO Screen Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement and provided, further, if the LIBO Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”) with respect to Dollars then the LIBO Rate shall be the Interpolated Rate, provided, that, if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Lien” means any interest in any property or asset in favor of a Person other than the owner of such property or asset and securing an obligation owed to, or a claim by, such Person, whether such interest is based on the common law, statute or contract, including the security interest or lien arising from a mortgage, encumbrance, pledge, conditional sale, security agreement or trust receipt, or a lease, consignment or bailment for security purposes.
“Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement.
“Local Content Subsidiary” means any Subsidiary of the Borrower that is a party to a bareboat charter contract or other charter contract or otherwise holds the right to receive freight, hire, passage moneys payable or other compensation attributable to a Collateral Vessel for the purpose of satisfying any local content law or regulation or similar law or regulation.
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“Mandatory Borrowing” has the meaning set forth in Section 2.15(c).
“MarAd” means the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator.
“Material Acquisition or Disposition” means any acquisition or Disposition of (i) a Vessel or (ii) any other assets (including Capital Stock) for which the aggregate gross consideration exceeds $7,500,000.
“Material Adverse Effect” means a material adverse effect on (i) the business, assets, operations, liabilities (actual or contingent) or financial condition of the Borrower and its Restricted Subsidiaries taken as a whole, (ii) the Credit Parties’ ability, taken as a whole, to perform any of their payment obligations under this Agreement or the Notes, in respect of the Letters of Credit or under any other Credit Document to which a Credit Party is a party or (iii) the validity or enforceability in any material respect of any of the Credit Documents or the rights and remedies of the Security Trustee, the Administrative Agent or any Lender under the Credit Documents.
“Material Indebtedness” has the meaning set forth in Section 8.1(e).
“Material Plan” has the meaning set forth in Section 8.1(i).
“Maturity Date” means December 20, 2024.
“Minimum Collateral Coverage Ratio” has the meaning set forth in Section 7.7(c).
“Moody’s” means Moody’s Investors Service, Inc. or any successor thereto.
“Net Cash Proceeds” means, with respect to any Asset Sale or Event of Loss, the aggregate cash proceeds (including in respect of any insurance proceeds or condemnation awards) and the Fair Market Value of any Cash Equivalents received by the Borrower or any of its Restricted Subsidiaries in respect of any such Asset Sale or Event of Loss (including, without limitation, any cash or Cash Equivalents received upon the sale or other disposition of any Designated Non-cash Consideration or other non-cash consideration received in any such Asset Sale or Event of Loss), net of (i) the direct costs relating to such Asset Sale or Event of Loss and the sale or disposition of such Designated Non-cash Consideration or other non-cash consideration, including, without limitation, legal, accounting and investment banking fees, and sales commissions, transactional fees, brokers’ fees and other professional fees, severance costs and any relocation expenses Incurred as a result of such Asset Sale or Event of Loss, (ii) amounts actually paid or payable or distributed or required to be distributed in cash in respect of, or for the purpose of, total federal, state, local and foreign income, value added and similar taxes as a result of such Asset Sale or Event of Loss, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, (iii) amounts required to be applied to the repayment of Indebtedness secured by a Lien on the properties or assets that were the subject of such Asset Sale or Event of Loss, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale or Event of Loss or by applicable law, be repaid out of the proceeds from such Asset Sale or Event of Loss, (iv) payments of unassumed liabilities (not constituting Indebtedness) relating to the assets sold at the time of, or within 30 days after the date of, such Asset Sale or Event of Loss, and (v) any amounts to be set aside in any reserve established in accordance with GAAP or any amount placed in escrow, in either case for adjustment in respect of the sale price of such properties or assets, for indemnification obligations of the Borrower or any of its Restricted Subsidiaries in connection with such Asset Sale or Event of Loss or for other liabilities associated with such Asset Sale or Event of Loss and retained by the Borrower or any of its Restricted Subsidiaries until such time as such reserve is reversed or such escrow arrangement is terminated, in which case Net Cash Proceeds shall include only the amount of the reserve so reversed or the amount returned to the Borrower or its
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Restricted Subsidiaries from such escrow arrangement, as the case may be, provided however, that, if the Borrower shall deliver a CRF Deposit Notice at any time when the Borrower’s Leverage Ratio (when calculated as of the last day of the most recently ended period of four fiscal quarters for which financial statements are available and after giving pro forma effect to such Asset Sale or Event of Loss) does not exceed 2.50 to 1.00, then such proceeds shall not constitute Net Cash Proceeds until the end of the CRF Deposit Period at which time such proceeds shall constitute Net Cash Proceeds unless (x) such proceeds are withdrawn and used for the construction or acquisition of an additional Vessel and such Vessel becomes a Collateral Vessel hereunder, or (y) if a CRF Deposit Period is terminated as a result of the occurrence and continuation of an Event of Default, the Special Purpose Vehicle holding the applicable CRF Account withdraws all its deposits in such CRF Account (without regard to any adverse tax consequences to the Borrower or any of its Subsidiaries and within forty-five (45) Business Days of the occurrence of such Event of Default) and deposits the same in an account pledged to the Administrative Agent subject to an account control agreement in favor of the Security Trustee for the benefit of the Lenders.
“NYFRB” means the Federal Reserve Bank of New York.
“Note” has the meaning set forth in Section 2.8(e).
“Obligations” means all obligations of the Credit Parties to pay fees, costs and expenses hereunder, to pay principal or interest on Loans and Reimbursement Obligations, to provide cash collateral as provided herein or in any other Credit Document, and to pay any other obligations to the Administrative Agent, the Swingline Lender, any Lender or any Issuing Bank arising under any Credit Document.
“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the Treasury.
“Participant Register” has the meaning set forth in Section 11.10(d).
“Participants” has the meaning set forth in Section 11.10(d).
“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law October 26, 2001, as amended from time to time.
“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.
“Performance Guaranties” means all Guaranties of performance (and not financial Guaranties) of the Borrower or any of its Restricted Subsidiaries delivered in connection with the construction, operation, ownership or financing of Vessels.
“Permitted Business” means any business that is the same as, or reasonably related, ancillary or complementary to, any of the businesses in which the Borrower and its Restricted Subsidiaries are engaged on the Closing Date, and reasonable extensions thereof, in each case, as determined in good faith by the Borrower.
“Permitted Investments” means:
(a) any Investment in the Borrower or in a Restricted Subsidiary of the Borrower (other than a Ring-fenced Subsidiary);
(b) any Investment in cash and Cash Equivalents;
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(c) any Investment by the Borrower or any Restricted Subsidiary of the Borrower in a Person, if as a result of such Investment:
(i) such Person becomes a Restricted Subsidiary of the Borrower; or
(ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Borrower or a Restricted Subsidiary of the Borrower;
(d) Investments received as consideration for an Asset Sale permitted under Section 7.6 to the extent that at least 75% of the consideration from such Asset Sale is in the form of cash or Cash Equivalents;
(e) any Investment in any Person solely in exchange for the issuance of Capital Stock of the Borrower;
(f) any Investments received (i) from trade creditors or customers in the ordinary course of business, in the form of accounts receivable or notes receivable, if payable or dischargeable in accordance with customary trade terms of the Borrower or the applicable Restricted Subsidiary, (ii) in compromise or resolution of, upon satisfaction of judgments with respect to, (1) obligations of trade creditors or customers that were Incurred in the ordinary course of business of the Borrower or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer or (2) litigation, arbitration or other disputes; or (iii) as a result of a foreclosure by the Borrower or any of its Restricted Subsidiaries with respect to any secured Investment in default;
(g) Investments represented by Rate Management and Currency Protection Transactions to the extent permitted by Section 7.3(d);
(h) loans or advances to directors, officers and employees for moving, relocation and travel expenses and other similar expenditures (other than any loans or advances to any director or executive officer (or equivalent thereof) that would be in violation of Section 402 of the Sarbanes Oxley Act) (i) in each case, made in the ordinary course of business of the Borrower or any Restricted Subsidiary of the Borrower (including payroll, travel and entertainment related advances) or (ii) to purchase Capital Stock of the Borrower, which in each case do not exceed $250,000 in the aggregate at any one time outstanding;
(i) any Guaranty of Indebtedness permitted to be Incurred by Section 7.3;
(j) any Investment existing on, or made pursuant to binding commitments existing on, the Closing Date, and any modifications, renewals or extensions that do not increase the amount of the Investment being modified, renewed or extended (as determined as of such date of modification, renewal or extension) unless the incremental increase in such Investment is otherwise permitted;
(k) Investments acquired after the Closing Date as a result of the acquisition by the Borrower or any Restricted Subsidiary of the Borrower of another Person, including by way of a merger, amalgamation or consolidation with or into the Borrower or any of its Restricted Subsidiaries in a transaction that is not prohibited by the covenant described above under Section 7.1 after the Closing Date, to the extent that such Investments were not made in contemplation of such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition, merger, amalgamation or consolidation;
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(l) Guaranties by the Borrower or any of its Restricted Subsidiaries of operating leases (other than Capitalized Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into by the Borrower or any Restricted Subsidiary of the Borrower in the ordinary course of business;
(m) Investments in any Person to the extent such Investments consist of prepaid expenses, negotiable instruments held for collection and lease, utility and workers’ compensation, performance and other similar deposits made in the ordinary course of business by the Borrower or any of its Restricted Subsidiaries;
(n) Other investments in the aggregate amount not to exceed $1,000,000; and
(o) Investments listed in Schedule 7.5.
“Permitted Liens” has the meaning ascribed to such term in Section 7.2.
“Permitted Maritime Liens” shall mean, at any time with respect to a Collateral Vessel:
(a) Liens for crews’ wages (including the wages of the master of the Collateral Vessel) that are discharged in the ordinary course of business and have accrued for not more than thirty (30) days unless any such Lien is being contested in good faith and by appropriate proceedings or other acts by the relevant Credit Party and such Credit Party shall have set aside on its books adequate reserves with respect to such Lien and so long as such deferment in payment shall not subject the Collateral Vessel to sale, forfeiture or loss;
(b) Liens for salvage (including contract salvage) or general average, and Liens for wages of stevedores employed by the owner of the Collateral Vessel, the master of the Collateral Vessel or a charterer or lessee of such Collateral Vessel, which in each case have accrued for not more than thirty (30) days unless any such Lien is being contested in good faith and by appropriate proceedings or other acts by the relevant Credit Party and such Credit Party shall have set aside on its books adequate reserves with respect to such Lien and so long as such deferment in payment shall not subject the Collateral Vessel to sale, forfeiture or loss;
(c) shipyard Liens and other Liens arising by operation of law arising in the ordinary course of business in operating, maintaining, repairing, modifying, refurbishing, or rebuilding the Collateral Vessel (other than those referred to in (i) and (ii) above), including maritime Liens for necessaries, which in each case have accrued for not more than thirty (30) days unless any such Lien is being contested in good faith and by appropriate proceedings or other acts by the relevant Credit Party, and such Credit Party shall have set aside on its books adequate reserves with respect to such Lien and so long as such deferment in payment shall not subject the Collateral Vessel to sale, forfeiture, or loss;
(d) Liens for damages arising from maritime torts which are unclaimed, or are covered by insurance and any deductible applicable thereto, or in respect of which a bond or other security has been posted on behalf of the relevant Credit Party with the appropriate court or other tribunal to prevent the arrest or secure the release of the Collateral Vessel from arrest, unless any such Lien is being contested in good faith and by appropriate proceedings or other acts by the relevant Credit Party, and such Credit Party shall have set aside on its books adequate reserves with respect to such Lien and so long as such deferment in payment shall not subject the Collateral Vessel to sale, forfeiture, or loss;
(e) Liens that, as indicated by the written admission of liability therefor by an insurance company, are covered by insurance (subject to reasonable deductibles); and
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(e) Liens for charters or subcharters or leases or subleases, including any charter, subcharter, lease or sublease described in Schedule 7.2, permitted under this Agreement.
“Person” means an individual, partnership, corporation, limited liability company, association, trust, joint venture, unincorporated organization or any other entity or organization, including a government or any agency or political subdivision thereof.
“Plan” means an employee pension benefit plan subject to Title IV of ERISA or the minimum funding standards under Section 412 and 430 of the Code that is either (i) maintained by the Borrower or any of its Subsidiaries or ERISA Affiliates, or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which the Borrower or any of its Subsidiaries or ERISA Affiliates is then making or required to make contributions.
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time to time.
“Platform” has the meaning set forth in Section 11.7(b).
“Pledged Equity” means the Capital Stock in each Guarantor which is pledged to secure the Secured Obligations under the Guaranty and Collateral Agreement.
“Pledgor” means the Borrower and each Wholly-Owned Subsidiary, in each case, to the extent that such Person directly owns any Capital Stock in any Guarantor.
“Preferred Stock,” means, as applied to the Capital Stock of any Person, Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distributions of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital of any other class of such Person.
“Presumed Tax Rate” for any tax year means the highest effective combined Federal, state and local income tax rate applicable during such tax year to an individual resident of New York, New York, taxable at the highest marginal Federal income tax rate and the highest marginal applicable state and city income tax rates.
“Pricing Schedule” is the pricing schedule set forth on Annex II.
“Prior Credit Agreement” has the meaning set forth in the Recitals hereto.
“Pro Forma Basis” means, with respect to compliance with any financial test hereunder, compliance with such financial test immediately after giving effect to (a) any Material Acquisition or Disposition (with respect to any such acquisition, to the extent the assets subject thereto are not subsequently disposed of during such period), as if such Material Acquisition or Disposition, and all other Material Acquisitions or Dispositions consummated during the applicable period, were consummated at the beginning of such period, and any Indebtedness or other liabilities Incurred in connection with any such Material Acquisition or Disposition had been consummated and Incurred at the beginning of such period, (b) any designation or re-designation pursuant to Section 7.9, as if such designation or redesignation were consummated at the beginning of such period, and any Indebtedness or other liabilities Incurred in connection with any such designation or re-designation had been consummated and Incurred at the beginning of such period, (c) the Incurrence or repayment of any Indebtedness, as if such Incurrence or repayment had occurred at the beginning of such period or (d) any other event expressly required to be calculated on a Pro Forma Basis hereunder. For purposes of this definition, if any Indebtedness to be so
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Incurred bears interest at a floating rate and is being given pro forma effect, the interest on such Indebtedness will be calculated as if the rate in effect on the date of Incurrence had been the applicable rate for the entire period (taking into account the effect of any applicable Interest Rate Protection Agreements).
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
“QFC Credit Support” has the meaning set forth in Section 11.25.
“Qualified Equity Interests” means any Equity Interests of any Person other than Disqualified Stock.
“Rate Election Notice” has the meaning set forth in clause (b) of the definition of “Early Opt-in Election”.
“Rate Management and Currency Protection Obligations” means any and all obligations of the Borrower, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all Rate Management and Currency Protection Transactions, and (b) any and all cancellations, buy backs, reversals, terminations or assignments of any of the foregoing.
“Rate Management and Currency Protection Transaction” means any Interest Rate Protection Agreement or Currency Rate Protection Agreement now existing or hereafter entered into, in each case, between the Borrower and any Lender or any Affiliate of a Lender.
“Register” has the meaning set forth in Section 11.10(c).
“Reimbursement Obligation” has the meaning set forth in Section 2.12(c).
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.
“released” has the meaning set forth in Section 11.21(a).
“Relevant Governmental Body” means the Federal Reserve Board and/or the NYFRB, or a committee officially endorsed or convened by the Federal Reserve Board and/or the NYFRB or, in each case, any successor thereto.
“Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Sections 412 and 430 of the Code and of Sections 302 and 303 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(c) of the Code.
“Required Insurance” has the meaning set forth in Section 6.5(a).
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“Required Lenders” means, at any time, Lenders having Revolving Credit Exposures or outstanding Term Loans representing more than 50% of the sum of the total Revolving Credit Exposures and Term Loans outstanding at such time.
“Required Revolving Lenders” means, Lenders having Revolving Credit Exposures and unused Revolving Commitments representing more than 50% of the sum of the total Revolving Credit Exposures and unused Revolving Commitments at such time or, if the Revolving Commitments have been terminated or expired, Lenders having more than 50% of the sum of the total Revolving Credit Exposures of all Lenders; provided that the Revolving Credit Exposure of, and unused Revolving Commitment of, any Defaulting Lender shall be excluded for purposes of making a determination of Required Revolving Lenders.
“Restricted Investment” means any Investment other than a Permitted Investment.
“Restricted Payment” means:
(a) any dividend or any distribution (whether made in cash, securities or other property) by the Borrower or any Restricted Subsidiary with respect to its Capital Stock (including any payment in connection with any merger or consolidation involving the Borrower or any of its Restricted Subsidiaries and any Administrative Fees) other than:
(i) dividends or distributions payable solely in Capital Stock of the Borrower;
(ii) dividends or distributions payable in respect of taxes including but not limited to taxes relating to the period from and after May 2, 2014;
(iii) dividends or distributions by a Restricted Subsidiary, so long as, in the case of any dividend or distribution payable on or in respect of any Capital Stock issued by a Restricted Subsidiary that is not a Wholly-Owned Subsidiary, the Borrower or the Restricted Subsidiary holding such Capital Stock receives at least its pro rata share of such dividend or distribution; and
(iv) payments made in respect of any stock appreciation rights or similar benefits plans;
(b) the purchase, redemption, retirement or other acquisition for value, including in connection with any merger or consolidation, of any Capital Stock of the Borrower; and
(c) any Restricted Investment.
“Restricted Subsidiary” means any Subsidiary of the Borrower that is not an Unrestricted Subsidiary. Unless otherwise qualified, references to “Restricted Subsidiary” or “Restricted Subsidiaries” herein shall refer to those of the Borrower and include for the avoidance of doubt the Ring-fenced Subsidiaries.
“Revolving Commitment” means, with respect to any Revolving Lender, such Revolving Lender’s obligations to make Revolving Loans, participate in Letters of Credit and participate in Swingline Loans, pursuant to Sections 2.1(a), 2.12 and 2.15, respectively, initially in the amount set forth opposite its name on Annex I or as later increased pursuant to Section 2.14 or as set forth on an Assignment Agreement pursuant to Section 11.9, as such obligations may be increased or reduced from time to time as expressly provided pursuant to this Agreement.
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“Revolving Commitment Termination Date” means the earliest of (i) the Maturity Date, (ii) the date on which the Revolving Commitments are terminated in full or reduced to zero pursuant to Section 2.13, and (iii) the occurrence of any Event of Default described in Section 8.1(f) or (g) with respect to the Borrower or a Guarantor or the occurrence and continuance of any other Event of Default and either (x) the declaration of the Revolving Loans to be due and payable pursuant to Section 8.2 or (y) in the absence of such declaration, the giving of written notice by the Administrative Agent, acting at the direction of the Required Revolving Lenders, to the Borrower pursuant to Section 8.2 that the Revolving Commitments have been terminated.
“Revolving Credit Commitment Amount” means the sum of the Revolving Commitments of all of the Lenders, which is an amount initially equal to $100,000,000, as such amount may be reduced from time to time pursuant to the terms of this Agreement.
“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum at such time, without duplication, of (a) such Lender’s applicable Revolving Percentage of the principal amount of the outstanding Revolving Loans, (b) such Lender’s L/C Exposure and (c) such Lender’s applicable Revolving Percentage of the Swingline Exposure.
“Revolving Facility” means the Revolving Commitments and the Revolving Loans and Letters of Credit issued thereunder.
“Revolving Lender” means a Lender with a Revolving Commitment or Revolving Credit Exposure.
“Revolving Loan” has the meaning set forth in Section 2.1(a).
“Revolving Note” has the meaning set forth in Section 2.8(e).
“Revolving Percentage” means, for each Lender, the percentage of the aggregate amount of the Revolving Commitments of all Lenders (or, if the Revolving Commitments have been terminated, the Revolving Credit Exposure of all Lenders) represented by the amount of such Lender’s Revolving Commitment (or, if such Revolving Commitment has been terminated, such Lender’s Revolving Credit Exposure).
“Ring-fenced Subsidiaries” means each of SEA-Vista Newbuild II LLC, Seabulk Energy Transport LLC, Lightship Tankers I LLC and Lightship Tankers II LLC, each a Delaware limited liability company; provided that, any such Person shall cease to constitute a Ring-fenced Subsidiary hereunder upon (a) becoming the registered owner of a Vessel, (b) executing a Collateral Vessel Mortgage pursuant to Section 6.12(b) and (c) being or becoming a Guarantor pursuant to Section 6.12(c).
“S&P” means Standard & Poor’s Financial Services LLC or any successor thereto.
“Sale-Leaseback Transaction” means any arrangement whereby the Borrower or a Restricted Subsidiary shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease property that it intends to use for substantially the same purpose or purposes as the property sold or transferred.
“Sanctions Laws and Regulations” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.
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“Satisfactory Long-Term Contract” means any charter contract (a) with an initial term of at least three (3) years and a remaining term of at least eighteen (18) months at the Closing Date (or, if the initial term of such contract expires prior to the Maturity Date, renewed or replaced by a contract with a term that expires on or after the Maturity Date, as such Maturity Date may be extended from time to time pursuant to this Agreement), entered into by the Borrower or any Restricted Subsidiary other than a Ring-fenced Subsidiary, for which a Vessel (including any substitute Vessel) has been definitively nominated or (b) that is reasonably acceptable to the Administrative Agent.
“SEA-Vista Agreements” means (i) the SEA-Vista I Administrative and Accounting Services Agreement, (ii) the SEA-Vista II Administrative and Accounting Services Agreement, (iii) the SEA-Vista III Administrative and Accounting Services Agreement, and (iv) the SEA-Vista I Advisory Services and Monitoring Agreement.
“SEA-Vista LLC Agreement” means the operating agreements for each of SEA-Vista I LLC, SEA- Vista II LLC and SEA-Vista III LLC.
“SEACOR” means SEACOR Holdings Inc., a corporation organized and existing under the laws of Delaware.
“SEC” means the United States Securities and Exchange Commission, or any Governmental Authority succeeding to the functions of said Commission.
“Secured Obligations” means, collectively, (a) the Obligations, (b) all Rate Management and Currency Protection Obligations (other than Excluded Swap Obligations) and (c) all Specified Cash Management Obligations; provided, however, notwithstanding anything to the contrary contained herein or in any other Credit Document, no Rate Management and Currency Protection Obligation or Specified Cash Management Obligation shall constitute a Secured Obligation at any time on or after the occurrence of Security Termination.
“Secured Parties” means, collectively, the Administrative Agent, the Security Trustee, the Lenders, the Issuing Banks, the holders of the Rate Management and Currency Protection Obligations, the holders of any Specified Cash Management Obligations and any other holder of any Secured Obligation.
“Security Termination” means such time as when (a) all Commitments have been terminated or expired, (b) all Secured Obligations have been paid in full in cash (other than indemnification obligations and other contingent obligations not then due and payable and as to which no claim has been made as at the time of determination), have expired, or have been terminated and (c) all Letters of Credit have terminated or expired without any pending drawing thereon (other than Letters of Credit as to which cash collateral has been provided to the applicable Issuing Bank in an amount equal to 105% of the amount of such outstanding Letters of Credit or other arrangements satisfactory to the applicable Issuing Bank (in the sole discretion of such Issuing Bank) have been made).
“Security Trustee” means JPMorgan Chase Bank, N.A. acting in its capacity as Security Trustee for the Secured Parties, and any successor Security Trustee appointed hereunder pursuant to the Guaranty and Collateral Agreement.
“SOFR” with respect to any day means the secured overnight financing rate published for such day by the NYFRB, as the administrator of the benchmark (or a successor administrator), on the Federal Reserve Bank of New York’s Website.
“SOFR-Based Rate” means SOFR, Compounded SOFR or Term SOFR.
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“Solvent” and “Solvency” means, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, Incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature in their ordinary course, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital, after giving due consideration to the prevailing practice in the industry in which such Person is engaged, and (e) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
“Special Purpose Vehicle” means (a) any Restricted Subsidiary of the Borrower that has no business other than to hold deposits in a CRF Account and has no liabilities other than those set forth in any Credit Document or (b) an entity with respect to a CRF Account funded with proceeds received by such entity in connection with a sale or casualty event related to such entity’s Mortgaged Vessel; provided that (a) such entity is a Closing Date Guarantor or has provided a Guaranty of the Secured Obligations by becoming a party to the Guaranty and Collateral Agreement pursuant to Section 6.12 and (b) as of the 60th day following the date of such Asset Sale or Event of Loss such entity has no liabilities, other than those set forth in any Credit Document.
“Specified Cash Management Obligations” means obligations in respect of any agreement providing for treasury, depositary, purchasing card or cash management services, including in connection with any automated clearing house transfers of funds or any similar transactions between the Borrower and any Lender or any Affiliate of a Lender.
“Stated Maturity” means, with respect to any Indebtedness, the date specified in the agreement governing or certificate relating to such Indebtedness as the fixed date on which the final payment of principal of such Indebtedness is due and payable, including pursuant to any mandatory redemption provision, but not including any contingent obligations to repay, redeem or repurchase any such principal prior to the date originally scheduled for the payment thereof.
“Statutory Reserve Rate” means, the aggregate of the maximum reserve, liquid asset or similar percentages (including any marginal, special, emergency or supplemental reserves) applicable to any member bank of the Federal Reserve System of the United States of America in respect of Eurocurrency Liabilities (as defined in Regulation D of the Board of Governors of the Federal Reserve System of the United States of America). Eurodollar Loans shall be deemed to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any other applicable law, rule or regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the Closing Date of any change in any reserve percentage.
“Sub-Agent” means JPMorgan Chase Bank, N.A. or such other Affiliate of JPMorgan Chase Bank, N.A., that conducts international monetary transactions on behalf of JPMorgan Chase Bank, N.A., as from time to time notified to the Borrower by the Administrative Agent.
“Subsidiary” means, for any Person, any other Person of which more than fifty percent (50%) of the outstanding stock or comparable Capital Stock having ordinary voting power for the election of the Board of Directors, managers or similar governing body of such other Person (irrespective of whether or not at the time such stock or other Capital Stock of any other class or classes of such other Person shall have or might
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have voting power by reason of the happening of any contingency), is at the time directly or indirectly owned by such former Person or by one or more of its Subsidiaries. Unless otherwise qualified, references to “Subsidiary” or “Subsidiaries” herein shall refer to those of the Borrower.
“Supported QFC” has the meaning set forth in Section 11.25.
“Swingline Commitment” means the commitment of the Swingline Lender to make loans pursuant to Section 2.15, as the same may be reduced from time to time as expressly provided pursuant to this Agreement. The amount of the Swingline Commitment shall initially be $10,000,000.
“Swingline Exposure” means at any time the aggregate principal amount at such time of all outstanding Swingline Loans. The Swingline Exposure of any Lender at any time shall equal its applicable Revolving Percentage of the aggregate Swingline Exposure at such time.
“Swingline Lender” has the meaning set forth in the first paragraph hereof.
“Swingline Loan” means any loan made by the Swingline Lender pursuant to Section 2.15.
“Swingline Maturity Date” means, with respect to any Swingline Loan, the date that is five (5) Business Days prior to the Maturity Date.
“Swingline Note” has the meaning set forth in Section 2.8(e).
“Swingline Request” has the meaning set forth in Section 2.15(b).
“Taxes” has the meaning set forth in Section 5.11.
“Term Facilities” means the 2019 Term Loans and any Incremental Term Loans.
“Term Loan Lender” means the 2019 Term Loan Lenders and any Incremental Term Loan Lender.
“Term Loan Note” has the meaning set forth in Section 2.8(e).
“Term Loans” means the 2019 Term Loans and any Incremental Term Loans.
“Term SOFR” means the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Trade Date” has the meaning set forth in Section 11.10(f).
“Transactions” means the execution, delivery and performance by the Borrower of this Agreement, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder.
“Triggering Acquisition” means (a) the acquisition of any assets (including Capital Stock) for which the aggregate gross consideration exceeds $50,000,000 or (b) the acquisition of any Vessel for which the aggregate gross consideration exceeds $25,000,000.
“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to Adjusted LIBO Rate or the Base Rate.
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“UCC” means, with respect to any applicable jurisdiction, the Uniform Commercial Code as in effect from time to time in such jurisdiction.
“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment; provided that, if the Unadjusted Benchmark Replacement as so determined would be less than zero, the Unadjusted Benchmark Replacement will be deemed to be zero for the purposes of this Agreement.
“Unfunded Vested Liabilities” means, for any Plan at any time, the amount (if any) by which the present value of all vested nonforfeitable accrued benefits under such Plan exceeds the fair market value of all Plan assets allocable to such benefits, determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of the Borrower or any of its Subsidiaries or ERISA Affiliates to the PBGC or such Plan.
“Unrestricted Subsidiary” means any Subsidiary of the Borrower designated as an Unrestricted Subsidiary in writing to the Administrative Agent pursuant to Section 7.9.
“Unrestricted Subsidiary Non-Recourse Debt” means any Indebtedness of any Unrestricted Subsidiary, in each case in respect of which the holder or holders thereof (a) shall have recourse only to, and shall have the right to require the obligations of such Unrestricted Subsidiary to be performed, satisfied, and paid only out of, the property of such Unrestricted Subsidiary and/or one or more of its Subsidiaries (but only to the extent that such Subsidiaries are Unrestricted Subsidiaries) and/or any other Person (other than Borrower and/or any Restricted Subsidiary) and (b) shall have no direct or indirect recourse (including by way of guaranty, support or indemnity) to the Borrower or any Restricted Subsidiary or to any of their property, whether for principal, interest, fees, expenses or otherwise, except for Capital Stock of such Unrestricted Subsidiary.
“U.S. Special Resolution Regimes” has the meaning set forth in Section 11.25.
“Vessel” means, collectively, tankers, barges, tugboats, articulated tug and barge units, marine vessels and other carriers.
“Wholly-Owned Subsidiary” means (a) any Restricted Subsidiary of which all of the outstanding Capital Stock (other than any directors’ qualifying shares under applicable law), on a fully-diluted basis, are owned by the Borrower and/ or one or more of the Wholly-Owned Subsidiaries or (b) any Restricted Subsidiary that is organized in a jurisdiction and is required by the applicable laws and regulations of such jurisdiction to be partially owned by the government of such jurisdiction or individual or corporate citizens of such jurisdiction, provided that the Borrower, directly or indirectly, owns the remaining Capital Stock in such Subsidiary and, by contract or otherwise, controls the management and business of such Subsidiary and derives economic benefits of ownership of such Subsidiary to substantially the same extent as if such Subsidiary were a Wholly-Owned Subsidiary.
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
Section 1.2 Time of Day. Unless otherwise expressly provided, all references to time of day in this Agreement and the other Credit Documents shall be references to New York, New York time.
Section 1.3 Accounting Terms; GAAP; Pro Forma Calculations.
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(a)Except as otherwise expressly provided herein, and subject to the provisions of this Section 1.3, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or financial accounting standard having a similar result or effect) to value any Indebtedness or other liabilities of the Borrower any Subsidiary at “fair value”, as defined therein and (ii) without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or financial accounting standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated matter as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof.
(b)Notwithstanding anything to the contrary contained herein, for purposes of calculating any financial test hereunder, compliance with such financial test and the components thereof, including Adjusted EBITDA, Interest Expense and Consolidated Funded Debt, shall be calculated in accordance with the definition of “Pro Forma Basis” with respect to any event described in such definition.
(c)If either the Borrower or the Required Lenders notifies the Administrative Agent that (i) any change in accounting principles from those used in the preparation of the financial statements of the Borrower referred to in Section 5.9 is hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accounts (or successors thereto or agencies with similar functions), and such change affects the calculation of any component of any financial covenant, standard or term found in this Agreement, or (ii) there is a change in federal, state or foreign tax laws which affects the Borrower’s or any of its Restricted Subsidiaries’ ability to comply with the financial covenants, standards or terms found in this Agreement, then if the Borrower shall so request, the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions (with the agreement of the Required Lenders or, if required by Section 11.11, all of the Lenders) so as to equitably reflect such changes with the desired result that the criteria for evaluating the Borrower’s and its Restricted Subsidiaries’ consolidated financial condition shall be the same after such changes as if such changes had not been made; provided that, with respect to the changes referred to in clause (i) above, until so amended (or until such request is withdrawn), regardless of whether any such request is made before or after such change or the application thereof, (x) such financial covenants, standards or terms shall continue to be computed in accordance with the relevant accounting principles as in effect immediate prior to such change therein becoming effective and (y) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculation of such financial covenant, standard or term made before and after giving effect to such change.
Section 1.4 Terms and Interpretations Generally.
(a)It is not intended that the specification of any exception to any covenant herein shall imply that the excepted matter would, but for such exception, be prohibited or required.
(b)For purposes of determining compliance with any covenant hereunder, in the event that any Incurrence of Indebtedness, granting of Liens, making of Restricted Payment or Asset Sales or any other action restricted by any covenant herein meets the criteria of more than one of the baskets or categories of exceptions to such covenant or any definition related thereto, the Borrower will be permitted to divide or classify (or later divide, classify or reclassify in whole or in part in its sole discretion) such action in any manner that complies with the relevant covenant or definition.
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(c)For purposes of determining compliance under Sections 7.2, 7.3, 7.4, 7.5 and 7.6, any amount in a currency other than Dollars will be converted to Dollars in a manner consistent with that used in calculating Consolidated Net Income in the annual financial statements of the Borrower and its Restricted Subsidiaries delivered pursuant to Section 5.9. Notwithstanding the foregoing, for purposes of determining compliance with Sections 7.2, 7.3 and 7.5, with respect to any amount of Indebtedness or Restricted Payment in a currency other than Dollars, no breach of any basket contained in such sections shall be deemed to have occurred solely as a result of changes in rates of exchange occurring after the time such Indebtedness is Incurred or Restricted Payment is made.
(d)Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns, (iii) the words “herein”, “hereof’ and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (iv) all references herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Agreement (unless specifically indicated otherwise) and (v) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
Section 1.5 Divisions. For all purposes under the Credit Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized and acquired on the first date of its existence by the holders of its Equity Interests at such time.
Section 1.6 LIBOR Notification. The London interbank offered rate is intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. In July 2017, the U.K. Financial Conduct Authority announced that, after the end of 2021, it would no longer persuade or compel contributing banks to make rate submissions to the ICE Benchmark Administration (together with any successor to the ICE Benchmark Administrator, the “IBA”) for purposes of the IBA setting the London interbank offered rate. As a result, it is possible that commencing in 2022, the London interbank offered rate may no longer be available or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on Eurodollar Loans. In light of this eventuality, public and private sector industry initiatives are currently underway to identify new or alternative reference rates to be used in place of the London interbank offered rate. Upon the occurrence of a Benchmark Transition Event or an Early Opt-In Election, Section 2.17(b) provides a mechanism for determining an alternative rate of interest. The Administrative Agent will promptly notify the Borrower, pursuant to Section 2.17(d), of any change to the reference rate upon which the interest rate on Eurodollar Loans is based. However, the Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission or any other matter related to the London interbank offered rate or other rates in the definition of “LIBO Rate” or with respect to any alternative or successor rate thereto, or replacement rate thereof (including, without limitation, (i) any such alternative, successor or replacement rate implemented pursuant to Section 2.17(b), whether upon the occurrence of a Benchmark Transition Event or any Early Opt-in Election, and (ii) the implementation of
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any Benchmark Replacement Conforming Changes pursuant to Section 2.17(c)), including without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of, the LIBO Rate or have the same volume or liquidity as did the London interbank offered rate prior to its discontinuance or unavailability.
ARTICLE II
THE CREDIT FACILITIES
Section 2.1 Loans.
(a)Revolving Loans. Subject to the terms and conditions hereof, each Revolving Lender severally and not jointly agrees to make one or more loans (each, a “Revolving Loan”) to the Borrower submitting a Borrowing Request from time to time on and after the Closing Date prior to the Revolving Commitment Termination Date on a revolving basis; provided, however, that no Lender shall be required to make any Revolving Loan if, immediately after giving effect thereto, (i) the aggregate Revolving Credit Exposure of all Revolving Lenders would thereby exceed the Revolving Credit Commitment Amount then in effect or (ii) the Revolving Credit Exposure of such Lender would thereby exceed its Revolving Commitment then in effect. Each Borrowing of Revolving Loans shall be made ratably from the Lenders in proportion to their respective Revolving Percentages. Revolving Loans may be repaid, in whole or in part, and all or any portion of the principal amounts thereof reborrowed, from time to time before the Revolving Commitment Termination Date, subject to the terms and conditions hereof. Funding of any Revolving Loans shall be in Dollars.
(b)2019 Term Loans. Subject to the terms and conditions hereof, each 2019 Term Loan Lender severally and not jointly agrees to make, on the Closing Date, a term loan (each, a “2019 Term Loan”) to the Borrower in an amount up to its 2019 Term Loan Credit Commitment. 2019 Term Loans are not revolving and amounts borrowed and repaid may not be thereafter reborrowed. Funding of any 2019 Term Loans shall be in Dollars.
(c)Loans and Commitments under the Prior Credit Agreement. On the Closing Date (or as soon as practicable with respect to Section 2.1(c)(iii)):
(i)the Borrower shall pay all accrued and unpaid commitment fees, undrawn facility fees, break funding fees under Section 2.11 and all other fees that are outstanding under the Prior Credit Agreement for the account of each “Lender” under the Prior Credit Agreement;
(ii)each “Base Rate Loan” and “Eurodollar Loan” outstanding under the Prior Credit Agreement shall be refunded as a Base Rate Loan or Eurodollar Loan, as applicable, under this Agreement pro rata in accordance with each Lender’s Commitment;
(iii)any “Note” executed and delivered by the Borrower under the Prior Credit Agreement is hereby automatically cancelled and of no further force or effect, and the Administrative Agent shall use reasonable efforts to cause all “Lenders” under the Prior Credit Agreement holding such notes to deliver to the Borrower, as soon as practicable after the Closing Date, all such notes marked “canceled” or otherwise similarly defaced;
(iv)any “Letters of Credit” issued under the Prior Credit Agreement shall be deemed issued under this Agreement; and
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(v)the Prior Credit Agreement and the commitments thereunder shall be superseded by this Agreement and such commitments shall terminate.
It is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities existing under the Prior Credit Agreement or evidence repayment of any such obligations and liabilities and that this Agreement, from and after the Closing Date, amend and restate in its entirety the Prior Credit Agreement and re-evidence the obligations of the Borrower and the other Credit Parties outstanding thereunder and that any Credit Document and/or Liens securing the Obligations (as defined in the Prior Credit Agreement) shall continue in full force and effect to secure the Obligations hereunder.
Section 2.2 Types of Loans and Minimum Borrowing Amounts. Borrowings of Loans may be outstanding as either Base Rate Loans or Eurodollar Loans, as selected by the Borrower pursuant to Section 2.3. Each Borrowing of Base Rate Loans shall be in an amount of not less than $1,000,000 and each Borrowing of Eurodollar Loans shall be in an amount of not less than $2,000,000 and in an integral multiple of $100,000 in excess thereof.
Section 2.3 Manner of Loan Borrowings; Continuations and Conversions of Borrowings.
(a)Notice of Borrowing. To request the advance of a Borrowing of Loans (other than Mandatory Borrowings), the Borrower shall give notice to the Administrative Agent, in accordance with Section 2.3(c), by no later than (i) 12:00 P.M. at least three (3) Business Days before the date on which the Borrower requests the Lenders to advance a Borrowing of Eurodollar Loans and (ii) 10:00 A.M. on the date the Borrower requests the Lenders to advance a Borrowing of Base Rate Loans.
(b)Notice of Continuation or Conversion of Outstanding Borrowings. The Borrower may from time to time elect to change or continue the type of interest rate borne by each Loan Borrowing or, subject to the minimum amount requirements in Section 2.1(c) for each outstanding Loan Borrowing, a portion thereof, as follows: (i) if such Borrowing is of Eurodollar Loans, the Borrower may continue part or all of such Borrowing as Eurodollar Loans for an Interest Period specified by it or convert part or all of such Borrowing into Base Rate Loans on the last day of the Interest Period applicable thereto, or the Borrower may earlier convert part or all of such Borrowing into Base Rate Loans so long as it pays the breakage fees and funding losses provided in Section 2.11; and (ii) if such Borrowing is of Base Rate Loans, the Borrower may convert all or part of such Borrowing into Eurodollar Loans for an Interest Period specified by it on any Business Day, in each case pursuant to notices of continuation or conversion as set forth below. The Borrower may select multiple Interest Periods for the Eurodollar Loans requested in any single Borrowing Request, provided that at no time shall the number of different Interest Periods for outstanding Eurodollar Loans exceed twenty (20) (it being understood for such purposes that (x) Interest Periods of the same duration, but commencing on different dates, shall be counted as different Interest Periods, and (y) all Interest Periods commencing on the same date and of the same duration shall be counted as one Interest Period regardless of the number of Borrowings or Loans involved). Notices of the continuation of such Eurodollar Loans for an additional Interest Period or of the conversion of part or all of such Eurodollar Loans into Base Rate Loans or of such Base Rate Loans into Eurodollar Loans must be given by no later than (A) 12:00 P.M. at least three (3) Business Days prior to the date of such continuation of, or conversion to, Eurodollar Loans and (B) 12:00 P.M. on the date of any conversion of Eurodollar Loans to Base Rate Loans.
(c)Manner of Notice. The Borrower shall give such notices concerning the advance, continuation, or conversion of a Borrowing described in Sections 2.3(a) and (b), as applicable, by telephone, facsimile or email (which notice shall be irrevocable once given and, if by telephone, shall be promptly confirmed in writing) pursuant to a Borrowing Request, which shall specify the date of the requested advance, continuation or conversion (which shall be a Business Day), the amount of the requested
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Borrowing, whether such Borrowing is to be comprised of a Borrowing of Revolving Loans or 2019 Term Loans, whether such Borrowing is to be advanced, continued, or converted, the Type of Revolving Loans to comprise such new, continued or converted Borrowing, if such Borrowing is to be comprised of Eurodollar Loans and the Interest Period applicable thereto and the Borrower. The Borrower agrees that the Administrative Agent may rely on any such telephonic, facsimile or email notice given by any Person it in good faith believes is an authorized representative of the Borrower without the necessity of independent investigation and that, if any such notice by telephone conflicts with any written confirmation, such telephonic notice shall govern if the Administrative Agent has acted in reliance thereon.
(d)Notice to the Lenders. The Administrative Agent shall give prompt telephonic, email or facsimile notice to each Revolving Lender and 2019 Term Loan Lender of any notice received by it pursuant to this Section 2.3 relating to a Revolving Loan Borrowing, or the 2019 Term Loan Borrowing, as applicable. The Administrative Agent shall give notice to the Borrower and each applicable Lender by like means of the interest rate applicable to each Borrowing of Eurodollar Loans of the Borrower (but, if such notice is given by telephone, the Administrative Agent shall confirm such rate in writing) promptly after the Administrative Agent has made such determination.
(e)Failure to Notify. If the Borrower fails to give notice pursuant to Section 2.3(a) or (b) of (i) the continuation or conversion of any outstanding principal amount of a Borrowing of Eurodollar Loans or (ii) a Borrowing of Revolving Loans to pay outstanding Reimbursement Obligations, and has not notified the Administrative Agent by (A) 12:00 P.M. at least three (3) Business Days before the last day of the Interest Period for any Borrowing of Eurodollar Loans or (B) the day such Reimbursement Obligation becomes due, respectively, that it intends to repay such Borrowing or Reimbursement Obligation, as applicable, the Borrower shall be deemed to have requested, respectively, (x) the continuation of such Borrowing as a Eurodollar Loan with an Interest Period of one (1) month or (y) the advance of a new Borrowing of Base Rate Loans on such day in the amount of the Reimbursement Obligation then due, which Borrowing pursuant to this clause (y) shall be deemed to have been funded on such date by the Revolving Lenders in accordance with Section 2.3(a) and to have been applied on such day to pay the Reimbursement Obligation then due, in each case so long as no Event of Default shall have occurred and be continuing or would occur as a result of such Borrowing but otherwise disregarding the conditions to the advance of Borrowings set forth in Section 4.2. Upon the occurrence and during the continuance of any Event of Default, and upon written notice thereof from the Administrative Agent to the Borrower (i) each Eurodollar Loan will automatically, on the last day of the then existing Interest Period therefor, convert into a Base Rate Loan, and (ii) the obligation of the Lenders to make, continue or convert Loans into Eurodollar Loans shall be suspended.
(f)Conversion. If the Borrower shall elect to convert any particular Borrowing pursuant to this Section 2.3 from one Type of Loan to the other only in part, then, from and after the date on which such conversion shall be effective, such particular Borrowing shall, for all purposes of this Agreement (including, for purposes of subsequent application of this sentence) be deemed to instead constitute two Borrowings (each originally advanced on the same date as such particular Borrowing), one comprised of (subject to subsequent conversion in accordance with this Agreement) Eurodollar Loans in an aggregate principal amount equal to the portion of such Borrowing so elected by the Borrower to be comprised of Eurodollar Loans and the second comprised of (subject to subsequent conversion in accordance with this Agreement) Base Rate Loans in an aggregate principal amount equal to the portion of such particular Borrowing so elected by the Borrower to be comprised of Base Rate Loans. If the Borrower shall elect to have multiple Interest Periods apply to any such particular Borrowing comprised of Eurodollar Loans, then, from and after the date such multiple Interest Periods commence, such particular Borrowing shall, for all purposes of this Agreement (including, for purposes of subsequent application of this sentence), be deemed to constitute a number of separate Borrowings (each originally commencing on the same date as such particular Borrowing) equal to the number of, and corresponding to, the different Interest Periods so
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selected, each such deemed separate Borrowing corresponding to a particular selected Interest Period comprised of (subject to subsequent conversion in accordance with this Agreement) Eurodollar Loans in an aggregate principal amount equal to the portion of such particular Borrowing so elected by the Borrower to have such Interest Period. This Section 2.3(f) shall be applied appropriately in the event that the Borrower shall make the elections described in the two preceding sentences at the same time with respect to the same particular Borrowing.
Section 2.4 Interest Periods. As provided in Section 2.3, at the time of each request for a Borrowing of Eurodollar Loans, or for the continuation or conversion of any Borrowing of Eurodollar Loans, the Borrower shall select the Interest Period(s) to be applicable to such Loans from among the available options, subject to the limitations in Section 2.3; provided, however, that:
(a)no Interest Period may be selected (1) with respect to Revolving Loans that extends beyond the Revolving Commitment Termination Date or (2) with respect to Term Loans that extends beyond the Maturity Date;
(b)whenever the last day of any Interest Period would otherwise be a day that is not a Business Day, the last day of such Interest Period shall be extended to the next succeeding Business Day; provided, however, that if the next succeeding Business Day is in the next calendar month, the last day of such Interest Period shall be the immediately preceding Business Day; and
(c)for purposes of determining an Interest Period, a month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month; provided, however, that if there is no such numerically corresponding day in the month in which an Interest Period is to end or if an Interest Period begins on the last Business Day of a calendar month, then such Interest Period shall end on the last Business Day of the calendar month in which such Interest Period is to end.
Section 2.5 Funding of Loans.
