-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PdrtONPxxxklzWJaqODDV3P+PvY64rNa4nFB5mgBZ86W4dNlpwesx32wl92a7/Vf ysi1Wf2DGWbuQpJRt80pOw== 0000950123-04-003546.txt : 20040319 0000950123-04-003546.hdr.sgml : 20040319 20040319165850 ACCESSION NUMBER: 0000950123-04-003546 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040319 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROWLEY MARITIME CORP CENTRAL INDEX KEY: 0001130194 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 943148464 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-49717 FILM NUMBER: 04680547 BUSINESS ADDRESS: STREET 1: 155 GRAND AVE. STREET 2: 7TH FL. CITY: OAKLAND STATE: CA ZIP: 94612 BUSINESS PHONE: 5102517574 MAIL ADDRESS: STREET 1: 155 GRAND AVE. STREET 2: 7TH FL. CITY: OAKLAND STATE: CA ZIP: 94612 10-K 1 y93312e10vk.txt FORM 10-K . . . UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003 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 000-49717 CROWLEY MARITIME CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 94-3148464 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 155 GRAND AVENUE, OAKLAND, CALIFORNIA 94612 (Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 251-7500 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR VALUE $.01 PER SHARE (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] The aggregate market value of the shares of the registrant's voting common stock held by non-affiliates of the registrant as of June 30, 2003 was $23,993,238 (based upon $1,140 per share being the average of the closing bid and asked price on June 30, 2003 as reported in the Pink Sheets). As of March 17, 2004, 89,404 shares of voting common stock, par value $.01 per share, and 46,138 shares of non-voting Class N common stock, par value $.01 per share, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement to be used by the registrant in connection with its 2004 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. CROWLEY MARITIME CORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003 TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business.................................................... 1 Executive Officers of the Registrant........................ 14 Item 2. Properties.................................................. 14 Item 3. Legal Proceedings........................................... 15 Item 4. Submission of Matters to a Vote of Security Holders......... 16 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................................... 16 Item 6. Selected Financial Data..................................... 17 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 19 Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................................ 36 Item 8. Financial Statements and Supplementary Data................. 38 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.................................... 69 Item 9A. Controls and Procedures..................................... 69 PART III Item 10. Directors and Executive Officers of the Registrant.......... 70 Item