(a)Disbursement of Loans. Not later than 12:00 P.M. with respect to Borrowings of Eurodollar Loans, and 2:00 P.M. with respect to Borrowings of Base Rate Loans, on the date of any requested advance of a new Borrowing of Loans, each Lender, subject to all other provisions hereof, shall make available for the account of its applicable Lending Office its Loans comprising its portion of such Borrowing in funds immediately available for the benefit of the Administrative Agent in the applicable Administrative Agent’s Account and according to the payment instructions of the Administrative Agent. The Administrative Agent shall promptly make the proceeds of each such Borrowing available in immediately available funds to the Borrower (or as directed in writing by the Borrower) on such date. In the event that any Lender does not make such amounts available to the Administrative Agent by the time prescribed above, but such amount is received later that day, such amount shall nevertheless be promptly credited to the Borrower in the manner described in the preceding sentence (and if such credit is made on the next Business Day, with interest on such amount to begin accruing hereunder on such next Business Day); provided that acceptance by the Borrower of any such late amount shall not be deemed a waiver by the Borrower of any rights it may have against such Lender. No Lender shall be responsible to the Borrower for any failure by another Lender to fund its portion of a Borrowing, and no such failure by a Lender shall relieve any other Lender from its obligation, if any, to fund its portion of a Borrowing.
(b)Administrative Agent Reliance on Lender Funding. Unless the Administrative Agent shall have been notified by a Lender prior to the time at which such Lender is scheduled to make payment to the Administrative Agent of the proceeds of a Revolving Loan (which notice shall be effective upon receipt) that such Lender does not intend to make such payment, the Administrative Agent may assume that such Lender has made such payment when due and in reliance upon such assumption may (but shall not be
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required to) make available to the Borrower the proceeds of the Loan to be made by such Lender and, if any Lender has not in fact made such payment to the Administrative Agent, such Lender shall, on demand, pay to the Administrative Agent the amount made available to the Borrower attributable to such Lender together with interest thereon for each day during the period commencing on the date such amount was made available to the Borrower and ending on (but excluding) the date such Lender pays such amount to the Administrative Agent at a rate per annum equal to the Administrative Agent’s cost of funds for such amount. If such amount is not received from such Lender by the Administrative Agent immediately upon demand, the Borrower will, on demand, repay to the Administrative Agent the proceeds of the Loan attributable to such Lender with interest thereon at a rate per annum equal to the interest rate applicable to the relevant Loan, but the Borrower will in no event be liable to pay any amounts otherwise due pursuant to Section 2.11 in respect of such repayment. Nothing in this Section shall be deemed to relieve any Lender from any obligation to fund any Loans hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder.
(c)Source of Funding Options. Each Lender may, at its option, make any Loan available to the Borrower by causing any foreign or domestic branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.
Section 2.6 Applicable Interest Rates.
(a)Base Rate Loans. Each Base Rate Loan shall bear interest (computed on the basis of a 365-day year or 366-day year, as the case may be, and actual days elapsed including the first day but excluding the date of repayment) on the unpaid principal amount thereof from the date such Loan is made until maturity (whether by acceleration or otherwise) or conversion to a Eurodollar Loan, at a rate per annum equal to the lesser of (i) the Highest Lawful Rate or (ii) the Base Rate from time to time in effect plus the Applicable Margin. The Borrower agrees to pay such interest on each Interest Payment Date for such Loan and at maturity (whether by acceleration or otherwise).
(b)Eurodollar Loans. Each Eurodollar Loan shall bear interest (computed on the basis of a 360-day year and actual days elapsed including the first day but excluding the date of repayment) on the unpaid principal amount thereof from the date such Loan is made until maturity (whether by acceleration or otherwise) or conversion to a Base Rate Loan, at a rate per annum equal to the lesser of (i) the Highest Lawful Rate or (ii) the sum of Adjusted LIBO Rate plus the Applicable Margin. The Borrower agrees to pay such interest on each Interest Payment Date for such Loan and at maturity (whether by acceleration or otherwise) or, in the case of, conversion to a Base Rate Loan on a day prior to the end of the current Interest Period therefor, on the date of such conversion.
(c)Swingline Loans. Each Swingline Loan shall bear interest (computed on the basis of a 365-day year or 366-day year, as the case may be, and actual days elapsed including the first day but excluding the date of repayment) on the unpaid principal amount thereof from the date such Loan is made until maturity (whether by acceleration or otherwise) at a rate per annum equal to the lesser of (i) the Highest Lawful Rate or (ii) the Base Rate from time to time in effect plus the Applicable Margin for Base Rate Loans. The Borrower agrees to pay such interest on each Interest Payment Date for such Loan and at maturity (whether by acceleration or otherwise).
(d)Rate Determinations. The Administrative Agent shall determine each interest rate applicable to the Loans and Reimbursement Obligations hereunder insofar as such interest rate involves a determination of Base Rate, Adjusted LIBO Rate, LIBO Rate or LIBO Market Index Rate, or any applicable default rate pursuant to Section 2.7, and such determination shall be conclusive and binding except in the case of the Administrative Agent’s manifest error or willful misconduct. The Administrative
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Agent shall promptly give notice to the Borrower and each Lender of each determination of Adjusted LIBO Rate with respect to each Eurodollar Loan.
Section 2.7 Default Rate. If any payment of principal or interest on any Loan is not made when due after the expiration of the grace period therefor provided in Section 8.1(a) (whether by acceleration or otherwise), or any Reimbursement Obligation is not paid when due as provided in Section 2.12(c), such past due Loan or Reimbursement Obligation shall bear interest (computed on the basis of a year of 360, 365 or 366 days, as applicable, and actual days elapsed) after any such grace period expires until such principal then due is paid in full, which the Borrower agrees to pay on demand, at a rate per annum equal to:
(a)(i) for any Base Rate Loan, the lesser of (A) the Highest Lawful Rate and (B) the sum of two percent (2%) per annum plus the Base Rate from time to time in effect (but not less than the Base Rate in effect at the time such payment was due) plus the Applicable Margin, and (ii) for any Swingline Loan, the lesser of (A) the Highest Lawful Rate and (B) the sum of two percent (2%) per annum plus the LIBO Market Index Rate from time to time in effect (but not less than the LIBO Market Index Rate in effect at the time such payment was due) plus the Applicable Margin;
(b)for any Eurodollar Loan, the lesser of (i) the Highest Lawful Rate and (ii) the sum of two percent (2%) per annum plus the rate of interest (inclusive of the Applicable Margin) in effect thereon at the time of such default until the end of the Interest Period for such Loan and, thereafter, at a rate per annum equal to the sum of two percent (2%) per annum plus the Base Rate from time to time in effect (but not less than the Base Rate in effect at the time such payment was due) plus the Applicable Margin for Base Rate Loans; and
(c)for any unpaid Reimbursement Obligations, the lesser of (i) the Highest Lawful Rate and (ii) the sum of two percent (2%) per annum plus (x) in the case of any Reimbursement Obligations payable in Dollars, the Base Rate from time to time in effect (but not less than the Base Rate in effect at the time such payment was due) plus the Applicable Margin for Base Rate Loans, or (y) in the case of any Reimbursement Obligations payable in any currency other than Dollars, the interest rate (inclusive of the Applicable Margin) that would otherwise then be applicable under this Agreement to a Eurodollar Loan for an Interest Period of one month as from time to time in effect (but not less than such interest rate in effect at the time such payment was due).
It is the intention of the Administrative Agent and the Lenders to conform strictly to usury laws applicable to them. Accordingly, if the transactions contemplated hereby or any Loan or other Obligation would be usurious as to any of the Lenders under laws applicable to it (including the laws of the United States of America, including to the extent applicable, 46 U.S.C. Section 31322(b)), and the State of New York or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement, the Notes or any other Credit Document), then, in that event, notwithstanding anything to the contrary in this Agreement, the Notes or any other Credit Document, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under laws applicable to such Lender that is contracted for, taken, reserved, charged or received by such Lender under this Agreement, the Notes or any other Credit Document or otherwise shall under no circumstances exceed the Highest Lawful Rate, and any excess shall be credited by such Lender on the principal amount of the Loans or to the Reimbursement Obligations (or, if the principal amount of the Loans and all Reimbursement Obligations shall have been paid in full, refunded by such Lender to the Borrower); and (ii) in the event that the maturity of the Loans is accelerated by reason of an election of the holder or holders thereof resulting from any Event of Default hereunder or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under laws applicable to such Lender may never include more than the Highest Lawful Rate, and excess interest, if any, provided for in this Agreement, the Notes,
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any other Credit Document or otherwise shall be automatically canceled by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Loans or to the Reimbursement Obligations (or if the principal amount of the Loans and all Reimbursement Obligations shall have been paid in full, refunded by such Lender to the Borrower).
Section 2.8 Repayment of Loans; Evidence of Debt.
(a)Repayment of Loans.
(i)The Borrower hereby unconditionally promises to pay to the Administrative Agent, for the account of each Revolving Lender, on the Revolving Commitment Termination Date, the unpaid amount of each Revolving Loan made by such Lender to the Borrower then outstanding. The Borrower hereby unconditionally promises to pay to the Swingline Lender the unpaid principal amount of each Swingline Loan to the Borrower no later than the Revolving Commitment Termination Date.
(ii)The Borrower hereby unconditionally promises to pay to the Administrative Agent, for the ratable account of the 2019 Term Loan Lenders, in equal quarterly installments, which shall be due and payable on the last Business Day of each March, June, September and December, commencing with March, 2020 and ending with the last full Fiscal Quarter preceding the Maturity Date, an amount of 2.50% of the aggregate principal amount of the 2019 Term Loans outstanding as of the Closing Date, with the outstanding principal balance of the 2019 Term Loans due and payable on the Maturity Date.
(iii)The Borrower hereby unconditionally promises to pay to the Administrative Agent, for the ratable account of any Incremental Term Loan Lender, in equal quarterly installments, which shall be due and payable on the last Business Day of each March, June, September and December, commencing with the last day of the first Fiscal Quarter following the Increase Effective Date on which the extension of any Incremental Term Loans was made pursuant to Section 2.14(d) and ending with the last full Fiscal Quarter preceding the Maturity Date, an amount equal to 2.50% of the original aggregate principal amount of such Incremental Term Loans, with the outstanding principal balance of such Incremental Term Loans due and payable on the Maturity Date.
(b)Record of Loans by Lenders. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made to the Borrower by such Lender, including the amounts of principal and accrued interest payable and paid to such Lender from time to time hereunder.
(c)Record of Loans by Administrative Agent. The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and, with respect to Eurodollar Loans, the Interest Period applicable thereto, (ii) the amount of any principal or accrued interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.
(d)Evidence of Obligations. The entries made in the accounts maintained pursuant to Section 2.8(b) or (c) shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.
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(e)Notes. The Revolving Loans outstanding to the Borrower from any Lender shall, at the written request of such Lender, be evidenced by a Note of the Borrower payable to such Lender substantially in the form of Exhibit 2.8A (each, a “Revolving Note”). If requested by the Swingline Lender, the Swingline Loans outstanding to the Borrower shall be evidenced by a Note of the Borrower payable to the Swingline Lender substantially in the form of Exhibit 2.8B (each, a “Swingline Note”). The Term Loans outstanding to the Borrower from any Lender shall, at the written request of such Lender, be evidenced by a Note of the Borrower payable to such Lender substantially in the form of Exhibit 2.8C (each, a “Term Loan Note” and together with the Revolving Notes and the Swingline Note, each a “Note”). The Borrower agrees to execute and deliver to the Administrative Agent, for the benefit of each Lender requesting a Note, an original of each such Note, appropriately completed, to evidence the respective Loans made by such Lender to the Borrower hereunder, within ten (10) Business Days after the Borrower receives a written request therefor (or such longer period of time as such Lender may reasonably agree).
Section 2.9 Optional Prepayments of Loans. The Borrower shall have the right to prepay any Base Rate Loans or Swingline Loans, without premium or penalty, at any time and from time to time in whole or in part (but, if in part, then in an amount which is equal to or greater than $1,000,000); provided, however, that the Borrower shall have given notice of such prepayment to the Administrative Agent no later than 12:00 P.M. on the date of such prepayment. The Borrower shall have the right to prepay any Eurodollar Loans, without premium or penalty, at any time and from time to time in whole or in part (but, if in part, then in an amount which is equal to or greater than $1,000,000 and in an integral multiple of $100,000 in excess thereof or such smaller amount as needed to prepay any particular Borrowing in full) subject to any breakage fees and funding losses that are required to be paid pursuant to Section 2.11, with respect to any such prepayment on a day other than the last day of the applicable Interest Period of the applicable Loan; provided, however, that the Borrower shall have given notice of such prepayment to the Administrative Agent no later than 12:00 P.M. at least three (3) Business Days before the proposed prepayment date (or such shorter period as may be reasonably agreed by the Administrative Agent in its sole discretion). Any such prepayments shall be made by the payment of the principal amount to be prepaid and, with respect to any Eurodollar Loans, accrued and unpaid interest thereon to the date of such prepayment. Optional prepayments shall be applied to the Loans then outstanding in the order specified by the Borrower.
Section 2.10 Mandatory Prepayments of Loans.
(a)Excess Revolving Exposure. In the event and on each occasion that the aggregate Revolving Credit Exposure of all Lenders exceeds the Revolving Credit Commitment Amount then in effect, then (i) the Borrower shall promptly prepay Revolving Loans in an aggregate amount sufficient to eliminate such excess and (ii) if any excess remains after prepaying all of the Borrowings as a result of an L/C Exposure, pay to the Administrative Agent on behalf of the Lenders an amount equal to such excess to be held as cash collateral as provided in Section 8.4(b). Immediately upon determining the need to make any such prepayment, the Borrower shall notify the Administrative Agent of such required prepayment and of the identity of the particular Revolving Loans being prepaid. If the Administrative Agent shall notify the Borrower that the Administrative Agent has determined that any prepayment is required under this Section 2.10, the Borrower shall make such prepayment no later than the second Business Day following such notice. Any mandatory prepayment of Revolving Loans pursuant hereto shall not be limited by the notice or minimum prepayment requirements set forth in Section 2.9. Each such prepayment of Eurodollar Loans under this Section 2.10 shall be accompanied by a payment of all accrued and unpaid interest on the Loans prepaid and any applicable breakage fees and funding losses pursuant to Section 2.11.
(b)[Reserved].
(c)Asset Sales; Events of Loss. If, upon an Asset Sale or Event of Loss, either (i) the
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Borrower’s Leverage Ratio, when calculated as of the last day of the most recently ended period of four fiscal quarters for which financial statements are available and after giving pro forma effect to such Asset Sale or Event of Loss, is greater than 2.50 to 1.00, or (ii) the Borrower’s Collateral Coverage Ratio, when calculated on a pro forma basis after giving effect to such Asset Sale or Event of Loss, is less than the Minimum Collateral Coverage Ratio, then no later than the fifth (5th) Business Day following the date of receipt (or the date on which such amounts become Net Cash Proceeds by virtue of expiration of the relevant CRF Deposit Period) by the Borrower or any of its Restricted Subsidiaries of any Net Cash Proceeds in respect of any Asset Sale or Event of Loss, the Borrower shall, or shall cause the applicable Restricted Subsidiary to, prepay outstanding Term Loans for the ratable account of the Term Lenders in an amount equal to the lesser of (x) 100% of (A) in the case of an Asset Sale, the Net Cash Proceeds of such Asset Sale or (B) in the case of an Event of Loss, the Net Cash Proceeds of such Event of Loss in excess of $7,500,000 for each Collateral Vessel in respect of any Event of Loss related to such Collateral Vessel, and (y) such portion of the Net Cash Proceeds of such Asset Sale or Event of Loss necessary to reduce the Borrower’s Leverage Ratio to 2.50 to 1.00 and increase the Borrower’s Collateral Coverage Ratio to the Minimum Collateral Coverage Ratio.
(d)All prepayments of Loans under this Section 2.10 shall be accompanied by the concurrent payment of accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment.
(e)The Borrower shall deliver to the Administrative Agent and each Lender, at the time of each prepayment required under this Section 2.10 a certificate of an Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment.
(f)All prepayments under this Section 2.10 shall be subject to Section 2.11.
Section 2.11 Breakage Fees. If any Lender incurs any loss, cost or expense (excluding loss of anticipated profits and other indirect or consequential damages) by reason of the liquidation or re-employment of deposits or other funds acquired by such Lender to fund or maintain any Eurodollar Loan as a result of any of the following events other than any such occurrence as a result of a change of circumstance described in Sections 9.1 or 9.2:
(a)any payment, prepayment or conversion of any such Loan on a date other than the last day of its Interest Period (whether by acceleration, mandatory prepayment or otherwise);
(b)any failure to make a principal payment of any such Loan on the due date therefor; or
(c)any failure by the Borrower to borrow, continue or prepay, or convert to, any such Loan on the date specified in a notice given pursuant to Section 2.3 or Section 2.9, as applicable (other than by reason of a default of such Lender);
then the Borrower shall pay to such Lender such amount as will reimburse such Lender for such loss, cost or expense. If any Lender makes such a claim for compensation, it shall provide to the Borrower a certificate executed by an officer of such Lender setting forth the amount of such loss, cost or expense in reasonable detail (including an explanation of the basis for and the computation of such loss, cost or expense) no later than ninety (90) days after the event giving rise to the claim for compensation, and the amounts shown on such certificate shall be conclusive and binding in the absence of manifest error of such Lender’s entitlement thereto. Within ten (10) days of receipt of such certificate, the Borrower shall pay directly to such Lender such amount as will compensate such Lender for such loss, cost or expense as provided in such certificate, unless such Lender has failed to timely give notice to the Borrower of such claim for compensation as provided herein, in which event the Borrower shall not have any obligation to pay such claim.
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Section 2.12 Letters of Credit.
(a)Letters of Credit. Subject to the terms and conditions hereof and in reliance on the Lenders’ obligations under this Section 2.12, each Issuing Bank agrees to issue, from time to time on and after the Closing Date prior to the Revolving Commitment Termination Date, at the request of the Borrower, one or more standby letters of credit in form and substance reasonably acceptable to such Issuing Bank (each, a “Letter of Credit”) for the account of the Borrower or any Subsidiary in a face amount in each case of at least $1,000,000 (or, in either case, such lesser amount as the applicable Issuing Bank may agree to in its sole discretion); provided that an Issuing Bank shall not be required to issue, increase or extend a Letter of Credit pursuant to this Section 2.12 if (i) immediately after giving effect to the issuance, increase or extension thereof, the aggregate L/C Exposures of all Lenders would thereby exceed the L/C Limit, (ii) the issuance, increase or extension of such Letter of Credit would violate any legal or regulatory restriction then applicable to such Issuing Bank or any Revolving Lender or would violate one or more policies of such Issuing Bank generally applicable to all applicants with respect to the type of Letters of Credit requested, in each case as notified by such Issuing Bank or such Revolving Lender to the Administrative Agent before the date of issuance, increase or extension of such Letter of Credit or (iii) immediately after giving effect to the issuance, increase or extension thereof, the L/C Exposure of such Issuing Bank would exceed such Issuing Bank’s L/C Sublimit (unless otherwise agreed in writing to by such Issuing Bank in its sole discretion); and provided, further that, if there exists a Defaulting Lender, no Issuing Bank shall be required to issue, increase or extend a Letter of Credit unless the Borrower shall have complied with Section 2.12(g) with respect to any Fronting Exposure that exists at the time of such issuance, increase or extension, as applicable, or would exist immediately after giving effect to such issuance, increase or extension, as applicable. Letters of Credit and any increases and extensions thereof hereunder shall be issued in face amounts denominated in Dollars.
(b)Issuance Procedure.
(i)To request that an Issuing Bank issue a Letter of Credit, at least three (3) Business Days prior to the date of the requested issuance (or such shorter period of time as such Issuing Bank may reasonably agree to in its sole discretion), the Borrower shall deliver to such Issuing Bank (x) a duly executed application for such Letter of Credit substantially in such Issuing Bank’s customary form or in such other form as may be approved by the Borrower and such Issuing Bank or complete such other computerized issuance or application procedure, instituted from time to time by such Issuing Bank and agreed to by the Borrower (each, an “Application”), appropriately completed and signed by an Authorized Officer of the Borrower and including agreed-upon draft language for such Letter of Credit reasonably acceptable to the applicable Issuing Bank, in each case, completed to the reasonable satisfaction of such Issuing Bank, and (y) such other information as such Issuing Bank may reasonably request in accordance with its customary letter of credit issuance procedures, including information that would permit such Issuing Bank to verify the beneficiary’s identity or to comply with any applicable law or regulations, including any Sanctions Laws and Regulations. Upon the receipt by the applicable Issuing Bank of a properly completed and, if applicable, executed Application and any other reasonably requested information in accordance with the terms of the preceding sentence, such Issuing Bank will process such Application in accordance with its customary procedures and issue the requested Letter of Credit on the requested issuance date. In the event of any irreconcilable conflict between the terms and conditions of this Agreement and an Application, the provisions of this Agreement shall govern. Unless the applicable Issuing Bank has received notice from the Administrative Agent prior to the requested issuance that any of the conditions to issuance (whether set forth herein, in Section 4.2 or otherwise) have not been satisfied, the applicable Issuing Bank may assume that all such conditions have been satisfied. The Borrower requesting the issuance of any Letter of Credit may cancel such request to issue such Letter of Credit at any time prior to the actual issuance thereof by providing the applicable Issuing Bank with written notice thereof; provided, that, for the avoidance of doubt, the Borrower shall remain liable to such Issuing Bank for all costs and
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expenses reasonably Incurred by such Issuing Bank in connection therewith. Unless cash collateralized in a manner satisfactory to the relevant Issuing Bank or other arrangements satisfactory to the relevant Issuing Bank (in such Issuing Bank’s sole discretion) with respect thereto have been made as provided below and a later date is otherwise agreed to by the applicable Issuing Bank, each Letter of Credit shall have an expiration date no later than five (5) Business Days before the Revolving Commitment Termination Date. Each Issuing Bank that issues a Letter of Credit agrees to issue amendments to any Letter of Credit increasing its amount, or extending its expiration date, at the request of the Borrower, subject to the conditions precedent set forth in Section 4.2 (which each Issuing Bank may assume are satisfied unless notified otherwise by the Administrative Agent in accordance with this Section 2.12(b)) and the other terms and conditions of this Section 2.12.
(ii)If the Borrower so requests in any applicable Application and, in any event, in the case of Letters of Credit with a one-year tenor, the relevant Issuing Bank may, in its sole discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that (A) any such Auto-Extension Letter of Credit must permit the Issuing Bank to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued (and, unless an Event of Default is continuing, such Issuing Bank shall give such notice of non-extension to the beneficiary if so directed by the Borrower) and (B) the Issuing Bank will not permit the extension of any Letter of Credit that would result in the expiration date of such Letter of Credit being later than the date that is five (5) Business Days prior to the Revolving Commitment Termination Date (unless such Letter of Credit is cash collateralized or other arrangements satisfactory to the relevant Issuing Bank in such Issuing Bank’s sole discretion) with respect thereto have been made as provided below and a later date is otherwise agreed to by the applicable Issuing Bank). Unless otherwise notified to the Borrower by the applicable Issuing Bank, the Borrower shall not be required to make a specific request to the Issuing Bank for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the applicable Issuing Bank to permit the extension of such Letter of Credit at any time to an expiry date not later than the earlier of (A) one year from the date of such issuance or an anniversary of any such extension and (B) the date that is five (5) Business Days prior to the Revolving Commitment Termination Date (unless such Letter of Credit is cash collateralized or other arrangements satisfactory to the relevant Issuing Bank (in such Issuing Bank’s sole discretion) with respect thereto have been made as provided below and a later date is otherwise agreed to by the applicable Issuing Bank); provided that such Issuing Bank shall not permit any such extension if (x) such Issuing Bank has determined that it would have no obligation at such time to issue such Letter of Credit in its extended form under the terms hereof (by reason of the provisions of Section 2.12 or otherwise), or (y) it has received notice on or before the day that is two (2) Business Days before the date which has been agreed upon pursuant to the proviso of the first sentence of this Section 2.12(b)(ii), from the Administrative Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 4.2 are not then satisfied. Notwithstanding anything to the contrary herein, any Letter of Credit (including an Auto-Extension Letter of Credit) may have an expiration date later than the date that is five (5) Business Days before the Revolving Commitment Termination Date, if (A) the Borrower requesting such Letter of Credit shall provide, no later than the Revolving Commitment Termination Date, (x) cash collateral to the applicable Issuing Bank in an amount equal to 105% of the undrawn face amount of such Letter of Credit or (y) a back-to-back letter of credit in form and substance satisfactory to the applicable Issuing Bank (in its sole discretion) in an amount equal to 105% of the undrawn face amount of such Letter of Credit from a bank or financial institution reasonably satisfactory to the applicable Issuing Bank) and which provides that such Issuing Bank may make a drawing thereunder in the event that such Issuing Bank pays a drawing under such Letter of Credit or (B) other arrangements satisfactory to the applicable Issuing Bank in its sole discretion shall have been made with respect to such Letter of Credit; provided, each Revolving Lender’s participation under Section 2.12(d) in any such Letter of Credit shall revert to such Issuing Bank on the
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Revolving Commitment Termination Date, and no Revolving Lender shall be entitled to any Letter of Credit fees pursuant to Section 3.1(b) on and after the Revolving Commitment Termination Date.
(c)Reimbursement Obligations, etc.
(i)The Borrower hereby irrevocably and unconditionally agrees to reimburse each Issuing Bank for each payment or disbursement made by such Issuing Bank under a Letter of Credit requested by the Borrower (a “Reimbursement Obligation”) within two (2) Business Days of the date that the Borrower receives notice from such Issuing Bank that such draft has been paid or such other payment has been made (and such Issuing Bank hereby agrees to give the Borrower such notice within one (1) Business Day after such draft is drawn or such other payment is made, provided, however, that the failure of such Issuing Bank to provide notice within such time period shall not release Borrower from its Reimbursement Obligations). Reimbursement Obligations may be reimbursed by the Borrower with either funds not borrowed hereunder or with a Borrowing of Revolving Loans in accordance with Section 2.3 (including paragraph (e) thereof) and subject to the other applicable terms and conditions contained in this Agreement. Reimbursement Obligations shall bear interest (which the Borrower hereby promises to pay) from and after the date such draft is paid or other payment is made until (but excluding the date) such Reimbursement Obligation is paid at the lesser of (A) the Highest Lawful Rate and (B) the Base Rate plus the Applicable Margin (in the case of a Reimbursement Obligation payable in Dollars) or the rate of interest that would then be applicable hereunder to an Eurodollar Loan with an Interest Period of one month plus the Applicable Margin, in each case so long as such Reimbursement Obligation shall not be past due, and thereafter at the default rate per annum as set forth in Section 2.7(c), whether or not the Revolving Commitment Termination Date shall have occurred.
(ii)In determining whether to honor any drawing under any Letter of Credit by the beneficiary(ies) thereof, the parties hereto agree that, with respect to drafts or other documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the applicable Issuing Bank may, in its reasonable discretion, either accept and make payment upon such drafts or other documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. For the avoidance of doubt, the parties hereto further acknowledge and agree that in respect of any Letter of Credit that contains a non-documentary condition, including any determination as to whether the Borrower or other Person performed or failed to perform obligations under any contract, the applicable Issuing Bank shall deem such condition as not stated and shall disregard such condition.
(iii)The Borrower assumes all risks of the acts or omissions of any beneficiary of any Letter of Credit with respect to its or any Credit Party’s use of such Letter of Credit. Neither an Issuing Bank nor any of its respective officers or directors shall be liable or responsible for: (a) the use which may be made of any Letter of Credit or any proceeds therefrom or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (c) any other circumstances (whether or not similar to any of the foregoing) whatsoever in making or failing to make payment under any Letter of Credit, including such Issuing Bank’s own negligence, but not for such Issuing Bank’s gross negligence or willful misconduct.
(iv)The Borrower agrees for the benefit of each Issuing Bank and each Revolving Lender that, notwithstanding any provision of any Application, the obligations of the Borrower under this Section 2.12(c) and each applicable Application shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement and each applicable Application under all circumstances whatsoever (other than the defense of payment in full in accordance
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with this Agreement), including, the following circumstances (subject in all cases to the defense of payment in full in accordance with this Agreement):
(A)any lack of validity or enforceability of any of the L/C Documents;
(B)any amendment or waiver of or any consent to depart from all or any of the provisions of any of the L/C Documents;
(C)the existence of any claim, set-off, defense or other right the Borrower or any Subsidiary may have at any time against a beneficiary of a Letter of Credit (or any person for whom a beneficiary may be acting), an Issuing Bank, any Lender or any other Person, whether in connection with this Agreement, another L/C Document or any unrelated transaction;
(D)any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;
(E)payment by any Issuing Bank under a Letter of Credit against presentation to such Issuing Bank of a draft or certificate that does not comply with the terms of the Letter of Credit; or
(F)any other act or omission to act or delay of any kind by any Issuing Bank, any Lender or any other Person or any other event or circumstance whatsoever that might, but for the provisions of this Section 2.12(c), constitute a legal or equitable discharge of the Borrower’s obligations hereunder or under an Application;
provided, however, the foregoing shall not be construed to excuse an Issuing Bank from liability to the Borrower to the extent of any direct damages (but excluding special, indirect, consequential or punitive damages, which are hereby waived to the extent not prohibited by applicable law) suffered by the Borrower that are caused by such Issuing Bank’s gross negligence or willful misconduct as found in a final non-appealable judgment of a court of competent jurisdiction.
(d)The Participating Interests. Immediately upon the issuance or increase of each Letter of Credit, without any further action by any Person, each Revolving Lender severally and not jointly shall be deemed to have purchased from each Issuing Bank, and such Issuing Bank shall be deemed to have sold to each Revolving Lender, an undivided percentage participating interest, to the extent of its Revolving Percentage, in each Letter of Credit issued or increased by, and Reimbursement Obligation owed to, such Issuing Bank in connection with a Letter of Credit. Upon any failure by the Borrower to pay any Reimbursement Obligation in connection with a Letter of Credit issued by an Issuing Bank at the time required in Sections 2.12(c) and 2.3(e), or if such Issuing Bank is required at any time to return to the Borrower or to a trustee, receiver, liquidator, custodian or other Person any portion of any payment by the Borrower of any Reimbursement Obligation in connection with a Letter of Credit, such Issuing Bank shall promptly give notice of same to the Administrative Agent and the Administrative Agent shall promptly give notice thereof to each Revolving Lender. Such Issuing Bank shall have the right to require each Revolving Lender to fund its participation in such Reimbursement Obligation. Each Revolving Lender (except the Issuing Bank that issued such Letter of Credit, if it is also a Revolving Lender) shall pay to the Administrative Agent for the account of the applicable Issuing Bank an amount equal to such Revolving Lender’s Revolving Percentage of such unpaid or recaptured Reimbursement Obligation not later than the Business Day it receives notice from the Administrative Agent to such effect, if such notice is received before 2:00 P.M., or not later than the following Business Day if such notice is received after such time. The Administrative Agent shall promptly pay such amounts to such Issuing Bank. If a Revolving Lender
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fails to pay timely such amount to the Administrative Agent for the account of the applicable Issuing Bank, it shall also pay to the Administrative Agent for the account of the applicable Issuing Bank interest on such amount accrued from the date payment of such amount was made by such Issuing Bank to the date of such payment by the Revolving Lender at a rate per annum equal to the Base Rate in effect for each such day and only after such payment shall such Revolving Lender be entitled to receive its Revolving Percentage of each payment received on the relevant Reimbursement Obligation and of interest paid thereon. The Administrative Agent shall promptly pay such amounts to such Issuing Bank. The several obligations of the Revolving Lenders to the Issuing Banks under this Section 2.12(d) shall be absolute, irrevocable and unconditional under any and all circumstances whatsoever and shall not be subject to any set-off, counterclaim or defense to payment any Lender may have or have had against the Borrower, any Issuing Bank, any other Lender or any other Person whatsoever including any defense based on or related to (i) the failure of the demand for payment under the Letter of Credit to conform to the terms of such Letter of Credit, (ii) the legality, validity, regularity or enforceability of such Letter of Credit, (iii) force majeure or (iv) ANY DEFENSE RESULTING FROM AN ISSUING BANK’S OWN SIMPLE OR CONTRIBUTORY NEGLIGENCE. Without limiting the generality of the foregoing, such obligations shall not be affected by any Default or Event of Default or by any subsequent reduction or termination of any Revolving Commitment of a Revolving Lender, and each payment by a Revolving Lender under this Section 2.12 shall be made without any offset, abatement, withholding or reduction whatsoever.
(e)Letter of Credit and Reimbursement Obligation Amounts. Unless otherwise specified herein, the amount of a Letter of Credit or Reimbursement Obligation at any time shall be deemed to be, respectively, the stated amount of such Letter of Credit in effect at such time or the amount of Reimbursement Obligation outstanding at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Application related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
(f)Letters of Credit Issued for Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary, the Borrower shall be obligated to reimburse the applicable Issuing Bank hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance (or increase or extension) of Letters of Credit for the account of its Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the issuance (or increase or extension) of such Letters of Credit and the businesses of such Subsidiaries.
(g)Letter of Credit Fronting Exposure. If, at any time there shall exist any Fronting Exposure with respect to Letters of Credit, then the Borrower shall, if the full amount of such Fronting Exposure has not been reallocated pursuant to Section 2.16(a)(iv), promptly upon the request of the Administrative Agent or the applicable Issuing Bank, take one or more of the following actions as the Borrower may elect: (i) deliver to the Administrative Agent cash (with respect to each Letter of Credit in the same currency as the currency in which such Letter of Credit is issued) or Cash Equivalent Collateral to secure such unallocated Fronting Exposure in accordance with Section 8.4(b) and/or (ii) enter into other arrangements satisfactory to such Issuing Bank (in such Issuing Bank’s sole discretion, including pursuant to Section 9.6) with the Issuing Bank to eliminate such Fronting Exposure.
Section 2.13 Reductions and Terminations of the Commitments and the Swingline Commitment. The Borrower shall have the right at any time and from time to time, upon three (3) Business Days’ prior and irrevocable written notice (provided, such notice may be conditioned upon the effectiveness of other credit facilities or the closing of one or more securities offerings, in which case such notice shall be deemed rescinded if such condition shall fail to be satisfied by the proposed Closing Date of such commitment
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termination, provided, further, that upon any such rescission, the Borrower shall be liable for any breakage fees and funding losses that are required to be paid pursuant to Section 2.11) to the Administrative Agent, to terminate or reduce the Commitments or the Swingline Commitment, in each case without premium or penalty and in whole or in part, with any partial reduction (i) to be in an amount not less than $1,000,000 as determined by the Borrower and in integral multiples of $1,000,000 in excess thereof and (ii) as to the Commitments, to be allocated ratably among the Lenders in proportion to their respective Revolving Percentages; provided, that the Revolving Credit Commitment Amount may not be reduced to an amount less than the aggregate Revolving Credit Exposure of all Lenders, after giving effect to payments on such proposed termination or reduction date; provided, however, that for purposes of determining the amount of L/C Obligations in the immediately preceding proviso, such L/C Obligations may be reduced on a dollar-for-dollar basis by the amount of (a) cash and Cash Equivalent Collateral deposited with the Administrative Agent for the purpose of securing such L/C Obligations and (b) the face amount of back-to-back letters of credit issued in connection with one or more Letters of Credit included in such L/C Obligations by a bank(s) or financial institution(s) whose short-term unsecured debt rating is rated A or above by either S&P or Moody’s or such other bank(s) or financial institution(s) satisfactory to the Required Revolving Lenders with an expiration date of at least five (5) days after the expiration date of the applicable backstopped Letter of Credit and which provides that the Administrative Agent may make a drawing thereunder in the event that a drawing is made under the applicable backstopped Letter of Credit; provided, further that the Revolving Credit Commitment Amount may not be reduced to an amount less than the Swingline Commitment, after giving effect to any contemporaneous reduction thereof. The Administrative Agent shall give prompt notice to each Revolving Lender of any such termination or reduction of the Revolving Commitments or the Swingline Commitment. Any termination of Commitments or the Swingline Commitment pursuant to this Section 2.13 is permanent and may not be reinstated.
Section 2.14 Increase of Revolving Commitments and Incremental Term Loans.
(a)The Borrower may, upon ten (10) Business Days’ prior written notice to the Administrative Agent, request, on one or more occasions, the establishment of one or more Incremental Commitment. Each such notice shall specify (i) the date (each, an “Increase Effective Date”) on which the Borrower proposes that the requested Incremental Commitment shall become effective, which date shall be a date not less than ten (10) Business Days after the date on which such notice is delivered to the Administrative Agent and (ii) the identity of each Incremental Lender to whom the Borrower proposes any portion of such Incremental Commitments be allocated and the amounts of such allocations; provided that any existing Lender approached to provide all or a portion of the Incremental Commitments may elect or decline, in its sole discretion, to provide such Incremental Commitment.
(b)Any Incremental Commitment requested pursuant to Section 2.14(a) shall become effective, as of such Increase Effective Date; provided that:
(i)the Administrative Agent shall have received evidence satisfactory to it that the conditions set forth in Section 4.2 have been satisfied or waived;
(ii)on the Increase Effective Date, after giving pro forma effect to the making of any Loans pursuant to the Incremental Commitments (each such Loan, an “Incremental Loan”), the Borrower shall be in pro forma compliance with the covenants set forth in Section 7.7 as of the last day of the most recently ended Fiscal Quarter;
(iii)the Administrative Agent shall have received an Incremental Amendment in form and substance reasonably satisfactory to the Administrative Agent and consistent with the
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provisions of Section 4.2 and this Section 2.14 (which, notwithstanding anything in Section 11.11 to the contrary, shall not require the consent of any Lender other than the Incremental Lenders);
(iv)the aggregate principal amount of any Incremental Term Loan Commitments made pursuant to any Incremental Amendments shall not, at any time, exceed $25,000,000 and shall not be less than $10,000,000;
(v)the aggregate principal amount of any Incremental Revolving Commitments made pursuant to any Incremental Amendments shall not, at any time, exceed $25,000,000 and shall not be less than $10,000,000; and
(vi)all fees and expenses owing in respect of such increase to the Administrative Agent and the Lenders providing the Incremental Loans shall have been paid.
(c)The terms and provisions of the Incremental Loans shall be as follows:
(i)the pricing, covenants, representations and warranties and events of default applicable to any Incremental Loans shall be the same as those applicable to the then-outstanding loans under this Agreement;
(ii)and
(iii)all such Incremental Loans shall be due and payable on the Maturity Date.
Notwithstanding Section 11.11 or anything in this Agreement or any other Credit Document to the contrary, the Incremental Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Credit Documents as may be necessary, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.14.
(d)On any Increase Effective Date on which Incremental Commitments for Incremental Loans are effective, subject to the satisfaction of the foregoing terms and conditions, each Incremental Lender having an effective Incremental Commitment shall make an Incremental Loan to the Borrower in accordance with the terms of the Incremental Amendment providing for such Incremental Commitment.
(e)The Incremental Loans and Incremental Commitments established pursuant to this Section 2.14 shall constitute Loans and Commitments under, and shall be entitled to all the benefits afforded by, this Agreement and the other Credit Documents, and shall, without limiting the foregoing, benefit equally and ratably from the Guaranty and security interests created by the Collateral Documents. The Guarantors shall take any actions reasonably required by the Administrative Agent to ensure and/or demonstrate that the Liens and security interests granted by the Collateral Documents continue to be perfected under the UCC or otherwise after giving effect to the establishment of any such Loans and Commitments substantially similar to those applicable to the then-outstanding Loans.
Section 2.15 Swingline Loans.
(a)Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans in Dollars to the Borrower from time to time on and after the Closing Date prior to the Swingline Maturity Date, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding the Swingline Commitment, (ii) the sum of (x) the Swingline Exposure of such Swingline Lender, (y) the aggregate principal amount of outstanding Revolving Loans made by such Swingline Lender (in its capacity as a Revolving Lender) and
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(z) the L/C Exposure of such Swingline Lender (in its capacity as a Revolving Lender) exceeding its Revolving Commitment then in effect and (iii) the aggregate Revolving Credit Exposure of all Revolving Lenders exceeding the Revolving Credit Commitment Amount then in effect. The Swingline Loans shall be Base Rate Loans. Each outstanding Swingline Loan shall be repaid in full on the earlier of (a) fifteen (15) Business Days after such Swingline Loan is initially borrowed and (b) the Swingline Maturity Date. No Swingline Lender shall make any Swingline Loan after receiving a written notice from the Borrower, the Administrative Agent or any Lender stating that an Event of Default exists and is continuing until such time as the Swingline Lenders shall have received written notice of (i) rescission of all such notices from the party or parties originally delivering such notice or (ii) the waiver of such Event of Default in accordance with Section 11.11. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, repay and reborrow Swingline Loans.
(b)To request a Swingline Loan, the Borrower shall deliver, by hand delivery, facsimile or email, a duly completed and executed Swingline Loan Request substantially in the form of Exhibit 2.15 (each, a “Swingline Request”) to the Administrative Agent and the Swingline Lender, not later than 2:00 p.m., on the requested advance date of a proposed Swingline Loan. Each such Swingline Request shall be irrevocable and shall specify the requested date (which shall be a Business Day) and the amount of the requested Swingline Loan and the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower to an account as directed in writing by the Borrower in the applicable Swingline Request maintained with the Administrative Agent by 3:00 p.m. on the requested date of such Swingline Loan. Swingline Loans shall be made in minimum amounts of $1,000,000 and integral multiples of $100,000 above such amount.
(c)On any Business Day, the Swingline Lender may, in its sole discretion, give notice to each Revolving Lender that all then-outstanding Swingline Loans shall be funded with a Borrowing of Revolving Loans, in which case Revolving Loans constituting Base Rate Loans (each such Borrowing, a “Mandatory Borrowing”) shall be made on the immediately succeeding Business Day by each Revolving Lender pro rata based on each Revolving Lender’s Revolving Percentage, and the proceeds thereof shall be applied directly to the Swingline Lender to repay the Swingline Lender for such outstanding Swingline Loans. Each Revolving Lender hereby irrevocably agrees to make such Revolving Loans upon one Business Day notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified to it in writing by the Swingline Lender notwithstanding (i) that the amount of the Mandatory Borrowing may not comply with the minimum amount for each Borrowing specified in Section 2.2, (ii) whether any conditions specified in Section 4.2 are then satisfied, (iii) whether a Default or an Event of Default has occurred and is continuing, (iv) the date of such Mandatory Borrowing or (v) any reduction in the aggregate Revolving Commitment after any such Swingline Loans were made. In the event that, in the sole judgment of the Swingline Lender, any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including as a result of the commencement of a proceeding under the Bankruptcy Code in respect of the Borrower), each Revolving Lender hereby agrees that it shall forthwith purchase from the Swingline Lender (without recourse or warranty) such participation of the outstanding Swingline Loans as shall be necessary to cause the Revolving Lenders to share in such Swingline Loans ratably based upon their respective Revolving Percentages, provided that all principal and interest payable on such Swingline Loans shall be for the account of the Swingline Lender until the date the respective participation is purchased and, to the extent attributable to the purchased participation, shall be payable to such Revolving Lender purchasing same from and after such date of purchase.
(d)Mandatory Borrowings shall be made upon the notice specified in Section 2.15(c), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set forth in such Section.
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(e)If, at any time there shall exist any Fronting Exposure with respect to the Swingline Exposure, then the Borrower shall, if the full amount of such Fronting Exposure has not been reallocated pursuant to Section 2.16(a)(iv), promptly upon the request of the Administrative Agent or the Swingline Lender, prepay such Swingline Loan to eliminate such unallocated Fronting Exposure or enter into other arrangements satisfactory to the Swingline Lender (in the Swingline Lender’s sole discretion, including pursuant to Section 9.6) with the Swingline Lender to eliminate such Fronting Exposure.
Section 2.16 Defaulting Lenders.
(a)Adjustments. Notwithstanding anything to the contrary contained in this Agreement or any other Credit Document, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:
(i)Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement or any other Credit Document shall be restricted as set forth in Section 11.10(a).
(ii)Reallocation of Payments. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise, and including any amounts made available to the Administrative Agent by such Defaulting Lender pursuant to Section 11.6), shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Issuing Banks or Swingline Lender hereunder; third, if so determined by the Administrative Agent or requested by the Issuing Banks or Swingline Lender, to be held as collateral for future funding obligations of such Defaulting Lender of any participation in any Letter of Credit or Swingline Loan; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a non-interest bearing deposit account and released in order to satisfy obligations of such Defaulting Lender to fund Loans under this Agreement; sixth, to the payment of any amounts owing to the Lenders, the Issuing Banks or Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the Issuing Banks or Swingline Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to a Credit Party as a result of any judgment of a court of competent jurisdiction obtained by such Credit Party against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or Reimbursement Obligations in respect of which such Defaulting Lender has not fully funded its appropriate share and (y) such Loans or Reimbursement Obligations were made at a time when the conditions set forth in Section 4.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and Reimbursement Obligations owed to, all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or Reimbursement Obligations owed to, such Defaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held to be applied) pursuant to this Section 2.16(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and such Defaulting Lender shall have no recourse to any Credit Party for the payment of such amounts, and each Lender irrevocably consents hereto and the application of such payments in accordance with this Section shall not constitute an Event of Default or a Default, and no payment of principal of or interest on the Loans of such Defaulting Lender shall be considered to be overdue for purposes of any Credit Document, if, had such
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payments been applied without regard to this Section, no such Event of Default or Default would have occurred and no such payment of principal of or interest on the Loans of such Defaulting Lender would have been overdue.
(iii)Certain Fees. Commitment fees under Section 3.1(a) shall cease to accrue on the Commitment of such Defaulting Lender and such Defaulting Lender shall not be entitled to receive any letter of credit fees under Section 3.1(b), in each case for any period during which such Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fees that otherwise would have been required to have been paid to such Defaulting Lender).
(iv)Reallocation of Percentages to Reduce Fronting Exposure. During any period in which there is a Revolving Lender that is a Defaulting Lender, for purposes of computing the amount of the obligation of each non-Defaulting Lender that is a Revolving Lender to acquire, refinance or fund participations in Letters of Credit or Swingline Loans pursuant to Sections 2.12 and 2.15, the “Revolving Percentage” of each non-Defaulting Lender that is Revolving Lender shall be computed without giving effect to the Revolving Commitment of such Defaulting Lender; provided that, the aggregate obligation of each non-Defaulting Lender that is a Revolving Lender to acquire, refinance or fund participations in Letters of Credit and Swingline Loans shall not exceed the positive difference, if any, of (A) the Revolving Commitment of such non-Defaulting Lender minus (B) the Revolving Credit Exposure of such non-Defaulting Lender.
(b)Defaulting Lender Cure. If the Borrower, the Administrative Agent, and with respect to a Revolving Lender, the Swingline Lender and the Issuing Banks agree in writing in their sole discretion that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the Closing Date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any collateral), such Lender will, to the extent applicable, purchase that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the outstanding Loans and funded and unfunded participations in Letters of Credit and Swingline Loans to be held on a pro rata basis by the Lenders in accordance with their respective Revolving Percentages (without giving effect to Section 2.16(a)(iv)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of any Credit Party while such Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder in any Lender’s status from Defaulting Lender to non-Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.
(c)No Waiver. The rights and remedies against, and with respect to, a Defaulting Lender under this Section 2.16(c) are in addition to, and cumulative and not in limitation of, all other rights and remedies that the Administrative Agent and each Lender, Issuing Bank, Swingline Lender, the Borrower or any other Credit Party may at any time have against, or with respect to, such Defaulting Lender.
Section 2.17 Alternate Rate of Interest.
(a)If prior to the commencement of any Interest Period for a Eurodollar Borrowing:
(i)the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable (including because the LIBO Screen Rate is not available or published on a current basis), for Dollar for such Interest Period; provided that no Benchmark Transition Event shall have occurred at such time; or the Administrative Agent is advised by the Required
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Lenders that Adjusted LIBO Rate or the LIBO Rate, as applicable, for the Dollar for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for Dollars for such Interest Period;
(ii)the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for the Dollar for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for the Dollar for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone, telecopy or electronic mail as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (A) any Borrowing Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective and (B) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as a Base Rate Borrowing.
(b)Notwithstanding anything to the contrary herein or in any other Credit Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, the Administrative Agent and the Borrower may amend this Agreement to replace the LIBO Rate with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. on the fifth (5th) Business Day after, in each case, the Administrative Agent has posted such proposed amendment to all Lenders and the Borrower, or in the case of an Early Opt-In Election, provided the Rate Election Notice to the Borrower, so long as the Administrative Agent has not received, by such time, written notice of objection to such proposed amendment from the Borrower or from Lenders comprising the Required Lenders; provided that, with respect to any proposed amendment containing any SOFR-Based Rate, the Borrower and the Lenders shall be entitled to object only to the Benchmark Replacement Adjustment contained therein. Any such amendment with respect to an Early Opt-in Election will become effective, so long as the Lender has not received, by such date, written objection to such early Opt-In Election from the Borrower, on the date that Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders accept such amendment. No replacement of LIBO Rate with a Benchmark Replacement will occur prior to the applicable Benchmark Transition Start Date.
(c)In connection with the implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Credit Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.
(d)The Administrative Agent will promptly notify the Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or Lenders pursuant to this Section 2.17, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 2.17.
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(e)Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, (i) any Borrowing Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as a Base Rate Borrowing.
ARTICLE III
FEES AND PAYMENTS
Section 3.1 Fees.
(a)Commitment Fees. The Borrower agrees to pay to the Administrative Agent for the ratable account of each Revolving Lender a commitment fee, which shall accrue at the Applicable Commitment Fee Rate on the daily unused amount of the Revolving Commitment of such Lender during the period from and including the Closing Date to but excluding the date on which such Revolving Commitment terminates. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year, commencing on December 31, 2019, and on the Revolving Commitment Termination Date. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
(b)Letter of Credit Fees. Commencing December 31, 2019, and thereafter on the last day of each March, June, September and December, the Borrower shall pay to the Administrative Agent quarterly in arrears, for the period until the next Letter of Credit fee payment date, for the ratable account of the Revolving Lenders, a non-refundable fee payable in Dollars on the aggregate undrawn amount on all outstanding Letters of Credit at a rate per annum equal to the Applicable Letter of Credit Fee Rate calculated on the basis of a 360 day year and actual days elapsed and based on the then scheduled expiration date of the Letter of Credit. The Borrower shall pay to each Issuing Bank, a fronting fee at a mutually acceptable rate with respect to the issuance of each Letter of Credit issued by such Issuing Bank.
(c)Administrative Agent and Arrangement Fees. The Borrower shall pay, or cause to be paid, to the Administrative Agent the administrative agency fees from time to time agreed to by the Borrower and the Administrative Agent and the arrangement fees previously agreed to by the Borrower and the Arrangers, in each case, in the manner provided by such other agreements.
Section 3.2 Place and Application of Payments.
(a)All payments of principal of and interest on the Loans, Reimbursement Obligations and all fees and other amounts payable by any Credit Party under the Credit Documents shall be made free and clear of any set-off, counterclaim or defense by such Credit Party to the Administrative Agent (or, in the case of any Reimbursement Obligations, customary issuance and administrative fees, fronting fees and expenses in respect of Letters of Credit described in Section 3.1(b), to the applicable Issuing Bank and, in the case of Swingline Loans, to the Swingline Lender, except as provided in Section 2.15), for the benefit of the Lenders and the Issuing Banks entitled to such payments, in immediately available funds on the due date thereof no later than 2:00 P.M. in the applicable Administrative Agent’s Account or such other location as the Administrative Agent may designate in writing to the Borrower in the applicable Administrative Agent’s Account. Any payments received by the Administrative Agent from any Credit Party after the time specified in the preceding sentence shall be deemed to have been received on the next Business Day. The Administrative Agent will, on the same day each payment is received or deemed to have been received in accordance with this Section 3.2, cause to be distributed like funds in like currency to (i) each Lender owed
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an Obligation for which such payment was received, pro rata based on the respective amounts of such type of Obligation then owing to each Lender, and (ii) each Issuing Bank entitled thereto.
(b)If any payment received by the Administrative Agent under any Credit Document is insufficient to pay in full all Obligations then due and payable under the Credit Documents, such payment shall be distributed by the Administrative Agent and applied by the Administrative Agent in the order set forth in Section 8.7. In calculating the amount of Obligations owing each Lender other than for principal and interest on Loans and Reimbursement Obligations and fees under Section 3.1, the Administrative Agent shall only be required to include such other Obligations that Lenders have certified to the Administrative Agent in writing are due to such Lenders.
Section 3.3 Withholding Taxes.
(a)Payments Free of Withholding. Except as otherwise required by law, each payment by or on behalf of the Borrower to any Lender, any Issuing Bank, the Swingline Lender or the Administrative Agent under this Agreement or any other Credit Document shall be made without withholding for or on account of any Taxes. If any such withholding is so required by law (as determined in good faith by an applicable withholding agent), the applicable withholding agent shall make the withholding and pay the amount withheld to the appropriate Governmental Authority within the time allowed. Moreover, in the case of any such present or future Taxes imposed by or within the jurisdiction in which the Borrower is organized, any jurisdiction from which the Borrower makes any payment under this Agreement or any other Credit Document, or (in each case) any political subdivision or taxing authority thereof or therein, excluding, in the case of each Lender, each Issuing Bank, the Swingline Lender and the Administrative Agent, the following Taxes (whether imposed on or with respect to such Lender, Issuing Bank, Swingline Lender or Administrative Agent or required to be withheld or deducted from any payment by or on account of any obligation of the Borrower under any Credit Document):
(i)Taxes imposed on, based upon, or measured by such Lender’s, such Issuing Bank’s, the Swingline Lender’s or the Administrative Agent’s net income, profits, gains, overall revenues or receipts, and branch profits, franchise and similar Taxes imposed on it, in each case, as a result of a present or former connection between the taxing jurisdiction and such Lender, such Issuing Bank, the Swingline Lender (including in each case any applicable lending office) or Administrative Agent, or any owner or affiliate thereof, as the case may be, other than connections arising from such Lender’s, such Issuing Bank’s, such Swingline Lender’s or the Administrative Agent’s having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to, or enforced, any Credit Document, or sold or assigned an interest in any Loan or Credit Document;
(ii)Taxes imposed (other than pursuant to FATCA) by the United States of America (or any political subdivision thereof or tax authority therein) on or with respect to a Lender, Issuing Bank, Swingline Lender or Administrative Agent organized under the laws of a jurisdiction outside of the United States, except to the extent that such tax is imposed as a result of any Change in Law (x) after the date hereof, in the case of each Lender, Issuing Bank, Swingline Lender or Administrative Agent originally a party hereto, (y) in the case of any Lender or other Issuing Bank or Administrative Agent, after the date on which it becomes a Lender, Issuing Bank, or Administrative Agent, as the case may be (unless such Lender or Issuing Bank acquired its interest following a request by the Borrower under Section 9.6) or (z) after the designation by such Lender, such Issuing Bank, the Swingline Lender or Administrative Agent of a new Lending Office (other than pursuant to this Section 3.3(a) or Section 9.3(c));
(iii)Taxes imposed by the United States of America pursuant to FATCA; or
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(iv)Taxes which would not have been imposed but for (a) the failure of such Lender, such Issuing Bank, the Swingline Lender or the Administrative Agent, as the case may be, to provide on a timely basis (I) the applicable forms prescribed by the Internal Revenue Service, as required pursuant to Section 3.3(b) and Section 3.3(d), or (II) any other form, certification, documentation or proof which is reasonably requested by the Borrower or the Administrative Agent or (b) a determination by a taxing authority or a court of competent jurisdiction that a form, certification, documentation or other proof provided by such Lender, such Issuing Bank, the Swingline Lender or the Administrative Agent to establish an exemption from such tax, assessment or other governmental charge is false or not properly completed;
(all present or future Taxes, other than the Taxes described in the preceding clauses (i) through (iv), “Indemnified Taxes”), the Borrower shall forthwith pay such additional amount as may be necessary to ensure that the net amount actually received by each Lender, each Issuing Bank, the Swingline Lender and the Administrative Agent is free and clear of such Taxes that are Indemnified Taxes (including Indemnified Taxes on such additional amount) and is equal to the amount that such Lender, such Issuing Bank, the Swingline Lender or the Administrative Agent (as the case may be) would have received had withholding of any Indemnified Taxes not been made. If the Borrower pays any such Taxes that are Indemnified Taxes, or any penalties or interest in connection therewith, it shall deliver official tax receipts evidencing the payment or certified copies thereof, or other evidence of payment if such tax receipts have not yet been received by the Borrower (with such tax receipts to be delivered within thirty (30) days after being actually received), to the Lender, the Swingline Lender, Issuing Bank or the Administrative Agent on whose account such withholding was made (with a copy to the Administrative Agent if not the recipient of the original) within thirty (30) days of such payment. If the Administrative Agent, any Issuing Bank, the Swingline Lender or any Lender pays any Indemnified Taxes which the Borrower has failed to withhold or pay to the appropriate governmental authority, or any penalties or interest in connection therewith, the Borrower shall reimburse the Administrative Agent, that Issuing Bank, the Swingline Lender or that Lender for the payment in the currency in which such payment was made within thirty (30) days after the receipt of written demand therefor. Such Lender, such Issuing Bank, the Swingline Lender or the Administrative Agent shall make written demand on the Borrower for reimbursement hereunder within one calendar year after the earlier of (i) the date on which such Lender, such Issuing Bank, the Swingline Lender or the Administrative Agent makes payment of the Indemnified Taxes, penalties and interest, and (ii) the date on which the relevant taxing authority or other governmental authority makes written demand upon such Lender, such Issuing Bank, the Swingline Lender or the Administrative Agent for payment of the Indemnified Taxes, penalties and interest. Any such demand shall describe in reasonable detail such Indemnified Taxes, penalties or interest, including the amount thereof if then known to such Lender, such Issuing Bank, the Swingline Lender or the Administrative Agent, as the case may be. In the event that such Lender, the Swingline Lender, Issuing Bank or the Administrative Agent fails to give the Borrower timely notice as provided herein, the Borrower shall not have any obligation to pay such claim for reimbursement. In the event that any taxing authority notifies the Borrower that it has improperly failed to withhold any Taxes (other than Indemnified Taxes) from a payment to any Lender, any Issuing Bank, the Swingline Lender or the Administrative Agent under this Agreement or any other Credit Document, the Borrower shall timely and fully pay such Taxes to such taxing authority and such Lender, Issuing Bank, Swingline Lender or Administrative Agent, as the case may be, shall pay the amount of such Taxes to the Borrower within thirty (30) days after the receipt of written demand therefor. If the Borrower is or will be required to pay an additional amount to a Lender, an Issuing Bank, the Swingline Lender or the Administrative Agent pursuant to this Section 3.3(a), then such payee shall use reasonable efforts to take requested measures (including changing the jurisdiction of its Lending Office) so as to reduce or eliminate any such amounts which may thereafter accrue, if such change would not otherwise be materially disadvantageous to such payee.
(b)U.S. Withholding Tax Exemptions.
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(i)Each Lender, the Swingline Lender or Issuing Bank that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) shall submit to the Borrower and the Administrative Agent two copies of a properly completed and duly executed certification on the applicable United States Internal Revenue Service Form W-8 (or any successor form) wherein such Lender, Swingline Lender or Issuing Bank either (x) claims entitlement to complete exemption from U.S. federal withholding tax with respect to payments to be received pursuant to the Credit Documents (as if such payments were U.S. source) or (y) certifies that it is not a United States person, provided, that, in the case of subclause (y), such Lender, Swingline Lender or Issuing Bank also shall submit a certificate substantially in the form of the applicable Exhibit 3.3 to the effect that such Lender, Swingline Lender or Issuing Bank is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10-percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code. Each Lender, Swingline Lender or Issuing Bank that delivers a certificate pursuant to the foregoing subsequently shall deliver two further copies of such certificate on or before the date that any such form expires or becomes obsolete, or promptly after the occurrence of any event requiring a change in the most recent certificate so delivered.
(ii)Upon the request of the Borrower or the Administrative Agent, each Lender, the Swingline Lender or Issuing Bank that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) shall submit to the Borrower and the Administrative Agent properly completed and duly executed copies of any additional forms of the United States Internal Revenue Service (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) that the Borrower believe to be reasonably necessary to accomplish exemption from (or a reduced rate of) withholding obligations under then-applicable United States law or that the Administrative Agent believes to be necessary to facilitate the Administrative Agent’s performance under this Agreement; provided that the submission of such documentation shall not be required if in the Lender’s, Swingline Lender’s or Issuing Bank’s reasonable judgment such submission would subject such Lender, Swingline Lender or Issuing Bank to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender, Swingline Lender or Issuing Bank.
(iii)Each Lender, the Swingline Lender or Issuing Bank that is a United States person (as such term is defined in Section 7701(a)(30) of the Code) shall submit to the Borrower two copies of a properly completed and duly executed certification on United States Internal Revenue Service Form W-9 to the effect that it is such a United States person and is exempt from U.S. withholding tax.
(c)Inability of Lender to Submit Forms. If any Lender, the Swingline Lender or Issuing Bank determines in good faith that (i) it is not legally able to submit to the Borrower or Administrative Agent any form or certificate that such Lender, the Swingline Lender or Issuing Bank is obligated to submit pursuant to Section 3.3(b), (ii) it is required to withdraw or cancel any such form or certificate previously submitted, or (iii) any such form or certificate otherwise becomes ineffective or inaccurate, such Lender, the Swingline Lender or Issuing Bank shall promptly notify the Borrower and Administrative Agent of such fact, and such Lender, the Swingline Lender or Issuing Bank shall to that extent not be obligated to provide any such form or certificate and will be entitled to withdraw or cancel any affected form or certificate, as applicable.
(d)FATCA Compliance. If any payment required to be made to any Lender, Swingline Lender or Issuing Bank under this Agreement or any other Credit Document would be subject to Taxes imposed by the United States of America pursuant to FATCA as a result of such Lender, Swingline Lender or Issuing Bank failing to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender, Swingline Lender or Issuing Bank shall submit to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the
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Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender, Swingline Lender or Issuing Bank has complied with its obligations under FATCA or to determine the amount to deduct and withhold from such payment.
(e)Refund of Taxes. If any Lender, Issuing Bank, Swingline Lender or the Administrative Agent receives a refund of any Indemnified Tax or any tax referred to in Section 11.3, in either case, with respect to which the Borrower has paid any amount pursuant to this Section 3.3 or Section 11.3, such Lender, such Issuing Bank, the Swingline Lender or the Administrative Agent shall pay the amount of such refund (including any interest received with respect thereto) to the Borrower within thirty (30) days after receipt thereof. A Lender, Issuing Bank, the Swingline Lender or the Administrative Agent shall provide, at the sole cost and expense of the Borrower, such assistance as the Borrower may reasonably request in order to obtain such a refund; provided, however, that none of the Administrative Agent, any Lender, any Issuing Bank or Swingline Lender shall in any event be required to disclose any information to the Borrower with respect to the overall tax position (or any other information relating to taxes that such Person reasonably determines to be confidential) of the Administrative Agent, Issuing Bank, the Swingline Lender or such Lender.
(f)Indemnification by Lenders. Each Lender, Issuing Bank and Swingline Lender shall severally indemnify the Administrative Agent, within ten (10) days after written demand therefor, for (i) any Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Taxes and without limiting the obligation of the Borrower to do so) and (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 11.10 relating to the maintenance of a Participant Register, in either case, that are payable or paid by the Administrative Agent in connection with any Credit Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Credit Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (f).
(g)FATCA Certification. Each Lender, Issuing Bank and Swingline Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) hereby represents and warrants that it is entitled to complete exemption from U.S. federal withholding tax under FATCA with respect to payments to be received pursuant to any Credit Document (as if such payments were U.S. source), and agrees to use its reasonable best efforts to maintain such exemption. In the event that any such Lender, Issuing Bank or Swingline Lender ceases to maintain such exemption, it shall promptly so notify the Borrower and the Administrative Agent in writing.
(h)Survival. Each party’s obligations under this Section 3.3 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender or the Issuing Bank, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Credit Document.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Closing Date. This Agreement shall be effective upon the satisfaction of the following conditions precedent.
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(a)Executed Credit Agreement. The Administrative Agent shall have received (including by facsimile or other electronic means) duly executed signature pages from each party to this Agreement.
(b)Executed Credit Documents. The Administrative Agent shall have received (including by facsimile or other electronic means) (w) any Notes requested pursuant to Section 2.8(e) prior to the Closing Date, (x) a ratification agreement, in a form reasonably acceptable to the Administrative Agent, executed by each Credit Party and ratifying the obligations of each Credit Party as a Guarantor under each of the Credit Documents to which such Credit Party is a party; (y) amendments to each Collateral Vessel Mortgage in effect on the Closing Date, executed by each Collateral Vessel Owner and substantially in the form of Exhibit 4.1 hereto and (z) the following all in form and substance reasonably satisfactory to the Administrative Agent:
(i)Secretary’s Certificates of the Credit Parties. Certificates of the secretary, assistant secretary (or, if a Credit Party does not have a secretary or assistant secretary, any other Person duly authorized to execute such a certificate on behalf of such Credit party including a member of such Credit Party) or Authorized Officer containing specimen signatures of the persons authorized to execute Credit Documents to which such Credit Party is a party or any other documents provided for herein or therein, together with (A) copies of resolutions of the Board of Directors or other appropriate governing body of such Credit Party authorizing the execution and delivery of the Credit Documents to which it is a party and (B) copies of such Credit Parties’ constituent organizational documents;
(ii)Good Standing Certificates of the Credit Parties. For each Credit Party, a certificate of good standing (or the equivalent) from the appropriate governing agency of such Credit Party’s jurisdiction of organization (to the extent the concept of good standing is applicable in such jurisdiction);
(iii)Regulatory Filings and Approvals. A certificate of an Authorized Officer of the Borrower certifying that copies of all necessary governmental and third party approvals, registrations, and filings in respect of the transactions contemplated by this Agreement have been provided to the Administrative Agent;
(iv)Insurance Certificate. An insurance certificate dated not more than ten (10) Business Days prior to the Closing Date describing in reasonable detail the insurance maintained by, or on behalf of, the Borrower and its Restricted Subsidiaries in respect of the Closing Date Collateral Vessels as of the Closing Date, but only to the extent such insurances are subject to a separate assignment of insurances, as required by Section 6.5;
(v)Opinions of Counsel. A written opinion of Watson Farley & Williams LLP, counsel for the Credit Parties, addressed to the Administrative Agent and the Lenders and dated the Closing Date, covering such matters relating to the Credit Parties and the Credit Documents as are usual and customary in respect of the transaction contemplated by this Agreement;
(vi)Closing Certificate. A certificate of an Authorized Officer of the Borrower as to the satisfaction of all conditions set forth in Sections 4.1(c) and (d);
(vii)Vessel Matters. Each of the following for each Closing Date Collateral Vessel:
(A)certificates of ownership from appropriate authorities showing (or confirmation updating previously reviewed certificates and indicating) the registered ownership of such Closing Date Collateral Vessel; and
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(B)the results of maritime registry searches with respect to such Closing Date Collateral Vessel, indicating no record liens other than Permitted Liens.
(viii)UCC-3s; UCC Searches. Each of the following:
(A)continuation statements on Form UCC-3 in proper form for filing under the UCC in each jurisdiction as may be necessary, or in the reasonable opinion of the Security Trustee desirable, to perfect the security interests purported to be created by the Guaranty and Collateral Agreement to the extent such perfection is required by the Guaranty and Collateral Agreement; and
(B)appropriate UCC search results in respect of the Credit Parties, as may be reasonably requested by the Security Trustee, from Washington D.C. and any other relevant jurisdiction, reflecting no prior Liens encumbering the properties of any Credit Party, other than those which shall be released prior to or contemporaneously with the Closing Date and Permitted Liens and those securing Secured Obligations under the Prior Credit Agreement.
(ix)Solvency Certificate. A solvency certificate from the chief financial officer or controller (or other financial officer) of the Borrower, dated as of the Closing Date, setting forth the conclusion that, immediately after giving effect to the Incurrence of all the financings contemplated hereby, the Borrower and its Restricted Subsidiaries, on a consolidated basis, are Solvent.
(c)Each of the representations and warranties of the Borrower and its Restricted Subsidiaries set forth herein and in the other Credit Documents shall be true and correct in all material respects (without duplication of any materiality qualifiers) as of the Closing Date, except to the extent that any such representation or warranty relates solely to an earlier date, in which case it shall have been true and correct in all material respects as of such earlier date.
(d)No Default or Event of Default shall have occurred and be continuing.
(e)On or before the Closing Date, the Lenders, the Administrative Agent and the Arrangers shall have received all fees and all reasonable and documented out-of-pocket expenses (to the extent invoiced at least two (2) Business Days prior to the Closing Date) then due and owing to the Administrative Agent, the Lenders, and the Arrangers pursuant to this Agreement and as otherwise agreed in writing by the Borrower.
(f)If reasonably requested by the Administrative Agent and the Lenders a reasonable period in advance of the Closing Date, the Administrative Agent, the Issuing Banks and the Lenders shall have received (i) all documentation and other information required by regulatory authorities with respect to the Credit Parties under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act and (ii) to the extent the Borrower qualifies as a “legal entity customer” under 31 C.F.R. § 1010.230 (the “Beneficial Ownership Regulation”), a certificate from the Borrower regarding beneficial ownership or control as required by the Beneficial Ownership Regulation.
(g)The Administrative Agent shall have received such other documents as the Administrative Agent or special counsel to the Administrative Agent may reasonably request.
The Administrative Agent (or at the Administrative Agent’s direction, its counsel) shall notify the Borrower and the Lenders of the Closing Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is
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satisfied (or waived pursuant to Section 11.11) at or prior to 2:00 p.m., New York City time, on December 31, 2019 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time).
Section 4.2 All Credit Extensions. The obligation of each Lender to make any advance of any Loan, of the Swingline Lender to make any advance of any Swingline Loan, and of each Issuing Bank to issue, increase or extend any Letter of Credit hereunder is subject to satisfaction (or waiver in accordance with Section 11.11) of the following conditions precedent:
(a)Notices. (i) The Administrative Agent shall have received in the case of any Loan, the Borrowing Request required by the first sentence of Section 2.3(a) in accordance with Section 2.3(c), (ii) the Administrative Agent shall have received in the case of any Swingline Loan, the Swingline Request required by Section 2.15(b) and (iii) the relevant Issuing Bank shall have received in the case of the issuance, extension or increase of a Letter of Credit, a duly completed Application for such Letter of Credit in accordance with Section 2.12(b).
(b)True and Correct Representations and Warranties. In the case of any advance of a Loan, advance of a Swingline Loan or issuance, increase or extension of any Letter of Credit, in each case, that increases the aggregate amount of Loans or L/C Obligations, as applicable, outstanding immediately after giving effect to such advance or issuance, increase or extension (and any prepayments or reimbursements made substantially concurrently therewith or any extension of the expiry date of any such Letter of Credit), each of the representations and warranties of the Borrower and its Restricted Subsidiaries set forth herein and in the other Credit Documents shall be true and correct in all material respects (without duplication of any materiality qualifiers) as of the time of such advance or issuance or increase of any Letter of Credit, except as a result of the transactions expressly permitted hereunder or thereunder and except to the extent that any such representation or warranty relates solely to an earlier date, in which case it shall have been true and correct in all material respects as of such earlier date.
(c)No Default. No Default or Event of Default shall have occurred and be continuing or would occur as a result of any such advance or issuance, increase or extension.
Each acceptance by the Borrower of an advance of any Loan or of the issuance of, increase in the amount of, or extension of the expiration date of, a Letter of Credit after the Closing Date shall be deemed to be a representation and warranty by the Borrower on the date of such acceptance, as to the matters specified in Sections 4.2(b) and (c) (except to the extent the satisfaction of such matters have been waived in accordance with this Agreement).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each Lender, each Issuing Bank, the Swingline Lender and Administrative Agent, which representations and warranties shall be deemed made on the Closing Date or as otherwise provided in the Credit Documents, as follows:
Section 5.1 Corporate Organization. Each Credit Party: (i) is duly incorporated or organized and existing in good standing under the laws of the jurisdiction of its organization or incorporation (to the extent the concept of good standing is applicable in such jurisdiction); (ii) has all necessary organizational or other corporate power and authority to own the property and assets it uses in its business and otherwise to carry on its present business; and (iii) is duly licensed or qualified and in good standing (to the extent the concept of good standing is applicable in such jurisdiction) in each jurisdiction in which the nature of the business transacted by it or the nature of the property owned or leased by it makes such licensing or
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qualification necessary, except in each case, where the failure to have such power and authority or to be so licensed or qualified or to be in good standing, as the case may be, would not have a Material Adverse Effect.
Section 5.2 Power and Authority; Validity. Each of the Credit Parties has the organizational power and authority to execute, deliver and carry out the terms and provisions of the Credit Documents to which it is a party and has taken all necessary company action to authorize the execution, delivery and performance of such Credit Documents. Each of the Credit Parties has duly executed and delivered each Credit Document to which it is a party and each such Credit Document constitutes the legal, valid and binding obligation of such Credit Party which is a party thereto enforceable against it in accordance with its terms, subject as to enforcement only to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and equitable principles.
Section 5.3 No Violation. Neither the execution, delivery or performance by any Credit Party of the Credit Documents to which it is a party nor compliance by it with the terms and provisions thereof, nor the consummation by it of the transactions contemplated herein or therein, will (i) contravene in any applicable provision of any law, statute, rule or regulation, or any applicable order, writ, injunction or decree of any court or governmental instrumentality, except where such contravention would not reasonably be expected to have a Material Adverse Effect, (ii) conflict with or result in any breach of any term, covenant, condition or other provision of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien other than any Permitted Lien upon any of the property or assets of such Credit Party or any of its Restricted Subsidiaries under, the terms of any material agreement evidencing Indebtedness to which such Credit Party or any of its Restricted Subsidiaries is a party or by which they or any of their properties or assets are bound or to which they may be subject, or (iii) violate or conflict with any provision of the memorandum of association and articles of association, charter, articles or certificate of incorporation, partnership or limited liability company agreement, by-laws, or other applicable governance documents of such Credit Party or any of its Restricted Subsidiaries.
Section 5.4 Litigation. As of the Closing Date, there are no actions, suits, proceedings or counterclaims (including derivative or injunctive actions, except ex parte actions for which notice has not yet been received by the Borrower) pending or, to the knowledge of the Borrower, threatened against the Borrower or any of its Restricted Subsidiaries that are reasonably likely to have a Material Adverse Effect.
Section 5.5 Use of Proceeds; Margin Regulations.
(a)Use of Proceeds. The proceeds of the Revolving Loans shall be used for working capital needs, general corporate purposes and capital commitments of the Borrower or its Subsidiaries (subject in each case to the limitations set forth in Section 7.5). The proceeds of the 2019 Term Loans shall be used to repay Indebtedness of the Borrower under the Prior Credit Agreement and pay a dividend to SEACOR in accordance with Section 7.5.
(b)Margin Stock. Neither the Borrower nor any of its Restricted Subsidiaries is engaged principally or as one of its important activities in the business of extending credit for the purpose of “purchasing” or “carrying” “margin stock” (each, as defined in Regulation U of the Board of Governors of the Federal Reserve System). No proceeds of the Loans or the Letters of Credit will be used by the Borrower or its Subsidiaries for a purpose which violates Regulations T, U or X of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect.
Section 5.6 Investment Company Act. Neither the Borrower nor any of its Restricted Subsidiaries is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.
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Section 5.7 Anti-Corruption Laws; Sanctions Laws and Regulations. The Borrower and its Subsidiaries have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance with Anti-Corruption Laws and applicable Sanctions Laws and Regulations. The Borrower and its Subsidiaries and their respective officers, employees, directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions Laws and Regulations in all material respects. Neither the Borrower nor any of its Subsidiaries, or any of their directors or officers, or any of their respective agents acting or benefiting in any capacity in connection with this Agreement or any other Credit Document, is a Designated Person or is knowingly engaged in any activity that could reasonably be expected to result in such Person becoming a Designated Person. No Borrowing or Letter of Credit, use of proceeds or other Transaction contemplated by this Agreement will result in a violation of Anti-Corruption Laws or applicable Sanctions Laws and Regulations by the Borrower or any of its Subsidiaries.
Section 5.8 True and Complete Disclosure. All factual information (taken as a whole) furnished by the Borrower or any of its Restricted Subsidiaries in writing to the Administrative Agent or any Lender in connection with any Credit Document or any transaction contemplated therein did not, as of the date such information was furnished (or, if such information expressly related to a specific date, as of such specific date), contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein (taken as a whole), in light of the circumstances under which such information was furnished, not misleading, except for such statements, if any, as have been updated, corrected, supplemented, superseded or modified pursuant to a written correction or supplement furnished to the Lenders prior to the date of this Agreement; provided, that with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed by it to be reasonable at the time, it being understood that (i) such projections are not to be viewed as facts and that actual results during the period(s) covered by any such projections may differ significantly from the projected results and that such difference may be material and that such projections are not a guarantee of financial performance and (ii) no representation is made with respect to information of a general economic or general industry nature. To the extent commercially reasonable, the Borrower has provided such information and has taken such action, in each case, as has been reasonably requested in writing by the Administrative Agent or any Lender in order to assist the Administrative Agent or such Lender in maintaining compliance with the Patriot Act and the Beneficial Ownership Regulation.
Section 5.9 Financial Statements. The Borrower heretofore has delivered to the Administrative Agent and each Lender true, correct and complete copies of the audited combined balance sheet of the Borrower and its consolidated Subsidiaries for the fiscal year ended December 31, 2018 and the unaudited combined balance sheet of the Borrower and its consolidated Subsidiaries for the fiscal quarter ended September 30, 2019. Such balance sheets fairly present, in all material respects, the Borrower’s and its consolidated Subsidiaries’ financial position at such dates.
Section 5.10 No Material Adverse Change. Since December 31, 2018, there has occurred no event or circumstance that has had a Material Adverse Effect.
Section 5.11 Taxes. The Borrower and its Subsidiaries have filed all material tax returns required to be filed, whether in the United States or in any foreign jurisdiction, and have paid all governmental taxes, assessments, levies and similar charges (collectively, “Taxes”) shown to be due and payable on such returns or on any assessments made against the Borrower and its Subsidiaries or any of their properties (other than any such assessments, fees, charges or levies that are not more than thirty (30) days past due, or which can thereafter be paid without penalty, or which are being contested in good faith by appropriate proceedings and for which reserves have been provided in conformity with GAAP, or which the failure to pay or delay in filing could not reasonably be expected to have a Material Adverse Effect).
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Section 5.12 Consents. As of the Closing Date, all consents and approvals of, and filings and registrations with, and all other actions of, all governmental agencies, authorities or instrumentalities required to have been obtained or made by the Credit Parties in order to execute and deliver and perform their obligations under the Credit Documents to which they are a party, have been or will have been obtained or made and are or will be in full force and effect.
Section 5.13 Insurance. As of the Closing Date, the Borrower and its Restricted Subsidiaries, or an Affiliate of the Borrower, on behalf of the Borrower and its Restricted Subsidiaries, maintain, or cause to be maintained, in effect the Required Insurance; provided that the Borrower or any Restricted Subsidiary or an Affiliate of the Borrower may self-insure to the extent and in the manner normal for companies of like size, type and financial condition.
Section 5.14 Intellectual Property. The Borrower and its Restricted Subsidiaries own or hold valid licenses to use all the patents, trademarks, permits, service marks, and trade names that are necessary to the operation of the business of the Borrower and its Restricted Subsidiaries as presently conducted, except where the failure to own, or hold valid licenses to use, such patents, trademarks, permits, service marks, and trade names could not reasonably be expected to have a Material Adverse Effect.
Section 5.15 Ownership of Property.
(a)The Borrower and its Restricted Subsidiaries have good title to or a valid leasehold interest in all of their real property and good title to, or a valid leasehold interest in, all of their other property, subject to no Liens except Permitted Liens, except where the failure to have such title or leasehold interest in such property could not reasonably be expected to have a Material Adverse Effect.
(b)The Borrower and/or each Credit Party is the true, lawful and sole owner of each Collateral Vessel stated to be owned by it, with respect to Closing Date Collateral Vessels, on Schedule 5.15B, and thereafter, in the relevant Collateral Vessel Mortgage, and its ownership of each Collateral Vessel is free and clear of all Liens except for Permitted Liens.
Section 5.16 Collateral Documents. The Collateral Documents are effective to create in favor of the Security Trustee (for the benefit of the Secured Parties) a legal, valid and enforceable Lien in the Credit Party’s right, title and interest in the Collateral described therein. When financing statements or equivalent filings or notices have been made or the Collateral Vessel Mortgages are filed or recorded in the appropriate offices as may be required under applicable law and upon the taking of possession or control by the Security Trustee of such Collateral with respect to which a security interest may be perfected only or control (which control shall be given to the Security Trustee to the extent required by any Collateral Document), the Security Trustee shall have fully perfected Liens on, and security interests in, all right, title and interest of the Credit Parties in such Collateral, in each case prior and superior in right to any other Liens, other than Permitted Liens which are permitted to attach to such Collateral under the terms of this Agreement.
Section 5.17 Legal Names of Borrower and Subsidiaries. Schedule 5.17 sets forth, as of the Closing Date, the legal name of the Borrower and each Subsidiary of the Borrower, the type of organization or entity of each such Person and the jurisdiction of organization or incorporation of each such Person. Schedule 5.17 also sets forth, as of the Closing Date, the direct owner and percentage ownership of each such Subsidiary on the Closing Date. As of the Closing Date, there are no Unrestricted Subsidiaries.
Section 5.18 Vessels.
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(a)As of the Closing Date, the name, registered owner and official number, and jurisdiction of registration and flag of each Closing Date Collateral Vessel are set forth on Schedule 5.15B. Each Vessel owned by the Borrower or a Restricted Subsidiary is operated in compliance with all applicable law, rules and regulations (applicable to such Vessel and as required by the American Bureau of Shipping or other internationally recognized classification society reasonably acceptable to the Administrative Agent), except where failure to comply with such law, rules or regulations could not reasonably be expected to have a Material Adverse Effect.
(b)Each Credit Party which owns or operates one or more Vessels is qualified to own and operate such Vessel under the laws of such Credit Party’s jurisdiction of incorporation and the jurisdiction in which such Vessel is flagged, except where failure to so qualify could not reasonably be expected to have a Material Adverse Effect.
(c)Each Collateral Vessel (except a Vessel that is laid up) maintains its classification as is applicable for Vessels of comparable age and size with the American Bureau of Shipping or another internationally recognized classification society reasonably acceptable to the Administrative Agent, free of any conditions or recommendations affecting class, except for temporary lapses of such classification as may from time to time arise as a result of the normal operation of such Collateral Vessel, so long as the Borrower or applicable Collateral Vessel Owner is using commercially reasonable efforts to remedy such lapses.
Section 5.19 Form of Documentation. Each of the Collateral Vessel Mortgages is or, when executed, will be in proper legal form under the laws of the United States of America for the enforcement thereof under such laws and the laws of the jurisdiction of organization of the applicable Credit Party party thereto, subject as to enforceability, to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and equitable principles. To ensure the legality, validity, enforceability or admissibility in evidence of each such Collateral Vessel Mortgage in the United States of America or the jurisdiction of the applicable Credit Party party thereto, it is not necessary that any Collateral Vessel Mortgage or any other document be filed or recorded with any court or other authority in any such jurisdiction, except for those filings as have been, or will be, made.
Section 5.20 Pari Passu or Priority Status. Neither the Borrower nor any other Credit Party has taken any action which would cause the claims of unsecured creditors of the Borrower or of any other Credit Party, as the case may be (other than claims of such creditors to the extent that they are statutorily preferred or Permitted Liens), to have priority over the claims of the Administrative Agent, the Security Trustee and the Secured Parties against the Borrower and such other Credit Party under this Agreement or the other Credit Documents.
Section 5.21 No Immunity. Neither the Borrower nor any other Credit Party is a sovereign entity or has immunity on the grounds of sovereignty or otherwise from setoff or any legal process under the laws of any jurisdiction. The execution and delivery of the Credit Documents by the Credit Parties and the performance by them of their respective obligations thereunder constitute commercial transactions.
Section 5.22 Solvency. The Borrower and its Restricted Subsidiaries, on a consolidated basis, are Solvent.
Section 5.23 Compliance With Laws. The Borrower and its Subsidiaries are in compliance with all laws, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective property and all Environmental Laws, except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect.
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ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, from and after the Closing Date and for so long thereafter as any Loan, Note or Commitment is outstanding hereunder, or any L/C Obligation is outstanding hereunder (unless such L/C Obligation has been cash collateralized in accordance with the provisions of this Agreement or other arrangements with respect thereto have been made that are satisfactory to the applicable Issuing Bank), or any other Obligation is due and payable hereunder:
Section 6.1 Corporate Existence. The Borrower will, and will cause each of its Restricted Subsidiaries to, preserve and maintain its incorporation status or organizational existence, except (i) for the dissolution of any Restricted Subsidiaries whose assets are transferred to the Borrower or any of its Restricted Subsidiaries, (ii) where the failure to preserve, renew or keep in full force and effect the incorporation status or existence of any Restricted Subsidiary could not reasonably be expected to have a Material Adverse Effect or (iii) as otherwise expressly permitted in this Agreement.
Section 6.2 Maintenance of Properties, including Vessels; Vessel Contracts.
(a)The Borrower will, and will cause each of its Restricted Subsidiaries to, maintain, preserve and keep its properties and equipment necessary to the proper conduct of its business in reasonably good repair, working order and condition (normal wear and tear or damage done by casualty or condemnation excepted) and will from time to time make all reasonably necessary repairs, renewals, replacements, additions and betterments thereto so that at all times such properties and equipment are reasonably preserved and maintained, in each case with such exceptions as could not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect; provided, however, that nothing in this Section 6.2 shall prevent the Borrower or any Restricted Subsidiary from discontinuing the operation or maintenance of any such properties or equipment if such discontinuance is, in the judgment of the Borrower desirable in the conduct of its business.
(b)The Borrower will, and will cause each Collateral Vessel Owner to, at all times, and without cost or expense to the Administrative Agent, maintain and preserve, or cause to be maintained and preserved, each Vessel owned by such Collateral Vessel Owner (except for any Vessel that is laid up) and its material equipment, outfit and appurtenances, tight, staunch, strong, in good condition, working order and repair and fit for its intended service. The Borrower will, and will cause each Collateral Vessel Owner to, with respect to each Vessel owned by such Collateral Vessel Owner (except for any Vessel that is laid up), at all times comply with all applicable laws, treaties and conventions of the jurisdiction in which the applicable Vessel is flagged, and rules and regulations issued thereunder, and shall have on board as and when required thereby valid certificates showing compliance therewith, unless the failure to so comply or have on board such documentation could not reasonably be expected to have a Material Adverse Effect. The Borrower will, and will cause each Collateral Vessel Owner to, keep each Vessel owned by such Collateral Vessel Owner (except for any Vessel that is laid up) in such condition as will entitle such Vessel to maintain its classification, as is applicable for Vessels of comparable age and type, by the American Bureau of Shipping or another internationally recognized classification society reasonably acceptable to the Administrative Agent. The Borrower will, and will cause each Collateral Vessel Owner to, with respect to each Vessel owned by such Collateral Vessel Owner (except for any Vessel that is laid up), comply with and satisfy in all material respects the provisions of any applicable law, convention, regulation, proclamation or order concerning financial responsibility for liabilities imposed on such Collateral Vessel Owner, the Borrower, the Borrower’s Subsidiaries or such Vessel with respect to pollution by any state or nation or political subdivision thereof and will maintain all certificates or other evidence of financial responsibility as may be required by any such law, convention, regulation, proclamation or order with respect to the trade in which the Vessel is from time to time engaged and the cargo carried by it.
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(c)The Borrower will, and will cause each Collateral Vessel Owner to, supply the Administrative Agent promptly following its receipt of a written request from the Administrative Agent with copies of all survey reports with respect to such Collateral Vessel.
(d)The Borrower will, and will cause each Collateral Vessel Owner to, promptly notify the Administrative Agent of and furnish the Administrative Agent with full information, promptly upon becoming available, including copies of reports and surveys, regarding any material accident or accident involving repairs (except to the extent any such accident could not reasonably be expected to result in a Material Adverse Effect).
(e)The Borrower will, and will cause each applicable Collateral Vessel Owner to, use commercially reasonable efforts to, perform any and all charter contracts which are, or may be, entered into with respect to each Collateral Vessel, except to the extent any such nonperformance could not reasonably be expected to result in a Material Adverse Effect.
Section 6.3 Taxes. The Borrower will, and will cause each of its Subsidiaries to, duly pay and discharge all Taxes upon or against it or its properties and all other obligations (including ERISA obligations) within thirty (30) days after becoming due (in the case of Taxes) or, if later, prior to the date on which penalties are imposed for such unpaid Taxes, unless and to the extent that (i) the same is being contested in good faith and by appropriate proceedings and reserves have been established in conformity with GAAP, or (ii) the failure to effect such payment or discharge or any delay in filing could not reasonably be expected to have a Material Adverse Effect.
Section 6.4 ERISA. Each of the Borrower and its Subsidiaries will timely pay and discharge all obligations and liabilities arising under ERISA or otherwise with respect to each Plan of a character which if unpaid or unperformed could reasonably be expected to result in the imposition of a material Lien with respect to such Plan against any properties or assets of the Borrower or any of its Subsidiaries and will promptly notify the Administrative Agent upon an Authorized Officer of the Borrower becoming aware thereof, of (i) the occurrence of any Reportable Event relating to a Plan (other than a multi-employer plan, as defined in ERISA), so long as the event thereunder could reasonably be expected to have a Material Adverse Effect, other than any such event with respect to which the PBGC has waived notice by regulation; (ii) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor; (iii) the Borrower’s or any of its Subsidiaries’ or ERISA Affiliates’ intention to terminate or withdraw from any Plan if such termination or withdrawal would result in liability under Title IV of ERISA, unless such termination or withdrawal could not reasonably be expected to have a Material Adverse Effect; and (iv) the receipt by the Borrower or any of its Subsidiaries or ERISA Affiliates of notice of the occurrence of any event with respect to a Plan that could reasonably be expected to result in the Incurrence of any liability (other than for benefits), fine or penalty to the Borrower and/or to any of its Subsidiaries or ERISA Affiliates, or any amendment to a Plan that could reasonably be expected to increase the contingent liability of the Borrower and its Subsidiaries or ERISA Affiliates, taken as a whole, in either case in connection with any post-retirement benefit under a welfare plan (subject to ERISA), unless such event or amendment could not reasonably be expected to have a Material Adverse Effect. The Borrower will also promptly notify the Administrative Agent of (i) any material contributions to any Foreign Plan that have not been made by the required due date for such contribution if such default could reasonably be expected to have a Material Adverse Effect; (ii) any Foreign Plan that is not funded to the extent required by the law of the jurisdiction whose law governs such Foreign Plan based on the actuarial assumptions reasonably used at any time if such underfunding (together with any penalties likely to result) could reasonably be expected to have a Material Adverse Effect, and (iii) the receipt by the Borrower or its Subsidiaries of notice of any material change anticipated to any Foreign Plan that could reasonably be expected to have a Material Adverse Effect.
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Section 6.5 Insurance.
(a)The Borrower will, and will cause each of its Restricted Subsidiaries to, or will cause an Affiliate of the Borrower to arrange through a bareboat charterer, agent or otherwise, on behalf of the Borrower and its Restricted Subsidiaries to, (i) maintain with financially sound and reputable insurance companies (provided that this Section 6.5 shall not be deemed to be breached if an insurance company with which the Borrower, any Restricted Subsidiary or the applicable Affiliate of the Borrower maintains insurance becomes financially troubled and the Borrower, such Restricted Subsidiary or such Affiliate of the Borrower reasonably promptly obtains coverage from a different, financially sound insurer) insurance on the Vessels and other material insurable properties of the Borrower and its Restricted Subsidiaries in at least such amounts and against all such risks as is consistent and in accordance with normal industry practice for similarly situated insureds and as provided in this Section 6.5 (the “Required Insurance”) and (ii) furnish to the Administrative Agent, at the written request of the Administrative Agent or any Lender, a complete description of the material terms of insurance carried on the Collateral Vessels.
(b)The Borrower will, and will cause each of the Collateral Vessel Owners to, or will cause an Affiliate of the Borrower, or bareboat charterer thereof to, on behalf of the Borrower and the Collateral Vessel Owners, at all times to keep the Collateral Vessels insured in favor of the Security Trustee as provided in this Section 6.5; and (x) all policies or certificates with respect to such insurance (and any other insurance maintained by the Borrower or such Collateral Vessel Owners): (i) shall be endorsed to the Security Trustee’s reasonable satisfaction for the benefit of the Security Trustee (including by naming the Security Trustee as loss payee and/or additional insured, as its interests may appear) and (ii) shall provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Security Trustee and the other Secured Parties and (y) the Borrower and/or the applicable Collateral Vessel Owner will use commercially reasonable efforts to provide that such insurance policies state that they shall not be canceled for non-payment of premium without at least thirty (30) days’ prior written notice thereof by the respective insurer to the Security Trustee. On the Closing Date and from time to time thereafter to the extent reasonably requested by the Security Trustee, but no more frequently than once each calendar year, the Borrower shall deliver certificates evidencing such insurance policies for deposit with the Security Trustee. The Administrative Agent shall be under no duty or obligation to verify the adequacy or existence of any such insurance or any such policies or endorsements.
(c)The Borrower will, and will cause each of the Collateral Vessel Owners to, or will cause an Affiliate of the Borrower to, on behalf of the Borrower and the applicable Collateral Vessel Owners, cause the Collateral Vessels to be insured with insurers or protection and indemnity clubs or associations of the type described in Section 6.5(a)(i), against the risks indicated below:
(i)marine war risk insurance, including primary P&I war risk insurance and coverage afforded by the London Blocking and Trapping Addendum (or equivalent) and Missing Vessel Clause (or equivalent), and marine hull and machinery insurance in an amount equal to not less than the lesser of (1) 120% of the total Commitments at such time and (2) 110% of the appraised aggregate fair market value of the Collateral Vessels at such time, except as otherwise reasonably agreed in writing by the Security Trustee. The insured values for hull and machinery required under this clause (c)(i) for the Collateral Vessels shall at all times be in an amount not less than 60% of the Fair Market Value of each Collateral Vessel, and the remaining hull and machinery insurance required by this clause (c)(i) may be procured as increased value and/or disbursements insurance;
(ii)marine protection and indemnity insurance or equivalent (including coverage against liability for war risk perils, passengers, fines and penalties arising out of the operation of the Collateral Vessels, including crew, pollution (including liability for oil pollution in such amounts as are from time to time available through an entry in a P&I club that is a member of the International Group of
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P&I Clubs, which amount currently available is $1,000,000,000 and excess war risk protection and indemnity cover), spillage or leakage, and workers’ compensation or U.S. Longshore and Harbor Worker’s Act insurance as shall be required by applicable law) in an amount equal to not less than the lesser of (1) 120% of the total Commitments at such time and (2) 110% of the appraised aggregate fair market value of the Collateral Vessels at such time; provided, however, that insurance against liability under applicable law or international convention arising out of pollution, spillage or leakage shall be in an amount not less than the amounts required by the laws or regulations of the United States or any applicable jurisdiction in which the Collateral Vessel may be trading from time to time;
(iii)the Security Trustee’s interest insurance (including extended mortgagee’s interest-additional perils-pollution) coverage for an amount of not less than 120% of the aggregate outstanding principal amount of the Loans at such time on terms satisfactory to the Administrative Agent;
(iv)while a Collateral Vessel is idle or laid up, at the option of the Borrower or the applicable Collateral Vessel Owner and in lieu of the above-mentioned marine and war risk hull insurance, port risk insurance insuring the relevant Collateral Vessel against the usual risks encountered by like Vessels under similar circumstances; and
(v)for the marine, war-risks and protection and indemnity/liability insurances required herein, the Borrower or the applicable Collateral Vessel Owner shall have the discretion to utilize deductibles or self-insured retentions that are customary for similar Vessels engaged in similar activities.
All insurance maintained hereunder shall be primary insurance without right of contribution against any other insurance maintained by the Security Trustee. The policy of marine and war risk hull and machinery insurance with respect to the Collateral Vessels shall provide that the Security Trustee shall be named in its capacity as Security Trustee and as a loss payee and the loss payee clause shall refer to a major casualty amount of $1,000,000, unless otherwise agreed to in writing by the Security Trustee pursuant to an assignment of insurances or other agreement. Any such entry in a marine and war risk protection and indemnity club with respect to the Collateral Vessels shall note the interest of the Security Trustee. The Administrative Agent, the Security Trustee and each of their respective successors and assigns shall not be responsible for any premiums, club calls, if any, assessments or any other obligations or for the representations and warranties made therein by any Collateral Vessel Owner, the Borrower, any of the Borrower’s Subsidiaries or any other Person.
(d)The Borrower will, or will cause each of the Collateral Vessel Owners to, or will cause an Affiliate of the Borrower to, on behalf of the Borrower and the applicable Collateral Vessel Owners, furnish to the Administrative Agent (i) copies of all certificates of insurance and (ii) a summary prepared and signed by its insurance brokers with respect to the protection and indemnity insurance, the hull and machinery and war risk insurance carried and maintained on the Collateral Vessels, together with their opinion as to the adequacy thereof and its compliance with the provisions of this Section 6.5. The Borrower will, or will cause each of the Collateral Vessel Owners to, or will cause an Affiliate of the Borrower to, on behalf of the Borrower and the applicable Collateral Vessel Owners, cause such insurance broker and/or the protection and indemnity club or association providing protection and indemnity insurance referred to in Section 6.5(c)(ii), to agree to provide the Administrative Agent with such information as to such insurances as the Administrative Agent may reasonably request with respect to expiration, termination or cancellation of any policy or any default in the payment of any premium.
(e)Unless the Administrative Agent has given notice to the underwriters of the occurrence and continuance of an Event of Default, all insurance claim proceeds of whatsoever nature with respect to the Collateral Vessels payable under any insurance shall be payable to the Borrower, the applicable Collateral Vessel Owner or others as their interests may appear; thereafter, payments of insurance claim proceeds with
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respect to the Collateral Vessels shall be made to the Security Trustee for distribution in accordance herewith.
(f)In the event that any claim or Lien in excess of $2,500,000 is asserted against a Collateral Vessel for loss, damage or expense that is covered by insurance required hereunder and it is necessary for the applicable Collateral Vessel Owner to obtain a bond or supply other security to prevent arrest of such Collateral Vessel or to release such Collateral Vessel from arrest on account of such claim or Lien, the Security Trustee, on request of the applicable Collateral Vessel Owner, may, in the sole discretion of the Security Trustee, assign to any person, firm or corporation executing a surety or guarantee bond or other agreement to save or release the Collateral Vessel from such arrest, all right, title and interest of the Security Trustee in and to said insurance covering said loss, damage or expense, as collateral security to indemnify against liability under said bond or other agreement.
(g)The Borrower will not, and will not permit any Collateral Vessel Owner to, execute or permit or willingly allow to be done any act by which any insurance required under this Section 6.5 may be suspended, impaired or cancelled, and will not permit or allow any Collateral Vessel to undertake any voyage or operational risk which may not be permitted by the policies in force, without having previously notified the Administrative Agent in writing and insured the relevant Collateral Vessel by additional coverage to extend to such voyages, risks, passengers or cargoes in accordance with customary marine insurance industry standards.
(h)If an Event of Default has occurred and is continuing, subject to the rights of any charterer, the Security Trustee shall have the exclusive right to negotiate and agree to any compromise to any claim with respect to any Collateral Vessel with respect to which any underwriter proposes to pay less on any claim than the amount thereof.
(i)If the Borrower or any Restricted Subsidiary shall fail to maintain insurance in accordance with this Section 6.5 with respect to the Collateral Vessels, the Security Trustee shall have the right (but shall be under no obligation) to procure such insurance, and the Borrower agrees to reimburse the Administrative Agent for all reasonable costs and expenses of procuring such insurance.
Section 6.6 Financial Reports and Other Information.
(a)Periodic Financial Statements. The Borrower will, and will cause its Subsidiaries to, maintain a system of accounting in such manner as will enable preparation of financial statements in accordance with GAAP and will furnish to the Lenders and their respective authorized representatives such information about its insurances and the business and financial condition of the Borrower and its Subsidiaries as any Lender may reasonably request; and, without any request, will furnish to the Administrative Agent:
(i)within sixty (60) days after the end of each Fiscal Quarter of each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income and retained earnings and of cash flows for such Fiscal Quarter and for the portion of the fiscal year ended with the last day of such Fiscal Quarter, all of which shall be in reasonable detail and certified by the chief financial officer of the Borrower that they fairly present the financial condition of the Borrower and its Subsidiaries as of the dates indicated and the results of their operations and changes in their cash flows for the periods indicated and that they have been prepared in accordance with GAAP, in each case, subject to normal year-end audit adjustments;
(ii)within one hundred twenty (120) days after the end of each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such
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fiscal year and the related consolidated statements of income and retained earnings and of cash flows for such fiscal year and setting forth consolidated comparative figures as of the end of and for the preceding fiscal year, audited by an independent nationally-recognized accounting firm; and
(iii)promptly after the same become available, copies of all quarterly and annual financial statements that the Borrower sends to its stockholders generally.
(b)Other Documents; Notices. The Borrower will, and will cause its Subsidiaries to furnish:
(i)promptly after the Borrower’s receipt of a written request therefor from the Administrative Agent, but no more frequently than once each calendar year (unless an Event of Default has occurred and is continuing), a certificate by the applicable classification society that each Collateral Vessel (except a Vessel that is laid up) is kept, in such condition as will entitle such Collateral Vessel to maintain the classification, as is applicable for Vessels of comparable age and type, by the American Bureau of Shipping or another internationally recognized classification society reasonably acceptable to the Administrative Agent, as applicable, subject to any temporary lapse of such classification as may from time to time arise as a result of the normal operation of such Collateral Vessels, so long as the Borrower or the applicable Collateral Vessel Owner is using commercially reasonable efforts to remedy such lapse;
(ii)any change in the information provided in the Beneficial Ownership Certification delivered to such Lender that would result in a change to the list of beneficial owners identified in such certification; and
(iii)such other information as the Administrative Agent or any Lender may reasonably request regarding the operations, business affairs and financial condition of the Borrower and its Restricted Subsidiaries.
The Administrative Agent will forward promptly to the Lenders the information provided by the Borrower pursuant to (a) through (b) above.
(c)Compliance Certificates. Within the sixty (60) day or one hundred twenty (120) day time periods set forth in subsections (i) and (ii) of Section 6.6(a) for furnishing financial statements, the Borrower shall deliver to the Administrative Agent (who will in turn provide notice to the Lenders of) (i) additional information setting forth calculations excluding the effects of any Unrestricted Subsidiaries and containing such calculations for any Unrestricted Subsidiaries as reasonably requested by the Administrative Agent, including any supporting documents used to prepare such calculations, and (ii) a Compliance Certificate signed by the Borrower’s chief financial officer (or other financial officer of the Borrower), in his or her capacity as such, showing the Borrower’s compliance with the covenants set forth in Section 7.7 and certifying that no Default or Event of Default then exists or, if any such Default or Event of Default exists as of the date of such certificate, setting forth a description of such Default or Event of Default and specifying the action, if any, taken by the Borrower to remedy the same.
(d)Appraisal Reports. Together with the delivery of the financial statements described in Section 6.6(a)(ii) (beginning with the fiscal year of the Borrower ending December 31, 2019), a desktop appraisal report as of recent date in form and substance, and from an Approved Appraiser, stating the then current Fair Market Value (and each current Fair Market Value used in such determination) of each of the Collateral Vessels on an individual charter-free basis, provided, however, that if the Fair Market Value of a Collateral Vessel in such desktop appraisal report is expressed as a numerical range of a high and low score, the Fair Market Value for such Collateral Vessel shall be deemed to be the mathematical average of such scores. All such appraisals shall be arranged by, and made at the expense of, the Borrower or its Subsidiaries.
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(e)Notice of Events Relating to Environmental Laws and Claims. Promptly after any Authorized Officer of the Borrower obtains knowledge of any of the following, the Borrower will provide the Administrative Agent (who will in turn provide notice to the Lenders of) with written notice in reasonable detail of any of the following that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect:
(i)any pending or threatened Environmental Claim against the Borrower or any of its Subsidiaries or any property owned or operated by the Borrower or any of its Subsidiaries;
(ii)any condition or occurrence on any property owned or operated by the Borrower or any of its Subsidiaries that results in noncompliance by the Borrower or any of its Subsidiaries with any Environmental Law; and
(iii)the taking of any material remedial action in response to the actual or alleged presence of any Hazardous Material on any property owned or operated by the Borrower or any of its Subsidiaries other than in the ordinary course of business.
(f)Notices of Default, Litigation, Etc. The Borrower will promptly, and in any event within five (5) Business Days, after an Authorized Officer of the Borrower has knowledge thereof, give written notice to the Administrative Agent of (who will in turn provide notice to the Lenders of): (i) the occurrence of any Default or Event of Default; (ii) any litigation or governmental proceeding of the type described in Section 5.4; (iii) any circumstance that has had or could reasonably be expected to have a Material Adverse Effect; and (iv) any notice received by it or any Restricted Subsidiary from the holder(s) of Indebtedness of the Borrower or any Restricted Subsidiary in an amount which, in the aggregate, exceeds $5,000,000, where such notice states or claims the existence or occurrence of any event of default with respect to such Indebtedness under the terms of any indenture, loan or credit agreement, debenture, note, or other document evidencing or governing such Indebtedness.
(g)Notices of Event of Loss, Certain Events related to Collateral Vessels. The Borrower will promptly, and in any event within ten (10) Business Days, after an Authorized Officer of the Borrower has knowledge thereof, give written notice to the Administrative Agent of (who will in turn provide notice to the Lenders of): any Event of Loss, the filing of a libel or complaint against a Collateral Vessel, or an attachment or levy which remains in effect more than thirty days, or the taking into custody by virtue of any legal proceeding in any court of competent jurisdiction of a Collateral Vessel and any failure by a Collateral Vessel Owner to maintain the flag and vessel or ship registry in the United States of America.
Section 6.7 Lender Inspection rights. Upon reasonable notice from the Administrative Agent or any Lender and no more often than once in the aggregate for the Administrative Agent and the Lenders, as the case may be, in any calendar year (unless an Event of Default has occurred and is continuing, in which case there shall be no limit to the number or frequency of such visitations or inspections while such Event of Default is continuing), the Borrower will permit the Administrative Agent or any Lender (and such Persons as the Administrative Agent or such Lender may reasonably designate) during normal business hours at such entity’s sole expense (unless an Event of Default shall have occurred and is continuing, in which event at the Borrower’s expense), to visit and inspect any of the Collateral Vessels of the Borrower or of any of its Restricted Subsidiaries, subject to any confidentiality restrictions with third parties or attorney-client privilege, to examine all of the books and records of the Borrower and any of its Restricted Subsidiaries, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Borrower authorizes such accountants to discuss with the Administrative Agent and any Lender (and such Persons as the Administrative Agent or such Lender may reasonably designate) the affairs, finances and accounts of the Borrower and its Restricted Subsidiaries; provided that any inspection of any Collateral
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Vessel, its cargo and its papers shall be subject to the requirements of any operators of such Collateral Vessel and any applicable Governmental Authority and shall not interfere with the day to day operation of such Collateral Vessel. The chief financial officer (or other financial officer) of the Borrower and/or his or her designee shall be afforded the opportunity to be present at any meeting of the Administrative Agent or the Lenders and such accountants or such examination of books or records. The Administrative Agent agrees to use reasonable efforts to minimize, to the extent practicable, the number of separate requests from the Lenders to exercise their rights under this Section 6.7 and/or Section 6.6 and to coordinate the exercise by the Lenders of such rights.
Section 6.8 Conduct of Business. The Borrower and its Restricted Subsidiaries will at all times remain primarily engaged in any of (i) the owning, operating, investing in and marketing equipment, primarily in the shipping and logistics industries, including the United States coast-wide trade or (ii) any related or ancillary businesses.
Section 6.9 Use of Proceeds. The Borrower will use the proceeds of the Loans and the Letters of Credit only for purposes and in the manner set forth in Section 5.5.
Section 6.10 Compliance with Laws.
(a)The Borrower will, and will cause its Restricted Subsidiaries to, conduct their business, and otherwise be, in compliance with all applicable laws, regulations, ordinances and orders of any governmental or judicial authorities (including Environmental Laws and ERISA); provided, however, that this Section 6.10 shall not require the Borrower or any Restricted Subsidiary to comply with any such law, regulation, ordinance or order if (x) it shall be contesting such law, regulation, ordinance or order in good faith by appropriate proceedings and reserves in conformity with GAAP have been provided therefor, or (y) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.
(b)The Borrower and its Subsidiaries will maintain in effect and enforce policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance with Anti-Corruption Laws and applicable Sanctions Laws and Regulations.
Section 6.11 Use of Property and Facilities; Environmental Laws. The Borrower will, and will cause its Restricted Subsidiaries to, comply with all Environmental Laws applicable to or affecting the properties or business operations of the Borrower or any Restricted Subsidiary of the Borrower, except where the failure to comply could not reasonably be expected to have a Material Adverse Effect.
Section 6.12 Further Assurances; Additional Collateral and Additional Guarantors.
(a)Further Assurances. The Borrower will, and will cause the Credit Parties to, make, execute and deliver all such additional and further acts, deeds, instruments and documents in a form reasonably satisfactory to the Security Trustee and consistent with the existing Collateral Documents as the Security Trustee or the Required Lenders (through the Administrative Agent) may reasonably require for the purposes of implementing or effectuating the provisions of this Agreement and the other Credit Documents, or of renewing the rights of the Secured Parties with respect to the Collateral as to which the Security Trustee, for the ratable benefit of the Secured Parties, has or is intended to have a perfected Lien pursuant hereto or thereto, including filing any financing or continuation statements under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby or by the other Credit Documents.
(b)Additional Collateral Vessels. Upon delivery of any Vessel under construction to the Borrower or any of its Restricted Subsidiaries or the acquisition by the Borrower or any of its Restricted
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Subsidiaries (including, for the avoidance of doubt, a Ring-fenced Subsidiary that becomes the registered owner of a Vessel) of any Vessel (the “Additional Vessel Date”), the Borrower shall within sixty (60) days (or such longer period of time as the Security Trustee may reasonably agree) of such delivery or acquisition, execute and deliver, or cause such Restricted Subsidiary(ies) (including, for the avoidance of doubt, the Ring-fenced Subsidiary that becomes the registered owner of a Vessel) to execute and deliver, and cause to be filed for recording (or make arrangements satisfactory to the Security Trustee for the filing for recording thereof) in the appropriate vessel registry, amendments or supplements to existing Collateral Vessel Mortgages or such other Collateral Vessel Mortgages as the Security Trustee shall deem reasonably necessary or advisable to grant to the Security Trustee, for the ratable benefit of the Secured Parties, a Lien over any Vessels owned by the Borrower or any of its Restricted Subsidiaries (including, for the avoidance of doubt, a Ring-fenced Subsidiary that becomes the registered owner of a Vessel), as applicable, not already subject to a Collateral Vessel Mortgage, to the extent necessary to ensure that, immediately after giving effect to the addition of the additional Collateral Vessels all Vessels in the registered ownership of the Borrower and its Restricted Subsidiaries (including, for the avoidance of doubt, a Ring-fenced Subsidiary that becomes the registered owner of a Vessel) are subject to Collateral Vessel Mortgages. In connection with the execution and delivery of such Collateral Vessel Mortgages over such additional Collateral Vessels, the Borrower shall, or shall cause the applicable Collateral Vessel Owner, within sixty (60) days of (or such longer period of time as the Security Trustee may reasonably agree) of the Additional Vessel Date, to deliver (i) such other instruments, certificates and documents described in Section 4.1(b)(vii)(A) and (B) with respect to such additional Collateral Vessel(s), (ii) opinions of local counsel for the jurisdiction in which the applicable additional Collateral Vessel is flagged, covering customary matters and in form and substance reasonably satisfactory to the Administrative Agent, and (iii) and such other filings or actions necessary or desirable in the reasonable opinion of the Security Trustee to perfect the security interest created by such Collateral Vessel Mortgages.
(c)Additional Guarantors; Additional Property Collateral. Within sixty (60) days (or such longer period of time as the Security Trustee may reasonably agree) of the date that (i) any entity (other than a Ring-fenced Subsidiary) becomes a Wholly-Owned Subsidiary of the Borrower or (ii) a Ring-fenced Subsidiary is required to comply with Section 6.12(b), the Borrower shall cause such Wholly-Owned Subsidiary or Ring-fenced Subsidiary, as the case may be, to become a Guarantor hereunder and duly authorize, execute and deliver to the Security Trustee joinders to the Guaranty and Collateral Agreement to the extent such Wholly-Owned Subsidiary is not already a party thereto. In connection with any such joinder, the Borrower shall also deliver, or cause to be delivered, to the Administrative Agent customary certificates and legal opinions relating to such joinder, as may be reasonably requested by the Administrative Agent.
(d)CRF Deposits and Notices. Following any Asset Sale or Event of Loss the proceeds from which the Borrower desires to deposit into a CRF Account, the Borrower shall deliver a CRF Deposit Notice setting out the anticipated CRF Deposit Period in respect thereof. Concurrently with the delivery of the financial statements required to be delivered pursuant to Section 6.6(a), the Borrower shall provide a certificate of an Authorized Officer setting forth the aggregate amount then on deposit in all CRF Accounts.
Section 6.13 Change of Ownership; Registry; Management; Legal Names; Type of Organization (and whether a Registered Organization); Jurisdiction of Organization; etc.
(a)Flag and Registry. The Borrower shall, and shall cause the Collateral Vessel Owners, to maintain the flag and vessel or ship registry in the United States of America with respect to the Collateral Vessels.
(b)Corporate Changes. Within 30 days (or such longer period reasonably agreed to by the Security Trustee) of any change in the legal name, incorporation status or type of organization or
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jurisdiction of organization or incorporation of the Borrower or any Guarantor, the Borrower shall deliver, or cause to be delivered, to the Security Trustee written notice of such change, and shall take, or cause to be taken, all actions reasonably requested by the Security Trustee to maintain the security interests of the Security Trustee, for the benefit of the Secured Parties, in the Collateral intended to be granted under the Collateral Documents at all times perfected and in full force and effect to the extent required by the Collateral Documents.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that, from and after the Closing Date and for so long thereafter as any Loan, Note or Commitment is outstanding hereunder, or any L/C Obligation is outstanding hereunder (unless such L/C Obligation has been cash collateralized in accordance with the provisions of this Agreement or other arrangements with respect thereto have been made that are satisfactory to the applicable Issuing Bank), or any other Obligation is due and payable hereunder:
Section 7.1 Restrictions on Fundamental Changes. The Borrower will not, and will not permit any of its Restricted Subsidiaries to wind up, liquidate or dissolve its affairs, merge or consolidate with any other Person, or Dispose of all or substantially all of the assets of the Borrower and its Restricted Subsidiaries, taken as a whole, to any other Person, except that:
(a)any Restricted Subsidiary of the Borrower may merge with and into, consolidate with or be dissolved or liquidated into, the Borrower, any Guarantor or any other Restricted Subsidiary, so long as (x) in the case of any such merger, consolidation, dissolution or liquidation involving the Borrower, the Borrower is the surviving Person of any such merger, consolidation, dissolution or liquidation, (y) except as provided in preceding clause (x), in the cases of any such merger, consolidation, dissolution or liquidation involving a Guarantor, a Guarantor is the surviving corporation of any such merger, consolidation, dissolution or liquidation, and (z) in all cases in connection with a merger, consolidation, dissolution or liquidation involving a Credit Party, the Collateral and Guaranty Requirements shall be fully satisfied immediately after giving effect thereto;
(b)the Borrower may merge or consolidate with, or Dispose of all or substantially all of its assets to, any other Person, so long as (w) the Borrower is the surviving Person of any such merger or consolidation, (x) no Default or Event of Default shall have occurred and is continuing, (y) no Event of Default described in Section 8.1(k) occurs as a result thereof and (z) in all cases in connection with any such merger, consolidation or Disposition of assets, the Collateral and Guaranty Requirements shall be fully satisfied immediately after giving effect thereto;
(c)any Restricted Subsidiary may merge or consolidate with any other Person, so long as (x) in the case of any merger or consolidation involving a Guarantor, the Guarantor is the surviving Person of any such merger or consolidation, (y) no Default or Event of Default shall have occurred and is continuing and (z) in all cases in connection with a merger or consolidation involving a Guarantor, the Collateral and Guaranty Requirements shall be fully satisfied immediately after giving effect thereto;
(d)any Restricted Subsidiary that is not a Credit Party may wind up, liquidate or dissolve its affairs, so long as (x) the Borrower determines that such action is not adverse to the interests of the Lenders and (y) the Liens granted to the Security Trustee for the benefit of the Secured Parties to the extent required by the Collateral and Guaranty Requirements shall remain in full force and effect; and
(e)Dispositions permitted by Section 7.5 and Section 7.6 (including Dispositions that are excluded from the definition of “Asset Sale”) shall be permitted.
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Section 7.2 Liens . The Borrower shall not, and shall not permit its Restricted Subsidiaries to Incur or suffer to exist any Lien of any kind on any property or asset of any kind of the Borrower or any Restricted Subsidiary, except the following (collectively, the “Permitted Liens”):
(a)Liens in existence on the Closing Date and described on Schedule 7.2;
(b)Liens (i) arising in the ordinary course of business or by operation of law, deposits, pledges or other Liens in connection with workers’ compensation, unemployment insurance, old age benefits, social security obligations, taxes, assessments, public or statutory obligations or other similar charges, good faith deposits, pledges; or (ii) in connection with (or to obtain letters of credit in connection with) bids, purchase agreement, or letters of intent (including earnest money deposits in respect of same), performance, return-of-money or payment bonds and similar bonds, contracts or leases to which the Borrower or its Restricted Subsidiaries are parties or other deposits required to be made in the ordinary course of business; provided that, in each case of clause (i) and (ii), the obligation secured is not for Indebtedness for borrowed money and is not overdue for more than thirty (30) days or, if overdue for more than thirty (30) days, is being contested in good faith by appropriate proceedings and reserves in conformity with GAAP have been provided therefor;
(c)mechanics’, workmen’s, materialmen’s, warehousemen’s, suppliers’ repairmen’s, landlords’, carriers’, crews’ wages, maritime, custom, revenue authority or other similar Liens arising in the ordinary course of business (or deposits to obtain the release of such Liens) related to obligations not overdue for more than thirty (30) days, or, if so overdue, that are being contested in good faith by appropriate proceedings and reserves in conformity with GAAP have been provided therefor;
(d)Liens for Taxes not more than thirty (30) days past due or which can thereafter be paid without penalty or which are being contested in good faith by appropriate proceedings and reserves in conformity with GAAP have been provided therefor, or if such Liens otherwise could not reasonably be expected to have a Material Adverse Effect;
(e)Liens imposed by ERISA (or comparable foreign laws) which are being contested in good faith by appropriate proceedings and reserves in conformity with GAAP have been provided therefor;
(f)Liens arising out of or in respect of judgments, awards or attachments (or in connection with the surety or bonding of appeals) not resulting in an Event of Default described in Section 8.1(h);
(g)Liens on fixed or capital assets acquired, constructed, improved, altered or repaired by the Borrower or any Restricted Subsidiary and related contracts, intangibles and other assets that are incidental thereto (including accessions thereto and replacements thereof) or otherwise arise therefrom; provided that (i) such Liens secure Indebtedness otherwise permitted by this Agreement, (ii) such Liens and the Indebtedness secured thereby are Incurred prior to or within 365 days after such acquisition or the later of the completion of such construction, improvement, alteration or repair or the date of commercial operation of the assets constructed, improved, altered or repaired, (iii) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing, improving, altering or repairing such fixed or capital assets, as the case may be (plus fees and expenses related thereto), (iv) such Lien shall not apply to any other property or assets of the Borrower or any Restricted Subsidiary (although individual financings of equipment may be cross-collateralized to other financings of equipment by the same lender), and (v) such Lien shall not attach to any Collateral Vessel;
(h)Liens on property existing at the time such property is acquired by the Borrower or any Subsidiary of the Borrower and not created in contemplation of such acquisition (or on repairs, renewals, replacements, additions, accessions and betterments thereto), and Liens on the assets of any Person at the
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time such Person becomes a Restricted Subsidiary of the Borrower and not created in contemplation of such Person becoming a Restricted Subsidiary of the Borrower (or on repairs, renewals, replacements, additions, accessions and betterments thereto);
(i)any extension, modification, renewal, refinancing or replacement (or successive extensions, modifications, renewals, refinancings or replacements) in whole or in part of any Lien referred to in the foregoing subsections (a) through (h), provided, however, that the principal amount of Indebtedness secured thereby does not exceed the principal amount secured at the time of such extension, modification, renewal, refinancing or replacement (other than unpaid accrued interest and premium thereon and amounts incurred to pay fees and expenses (including any bona fide amendment, waiver or consent fee) of such extension, modification, renewal, refinancing or replacement), and that such extension, modification, renewal, refinancing or replacement is limited to the property already subject to the Lien so extended, modified, renewed, refinanced or replaced (together with accessions and improvements thereto and replacements thereof);
(j)Liens created or evidenced by or resulting from financing statements filed by lessors of property (but only with respect to the property so leased);
(k)Liens on the Capital Stock owned by the Borrower or any Restricted Subsidiary in any Unrestricted Subsidiary or joint venture;
(l)Liens on the proceeds of insurance policies and unearned or refunded premiums securing Indebtedness owed to an insurance company permitted by Section 7.3(h);
(m)licenses, sublicenses, leases and subleases granted with respect to the assets or properties of the Borrower or any Restricted Subsidiary (including the demise, bareboat, time, voyage or other charter, lease or right to use of a Vessel), in each case entered into in the ordinary course of business, so long as such licenses, sublicenses, leases or subleases do not, individually or in the aggregate, (i) interfere in any material respect with the ordinary conduct of the business of the Borrower or its Restricted Subsidiaries or (ii) materially impair the use (for its intended purposes) or the value of the property subject thereto;
(n)Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Borrower or its Restricted Subsidiaries in the ordinary course of business and other Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(o)bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by the Borrower or its Restricted Subsidiaries, in each case granted in the ordinary course of business or arising by operation of law in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements;
(p)customary restrictions on assets to be disposed of pursuant to merger agreements, stock or asset purchase agreements and similar agreements to the extent that such dispositions are permitted hereunder;
(q)Liens (not otherwise permitted by this Section 7.2) securing Indebtedness or other obligations not exceeding at the time of Incurrence thereof (together with all such other Liens securing
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Indebtedness or other obligations outstanding pursuant to this clause (q) at such time) not to exceed $10,000,000; and
(r)Permitted Maritime Liens.
Section 7.3 Indebtedness. The Borrower shall not, and shall not permit its Restricted Subsidiaries to, Incur or suffer to exist any Indebtedness, except:
(a)existing Indebtedness outstanding on the Closing Date and described on Schedule 7.3;
(b)Indebtedness under the Credit Documents;
(c)intercompany loans and advances made by (i) the beneficial owners of the Borrower to the Borrower in relation to unfunded capital calls as provided in the organizational documents of the Borrower, so long as such indebtedness is subject to a customary subordination agreement with respect to the liens of the Lenders, pays only dividends in kind and the amount of such dividend is capitalized and (ii) the Borrower to any Restricted Subsidiary or made by any Restricted Subsidiary to the Borrower or its Restricted Subsidiaries; provided that any such Indebtedness owed by any Credit Party shall be subordinated to the Obligations on terms reasonably satisfactory to the Administrative Agent pursuant to a customary subordination agreement;
(d)Indebtedness under any Rate Management and Currency Protection Transactions entered into in the ordinary course of business and not for speculative purposes, and Indebtedness in respect of Specified Cash Management Obligations; provided that, in each case, the incurrence of such Indebtedness shall be conditioned upon receipt by the Administrative Agent and the applicable Lender or Affiliate of a Lender that is a party to such transaction of copies of resolutions of the Board of Directors or other appropriate governing body of the Borrower authorizing the execution and delivery of the documents evidencing such Indebtedness;
(e)Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Borrower or is merged with or into the Borrower or any Restricted Subsidiary of the Borrower and not Incurred in contemplation of such transaction;
(f)Capitalized Lease Obligations and Indebtedness secured by Liens permitted under Section 7.2(g); provided that the aggregate principal amount of all Capitalized Lease Obligations and Indebtedness under this Section 7.3(f) shall not exceed at any one time outstanding $10,000,000;
(g)Guaranties with respect to Indebtedness pursuant to this Section 7.3 (other than clause (c) unless otherwise permitted pursuant to such clause) and a guarantee within a letter agreement relating to the SEA-Vista Newbuild II LLC Sale Leaseback Transaction, in substantially the form attached hereto as Schedule 7.3(g);
(h)Indebtedness owing to any insurance company in connection with the financing of any insurance premiums permitted by such insurance company;
(i)Indebtedness in respect of bid, performance or surety bonds, workers’ compensation claims, self-insurance obligations and bankers acceptances issued not to exceed $5,000,000;
(j)any other unsecured Indebtedness, not to exceed $50,000,000 at any one time outstanding, Incurred by any Credit Party, provided that the Borrower is in compliance on a Pro Forma Basis with the covenants set forth in Section 7.7; and
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(k)extensions, modifications, renewals, refinancings or replacements of Indebtedness permitted by this Section 7.3 that do not increase the principal amount of such Indebtedness (other than by amounts equal to unpaid accrued interest and premium thereon plus other amounts paid, and fees and expenses (including any bona fide amendment, waiver or consent fee) reasonably Incurred, in connection such extension, modification, renewal, refinancing or replacement).
Section 7.4 Transactions with Affiliates. Except as otherwise specifically permitted herein, the Borrower and its Restricted Subsidiaries shall not enter into or engage in any material transaction or arrangement or series of related transactions or arrangements which in the aggregate would be material with any Controlling Affiliate of the Borrower, including the purchase from, sale to or exchange of property with, any merger or consolidation with or into, or the rendering of any service by or for, any Controlling Affiliate of the Borrower, except pursuant to the requirements of the Borrower’s or such Restricted Subsidiary’s business and unless such transaction or arrangement or series of related transactions or arrangements, taken as a whole, are no less favorable to the Borrower or such Restricted Subsidiary than would be obtained in an arms’ length transaction with a Person not a Controlling Affiliate of the Borrower; provided that, this Section 7.4 shall not limit (i) any transactions or arrangements between the Borrower and any Restricted Subsidiary or among Restricted Subsidiaries, (ii) the transactions listed in Schedule 7.4, (iii) transactions permitted by Sections 7.1, 7.3 and 7.6, transactions constituting Restricted Payments permitted by Section 7.5 and Investments not prohibited by Section 7.5 and (iv) any transaction or series of related transactions with an Affiliate involving aggregate consideration to be paid by the Borrower and/or any Restricted Subsidiary of less than $1,000,000.
Section 7.5 Limitation on Restricted Payments. The Borrower shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment unless, at the time of and immediately after giving effect to such Restricted Payment:
(a)no Default shall have occurred and be continuing (or would result therefrom);
(b)the Borrower is in compliance on a Pro Forma Basis after giving effect to such Restricted Payment with the covenants set forth in Section 7.7 (calculated without increasing Adjusted EBITDA, and Aggregate Collateral Vessel Value, as applicable, by any Cure Amount used to cure a Financial Covenant Default (i) in the case of Adjusted EBITDA, during the period of the four (4) consecutive Fiscal Quarters then being utilized and (ii) in the case of Aggregate Collateral Vessel Value, during the preceding Fiscal Quarter); and
(c)the Borrower’s Leverage Ratio is equal to or less than 2.50 to 1.00.
(d)The provisions of this Section 7.5 will not prohibit:
(i)any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Capital Stock of the Borrower made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Borrower (other than Capital Stock issued or sold to a Restricted Subsidiary or to an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or guaranteed by the Borrower or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); provided, however, that the net cash proceeds from such sale of Capital Stock will be excluded from Section 7.5(c)(ii);
(ii)any Restricted Payment to any existing or former directors, employees, management or consultants or advisors of the Borrower or any Subsidiary of the Borrower or their assigns, estates or heirs, in each case in connection with equity incentive plans, under stock option plans or stock
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purchase agreements or other agreements to compensate such persons approved by the Board of Directors of the Borrower; provided that the Capital Stock with respect to which such Restricted Payment are made was received for services related to, or for the benefit of, the Borrower and its Restricted Subsidiaries; and provided, further, that Restricted Payments pursuant to this clause will not exceed $1,500,000 in the aggregate during any calendar year (with any unused amounts in any calendar year being carried over to successive calendars year and added to such amount subject to a maximum of $1,500,000 in any calendar year); plus, to the extent not previously applied or included, (x) the net cash proceeds received by the Borrower or any of its Restricted Subsidiaries from sales of Capital Stock to directors, employees, management or consultants or advisors of the Borrower or any Subsidiary of the Borrower that occur after the Closing Date (to the extent such net cash proceeds have not otherwise been applied to the payment of Restricted Payments pursuant to Section 7.5(c)(ii)) and (y) the net cash proceeds of key man life insurance policies received by the Borrower or any of its Restricted Subsidiaries after the Closing Date; provided that the Borrower may elect to apply all or any portion of the aggregate increase contemplated by clauses (x) and (y) above in any calendar year; and provided, further, that cancellation of Indebtedness owing to the Borrower or any Restricted Subsidiary from any existing or former directors, employees, management or consultants or advisors of the Borrower or any Subsidiary of the Borrower in connection with a repurchase of Capital Stock of the Borrower or any Restricted Subsidiary will not be deemed to constitute a Restricted Payment for purposes of this covenant or any other provision of this Agreement;
(iii)the purchase, repurchase, redemption, defeasance or other acquisition or retirement of Capital Stock deemed to occur upon the exercise, conversion or exchange of stock options, warrants, other rights to purchase Capital Stock or other convertible or exchangeable securities if such Capital Stock represents all or portion of the exercise price thereof;
(iv)the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Capital Stock of the Borrower or any Restricted Subsidiary of the Borrower held by existing or former directors, employees, management or consultants or advisors of the Borrower or any Subsidiary of the Borrower in connection with the exercise or vesting of any equity compensation (including stock options, restricted stock and phantom stock) in order to satisfy any tax withholding obligation with respect to such exercise or vesting;
(v)any payment of cash, dividends, distributions, advances or other Restricted Payments by the Borrower or any of its Restricted Subsidiaries in respect of fractional shares of the Borrower’s Capital Stock upon the exercise, conversion or exchange of any stock options (provided that the net cash proceeds from such sales or contributions will be excluded from Section 7.5(c)(ii)), warrants, other rights to purchase Capital Stock or other convertible or exchangeable securities;
(vi)Permitted Investments;
(vii)any administrative, advisory or other management fees required to be paid pursuant to the SEA-Vista Agreements;
(viii)any payment or reimbursement of reasonable out-of-pocket costs and expenses incurred or required to be reimbursed under the SEA-Vista LLC Agreements as and when due, but in no event to exceed $200,000 in any twelve month period; and
(ix)dividends or distributions made for the purposes of permitting Borrower or any Restricted Subsidiary to pay any taxes levied on any of them or made for the purpose of funding any Income Tax Advance relating to any period beginning on or after May 2, 2014,
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provided, however, that at the time of and immediately after giving effect to, any Restricted Payment permitted under this Section 7.5(d) (except Section 7.5(d)(x)), no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof.
The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of such Restricted Payment of the assets or securities proposed to be transferred or issued by the Borrower or such Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment. The amount of any Restricted Payment paid in cash shall be its face amount.
Section 7.6 Limitation on Asset Sales. The Borrower shall not, and shall not permit any Credit Party to, engage in any Asset Sale unless: (a) no Default or Event of Default shall have occurred and is continuing or would result therefrom, and (b) immediately after giving effect to such Asset Sale and any concurrent repayment of Indebtedness the Borrower is in Pro Forma Compliance with the covenants set forth in Section 7.7.
Section 7.7 Financial Covenants.
(a)Maximum Leverage Ratio. The Borrower will not permit the Leverage Ratio, as of the last day of any Fiscal Quarter, commencing with December 31, 2019, to be greater than 3.50 to 1.00; provided that if (i) during the immediately preceding period of four consecutive Fiscal Quarters a Triggering Acquisition has occurred and (ii) no more than three (3) Triggering Acquisitions have occurred since the Closing Date, the Leverage Ratio shall not be greater than 4.00 to 1.00.
(b)Minimum Debt Service Coverage Ratio. The Borrower will not permit the Debt Service Coverage Ratio, as of the last day of any Fiscal Quarter, commencing with December 31, 2019, to be less than 1.25 to 1.00.
(c)Minimum Collateral Coverage Ratio. The Borrower will not permit the Collateral Coverage Ratio, as of the last day of any Fiscal Quarter commencing with December 31, 2019, to be less than 1.50 to 1.00 (the “Minimum Collateral Coverage Ratio”).
Section 7.8 Restrictive and Negative Pledge Agreements. The Borrower shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on (a) the ability of any Restricted Subsidiary to: (i) pay dividends or make other distributions to the Borrower or any Restricted Subsidiary on account of its Capital Stock, (ii) redeem Capital Stock held in it by the Borrower or another Restricted Subsidiary, (iii) repay loans and other Indebtedness owing by it to the Borrower or another Restricted Subsidiary, or (iv) transfer any of its assets to the Borrower or another Restricted Subsidiary; or (b) the ability of any Credit Party to create Liens on any Collateral to secure the Secured Obligations, except, in each case, (i) restrictions provided for in the Credit Documents, (ii) restrictions imposed by any Governmental Authority or by reason of applicable law, (iii) customary provisions restricting assignment of any agreement entered into in the ordinary course of business, (iv) any restriction on the transfer of property subject to a Permitted Lien, (v) any restrictions imposed by any agreement relating to secured Indebtedness permitted by this Agreement to the extent that such restrictions apply only to the property or assets securing such Indebtedness, (vi) customary restrictions and conditions contained in any agreement relating to a Disposition, purchase or merger permitted hereunder pending the consummation of such Disposition, purchase or merger, (vii) restrictions on cash or other deposits imposed under contracts entered into in the ordinary course of business, (viii) any agreement in effect at the time a Restricted Subsidiary becomes a Restricted Subsidiary, so long as such agreement was not entered into in connection with or in contemplation of such Person becoming a Restricted Subsidiary and (ix) customary provisions in partnership agreements, limited liability company organizational governance documents, asset sale and stock sale agreements and other similar
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agreements entered into in the ordinary course of business that restrict the transfer of ownership interests in such partnership, limited liability company or similar person.
Section 7.9 Unrestricted Subsidiaries. The Borrower:
(a)may designate, by written notification thereof to the Administrative Agent, any Restricted Subsidiary, including a newly formed or newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) immediately prior, and after immediately giving effect, to such designation, no Default has occurred and is continuing, and (ii) such designation is deemed to be an Investment in an Unrestricted Subsidiary in an amount equal to the Fair Market Value as of the date of such designation of the Borrower’s direct and indirect ownership interest in such Subsidiary and such Investment would not be prohibited under Section 7.5 at the time of such designation;
(b)may designate or redesignate, by written notification thereof to the Administrative Agent, any Unrestricted Subsidiary to be a Restricted Subsidiary if immediately after giving effect to such designation or redesignation, (i) the representations and warranties of the Borrower and its Restricted Subsidiaries contained in each of the Credit Documents are true and correct in all material respects on and as of such date as if made on and as of such redesignation (or, if stated to have been made expressly as of an earlier date, were true and correct in all material respects as of such date), (ii) no Default has occurred and is continuing, (iii) such designation is deemed to be an Investment in an Unrestricted Subsidiary and (iv) all Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstanding immediately following such designation or redesignation would, if Incurred or made at such time, have been permitted to be Incurred or made for all purposes hereof; and
(c)will not permit any Unrestricted Subsidiary (i) to Incur any Indebtedness other than Unrestricted Subsidiary Non-Recourse Debt, except any Guaranty given solely to support a pledge by the Borrower or any Restricted Subsidiary of the Capital Stock of such Unrestricted Subsidiary, which Guaranty is not recourse to the Borrower or any Restricted Subsidiary, and except for obligations of the Borrower or any Restricted Subsidiary in respect of Indebtedness of such Unrestricted Subsidiary that is permitted as both an Incurrence of Indebtedness under Section 7.3 and is an Investment not prohibited by Section 7.5, (ii) to guarantee or otherwise directly or indirectly provide credit support for any Indebtedness of the Borrower or any of its Restricted Subsidiaries, except for any pledge of Capital Stock of such Unrestricted Subsidiary to secure Indebtedness of the Borrower or any of its Restricted Subsidiaries and (iii) to hold any Capital Stock in, or any Indebtedness of, the Borrower or any Restricted Subsidiary.
If, at any time, any Unrestricted Subsidiary fails to meet the requirements of Section 7.9(c), it shall thereafter cease to be an Unrestricted Subsidiary for purposes hereof and any Indebtedness and Investments of the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be Incurred or made by a Restricted Subsidiary at such time and the Borrower shall not be deemed to be in default of this Section 7.9, but if the Indebtedness is not permitted to be Incurred under Section 7.3, the Investments are prohibited by Section 7.5, or the Lien is not permitted under Section 7.2, the Borrower shall be in default of the applicable covenant.
Section 7.10 Sanctions Laws and Regulations. The Borrower and its Subsidiaries shall not, and, to their knowledge, their respective officers, employees, directors and agents (in their capacity as officers, employees, directors or agents, respectively, of the Borrower or any of its Subsidiaries), shall not, use the proceeds of any Borrowing or Letter of Credit (i) to fund any activities or business of or with any Designated Person, or in any country or territory, that at the time of such funding is the subject of any country-wide sanctions under any Sanctions Laws and Regulations (on the Closing Date, Cuba, Iran, North Korea, Sudan and Syria), (ii) in any other manner that would result in a material violation of any Sanctions Laws and Regulations by the Borrower or its Subsidiaries or (iii) in furtherance of an offer, payment,
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promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws.
Section 7.11 Ring-fenced Subsidiaries. The Borrower shall not permit any Ring-fenced Subsidiary to, and each Ring-fenced Subsidiary shall not, directly or indirectly:
(a)incur any Indebtedness, other than Indebtedness of such Ring-fenced Subsidiary on the Closing Date or extensions, modifications, renewals, refinancings or replacements of such Indebtedness that do not increase the principal amount of such Indebtedness (other than by amounts equal to unpaid accrued interest and premium thereon plus other amounts paid, and fees and expenses (including any bona fide amendment, waiver or consent fee) reasonably Incurred, in connection such extension, modification, renewal, refinancing or replacement);
(b)retain any cash other than cash necessary to continue to operate in the ordinary course of its business as it exists on the Closing Date, as reasonably determined by such Ring-fenced Subsidiary or the Borrower;
(c)amend or waive its organizational documents or any agreement of such Ring-fenced Subsidiary in any manner that could be adverse to the value, perfection or enforceability of the security interest of the Lenders in the Capital Stock of such Ring-fenced Subsidiary;
(d)engage in any operation or business activities other than: (i) the operation and business activities engaged on the Closing Date, including but not limited to the performance of such Ring-fenced Subsidiary’s obligations with respect to any existing contracts on the Closing Date to which such Ring-fenced Subsidiary is a party, (ii) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance), (iii) the performance of its obligations with respect to the Credit Documents, (iv) payment of taxes (v) participating in tax, accounting and other administrative matters as a member of the consolidated group of the Borrower and its Subsidiaries or the making and filing of any reports required by any Governmental Authority, (vi) exercise any purchase options with respect to any vessel chartered in by it provided such Ring-fenced Subsidiary complies with the requirements set forth in Section 6.12, (vii) in the case of SEA-Vista Newbuild II LLC, enter into the SEA-Vista Newbuild II LLC Sale Leaseback Transaction and (viii) any other activities incidental to the foregoing or customary for passive holding companies;
(e)incur or suffer to exist any Liens on its property other than Liens existing on the Closing Date; or
(f)acquire any properties or assets except in the ordinary course of its business.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1 Events of Default. Any one or more of the following shall constitute an Event of Default if occurring on or after the Closing Date:
(a)default by any Credit Party in the payment of (i) any interest in respect of any Loan or Reimbursement Obligations or any fees payable hereunder, within five (5) Business Days following the date when due or (ii) any principal amount of any Loan or Reimbursement Obligation when due;
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(b)default by the Borrower or any Restricted Subsidiary in the observance or performance of any covenant set forth in Section 6.1, Section 6.6(f)(i), Section 6.13(a) or Article VII;
(c)default by the Borrower or any other Credit Party in the observance or performance of any provision hereof or of any other Credit Document not mentioned in clauses (a) or (b) above, which is not remedied within thirty (30) days after notice thereof to the Borrower by the Administrative Agent; provided that a Default as a result of a breach of Section 7.7 (a “Financial Covenant Default”) is subject to cure pursuant to Section 8.9;
(d)any representation or warranty made or deemed made herein or in any other Credit Document by the Borrower or any Restricted Subsidiary proves untrue in any material respect as of the date of the making, or deemed making, thereof;
(e)(1) (x) Indebtedness (other than the Obligations and Rate Management and Currency Protection Obligations) in the aggregate principal amount of $2,500,000 of the Borrower and its Restricted Subsidiaries (“Material Indebtedness”) shall (i) not be paid at maturity (beyond any applicable grace periods), or (ii) be declared to be due and payable or required to be prepaid, redeemed or repurchased prior to its Stated Maturity other than any repurchase or redemption of Indebtedness in connection with a change of control offer or asset sale offer or other similar mandatory prepayment or (y) any default in respect of Material Indebtedness shall occur which permits the holders thereof, or any trustees or agents on their behalf, to accelerate the maturity of such Indebtedness or requires such Indebtedness to be prepaid, redeemed, or repurchased prior to its Stated Maturity or (2) any default in respect of Rate Management and Currency Protection Obligations resulting in the exercise by the counterparty thereunder of its right to terminate its position under the applicable Rate Management and Currency Protection Transaction and the amount payable by the Borrower and its Restricted Subsidiaries in the aggregate (after giving effect to any netting agreements relating thereto) in respect of such termination is $2,500,000;
(f)the Borrower or a Guarantor (i) has entered involuntarily against it an order for relief under the United States Bankruptcy Code or a comparable action is taken under any applicable bankruptcy or insolvency law of another country or political subdivision of such country, (ii) generally does not pay, or admits its inability generally to pay, its debts as they become due, (iii) makes a general assignment for the benefit of creditors, (iv) applies for, seeks, consents to, or acquiesces in, the appointment of a receiver, custodian, trustee, liquidator or similar official for it or any substantial part of its property under the United States Bankruptcy Code or under the applicable bankruptcy or insolvency laws of another country or a political subdivision of such country, (v) institutes any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code or any comparable law, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fails to file an answer or other pleading denying the material allegations of or consents to or acquiesces in any such proceeding filed against it in a court of competent jurisdiction, (vi) makes any Board of Directors resolution in direct furtherance of any matter described in clauses (i) – (v) above, or (vii) a fails to contest in good faith any appointment or proceeding described in this Section 8.1(f);
(g)a custodian, receiver, trustee, liquidator or similar official is appointed for the Borrower or a Guarantor or any substantial part of its property under the United States Bankruptcy Code or under the applicable bankruptcy or insolvency laws of another country or a political subdivision of such country, or a proceeding described in Section 8.1(f)(v) is instituted against the Borrower or Guarantor in a court of competent jurisdiction, and such appointment continues undischarged or such proceeding continues undismissed and unstayed for a period of sixty (60) days (or one hundred twenty (120) days in the case of any such event occurring outside the United States of America);
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(h)the Borrower or any Restricted Subsidiary fails within thirty (30) days with respect to any judgments or orders that are rendered in the United States or sixty (60) days with respect to any judgments or orders that are rendered in a court of competent jurisdiction in foreign jurisdictions (or such earlier date as any execution on such judgments or orders shall take place) to vacate, pay, bond or otherwise discharge any judgments or orders for the payment of money the uninsured portion of which is in excess of $2,500,000 in the aggregate and which are not stayed on appeal or otherwise being appropriately contested in good faith in a manner that stays execution; provided that such event shall not be deemed to constitute an Event of Default if the relevant Credit Party is entitled to insurance coverage for the whole of such sum and the relevant insurers have confirmed liability and undertaken to make payment of the whole of such sum by writing to the person(s) entitled to payment and it is likely (in the reasonable opinion of the Required Lenders) that the insurers will be able to make such payment within thirty (30) days;
(i)(x) the Borrower or any Subsidiary or ERISA Affiliate fails to pay to the PBGC or to a Plan under Title IV of ERISA when due an amount that it is liable to pay with respect to a Plan; or a notice of intent to terminate a Plan having Unfunded Vested Liabilities of the Borrower or any of its Subsidiaries or ERISA Affiliate that could reasonably be expected to have a Material Adverse Effect (a “Material Plan”) is filed under Title IV of ERISA; or the PBGC institutes proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding is instituted by a fiduciary of any Material Plan against the Borrower or any Subsidiary or ERISA Affiliate to collect any liability with respect to any Material Plan under Section 515 or 4219(c)(5) of ERISA, and in each case such proceeding is not dismissed within thirty (30) days thereafter; or a condition exists by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated, and (y) the occurrence of one or more of the matters in the preceding clause (x) could reasonably be expected to result in liabilities that could reasonably be expected to have a Material Adverse Effect; or
(j)(i) any Credit Document ceases to be in full force and effect (other than as expressly permitted hereunder or thereunder by reason of a release of Collateral in accordance with the terms hereof or thereof or Security Termination), (ii) any Credit Document shall be declared null and void, (iii) any Credit Party shall repudiate in writing its obligations under any Credit Document to which it is party, (iv) any Credit Party shall contest the validity or enforceability of any Credit Document in writing or deny in writing that it has any further liability under any Credit Document to which it is party, or (v) the Security Trustee shall not have or shall cease to have, or any Credit Party shall assert in writing that the Security Trustee shall not have or shall cease to have, a valid and perfected Lien in any material portion of the Collateral purported to be covered by the Collateral Documents with the priority required by the relevant Collateral Document, in each case for any reason other than the failure of the Security Trustee to take any action within its control.
(k)A Change of Control shall occur.
Section 8.2 Non-Bankruptcy Defaults. When any Event of Default (other than those described in Section 8.1(f) or (g) with respect to the Borrower or a Guarantor) has occurred and is continuing, the Administrative Agent shall, by notice to the Borrower: (a) if so directed by the Required Lenders, terminate the remaining Commitments to the Borrower hereunder on the date stated in such notice (which may be the date thereof) and such termination shall automatically also terminate the Swingline Commitment on such date; (b) if so directed by the Required Lenders, declare the principal of and the accrued interest on all outstanding Loans to be forthwith due and payable and thereupon all outstanding Loans, including both principal and interest thereon, shall be and become immediately due and payable together with all other accrued amounts payable under the Credit Documents without further demand, presentment, protest or notice of any kind, including notice of intent to accelerate and notice of acceleration, each of which is expressly waived by the Borrower; and (c) if so directed by the Required Lenders, demand that the Borrower immediately pay to the Administrative Agent (to be held by the Administrative Agent pursuant to
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Section 8.4) the full amount then available for drawing under each outstanding Letter of Credit, and the Borrower agrees to immediately make such payment, and the Borrower acknowledges and agrees that the Lenders, the Issuing Banks, the Swingline Lender and the Administrative Agent would not have an adequate remedy at law for failure by the Borrower to honor any such demand and that the Administrative Agent, for the benefit of the Lenders, the Swingline Lender and the Issuing Banks, shall have the right to require the Borrower to specifically perform such undertaking whether or not any drawings or other demands for payment have been made under any Letter of Credit. The Administrative Agent, after giving notice to the Borrower pursuant to this Section 8.2, shall also promptly send a copy of such notice to the other Lenders, the Swingline Lender and the Issuing Banks, but the failure to do so shall not impair or annul the effect of such notice.
Section 8.3 Bankruptcy Defaults. When any Event of Default described in Section 8.1(f) or (g) has occurred and is continuing with respect to the Borrower or a Guarantor, then all outstanding Loans shall immediately become due and payable together with all other accrued amounts payable under the Credit Documents without presentment, demand, protest or notice of any kind, each of which is expressly waived by the Borrower; and all obligations of the Lenders, the Swingline Lender and the Issuing Banks to extend further credit pursuant to any of the terms hereof shall immediately terminate and the Borrower shall immediately pay to the Administrative Agent (to be held by the Administrative Agent pursuant to Section 8.4) the full amount then available for drawing under each outstanding Letter of Credit, the Borrower acknowledging that the Lenders, the Issuing Banks, the Swingline Lender and the Administrative Agent would not have an adequate remedy at law for failure by the Borrower to honor any such demand and that the Lenders, the Issuing Banks, the Swingline Lender and the Administrative Agent shall have the right to require the Borrower to specifically perform such undertaking whether or not any drawings or other demands for payment have been made under any of the Letters of Credit.
Section 8.4 Collateral for Undrawn Letters of Credit.
(a)If the prepayment of any L/C Obligations is required under Section 8.2 or 8.3, the Borrower shall forthwith pay the amount required to be so prepaid to be held by the Administrative Agent as provided in Section 8.4(b).
(b)All amounts prepaid pursuant to Section 8.4(a) or pursuant to Sections 2.10, 2.12(g) or Section 2.15(e) shall be held by the Administrative Agent in a separate collateral account (such account, and the credit balances, properties and any investments from time to time held therein, and any substitutions for such account, any certificate of deposit or other instrument evidencing any of the foregoing and all proceeds of and earnings on any of the foregoing being collectively called the “Collateral Account”) as security for, and for application to (i) the reimbursement of any drawing under any Letter of Credit then or thereafter paid by any Issuing Bank or (ii) any unallocated Fronting Exposure, and to (iii) the payment of any Revolving Loans, any Swingline Loans and all other unpaid Obligations then due and owing (collectively, the “Collateralized Obligations”). The Collateral Account shall be held in the name of and subject to the exclusive dominion and control of the Administrative Agent, for the benefit of the Issuing Banks, the Swingline Lender, the Administrative Agent, and the Lenders, as pledgee hereunder. If and when required by the Borrower, the Administrative Agent shall invest and reinvest funds held in the Collateral Account from time to time in Cash Equivalents specified from time to time by the Borrower, provided that the Administrative Agent is irrevocably authorized to sell on market terms any investments held in the Collateral Account when and as required to make payments out of the Collateral Account for application to Collateralized Obligations due and owing. When and if (A) (i) the Borrower shall have made payment of all Collateralized Obligations then due and payable, and (ii) all relevant preference or other disgorgement periods relating to the receipt of such payments have passed, or (B) no Default or Event of Default shall be continuing, the Administrative Agent shall repay to the Borrower any remaining amounts and assets held in the Collateral Account, provided that if the Collateral Account is being released pursuant
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to clause (A) and any Letter of Credit then remains outstanding, the Borrower, prior to or contemporaneously with such release, shall provide the Administrative Agent a back-to-back letter of credit in form and substance satisfactory to the applicable Issuing Bank (in its sole discretion) from a bank or financial institution whose short-term unsecured debt rating is rated A or above from either S&P or Moody’s or such other bank or financial institution satisfactory to the applicable Issuing Bank in either case in an amount equal to the undrawn face amount of each such Letter of Credit and which provides that the Administrative Agent may make a drawing thereunder in the event that the applicable Issuing Bank pays a drawing under such Letter of Credit. In addition, if the aggregate amount on deposit with the Security Trustee exceeds the Collateralized Obligations then existing, then the Administrative Agent shall release and deliver such excess amount upon the written request of the Borrower.
Section 8.5 Notice of Default. The Administrative Agent shall give notice to the Borrower under Section 8.2 promptly upon being requested to do so by the Required Lenders and shall thereupon notify all the Lenders thereof.
Section 8.6 Expenses. The Borrower agrees to pay to the Administrative Agent, each Issuing Bank, the Swingline Lender and each Lender all reasonable documented out-of-pocket expenses Incurred or paid by the Administrative Agent, the Issuing Bank, or such Lender, including reasonable attorneys’ fees and court costs, in connection with any Default or Event of Default hereunder or in connection with the enforcement of any of the Credit Documents.
Section 8.7 Distribution and Application of Proceeds. After the exercise of remedies provided for in Section 8.2 or the occurrence and during the continuance of an Event of Default described in Section 8.1(f) or (g), any payment to the Administrative Agent, any Issuing Bank, the Swingline Lender or any Lender hereunder, from the Security Trustee under the Guaranty and Collateral Agreement or from the proceeds of the Collateral Account or otherwise shall be paid to the Administrative Agent to be distributed and applied as follows (unless otherwise agreed by the Borrower, the Administrative Agent, all Issuing Banks, the Swingline Lender and all Lenders):
(a)First, to the payment of any and all reasonable documented out-of-pocket costs and expenses of the Administrative Agent, including reasonable attorneys’ fees and documented out-of-pocket costs and expenses, as provided by this Agreement or by any other Credit Document, Incurred in connection with the collection of such payment or in respect of the enforcement of any rights of the Administrative Agent, the Issuing Banks, the Swingline Lender or the Lenders under this Agreement or any other Credit Document;
(b)Second, to the payment of any and all reasonable out-of-pocket costs and expenses of the Issuing Banks, the Swingline Lender and the Lenders, including reasonable attorneys’ fees and out-of-pocket costs and expenses, as provided by this Agreement or by any other Credit Document, Incurred in connection with the collection of such payment or in respect of the enforcement of any rights of the Lenders, the Swingline Lender or the Issuing Banks under this Agreement or any other Credit Document, pro rata in the proportion in which the amount of such costs and expenses unpaid to each Lender, the Swingline Lender or each Issuing Bank bears to the aggregate amount of the costs and expenses unpaid to all Lenders, the Swingline Lender and all Issuing Banks collectively, until all such fees, costs and expenses have been paid in full;
(c)Third, to the payment of any due and unpaid fees to the Administrative Agent, any Lender, the Swingline Lender or any Issuing Bank as provided by this Agreement or any other Credit Document, pro rata in the proportion in which the amount of such fees due and unpaid to the Administrative Agent, each Lender, the Swingline Lender, and each Issuing Bank bears to the aggregate amount of the fees due
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and unpaid to the Administrative Agent, all Lenders, the Swingline Lender and all Issuing Banks collectively, until all such fees have been paid in full;
(d)Fourth, to the payment of accrued and unpaid interest on the Loans or the Reimbursement Obligations to the date of such application, pro rata in the proportion in which the amount of such interest, accrued and unpaid to each Lender, the Swingline Lender or each Issuing Bank bears to the aggregate amount of such interest accrued and unpaid to all Lenders, the Swingline Lender and all Issuing Banks collectively, until all such accrued and unpaid interest has been paid in full;
(e)Fifth, to the payment of the outstanding due and payable principal amount of each of the Loans, the amount of the outstanding Reimbursement Obligations (reserving cash collateral for all undrawn face amounts of any outstanding Letters of Credit (if Section 8.4(a) has not been complied with)), the amount of the outstanding Rate Management and Currency Protection Obligations and the amount of the outstanding Specified Cash Management Obligations, pro rata in the proportion in which the outstanding principal amount of such Loans, the amount of such outstanding Reimbursement Obligations owing to each Lender, the Swingline Lender and each Issuing Bank, together (if Section 8.4(a) has not been complied with) with the undrawn face amounts of such outstanding Letters of Credit, the amount of such outstanding Rate Management and Currency Protection Obligation and the amount of such outstanding Specified Cash Management Obligations, bears to the aggregate amount of all outstanding Loans, outstanding Reimbursement Obligations and (if Section 8.4(a) has not been complied with) the undrawn face amounts of all outstanding Letters of Credit, outstanding Rate Management and Currency Protection Obligation and outstanding Specified Cash Management Obligations. In the event that any such Letters of Credit, or any portions thereof, terminate or expire without any pending drawing thereon, any cash collateral therefor shall be distributed pro rata in accordance with this Section 8.7(e) by the Administrative Agent until the principal amount of all Loans and Reimbursement Obligations shall have been paid in full;
(f)Sixth, to the payment of any other outstanding Obligations then due and payable, pro rata in the proportion in which the outstanding Obligations owing to each Lender, each Issuing Bank, the Swingline Lender and Administrative Agent bears to the aggregate amount of all such Obligations until all such Obligations have been paid in full; and
(g)Seventh, to the Borrower or as the Borrower may direct unless otherwise directed by a court of competent jurisdiction.
Section 8.8 Enforcement rights. Notwithstanding anything to the contrary contained herein or in any other Credit Document, the authority to enforce rights and remedies hereunder and under the other Credit Documents against the Credit Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent (or its authorized designee, including Security Trustee as its mortgagee trustee) in accordance with Article VIII for the benefit of all the Lenders and the Issuing Banks; provided that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Credit Documents, (b) any Issuing Bank or the Swingline Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as an Issuing Bank or the Swingline Lender, as the case may be) hereunder and under the other Credit Documents, (c) any Lender from exercising setoff rights in accordance with Section 11.6 or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Credit Party under any law relating to bankruptcy, insolvency or reorganization or relief of debtors.
Section 8.9 Equity Cure.
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(a)Financial Performance Covenant Cure Right. Notwithstanding anything to the contrary contained in Section 7.7, if the Borrower fails to comply with the Financial Performance Covenants or any of them, then (i) the Borrower shall be permitted on or prior to the twentieth (20th) day following the earlier of (i) date the certificate calculating compliance with the Financial Performance Covenants is required to be delivered pursuant to Section 6.6(c) and (ii) the date of receipt of a notice from the Administrative Agent that the Borrower is not in compliance with the Financial Performance Covenants (the “Cure Deadline”), to cure such failure to comply by receiving cash contributions to its equity capital or cash proceeds from an issuance of Qualified Equity Interests as a cash capital contribution (collectively, the “Cure Right”), and (ii) upon receipt by the Borrower of such cash proceeds (such cash amount used to cure a Financial Covenant Default, the “Cure Amount”) pursuant to the exercise of such Cure Right, the Financial Performance Covenants shall be recalculated by increasing Adjusted EBITDA, and Aggregate Collateral Vessel Value by the Cure Amount (and such increase to Adjusted EBITDA, and Aggregate Collateral Vessel Value shall be taken into account solely for the Fiscal Quarter with respect to which the Cure Right was exercised); provided that Adjusted EBITDA, and Aggregate Collateral Vessel Value shall not be increased by more than the amount necessary for the Borrower to be in compliance with the Financial Performance Covenants.
(b)Treatment of Cure Amount. The parties hereby acknowledge that this Section 8.9 may not be relied on for purposes of calculating any financial ratios other than as applicable to Section 7.7 and shall not result in any adjustment to any baskets or other amounts other than the amount of the Adjusted EBITDA, and Aggregate Collateral Vessel Value for the purpose of Section 7.7.
(c)Cure of Financial Covenant Default. If a Financial Covenant Default has occurred and is continuing and if, after giving effect to the recalculation of the Financial Performance Covenants pursuant to this Section 8.9, the Borrower is in compliance with the Financial Performance Covenants, the Borrower shall be deemed to have satisfied the Financial Performance Covenants as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the Financial Covenant Default shall be deemed cured for the purposes of this Agreement.
(d)Limitations on Exercise of Cure Right. (i) In each four-Fiscal-Quarter period there shall be at least two Fiscal Quarters in which the Cure Right is not exercised and (ii) the Cure Right shall not be exercised more than five times during the term of this Agreement.
ARTCILE IX
CHANGE IN CIRCUMSTANCES
Section 9.1 Change in Law.
(a)Notwithstanding any other provisions of this Agreement or any Note, if a Change in Law makes it unlawful for any Lender to make or maintain Eurodollar Loans or any Issuing Bank to issue, extend or increase any Letter of Credit, such Lender or Issuing Bank, as the case may be, shall promptly give written notice thereof and of the basis therefor in reasonable detail to the Borrower, and such Lender’s or Issuing Bank’s obligations to fund Eurodollar Loans or make, continue or convert, as applicable, such Loans under this Agreement, or to issue, extend or increase any such Letters of Credit, as the case may be, shall thereupon be suspended until it is no longer unlawful for such Lender to make or maintain such Loans or such Issuing Bank to issue, extend or increase such Letters of Credit.
(b)Upon the giving of the notice to the Borrower referred to in Section 9.1(a) in respect of any such Eurodollar Loan and provided the Borrower shall not have prepaid such Loan pursuant to Section 2.9, (i) any such outstanding Eurodollar Loan of such Lender shall be automatically converted to a Base Rate Loan on the last day of the Interest Period then applicable thereto or on such earlier date as required by law
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and (ii) such Lender shall make or continue its portion of any requested Borrowing of a Eurodollar Loan as a Base Rate Loan, which Base Rate Loan shall, for all other purposes, be considered part of such Borrowing.
(c)Any Lender or Issuing Bank that has given any notice pursuant to Section 9.1(a) shall, upon determining that it would no longer be unlawful for it to make such Eurodollar Loans or issue such Letters of Credit, give prompt written notice thereof to the Borrower and the Administrative Agent, and upon giving such notice, its obligation to make, allow conversions into and maintain, as applicable, such Loans or issue such Letters of Credit shall be reinstated.
Section 9.2 [Reserved].
Section 9.3 Increased Cost and Reduced Return.
(a)If, a Change in Law, or compliance by any Lender or Issuing Bank (or its applicable Lending Office), with any request or directive (whether or not having the force of law) of any Governmental Authority issued after the date hereof (or, if later, after the date the Administrative Agent, such Issuing Bank, or such Lender becomes the Administrative Agent, an Issuing Bank, or a Lender):
(i)subjects any Lender or Issuing Bank (or its applicable Lending Office) to any tax, duty or other charge related to any Revolving Loan, Reimbursement Obligation, or its obligation to advance or maintain Loans or issue any Letter of Credit, or shall change the basis of taxation of payments to any Lender or Issuing Bank (or its applicable Lending Office) of the principal of or interest on its Revolving Loans, Letters of Credit or Reimbursement Obligation or any participations in any thereof, or any other amounts due under this Agreement related to its Revolving Loans, Letters of Credit, Reimbursement Obligations or participations therein, or its obligation to make Revolving Loans, issue Letters of Credit, or acquire participations therein (except for changes with respect to Taxes that are Indemnified Taxes); or
(ii)imposes, modifies or deems applicable any reserve, special deposit or similar requirement (including any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding for any Revolving Loan any such requirement included in an applicable Statutory Reserve Rate) against assets of, deposits with or for the account of, or credit extended by, any Lender or Issuing Bank (or its applicable Lending Office) or imposes on any Lender or Issuing Bank (or its Lending Office) or on the interbank market any other condition affecting its Loans, Letters of Credit, any Reimbursement Obligations owed to it, or its participation in any thereof, or its obligation to advance or maintain Revolving Loans, issue Letters of Credit or participate in any thereof;
and the result of any of the foregoing is to increase the cost to such Lender or Issuing Bank (or its applicable Lending Office) of advancing or maintaining any Loan, issuing or maintaining a Letter of Credit or participating therein, or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank (or its applicable Lending Office) in connection therewith under this Agreement, by an amount deemed by such Lender or Issuing Bank to be material, then, subject to Section 9.3(c), from time to time, within thirty (30) days after receipt of a certificate from such Lender or Issuing Bank (with a copy to the Administrative Agent) pursuant to Section 9.3(c) setting forth in reasonable detail such determination and the basis thereof, the Borrower shall, without duplication under this Agreement, be obligated to pay to such Lender or Issuing Bank such additional amount or amounts as will compensate such Lender or Issuing Bank for such increased cost or reduction.
(b)If, after the date hereof, the Administrative Agent, any Lender, the Swingline Lender or Issuing Bank shall have reasonably determined that a Change in Law regarding capital adequacy or liquidity (including any revision in the Final Risk-Based Capital Guidelines of the Board of Governors of
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the Federal Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225, Appendix A) or of the Office of the Comptroller of the Currency (12 CFR Part 3, Appendix A), or in any other applicable capital adequacy or liquidity rules heretofore adopted and issued by any governmental authority), or any change after the date hereof in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Administrative Agent, any Lender, the Swingline Lender or Issuing Bank (or its applicable Lending Office) with any request or directive regarding capital adequacy or liquidity (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender’s, Issuing Bank’s or Swingline Lender’s capital, or on the capital of any corporation controlling such Lender, Issuing Bank or Swingline Lender, as a consequence of its obligations hereunder to a level below that which such Lender, Issuing Bank or Swingline Lender could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s, Issuing Bank’s, Swingline Lender’s or its controlling corporation’s policies with respect to capital adequacy or liquidity in effect immediately before such adoption, change or compliance) by an amount reasonably deemed by such Lender, Issuing Bank or Swingline Lender to be material, then, subject to Section 9.3(c), from time to time, within thirty (30) days after its receipt of a certificate from such Lender, Issuing Bank or Swingline Lender (with a copy to the Administrative Agent) pursuant to Section 9.3(c) setting forth in reasonable detail such determination and the basis thereof, the Borrower shall pay to such Lender, Issuing Bank or Swingline Lender such additional amount or amounts as will compensate such Lender, Issuing Bank or Swingline Lender for such reduction.
(c)Each of the Administrative Agent, the Lenders, the Swingline Lender and the Issuing Banks that determines to seek compensation under this Section 9.3 shall give written notice to the Borrower and, in the case of a Lender, the Swingline Lender or an Issuing Bank other than the Administrative Agent, the Administrative Agent of the circumstances that entitle the Administrative Agent, such Lender, the Swingline Lender or such Issuing Bank to such compensation within one calendar year after the Administrative Agent, such Lender, the Swingline Lender or such Issuing Bank receives actual notice or obtains actual knowledge of the law, rule, order or interpretation or occurrence of another event giving rise to a claim hereunder. In any event the Borrower shall not have any obligation to pay any amount with respect to claims accruing prior to the 365th day preceding such written demand; provided that if the basis or circumstances giving rise to such compensation is retroactive, then such one calendar year period referred to in this sentence shall be extended to include the period with retroactive effect thereof. Each of the Administrative Agent, the Lenders, the Swingline Lender and the Issuing Banks shall use reasonable efforts to avoid the need for, or reduce the amount of, such compensation and any payment under Section 3.3, including the designation of a different Lending Office, if such action or designation will not, in the sole judgment of the Administrative Agent, such Lender, the Swingline Lender or such Issuing Bank made in good faith, be otherwise disadvantageous to it; provided that the foregoing shall not in any way affect the rights of any Lender, the Swingline Lender or any Issuing Bank or the obligations of the Borrower under this Section 9.3. A certificate of the Administrative Agent, any Lender, the Swingline Lender or any Issuing Bank, as applicable, claiming compensation under this Section 9.3, and setting forth the additional amount or amounts to be paid to it hereunder and accompanied by a statement prepared by the Administrative Agent, such Lender, Swingline Lender or such Issuing Bank, as applicable, describing in reasonable detail the calculations thereof shall be conclusive absent manifest error of the correctness thereof. In determining such amount, such Lender, the Swingline Lender or such Issuing Bank may use any reasonable averaging and attribution methods.
Section 9.4 Lending Offices. The Administrative Agent, the Swingline Lender, each Lender and each Issuing Bank may, at its option, elect to make or maintain its Loans and issue its Letters of Credit hereunder at the Lending Office for each Type and/or currency of Letter of Credit available hereunder or at such other of its branches, offices or Affiliates as it may from time to time elect and designate in a written notice to the Borrower and the Administrative Agent, provided that, except in the case of any such transfer
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to another of its branches, offices or Affiliates made at the request of the Borrower, the Borrower shall not be responsible for the costs arising under Section 3.3 or 9.3 resulting from any such transfer to the extent not otherwise applicable to such Lender, the Swingline Lender or such Issuing Bank prior to such transfer.
Section 9.5 Discretion of Lender as to Manner of Funding. Subject to the other provisions of this Agreement, each Lender, the Swingline Lender and each Issuing Bank shall be entitled to fund and maintain its funding of all or any part of its Loans and Letters of Credit in any manner it sees fit.
Section 9.6 Substitution of Lender or Issuing Bank. If (a) any Lender or Issuing Bank has demanded compensation or given notice of its intention to demand compensation under Section 9.3, (b) the Borrower is required to pay any additional amount to any Lender or Issuing Bank under Section 2.11, (c) any Lender or Issuing Bank fails to, or is unable to, submit any form or certificate required under Section 3.3(b) or withdraws or cancels any previously submitted form with no substitution therefor that complies with the requirements of Section 3.3(b), (d) any Lender or Issuing Bank gives notice of any Change in Law or regulations, or in the interpretation thereof, pursuant to Section 9.1, (e) any Lender or Issuing Bank is a Defaulting Lender, (f) any Lender or Issuing Bank shall seek to avoid its obligation to make or maintain Loans or issue Letters of Credit hereunder for any reason, including reliance upon 12 U.S.C. § 1821(e) or (n) (1) (B), (g) any taxes referred to in Section 3.3 or Section 11.3 have been levied or imposed (or the Borrower determines in good faith that there is a substantial likelihood that such taxes will be levied or imposed) so as to require withholding or deductions by the Borrower or payment by the Borrower of additional amounts to any Lender or Issuing Bank, or other reimbursement or indemnification of any Lender or Issuing Bank, as a result thereof, (h) any Lender shall decline to consent to a modification or waiver of the terms of this Agreement or any other Credit Documents requested by the Borrower, (i) an Issuing Bank gives notice pursuant to Section 2.12(a)(ii) that the issuance of the Letter of Credit would violate any legal or regulatory restriction then applicable to such Issuing Bank or (j) any Lender or Issuing Bank ceases to be entitled to complete exemption from U.S. federal withholding tax under FATCA with respect to payments to be received pursuant to any Credit Document (as if such payments were U.S. source) or so notifies the Borrower under Section 3.3(g), then and in such event, upon written request from the Borrower delivered to such Lender or Issuing Bank, and the Administrative Agent, such Lender shall assign, in accordance with the provisions of Section 11.10 (including the provisions governing required consents) and an appropriately completed Assignment Agreement, all of its rights and obligations under the Credit Documents to another Lender or a commercial banking institution selected by the Borrower, in consideration for the payments set forth in such Assignment Agreement and payment by the Borrower to such Lender of all other amounts which such Lender may be owed pursuant to this Agreement, including Sections 2.11, 3.3, 9.3 and 11.3.
ARTICLE X
THE ADMINISTRATIVE AGENT, THE SECURITY TRUSTEE AND ISSUING BANKS
Section 10.1 Appointment and Authorization of Administrative Agent. Each of the Lenders and the Swingline Lender hereby appoints JPMorgan Chase Bank, N.A. as the Administrative Agent, and hereby authorizes the Administrative Agent to take such action on each of its behalf and to exercise such powers under the Credit Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto.
Section 10.2 Rights and Powers as a Lender. The Administrative Agent, to the extent such Person is also a Lender, shall have the same rights and powers under the Credit Documents as any other Lender and may exercise or refrain from exercising such rights and power as though it were not the Administrative Agent. The Administrative Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any of its Subsidiaries or Affiliates thereof as if it were not the Administrative Agent under the Credit Documents. The term Lender as used in
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all Credit Documents, unless the context otherwise clearly requires, includes, to the extent such Person is also a Lender hereunder, the Administrative Agent in its individual capacity as a Lender.
Section 10.3 Action by Administrative Agent . The obligations of the Administrative Agent under the Credit Documents are only those expressly set forth therein. Without limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action concerning any Default or Event of Default, except as expressly provided in Sections 8.2 and 8.4. Unless and until the Required Lenders (or, if required by Section 11.11, all of the Lenders) give such direction (including the giving of a notice of default as described in Section 8.1(c)), the Administrative Agent may, except as otherwise expressly provided herein or therein, take or refrain from taking such actions as it deems appropriate and in the best interest of all the Lenders and the Swingline Lender. In no event, however, shall the Administrative Agent be required to take any action in violation of applicable law or of any provision of any Credit Document, and the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder or under any other Credit Document unless it first receives any further assurances of its indemnification from the Lenders that it may require, including prepayment of any related expenses and any other protection it requires against any and all costs, expenses, and liabilities it may Incur in taking or continuing to take any such action. The Administrative Agent shall be entitled to assume that no Default or Event of Default, other than non-payment of any scheduled principal or interest payment due hereunder, exists unless notified in writing to the contrary by a Lender or the Borrower. In all cases in which the Credit Documents do not require the Administrative Agent to take specific action, the Administrative Agent shall be fully justified in using its discretion in failing to take or in taking any action thereunder. Any instructions of the Required Lenders, or of any other group of Lenders called for under specific provisions of the Credit Documents, shall be binding on all the Lenders.
Section 10.4 Consultation with Experts. The Administrative Agent may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.
Section 10.5 Indemnification Provisions; Credit Decision. Neither the Administrative Agent nor any of its directors, officers, agents, or employees shall be liable to any Lender for any action taken or not taken by them in connection with the Credit Documents (i) with the consent or at the request of the Required Lenders (or, if required by Section 11.11, all of the Lenders), or (ii) in the absence of their own gross negligence or willful misconduct as found in a final non-appealable judgment of a court of competent jurisdiction. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement, any other Credit Document or any Borrowing; (ii) the performance or observance of any of the covenants or agreements of the Borrower or any Subsidiary contained herein or in any other Credit Document; (iii) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness, genuineness, enforceability, value, worth or collectability hereof or of any other Credit Document or of any other documents or writings furnished in connection with any Credit Document; and the Administrative Agent makes no representation of any kind or character with respect to any such matters mentioned in this sentence. The Administrative Agent may execute any of its duties under any of the Credit Documents by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders or any other Person for the default or misconduct of any such agents or attorneys-in-fact selected with reasonable care. The Administrative Agent shall not Incur any liability by acting in reliance upon any notice, consent, certificate, other document or statement (whether written or oral) believed by it to be genuine or to be sent by the proper party or parties. In particular and without limiting any of the foregoing, the Administrative Agent shall have no responsibility for confirming the accuracy of any Compliance Certificate or other document or instrument received by any of them under the Credit Documents. The
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Administrative Agent may treat the payee of any Note as the holder thereof until written notice of transfer shall have been filed with such Administrative Agent signed by such owner in form satisfactory to such Administrative Agent. Each of the Lenders and the Swingline Lender acknowledges that it has independently, and without reliance on the Administrative Agent, the Swingline Lender or any other Lender, obtained such information and made such investigations and inquiries regarding the Borrower and its Subsidiaries as it deems appropriate, and based upon such information, investigations and inquiries, made its own credit analysis and decision to extend credit to the Borrower in the manner set forth in the Credit Documents. It shall be the responsibility of each Lender and the Swingline Lender to keep itself informed about the creditworthiness and business, properties, assets, liabilities, condition (financial or otherwise) and prospects of the Borrower and its Subsidiaries, and the Administrative Agent shall have no liability whatsoever to any Lender or the Swingline Lender for such matters. The Administrative Agent shall have no duty to disclose to the Lenders or the Swingline Lender information that is not required by any Credit Document to be furnished by the Borrower or any Subsidiaries to the Administrative Agent at such time, but is voluntarily furnished to the Administrative Agent (either in its capacity as Administrative Agent or in its individual capacity).
Section 10.6 Indemnity. The Lenders shall ratably, in accordance with their Percentages, indemnify and hold the Administrative Agent and its directors, officers, employees, agents and representatives harmless from and against any liabilities, losses, costs or expenses suffered or Incurred by it under any Credit Document or in connection with the transactions contemplated thereby, regardless of when asserted or arising, except to the extent they are promptly reimbursed for the same by the Borrower and except to the extent that any event giving rise to a claim was caused by the gross negligence or willful misconduct of the party seeking to be indemnified as found in a final non-appealable judgment of a court of competent jurisdiction; provided that this Section 10.6 shall not limit the Borrower’s reimbursement obligations hereunder. The obligations of the Lenders under this Section 10.6 shall survive termination of this Agreement.
Section 10.7 Resignation.
(a)Resignation of Agents. The Administrative Agent may resign at any time and shall resign upon any removal thereof as a Lender pursuant to the terms of this Agreement upon at least thirty (30) days’ prior written notice to the Lenders and the Borrower. Any resignation of the Administrative Agent shall not be effective until a replacement therefor is appointed pursuant to the terms hereof. Upon any such resignation of the Administrative Agent, the Required Lenders and, so long as no Event of Default shall then exist, with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed) shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent’s giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and, so long as no Event of Default shall then exist, with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed) appoint a successor Administrative Agent which shall be any Lender hereunder or any commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance of its appointment as the Administrative Agent hereunder, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent under the Credit Documents; and the retiring Administrative Agent shall be discharged from its duties and obligations thereunder. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article X and all protective provisions of the other Credit Documents shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent.
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(b)Resignation of Issuing Banks. If at any time an Issuing Bank assigns all of its Commitment and Loans pursuant to Section 11.10, such Issuing Bank may, upon 30 days’ prior written notice to the Borrower, the Administrative Agent, and the Lenders, resign as an Issuing Bank. In such event, the Borrower may, with the approval of the Administrative Agent and the acceptance of the duties of an Issuing Bank by the Lender so requested, request that another Lender serve as Issuing Bank under this Agreement; provided, however, that the absence of any successor Issuing Bank shall not affect the resignation of the resigning Issuing Bank. Any resigning Issuing Bank shall retain all the rights, powers, privileges and duties of an Issuing Bank under this Agreement with respect to all Letters of Credit outstanding as of the Closing Date of its resignation and all Reimbursement Obligations with respect thereto (including the right to require the Lenders to make Loans or fund risk participations in Reimbursement Obligations pursuant to Section 2.12). Upon the appointment of any successor Issuing Bank (i) such successor Issuing Bank shall succeed to and become vested with all of the rights, powers, privileges and duties of an Issuing Bank under this Agreement, and (ii) such successor Issuing Bank shall issue Letters of Credit in substitution for the Letters of Credit, if any, previously issued by the resigning Issuing Bank that are outstanding at the time of such succession or make other arrangements satisfactory to the resigning Issuing Bank to effectively assume the obligations of the resigning Issuing Bank with respect to such Letters of Credit.
Section 10.8 Sub-Agent. The Sub-Agent has been designated under this Agreement to carry out certain duties of the Administrative Agent as described herein. The Sub-Agent shall be subject to each of the obligations in this Agreement to be performed by the Sub-Agent, and each of the Borrower and the Lenders agrees that the Sub-Agent shall be entitled to exercise each of the rights and shall be entitled to each of the benefits of the Administrative Agent under this Agreement as relate to the performance of its obligations hereunder.
Section 10.9 Collateral and Guaranty Matters. Each Lender (and, by its acceptance of the benefit of any Lien in Collateral pursuant to the terms of the Collateral Documents, each holder of the Rate Management and Currency Protection Obligations, each holder of the Specified Cash Management Obligations and each other Person for whose benefit the Security Trustee is granted a Lien in Collateral pursuant to the terms of the Collateral Documents) hereby authorizes and directs (i) JPMorgan Chase Bank, N.A. to act as Security Trustee under each Collateral Document, (ii) the Security Trustee, from time to time, to take any actions with respect to the Collateral or Collateral Documents which may be necessary to perfect and maintain the Liens upon the Collateral granted pursuant to the Collateral Documents and to enter into additional Collateral Documents or amendments to Collateral Documents, as contemplated by Section 6.12 or as necessary or advisable in connection with transfers or changes to the flag or vessel and/or ship registry of any Collateral Vessel permitted by Section 6.13, (iii) the Administrative Agent to, or to instruct the Security Trustee to (A) release any and all Collateral from the Liens created by the Collateral Documents, subordinate any Lien on any and all such Collateral and/or release any and all Guarantors from their respective obligations under the Guaranty and Collateral Agreement at any time and from time to time in accordance with the provisions of the Collateral Documents and Section 11.21 and (B) execute and deliver, and take any action referred to in Section 11.21, to evidence any such release or subordination and (iv) the Administrative Agent to appoint the Security Trustee as its mortgagee trustee to receive, hold, administer and enforce the Collateral Vessel Mortgages covering the Collateral Vessels.
Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s and/or the Security Trustee’s authority, as applicable, to release any Collateral from the Liens created by the Collateral Documents, to subordinate any such Liens and/or to release any Guarantor from its obligations under the Guaranty and Collateral Agreement, in each case, pursuant to this Section 10.9.
Section 10.10 Certain ERISA Matters.
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(a)Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and its Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Credit Party, that at least one of the following is and will be true:
(i)such Lender is not using “plan assets” (within the meaning of the Plan Asset Regulations) of one or more Benefit Plans in connection with the Loans, the Letters of Credit or the Commitments;
(ii)the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement;
(iii)(A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement; or
(iv)such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.
(b)In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or such Lender has provided another representation, warranty and covenant as provided in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and its Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Credit Party, that none of the Administrative Agent, any Arranger or any of their respective Affiliates is a fiduciary with respect to the Collateral or the assets of such Lender (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Credit Document or any documents related to hereto or thereto).
(c)The Administrative Agent, and each Arranger, hereby informs the Lenders that each such Person is not undertaking to provide investment advice or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Loans, the Letters of Credit, the Commitments, this Agreement and any other Credit Documents (ii) may recognize a gain if it extended the Loans, the Letters of Credit or the Commitments for an amount less than the amount being paid for an interest in the Loans, the Letters of
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Credit or the Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Credit Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early termination fees or fees similar to the foregoing.
Section 10.11 Credit Bidding. The Secured Parties hereby irrevocably authorize the Administrative Agent, at the direction of the Required Lenders, to credit bid all or any portion of the Indebtedness (including by accepting some or all of the Collateral in satisfaction of some or all of the Indebtedness pursuant to a deed in lieu of foreclosure or otherwise) and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral (a) at any sale thereof conducted under the provisions of the Bankruptcy Code, including under Sections 363, 1123 or 1129 of the Bankruptcy Code, or any similar laws in any other jurisdictions to which a Credit Party is subject, or (b) at any other sale, foreclosure or acceptance of collateral in lieu of debt conducted by (or with the consent or at the direction of) the Administrative Agent (whether by judicial action or otherwise) in accordance with any applicable law. In connection with any such credit bid and purchase, the Indebtedness owed to the Secured Parties shall be entitled to be, and shall be, credit bid by the Administrative Agent at the direction of the Required Lenders on a ratable basis (with Indebtedness with respect to contingent or unliquidated claims receiving contingent interests in the acquired assets on a ratable basis that shall vest upon the liquidation of such claims in an amount proportional to the liquidated portion of the contingent claim amount used in allocating the contingent interests) for the asset or assets so purchased (or for the Equity Interests or debt instruments of the acquisition vehicle or vehicles that are issued in connection with such purchase). In connection with any such bid, (i) the Administrative Agent shall be authorized to form one or more acquisition vehicles and to assign any successful credit bid to such acquisition vehicle or vehicles, (ii) each of the Secured Parties’ ratable interests in the Indebtedness which were credit bid shall be deemed without any further action under this Agreement to be assigned to such vehicle or vehicles for the purpose of closing such sale, (iii) the Administrative Agent shall be authorized to adopt documents providing for the governance of the acquisition vehicle or vehicles (provided that any actions by the Administrative Agent with respect to such acquisition vehicle or vehicles, including any disposition of the assets or Equity Interests thereof, shall be governed, directly or indirectly, by, and the governing documents shall provide for, control by the vote of the Required Lenders or their permitted assignees under the terms of this Agreement or the governing documents of the applicable acquisition vehicle or vehicles, as the case may be, irrespective of the termination of this Agreement and without giving effect to the limitations on actions by the Required Lenders contained in Section 11.11), (iv) the Administrative Agent on behalf of such acquisition vehicle or vehicles shall be authorized to issue to each of the Secured Parties, ratably on account of the relevant Indebtedness that was credit bid, interests, whether as equity, partnership interests, limited partnership interests or membership interests, in any such acquisition vehicle and/or debt instruments issued by such acquisition vehicle, all without the need for any Secured Party or acquisition vehicle to take any further action, and (v) to the extent that Indebtedness that is assigned to an acquisition vehicle are not used to acquire Collateral for any reason (as a result of another bid being higher or better, because the amount of Indebtedness assigned to the acquisition vehicle exceeds the amount of Indebtedness credit bid by the acquisition vehicle or otherwise), such Indebtedness shall automatically be reassigned to the Secured Parties pro rata with their original interest in such Indebtedness and the Equity Interests and/or debt instruments issued by any acquisition vehicle on account of such Indebtedness shall automatically be cancelled, without the need for any Secured Party or any acquisition vehicle to take any further action. Notwithstanding that the ratable portion of the Indebtedness of each Secured Party are deemed assigned to the acquisition vehicle or vehicles as set forth in clause (ii) above, each Secured Party shall execute such documents and provide such information regarding the Secured Party (and/or any designee of the Secured Party which will receive interests in or debt instruments issued by such acquisition vehicle) as the Administrative Agent may reasonably request in connection with the formation of any acquisition vehicle,
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the formulation or submission of any credit bid or the consummation of the transactions contemplated by such credit bid.

ARTICLE XI
MISCELLANEOUS
Section 11.1 No Waiver; etc. No delay or failure on the part of the Administrative Agent, any Lender, the Swingline Lender or any Issuing Bank, or on the part of the holder or holders of any Notes, in the exercise of any power, right or remedy under any Credit Document shall operate as a waiver thereof or as an acquiescence in any default, nor shall any single or partial exercise thereof preclude any other or further exercise of any other power, right or remedy. To the fullest extent permitted by applicable law, the powers, rights and remedies under the Credit Documents of the Administrative Agent, the Lenders, the Issuing Banks and the Swingline Lender and the holder or holders of any Notes are cumulative to, and not exclusive of, any powers, rights or remedies any of them would otherwise have.
Section 11.2 Non-Business Day. Subject to Section 2.4, if any payment of principal or interest on any portion of any Loan, any Reimbursement Obligation, or any other Obligation shall fall due on a day which is not a Business Day, interest or fees (as applicable) at the rate, if any, such portion of any Loan, any Reimbursement Obligation, or other Obligation bears for the period prior to maturity shall continue to accrue in the manner set forth herein on such Obligation from the stated due date thereof to the next succeeding Business Day, on which the same shall instead be payable.
Section 11.3 Documentary Taxes. The Borrower agrees that it will pay any documentary, stamp, intangible or similar Taxes payable with respect to any Credit Document or under or in connection with any Letter of Credit, including interest and penalties, in the event any such Taxes are assessed irrespective of when or against whom such assessment is made, other than any such Taxes imposed as a result of any transfer of an interest in a Credit Document. Each Lender, each Issuing Bank and the Swingline Lender that determines to seek compensation under this Section 11.3 shall give written notice to the Borrower and, in the case of a Lender, an Issuing Bank or the Swingline Lender other than the Administrative Agent, the Administrative Agent of the circumstances that entitle such Lender, such Issuing Bank or the Swingline Lender to such compensation no later than one calendar year after such Lender, such Issuing Bank or the Swingline Lender receives actual notice or obtains actual knowledge of the law, rule, order or interpretation or occurrence of another event giving rise to a claim hereunder. In any event, the Borrower shall not have any obligation to pay any amount with respect to claims under this Section 11.3 accruing prior to the one year anniversary preceding such written demand (except that, if the applicable event giving rise to such Taxes is retroactive, then the one year calendar period referred to above shall be extended to include the period of retroactive effect thereof).
Section 11.4 Survival of Representations. All representations and warranties made herein or in certificates given pursuant hereto shall survive the execution and delivery of this Agreement and the other Credit Documents, and shall continue in full force and effect with respect to the date as of which they were made until Security Termination.
Section 11.5 Survival of Indemnities. All indemnities and all provisions relative to reimbursement to the Lenders, the Swingline Lender and the Issuing Banks of amounts sufficient to protect the yield of the Lenders, the Swingline Lender and the Issuing Banks with respect to the Loans and the L/C Obligations, including Section 2.11, Section 3.3, Section 8.6, Section 9.3, Section 11.3 and Section 11.13 hereof, shall, subject to Section 9.3(c), survive the Security Termination.
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Section 11.6 Setoff; Pro Rata Sharing. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of, and throughout the continuance of, any Event of Default, each Lender, each Issuing Bank and the Swingline Lender and each subsequent holder of any Note or any of their respective Affiliates is hereby authorized by the Borrower at any time or from time to time, without prior notice to the Borrower or any other Person, any such prior notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts, and in whatever currency denominated) and any other Indebtedness at any time owing by that Lender, the Swingline Lender or that Issuing Bank or that subsequent holder or any of their respective Affiliates to or for the credit or the account of the Borrower, whether or not matured, against and on account of the due and unpaid obligations and liabilities of the Borrower to that Lender, the Swingline Lender or that Issuing Bank or that subsequent holder under the Credit Documents, irrespective of whether or not that Lender, the Swingline Lender or that Issuing Bank or that subsequent holder shall have made any demand hereunder. Each Lender, the Swingline Lender or each Issuing Bank or any of their respective Affiliates shall promptly give notice to the Borrower of any action taken by it under this Section 11.6, provided that any failure of such Lender, the Swingline Lender or such Issuing Bank or any of their respective Affiliates to give such notice to the Borrower shall not affect the validity of such setoff. Except as otherwise provided herein, each Lender, the Swingline Lender and each Issuing Bank agrees with each other Lender, the Swingline Lender and each other Issuing Bank a party hereto that if such Lender, the Swingline Lender or such Issuing Bank receives and retains any payment, whether by setoff or application of deposit balances or otherwise, in respect of the Loans or L/C Obligations in excess of its ratable share of payments on all such Obligations then owed to the Lenders, the Swingline Lender and the Issuing Banks hereunder, then such Lender, the Swingline Lender or such Issuing Bank shall purchase for cash at face value, but without recourse, ratably from each of the other Lenders such amount of the Loans and L/C Obligations and participations therein held by each such other Lender, Swingline Lender or Issuing Bank as shall be necessary to cause such Lender, Swingline Lender or such Issuing Bank to share such excess payment ratably with all the other Lenders, the Swingline Lender and the Issuing Banks; provided, however, that if any such purchase is made by any Lender, Swingline Lender or any Issuing Bank, and if such excess payment or part thereof is thereafter recovered from such purchasing Lender, Swingline Lender or Issuing Bank, the related purchases from the other Lenders, Swingline Lender or the Issuing Banks shall be rescinded ratably and the purchase price restored as to the portion of such excess payment so recovered, but without interest; provided, further, that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.16 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff.
Section 11.7 Notices.
(a)Except as otherwise specified herein and except as otherwise provided in Section 11.7(b), all notices under the Credit Documents shall be in writing (including email or facsimile) and shall be given to a party hereunder at its address, email address or facsimile number set forth below or such other address, email address or facsimile number as such party may hereafter specify by notice to the Administrative Agent and the Borrower, given by courier, by United States certified or registered mail, by facsimile or by other telecommunication device capable of creating a written record of such notice and its receipt. Notices under the Credit Documents to the Lenders shall be addressed to their respective domestic Lending Offices in the United States at the respective addresses, email addresses or facsimile numbers, or telephone numbers set forth on their applicable Administrative Questionnaire provided to the Administrative Agent and the Borrower or, in the case of Persons becoming Lenders pursuant to Assignment Agreements, on their
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applicable Assignment Agreements, and to the Borrower, the Administrative Agent, the Security Agent, the Swingline Lender and the Issuing Banks:
To the Borrower:
Sea-Vista I LLC
2200 Eller Drive, PO Box 13038
Fort Lauderdale, FL 33316
Attention:  Legal Department
Fax:  281-527-1772
Email:  probinson@ckor.com


To the Administrative Agent and the Security Agent
JPMorgan Chase Bank, N.A.
10 S Dearborn St L2
Chicago, IL  60603
Attention: Muoy Lim
Telephone: 312-732-2024
Facsimile: 888-303-9732
Email: jpm.agency.servicing.1@jpmorgan.com


To the Swingline Lender:
JPMorgan Chase Bank, N.A.
10 S Dearborn St L2
Chicago, IL 60603
Attention: Muoy Lim
Telephone: 312-732-2024
Facsimile: 888-303-9732
Email: jpm.agency.servicing.1@jpmorgan.com


To Issuing Banks:
JPMorgan Chase Bank, N.A.
10 S Dearborn St L2
Chicago, IL  60603
Attention: Muoy Lim
Telephone: 312-732-2024
Facsimile: 312-256-2608
Email:  Chicago.LC.Agency.Activity.Team@jpmorgan.com
Each such notice, request or other communication shall be effective (i) if given by facsimile or email, when such fax or email is transmitted to the facsimile number or email address specified in this Section 11.7 or pursuant to Section 11.10 and a confirmation of receipt of such fax or email has been received by the sender, (ii) if given by courier, when delivered, (iii) if given by mail, five (5) days after such communication is deposited in the mail, certified or registered with return receipt requested, or (iv) if given by any other means, when delivered at the addresses specified in this Section 11.7, or pursuant to Section 11.10; provided that any notice given pursuant to Article II shall be effective only upon receipt and, provided, further, that any notice that but for this proviso would be effective after the close of business on a Business Day or on a day that is not a Business Day shall be effective at the opening of business on the next Business Day.
Notwithstanding the foregoing, materials required to be delivered pursuant to Section 6.6 shall be delivered to the Administrative Agent as specified in Section 11.7(b) or as otherwise specified to the Borrower by the Administrative Agent; provided that any communication that (A) relates to a request for a new, or a conversion of an existing, Loan or other extension of credit (including any election of an interest rate or Interest Period relating thereto), (B) relates to the payment of any principal or other amount due
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under this Agreement prior to the scheduled date therefor, (C) provides notice of any Default or Event of Default or (D) is required to be delivered to satisfy any condition precedent to the effectiveness of any provision of this Agreement and/or any Loan, Letter of Credit, increase of any Letter of Credit or other extension of credit hereunder, shall be in writing (including facsimile or email communication) and mailed, faxed or delivered pursuant to this Section 11.7(a).
(b)The Borrower will provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to the Credit Documents, including all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing, Loan, a new Letter of Credit, any increase of any Letter of Credit, or other extension of credit (including any election of an interest rate or Interest Period relating thereto), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any Default or Event of Default or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of any provision of this Agreement and/or any Loan, Letter of Credit, increase of any Letter of Credit or other extension of credit hereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium to Tesfaye Anteneh at tesfaye.a.anteneh@jpmorgan.com.
The Borrower further agrees that the Administrative Agent may make the Communications available to the Swingline Lender, the Lenders and the Issuing Banks by posting the Communications on Intralinks or a substantially similar electronic transmission system (the “Platform”). The Borrower acknowledges that the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution.
THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THE RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES OF THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY TO THE BORROWER, ANY LENDER, ANY ISSUING BANK OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE TRANSMISSION BY THE BORROWER, ANY OF THE AGENT PARTIES OR ANY OTHER PERSON OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT OF A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its email address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Credit Documents. Each of the Lenders, the Swingline Lender
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and the Issuing Banks agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender, Swingline Lender or Issuing Bank, as the case may be, for purposes of the Credit Documents. Each of the Lenders, the Swingline Lender and the Issuing Banks agrees (i) to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender’s, Swingline Lender’s or such Issuing Bank’s, as the case may be, email address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such email address.
Nothing herein shall prejudice the right of the Administrative Agent, any Issuing Bank, the Swingline Lender or any Lender to give any notice or other communication pursuant to any Credit Document in any other manner specified in such Credit Document.
Section 11.8 Counterparts. This Agreement may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, each of which when executed shall be deemed an original, but all such counterparts taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic method of transmission (in .pdf format) shall be effective as delivery of a manually executed original counterpart of this Agreement.
Section 11.9 Successors and Assigns. This Agreement shall be binding upon the Borrower, each of the Lenders, the Issuing Banks, the Swingline Lender, the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of the Borrower, each of the Lenders, the Issuing Banks, the Swingline Lender, the Administrative Agent and their respective successors and assigns, including any subsequent holder of any Note; provided, however, (i) the Borrower may not assign any of its rights or obligations under this Agreement or any other Credit Document without the written consent of all Lenders, the Issuing Banks, the Swingline Lender and the Administrative Agent, (ii) the Administrative Agent may not assign any of its rights or obligations under this Agreement or any Credit Document except in accordance with Article X, and (iii) no Lender or Issuing Bank may assign any of its rights or obligations under this Agreement or any other Credit Document except in accordance with Section 11.10. Any Lender, the Swingline Lender or any Issuing Bank may at any time pledge or assign all or any portion of its rights under this Agreement and the Notes issued to it (i) to a Federal Reserve Bank or the European Central Bank to secure extensions of credit by such Federal Reserve Bank or the European Central Bank to such Lender, Swingline Lender or Issuing Bank, or (ii) in the case of any Lender that is a fund comprised in whole or in part of commercial loans, to a trustee for such fund in support of such Lender’s obligations to such trustee; provided that no such pledge or assignment shall release a Lender, Swingline Lender or Issuing Bank from any of its obligations hereunder or substitute any such Federal Reserve Bank or the European Central Bank or such trustee for such Lender, Swingline Lender or Issuing Bank as a party hereto and the Borrower, the Administrative Agent, the other Lenders, the Swingline Lender and the Issuing Banks shall continue to deal solely with such Lender, Swingline Lender or Issuing Bank in connection with the rights and obligations of such Lender, Swingline Lender and Issuing Bank under this Agreement.
Section 11.10 Participations in Loans and Notes; Sales and Transfers of Loans and Notes.
(a)Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Credit Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with Section 11.10(b), (ii) to any Eligible Assignee by way of participation in accordance with the provisions of Section 11.10(d), or (iii) by way of pledge or assignment
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of a security interest subject to the restrictions of Section 11.10(e) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 11.10(d) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b)Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) to an Eligible Assignee; provided that any such assignment shall be subject to the following conditions:
(i)Minimum Amounts.
(A)in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment or the Loans at the time owing to it or contemporaneous assignments to related Approved Funds (determined after giving effect to such assignments) that equal at least the amount specified in Section 11.10(b)(i)(B) in the aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and
(B)in any case not described in Section 11.10(b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment Agreement with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment Agreement, as of the Trade Date) shall not be less than $10,000,000, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
(ii)Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned, except that this clause (ii) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among the Facilities on a non-pro rata basis.
(iii)Required Consents. In addition to the consents for any assignments required by Section 11.10(b)(i)(B):
(A)the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default has occurred and is continuing at the time of such assignment, or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within 10 Business Days after having received written notice thereof;
(B)the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of (i) the Revolving Facility if such assignment is to a Person that is not a Lender with a Commitment in respect of such
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Facility, an Affiliate of such Lender or an Approved Fund with respect to such Lender, or (ii) any Term Loans to a Person who is not a Lender, an Affiliate of a Lender or an Approved Fund; and
(C)the consent of each Issuing Bank and Swingline Lender shall be required for any assignment in respect of the Revolving Facility.
(iv)Assignment Agreement. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment Agreement, together with a processing and recordation fee of $3,600; provided that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.
(v)No Assignment to Certain Persons. No such assignment shall be made to (A) the Borrower or any of the Borrower’s Affiliates or Subsidiaries or (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute a Defaulting Lender or a Subsidiary thereof.
(vi)No Assignment to Natural Persons. No such assignment shall be made to a natural Person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person).
(vii)Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, each Issuing Bank, each Swingline Lender and each other Lender hereunder (and interest accrued thereon), and (y) acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swingline Loans in accordance with its Revolving Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section 11.10, from and after the effective date specified in each Assignment Agreement, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment Agreement, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 11.13 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not
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comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section 11.10.
(c)Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in New York a copy of each Assignment Agreement delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(d)Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Eligible Assignee (other than a natural Person, or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person, or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights or obligations under this Agreement (including all or a portion of its Commitment or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and (iii) the Borrower, the Administrative Agent, the Issuing Banks and Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 10.6 with respect to any payments made by such Lender to its Participant(s).
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that requires the consent of each Lender hereunder and that affects such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Section 9.3, Section 2.11 and Section 3.3 and (subject to the requirements and limitations therein, including the requirements under Section 3.3(b) (it being understood that the documentation required under Section 3.3(b) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Section 9.6 as if it were an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment under Section 9.3 or Section 3.3, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 9.6 with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.6 as though it were a Lender; provided that such Participant agrees to be subject to Section 11.6 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Credit Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Credit Document) to any Person except to the
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extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
(e)Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(f)Disqualified Institutions.
(i)No assignment or participation shall be made to any Person that was a Disqualified Institution as of the date (the “Trade Date”) on which the assigning Lender entered into a binding agreement to sell and assign all or a portion of its rights and obligations under this Agreement to such Person (unless the Borrower has consented to such assignment in writing in its sole and absolute discretion, in which case such Person will not be considered a Disqualified Institution for the purpose of such assignment or participation). For the avoidance of doubt, with respect to any assignee that becomes a Disqualified Institution after the applicable Trade Date (including as a result of the delivery of a notice pursuant to, and/or the expiration of the notice period referred to in, the definition of “Disqualified Institution”), (x) such assignee shall not retroactively be disqualified from becoming a Lender and (y) the execution by the Borrower of an Assignment Agreement with respect to such assignee will not by itself result in such assignee no longer being considered a Disqualified Institution. Any assignment in violation of this clause (f)(i) shall not be void, but the other provisions of this clause (f) shall apply; provided further that any assignment to any Person, including a Disqualified Institution, made without the consent of the Borrower shall be invalid if the Borrower’s consent is required for such assignment under this Section 11.10.
(ii)If any assignment or participation is made to any Disqualified Institution without the Borrower’s prior written consent in violation of clause (i) above, or if any Person becomes a Disqualified Institution after the applicable Trade Date, the Borrower may, at its sole expense and effort, upon notice to the applicable Disqualified Institution and the Administrative Agent, (A) terminate any Revolving Credit Commitment of such Disqualified Institution and repay all obligations of the Borrower owing to such Disqualified Institution in connection with such Revolving Commitment, (B) in the case of outstanding Term Loans held by Disqualified Institutions, purchase or prepay such Term Loan by paying the lesser of (x) the principal amount thereof and (y) the amount that such Disqualified Institution paid to acquire such Term Loans of such Term Loans, in each case plus accrued interest, accrued fees and all other amounts (other than principal amounts) payable to it hereunder and/or (C) require such Disqualified Institution to assign, without recourse (in accordance with and subject to the restrictions contained in this Section 11.10), all of its interest, rights and obligations under this Agreement to one or more Eligible Assignees at the lesser of (x) the principal amount thereof and (y) the amount that such Disqualified Institution paid to acquire such interests, rights and obligations, in each case plus accrued interest, accrued fees and all other amounts (other than principal amounts) payable to it hereunder.
(iii)Notwithstanding anything to the contrary contained in this Agreement, Disqualified Institutions (A) will not have the right to (x) receive information, reports or other materials provided to Lenders by the Borrower, the Administrative Agent or any other Lender, (y) attend or
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participate in meetings attended by the Lenders and the Administrative Agent, or (z) access any electronic site established for the Lenders or confidential communications from counsel to or financial advisors of the Administrative Agent or the Lenders and (B) (x) for purposes of any consent to any amendment, waiver or modification of, or any action under, and for the purpose of any direction to the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) under this Agreement or any other Credit Document, each Disqualified Institution will be deemed to have consented in the same proportion as the Lenders that are not Disqualified Institutions consented to such matter, and (y) for purposes of voting on any Bankruptcy Plan, each Disqualified Institution party hereto hereby agrees (1) not to vote on such Bankruptcy Plan, (2) if such Disqualified Institution does vote on such Bankruptcy Plan notwithstanding the restriction in the foregoing clause (1), such vote will be deemed not to be in good faith and shall be “designated” pursuant to Section 1126(e) of the Bankruptcy Code (or any similar provision in any other Debtor Relief Laws), and such vote shall not be counted in determining whether the applicable class has accepted or rejected such Bankruptcy Plan in accordance with Section 1126(c) of the Bankruptcy Code (or any similar provision in any other Debtor Relief Laws) and (3) not to contest any request by any party for a determination by the Bankruptcy Court (or other applicable court of competent jurisdiction) effectuating the foregoing clause (2).
(iv)The Administrative Agent shall have the right, and the Borrower hereby expressly authorizes the Administrative Agent, to (A) post the list of Disqualified Institutions provided by the Borrower and any updates thereto from time to time (collectively, the “DQ List”) on the Platform, including that portion of the Platform that is designated for “public side” Lenders and/or (B) provide the DQ List to each Lender requesting the same.
Section 11.11 Amendments, Waivers and Consents. Any provision of the Credit Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by (a) in the case of this Agreement, the Borrower, the Required Lenders, and if the rights or duties of the Administrative Agent, the Swingline Lender or any Issuing Bank are affected thereby, the Administrative Agent, the Swingline Lender or such Issuing Bank, as the case may be, and (b) in the case of any other Credit Document, each party thereto and the Administrative Agent (with the consent of the Required Lenders), provided that:
(i)no amendment or waiver shall (A) increase or extend any Commitment of any Lender without the consent of such Lender, or (B) reduce the amount of or postpone the date for any scheduled payment of any principal of or interest (including any reduction in the rate of interest unless such reduction is otherwise provided herein) on any Loan or Reimbursement Obligation or of any fee payable hereunder, without the consent of each Lender and Issuing Bank owed any such Obligation, (C) release any Collateral for any Collateralized Obligations (other than as provided in accordance with Section 8.4) without the consent of all Lenders, (D) release all or substantially all of the value of the Guaranties of the Guarantors under the Guaranty and Collateral Agreement or all or substantially all of the Collateral (except as expressly provided for in the Guaranty and Collateral Agreement, the Collateral Documents or Section 11.21) without the consent of all Lenders, (E) waive the provisions of Article IV hereof without in each such case the consent of all Lenders, (F) change any provision requiring ratable funding or sharing of payments without the consent of all Lenders or (G) amend or waive this Section 11.11, the definition herein of “Required Lenders” or the number of Lenders required to take any action under any other provision of the Credit Documents without the consent of each Lender directly and adversely affected thereby;
(ii)notwithstanding anything to the contrary herein, (A) any Borrowing Request may be amended with the consent of only the Borrower and the Administrative Agent, (B) any Swingline Request may be amended with the consent of only the Borrower and the Swingline Lender, (C) any Application may be amended with the consent of only the Borrower and the applicable Issuing Bank and (D) any Letter of Credit may be amended only in accordance with Section 2.12; and
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(iii)notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (A) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (B) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than other affected Lenders shall require the consent of such Defaulting Lender.
Section 11.12 Headings. Section headings used in this Agreement are for reference only and shall not affect the construction of this Agreement.
Section 11.13 Legal Fees, Other Costs and Indemnification.
(a)The Borrower, upon written demand by the Administrative Agent, agrees to pay all reasonable documented out-of-pocket costs and expenses of the Administrative Agent (including the reasonable fees and disbursements of one legal counsel to the Administrative Agent, plus, if reasonably required by the Administrative Agent, one local counsel in each appropriate jurisdiction) in connection with the preparation and execution of the Credit Documents (not to exceed such amount previously agreed to by the Administrative Agent), and any amendment, waiver or consent related thereto, whether or not the transactions contemplated therein are consummated. The Borrower further agrees to indemnify and hold harmless each Lender, each Affiliate of a Lender, the Arrangers, each Issuing Bank, the Swingline Lender, the Administrative Agent, and their respective directors, officers, employees and agents (collectively, the “Indemnified Parties”), against all losses, claims, damages, penalties, judgments, liabilities and expenses (including the reasonable fees of one legal counsel for the Indemnified Parties, plus one local counsel in each appropriate jurisdiction and, in the case of an actual or perceived conflict of interest, another firm of counsel for the Indemnified Party affected by such conflict, and other reasonable expenses of litigation or preparation therefor, whether or not such Indemnified Party is a party thereto) which any of them may pay or Incur as a result of (a) any action, suit or proceeding by any third party or Governmental Authority against such Indemnified Party and relating to any Credit Document, the Loans, any Letter of Credit, or the application or proposed application by the Borrower of the proceeds of any Loan or use of any Letter of Credit, REGARDLESS OF WHETHER SUCH CLAIMS OR ACTIONS ARE FOUNDED IN WHOLE OR IN PART UPON THE ALLEGED SIMPLE OR CONTRIBUTORY NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES, (b) any investigation of any third party or any Governmental Authority involving any Lender, any Affiliate of a Lender, the Arrangers, any Issuing Bank, the Swingline Lender or the Administrative Agent (in each case, in such capacity hereunder) and related to any use made or proposed to be made by the Borrower of the proceeds of any Loan, or use of any Letter of Credit or any transaction financed or to be financed in whole or in part, directly or indirectly with the proceeds of any Loan or Letter of Credit, and (c) any investigation of any third party or any Governmental Authority, litigation or proceeding involving any Lender, any Affiliate of a Lender, the Arrangers, the Swingline Lender, any Issuing Bank or the Administrative Agent (in each case, in such capacity hereunder) and related to any environmental cleanup, audit, compliance or other matter relating to any Environmental Law or the presence of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law) with respect to the Borrower, regardless of whether caused by, or within the control of, the Borrower, provided, however, that the Borrower shall not be obligated to indemnify any Indemnified Party for any of the foregoing (i) arising out of such Indemnified Party’s gross negligence, willful misconduct or violation of law or willful breach of its obligations hereunder as found in a final non-appealable judgment of a court of competent jurisdiction or as expressly agreed in writing by such Indemnified Party, (ii) to the extent arising from a litigation, claim or proceeding solely among Indemnified Parties (other than a litigation, claim or proceeding brought against the Administrative Agent in its capacity as such or to the extent arising from the actions of a Credit Party)
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or (iii) to the extent such indemnification relates to Taxes, except any Taxes arising from a non-Tax claim and except as provided in Section 11.3. The Borrower, upon written demand by the Administrative Agent, a Lender, an Affiliate of a Lender, the Arrangers, the Swingline Lender or an Issuing Bank at any time, shall reimburse the Administrative Agent or such Lender, Affiliate of a Lender, Arranger, Swingline Lender or Issuing Bank for any reasonable legal or other expenses Incurred in connection with investigating or defending against any of the foregoing, except if the same is excluded from indemnification pursuant to the provisions of the preceding sentence. Each Indemnified Party agrees to contest any indemnified claim if requested by the Borrower, in a manner reasonably directed by the Borrower, with counsel selected by the Indemnified Party and approved by the Borrower, which approval shall not be unreasonably withheld or delayed. Any Indemnified Party that proposes or intends to settle or compromise any such indemnified claim shall give the Borrower written notice of the terms of such settlement or compromise reasonably in advance of settling or compromising such claim or proceeding and shall obtain the Borrower’ prior written consent thereto, which consent shall not be unreasonably withheld or delayed; provided that the Indemnified Party shall not be restricted from settling or compromising any such claim if (i) the Indemnified Party waives its right to indemnity from the Borrower in respect of such claim and such settlement or compromise does not materially increase the Borrower’ liability pursuant to this Section 11.13 to any related party of such Indemnified Party, (ii) an Event of Default as described in Section 8.1(a), (b) (as a result of a default under Section 7.7), (f) or (g) or has occurred and is continuing or (iii) the Indemnified Party reasonably believes the Credit Parties will not be able to satisfy the full amount of such claim and the Credit Parties have failed to provide sufficient collateral to the Indemnified Party to secure the value of such claim.
(b)To the extent that any Credit Party fails to pay any amount required to be paid by it to the Administrative Agent or any Issuing Bank under Section 11.13(a), each Lender severally agrees to pay to such Issuing Bank or the Administrative Agent within ten (10) days of demand therefor, as the case may be, such Lender’s Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent or such Issuing Bank in its capacity as such.
Section 11.14 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
(a)THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS, AND THE RIGHTS AND DUTIES OF THE PARTIES THERETO, SHALL, EXCEPT AS OTHERWISE PROVIDED IN CERTAIN OF THE OTHER CREDIT DOCUMENTS, BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(b)TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO AGREE THAT ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS, THE ISSUING BANKS, OR A CREDIT PARTY MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN FOR
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THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS, BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS.
(c)TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
(d)EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.7. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
(e)EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE ISSUING BANKS, THE SWINGLINE LENDER AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THIS SECTION 11.14 OR OTHERWISE RELATING TO THE CREDIT DOCUMENTS ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES); PROVIDED THAT THIS WAIVER DOES NOT LIMIT ANY OF THE BORROWER’S INDEMNIFICATION OBLIGATIONS HEREUNDER.
Section 11.15 Confidentiality. Each of the Administrative Agent, the Issuing Banks, the Swingline Lender and the Lenders agree to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to their respective Affiliates, to prospective Lenders and Participants, and to prospective counterparties under hedging, swap or derivatives agreements, and their respective directors, officers, employees and agents, including accountants, legal counsel and other advisors who have reason to use such Information in connection with the evaluation, administration or enforcement of the transactions contemplated by this Agreement (subject to similar confidentiality provisions as provided herein) solely for purposes of evaluating such Information, (ii) to the extent requested by any
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regulatory authority or self-regulatory body, (iii) to the extent required by applicable law or regulation or by any subpoena or similar legal process, (iv) in connection with the exercise of any remedies hereunder or any proceedings relating to this Agreement or the other Credit Documents, (v) with the written consent of the Borrower, or (vi) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section 11.15, or (B) becomes available on a non-confidential basis from a source other than the Borrower or its Affiliates, or the Lenders or their respective Affiliates, excluding any Information from such source which, to the actual knowledge of the Administrative Agent, the Issuing Banks, the Swingline Lender or Lender receiving such Information, has been disclosed by such source in violation of a duty of confidentiality to the Borrower or any of its Affiliates. For purposes hereof, “Information” means all information received by the Administrative Agent, the Lenders, the Swingline Lender or the Issuing Banks from the Borrower or any of its Subsidiaries relating to the Borrower, any of its Subsidiaries or their respective businesses, other than any such information (i) that is available to the Administrative Agent, the Lenders, the Swingline Lender or the Issuing Banks on a non-confidential basis prior to disclosure by the Borrower or such Subsidiary and (ii) pertaining to this Agreement routinely provided by arrangers to data service providers, including league table providers, that serve the lending industry, but excluding any Information from a source which, to the actual knowledge of the Administrative Agent, the Issuing Banks, the Swingline Lender or the Lender receiving such Information, has been disclosed by such source in violation of a duty of confidentiality to the Borrower or any Affiliate thereof. The Administrative Agent, the Issuing Banks, the Swingline Lender and the Lenders shall be considered to have complied with their respective obligations if they have exercised the same degree of care to maintain the confidentiality of such Information as they would accord their own confidential information.
Section 11.16 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 11.17 Currency Conversion. All payments of Obligations under this Agreement, the Notes or any other Credit Document shall be made in U.S. Dollars. If any payment of any Obligation, whether through payment by any Credit Party or the proceeds of any Collateral, shall be made in a currency other than the currency required hereunder, such amount shall be converted into the currency required hereunder at the rate determined by the Administrative Agent or the applicable Issuing Bank, as applicable, as the rate quoted by it in accordance with methods customarily used by such Person for such or similar purposes as the spot rate for the purchase by such Person of the required currency with the currency of actual payment through its principal foreign exchange trading office (including, in the case of the Administrative Agent, the Sub-Agent) at approximately 11:00 A.M. (local time at such office) two (2) Business Days prior to the date of such conversion, provided that the Administrative Agent or such Issuing Bank, as applicable, may obtain such spot rate from another financial institution actively engaged in foreign currency exchange if the Administrative Agent or such Issuing Bank, as applicable, does not then have a spot rate for the required currency. The parties hereto hereby agree, to the fullest extent that they may effectively do so under applicable law, that (i) if for the purposes of obtaining any judgment or award it becomes necessary to convert from any currency other than the currency required hereunder into the currency required hereunder any amount in connection with the Obligations, then the conversion shall be made as provided above on the Business Day before the day on which the judgment or award is given, (ii) in the event that there is a change in the applicable conversion rate prevailing between the Business Day before the day on which the judgment or award is given and the date of payment, the Borrower will pay to the Administrative Agent, for the benefit of the Lenders, such additional amounts (if any) as may be necessary, and the Administrative Agent, on behalf of the Lenders, will pay to the Borrower such excess amounts (if any) as result from such change in the rate of exchange, to assure that the amount paid on such date is the amount in such other currency, which when converted at the conversion rate described herein on
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the date of payment, is the amount then due in the currency required hereunder, and (iii) any amount due from the Borrower under this Section 11.17 shall be due as a separate debt and shall not be affected by judgment or award being obtained for any other sum due.
Section 11.18 [Reserved].
Section 11.19 Final Agreement. The Credit Documents constitute the entire understanding among the Credit Parties, the Lenders, the Swingline Lender, the Issuing Banks, and the Administrative Agent and supersede all earlier or contemporaneous agreements, whether written or oral, concerning the subject matter of the Credit Documents. THIS WRITTEN AGREEMENT TOGETHER WITH THE OTHER CREDIT DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 11.20 Officer’s Certificates. It is not intended that any certificate of any Authorized Officer of any Credit Party delivered to the Administrative Agent or any Lender pursuant to this Agreement shall give rise to any personal liability on the part of such Authorized Officer.
Section 11.21 Release of Collateral and Guarantors.
(a)Any Lien on any Collateral granted to or held by, and any Guaranty of a Guarantor of the Obligations to, the Administrative Agent and/or the Security Trustee under any Credit Document shall automatically be released, terminated and discharged (as used in this Section 11.21, “released”) without the need for any further action by any Person: (i) upon Security Termination, (ii) with respect to any such Lien, in the event that any asset constituting Collateral is, or is to be, Disposed of as part of, or in connection with, any transaction not prohibited hereunder or under any other Credit Document or (iii) to the extent approved, authorized or ratified in writing in accordance with Section 11.11.
(b)In addition, the Security Trustee and/or the Administrative Agent, as applicable, shall, without the need for any further action by any Person, subordinate or release any Lien on any Collateral granted to or held by the Security Trustee and/or the Administrative Agent, respectively, under any Credit Document to the holder of any Permitted Lien described in Section 7.2(g).
(c)In the case of any release or subordination described in this Section 11.21, the Administrative Agent and/or the Security Trustee, as applicable, shall, at the Borrower’ expense, promptly execute and deliver to the applicable Credit Party such documents as such Credit Party or the Borrower may reasonably request to evidence such release or subordination and take such additional actions as may from time to time be reasonably requested by the applicable Credit Party or the Borrower to effect the foregoing.
Section 11.22 Patriot Act Notice. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Patriot Act. The Borrower shall provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by the Administrative Agent or any Lenders in order to assist the Administrative Agent and the Lenders in maintaining compliance with the Patriot Act.
Section 11.23 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other
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modification hereof or of any other Credit Document), the Borrower acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (i) (A) the arranging and other services regarding this Agreement provided by the Administrative Agent, the Arrangers and the Lenders are arm’s-length commercial transactions between the Borrower and its Affiliates, on the one hand, and the Administrative Agent, the Arrangers and the Lenders, on the other hand, (B) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Credit Documents; (ii) (A) each of the Administrative Agent, each Lender and each Arranger is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrower or any of its Affiliates, or any other Person and (B) neither the Administrative Agent nor, the Arrangers nor any Lender has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Credit Documents; and (iii) the Administrative Agent, the Arrangers and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Administrative Agent, the Arrangers nor any Lender has any obligation to disclose any of such interests to the Borrower or its Affiliates. The Borrower hereby acknowledges and agrees that in no event shall the Administrative Agent, the Arrangers or any Lender be subject to any fiduciary or other duties which are not expressly provided for herein in connection with the transactions contemplated hereby.
Section 11.24 Acknowledgment and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Credit Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Credit Document may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a)the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(b)the effects of any Bail-In Action on any such liability, including, if applicable:
(i)a reduction in full or in part or cancellation of any such liability;
(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Credit Document; or
(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any EEA Resolution Authority.
Section 11.25 Acknowledgment Regarding Any Supported QFCs. To the extent that the Credit Documents provide support, through a guarantee or otherwise, for hedging agreements or any other agreement or instrument that is a QFC (such support “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated
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thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Credit Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Credit Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Credit Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.

[The remainder of this page is intentionally left blank.]


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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

SEA-VISTA I LLC, as Borrower





By:  

Name:  

Title:  




[Signature Page to Amended & Restated Credit Agreement]



JPMORGAN CHASE BANK, N.A., as Administrative Agent, Swingline Lender, Issuing Bank and Lender





By:  

Name:  

Title:  


[Signature Page to Amended & Restated Credit Agreement]



REGIONS BANK, as
as a Lender





By:  

Name:  

Title:  


[Signature Page to Amended & Restated Credit Agreement]



DNB CAPITAL LLC, as
as a Lender





By:  

Name:  

Title:  



[Signature Page to Amended & Restated Credit Agreement]


TRUIST BANK, as a Lender





By:  

Name:  

Title:  


[Signature Page to Amended & Restated Credit Agreement]



BMO HARRIS BANK, N.A., as a Lender





By:  

Name:  

Title:  


[Signature Page to Amended & Restated Credit Agreement]



HANCOCK WHITNEY BANK, as a Lender





By:  

Name:  

Title:  


[Signature Page to Amended & Restated Credit Agreement]



PRUDENTIAL, as a Lender





By:  

Name:  

Title:  



[Signature Page to Amended & Restated Credit Agreement]

ANNEX I
REVOLVING COMMITMENTS
Lender RevolvingCommitment
JPMorgan Chase Bank, N.A. $16,000,000.00
Regions Bank $15,000,000.00
DNB Capital LLC $15,000,000.00
Truist Bank $13,500,000.00
BMO Harris Bank, N.A. $13,500,000.00
Hancock Whitney Bank $13,500,000.00
Prudential $13,500,000.00
Total $100,000,000.00



[Signature Page to Amended & Restated Credit Agreement]

ANNEX II
PRICING SCHEDULE
APPLICABLE MARGIN LEVEL I STATUS LEVEL II STATUS LEVEL III STATUS LEVEL IV STATUS
LIBO Rate 2.00% 2.25% 2.50% 2.75%
Base Rate 1.00% 1.25% 1.50% 1.75%

APPLICABLE COMMITMENT
FEE RATE
LEVEL I STATUS LEVEL II STATUS LEVEL III STATUS LEVEL IV STATUS
Commitment Fee 0.50% 0.50% 0.50% 0.50%

APPLICABLE LETTER OF CREDIT FEE RATE LEVEL I STATUS LEVEL II STATUS LEVEL III STATUS LEVEL IV STATUS
Letter of
Credit Fee Rate 		2.00% 2.25% 2.50% 2.75%
For the purposes of this Pricing Schedule, the following terms have the following meanings, subject to the final paragraph of this Pricing Schedule:
“Level I Status” exists at any date if, as of the last day of the Fiscal Quarter of the Borrower, the Leverage Ratio is less than or equal to 2.00 to 1.00.
“Level II Status” exists at any date if, as of the last day of the Fiscal Quarter of the Borrower, the Leverage Ratio is greater than 2.00 to 1.00 and less than or equal to 3.00 to 1.00.
“Level III Status” exists at any date if, as of the last day of the Fiscal Quarter of the Borrower, the Leverage Ratio is greater than 3.00 to 1.00 and less than or equal to 3.50 to 1.00.
“Level IV Status” exists at any date if, as of the last day of the Fiscal Quarter of the Borrower, the Leverage Ratio is greater than 3.50 to 1.00.
“Status” means either Level I Status, Level II Status or Level III Status.
The Applicable Margin, Applicable Commitment Fee Rate and Applicable Letter of Credit Fee Rates shall be determined based on the Leverage Ratio set forth in the most recently delivered Compliance Certificate. Adjustments, if any, to the Applicable Margin, Applicable Commitment Fee Rate, or Applicable Letter of Credit Fee Rate shall be effective five (5) Business Days after the Administrative Agent has received the applicable Compliance Certificate, except that the Applicable Margin on a Eurodollar Loan shall be adjusted after the last day of the then current Interest Period with respect thereto. If the Borrower fails to deliver a Compliance Certificate to the Administrative Agent at the time required by Section 6.6(c), then the Applicable Margin, Applicable Commitment Fee Rate and Applicable Letter of Credit Fee Rate shall be deemed to be determined at Level III Status until the date


the applicable Compliance Certificate is so delivered (at which time, the Status shall be based upon the Leverage Ratio set forth in such Compliance Certificate).
In the event that any Compliance Certificate delivered pursuant to Section 6.6(c) is shown to be inaccurate (regardless of whether this Agreement or the Commitments are in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher or lower Applicable Margin, Applicable Commitment Fee Rate and/or Applicable Letter of Credit Fee Rate for any period (each, an “Applicable Period”) than the Applicable Margin, Applicable Commitment Fee Rate and/or Applicable Letter of Credit Fee Rate actually applied for such Applicable Period, the Borrower shall immediately (a) deliver to the Administrative Agent a corrected Compliance Certificate for such Applicable Period, (b) determine the Applicable Margin, Applicable Commitment Fee Rate and/or Applicable Letter of Credit Fee Rate for such Applicable Period based upon the corrected Compliance Certificate, and (c) immediately pay to the Administrative Agent for the benefit of the Lenders the net accrued additional interest and other fees owing as a result of such changes in the Applicable Margin, Applicable Commitment Fee Rate and/or Applicable Letter of Credit Fee Rate for each such Applicable Period, which payment shall be promptly distributed by the Administrative Agent to the Lenders entitled thereto. The Borrower’s obligations under this paragraph shall survive Security Termination for a period of six (6) months, at which time all of the Borrower’s obligations hereunder shall automatically terminate and be of no further force and effect.



ANNEX III
2019 TERM LOAN COMMITMENTS
Lender 2019 Term Loan Commitment
JPMorgan Chase Bank, N.A. $16,000,000.00
Regions Bank $15,000,000.00
DNB Capital LLC $15,000,000.00
Truist Bank $13,500,000.00
BMO Harris Bank, N.A. $13,500,000.00
Hancock Whitney Bank $13,500,000.00
Prudential $13,500,000.00
Total $100,000,000.00



Exhibit 21.1
SEACOR HOLDINGS INC.
MAJORITY OWNED SUBSIDIARIES
AS OF DECEMBER 31, 2019
Jurisdiction
of Incorporation/Formation
Arawak Line (T&C) Ltd. Turks & Caicos
Caribship LLC Delaware
Central Gulf Lines, LLC Delaware
CLEANCOR Energy Solutions LLC Delaware
CLEANCOR Holdings LLC Delaware
CLEANCOR LNG LLC Delaware
CLEANCOR Power Solutions LLC Marshall Islands
CLEANCOR Pressure Vessels LLC Delaware
CLEANCOR SOLUCIONES ENERGETICAS LLC Puerto Rico
C-Terms Partners
d/b/a C-Term Partners 		Florida
Eco-Tankers Crew Management LLC Delaware
F2 SEA Inc. Delaware
Gateway Terminals LLC Delaware
Graham Offshore Tugs LLC Delaware
Illinois Corn Processing Holdings Inc. Delaware
KS Maritime Holdings LLC Marshall Islands
KS Maritime Holdings (US) LLC Delaware
LCI Shipholdings Inc. Marshall Islands
Lightship Tankers I LLC Delaware
Lightship Tankers II LLC Delaware
Lightship Tankers III LLC Delaware
Lightship Tankers IV LLC Delaware
Lightship Tankers V LLC Delaware
McCall Boat Rentals Ocean Barges LLC Delaware
Mesa LNG Partners LLC Delaware
Naviera Central S.A. Colombia
O'Brien's Response Management, L.L.C. Delaware
ORM Holdings II LLC Delaware
ORM Holdings Inc. Delaware
Pantagro-Pantanal Produtos Agropecuarios Ltda. Brazil
Phoenix Crew Management LLC Delaware
Port Dania Holdings I LLC Delaware
Port Dania Holdings II LLC Delaware
Rehab Al-Bahar for General Services, General Transport and General Trading LLC Iraq
SCF Barge Line LLC Delaware
SCF Barge Line Leasing LLC Delaware
SCF Barge Line Vessel Holdings LLC Delaware
SCF Colombia (MI) I LLC Cayman Islands
SCF Colombia (MI) II LLC Cayman Islands
SCF Colombia (MI) III LLC Cayman Islands
SCF Colombia (MI) IV LLC Cayman Islands
SCF Colombia (MI) LLC Cayman Islands
SCF Colombia (US) LLC Delaware
SCF Fleeting LLC Delaware
SCF International LLC Marshall Islands
SCF/JAR Investments LLC Delaware
SCF Lewis and Clark Fleeting LLC Delaware


Jurisdiction
of Incorporation/Formation
SCF Lewis and Clark Terminals LLC
d/b/a Bulk Service Granite City
d/b/a Bulk Service Tyler Street
d/b/a Mid Coast Terminal 		Delaware
SCF Marine Inc. Delaware
SCF Real Estate LLC Delaware
SCF Riverport LLC Delaware
SCF Services LLC Delaware
SCF Shipyards LLC Delaware
SCF Specialty Barges LLC Delaware
SCF Terminals LLC Delaware
SCF Towboat III, L.P. Delaware
SCF Waxler Marine LLC
d/b/a Waxler Transportation Company 		Delaware
Seabulk Challenge LLC Delaware
Seabulk Energy Transport LLC Delaware
Seabulk Fleet Management LLC Delaware
Seabulk Island Transport, Inc. Marshall Islands
Seabulk Marine Services, Inc. Florida
Seabulk Petroleum Transport LLC Delaware
Seabulk Tankers, Inc. Delaware
Seabulk Towing Holdings Inc. Delaware
Seabulk Towing Services, Inc.
d/b/a Seabulk Towing 		Florida
Seabulk Towing, Inc.
d/b/a Port Canaveral Towing
d/b/a Port Everglades Towing
d/b/a Seabulk Towing of Port Canaveral
d/b/a Seabulk Towing of Port Everglades
d/b/a Seabulk Towing of Tampa
d/b/a Tampa Bay Towing
d/b/a Mobile Bay Towing 		Delaware
SEACAP AW LLC Marshall Islands
SEACAP Leasing Associates III LLC Delaware
SEACAP Leasing Associates XI LLC Delaware
SEACOR AMH LLC
d/b/a SCF AMH 		Delaware
SEACOR Asset Management LLC Delaware
SEACOR Capital (Asia) Limited Hong Kong
SEACOR Capital Corporation Delaware
SEACOR Colombia Fluvial (MI) LLC Cayman Islands
SEACOR Commodity Trading LLC Delaware
SEACOR Commodity Trading S.R.L. Argentina
SEACOR Container Lines LLC Delaware
SEACOR Environmental Services Inc. Delaware
SEACOR Gas Transport Corporation Marshall Islands
SEACOR Inland River Transport Inc. Delaware
SEACOR Island Lines LLC Delaware
SEACOR Management Services Inc. Delaware
SEACOR Meridian Inc. Delaware
SEACOR Ocean Investments LLC Delaware
SEACOR Ocean Transport Inc. Delaware
SEACOR Offshore Ocean Barges LLC Delaware
SEACOR Payroll Management LLC Delaware
SEACOR Response Inc. Delaware


Jurisdiction
of Incorporation/Formation
SEACOR Sugar LLC Delaware
SEACOR Tankers Holdings Inc. Delaware
SEACOR Tankers Inc. Delaware
SEACOR Tankers II LLC Delaware
SEACOR Vision Ocean Barges LLC Delaware
SEACOR Worldwide Ocean Barges LLC Delaware
SEA-Vista I LLC Delaware
SEA-Vista II LLC Delaware
SEA-Vista III LLC Delaware
SEA-Vista ATB I LLC Delaware
SEA-Vista Newbuild I LLC Delaware
SEA-Vista Newbuild II LLC Delaware
SEA-Vista Newbuild III LLC Delaware
SIL Holdings LLC Delaware
SIL Payroll Management LLC Marshall Islands
SIT Payroll Management LLC Marshall Islands
Soylutions LLC Illinois
Strategic Crisis Advisors LLC Georgia
Trailer Bridge Holdings LLC Delaware
United Ocean Services Inc. Delaware
V&A Commodity Traders LLC Delaware
VA&E Commodity Investment Limited United Kingdom
Waterman Logistics, Inc. Delaware
Waterman Steamship Corporation New York
Waterman Transport, Inc. Delaware
WCRY LLC Illinois
Weston Barge Line, Inc. Delaware
Witt Associates do Brasil Consultoria Ltda. Brazil
Witt O'Brien's Insurance Services, LLC New Jersey
Witt O'Brien's, LLC Delaware
Witt O'Brien's Payroll Management LLC Delaware
Witt O'Brien's PR LLC Puerto Rico
Witt O'Brien's USVI, LLC U.S. Virgin Islands



SEACOR HOLDINGS INC.
50% OR LESS OWNED SUBSIDIARIES
AS OF DECEMBER 31, 2019
Jurisdiction
of Incorporation/Formation
Asian Sky Group Limited Hong Kong
Avion Pacific Limited Hong Kong
Bunge-SCF Grain, LLC Delaware
Eagle Fabrication, LLC Illinois
Golfo de Mexico Rail Ferry Holdings LLC Delaware
GTI AW I Republic of Mauritius
Kotug Seabulk Maritime LLC Marshall Islands
Magsaysay-Seacor Inc. Philippines
Mandarin Containers Limited British Virgin Islands
Midas Medici Group Holdings, Inc. Delaware
O'Brien's do Brasil Consultoria em Emergencias e Meio Ambiente A/A Brazil
Rail Ferry Vessel Holdings LLC Marshall Islands
SCF Bunge Marine LLC Delaware
SCFCo Holdings LLC Marshall Islands
Seabulk Offshore de Mexico, S.A. de C.V. Mexico
Svitzer Idku S.A.E Egypt
Trailer Bridge, Inc. Delaware
VA&E Trading LLP United Kingdom
VA&E Trading USA LLC Delaware



EXHIBIT 23.1
Consent of Independent Registered Certified Public Accounting Firm
We have issued our reports dated February 28, 2020, with respect to the consolidated financial statements and internal control over financial reporting included in the Annual Report of Seacor Holdings Inc. on Form 10-K for the year ended December 31, 2019. We consent to the incorporation by reference of said reports in the Registration Statements of Seacor Holdings Inc. on Forms S-3 (File No. 333-230111, 333-05483, File No. 333-11705, File No. 333-20921, File No. 333-37492, File No. 333-56842) and on Forms S-8 (File No. 333-105340, File No. 333-105346, File No. 333-143066, File No. 333-179655, File No. 333-179656, File No. 333-182082, File No. 333-196304, and File No. 333-226680).
/s/ GRANT THORNTON LLP
Fort Lauderdale, Florida
February 28, 2020



EXHIBIT 23.2
Consent of Independent Registered Certified Public Accounting Firm
We consent to the incorporation by reference in the following in Registration Statement Nos. 333-230111, 333-05483, 333-11705, 333-20921, 333-37492, 333-56842 on Form S-3, Registration Statement Nos. 333-105340, 333-105346, 333-143066, 333-179655, 333-179656, 333-182082, 333-196304, 333-226680 on Form S-8 of our reports dated February 21, 2020, relating to the financial statements of Trailer Bridge, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2019.
/s/ Pivot CPAs
Ponte Vedra Beach, Florida
February 28, 2020



Exhibit 31.1
CERTIFICATION
I, Charles Fabrikant, certify that:
1.I have reviewed this annual report on Form 10-K of SEACOR Holdings Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
 
Date: February 28, 2020
/s/ CHARLES FABRIKANT
Name: Charles Fabrikant
Title: Executive Chairman and Chief Executive Officer
(Principal Executive Officer)




Exhibit 31.2
CERTIFICATION
I, Bruce Weins, certify that:
1.I have reviewed this annual report on Form 10-K of SEACOR Holdings Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
 
Date: February 28, 2020
/s/ BRUCE WEINS
Name: Bruce Weins
Title: Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)



Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Charles Fabrikant, as Principal Executive Officer of SEACOR Holdings Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the accompanying Annual Report on Form 10-K for the period ending December 31, 2019 as filed with the U.S. Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 28, 2020
 
/S/ CHARLES FABRIKANT
Charles Fabrikant
Executive Chairman and Chief Executive Officer
(Principal Executive Officer)




Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Bruce Weins, as Principal Financial Officer of SEACOR Holdings Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the accompanying Annual Report on Form 10-K for the period ending December 31, 2019 as filed with the U.S. Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 28, 2020
 
/s/ BRUCE WEINS
Bruce Weins
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)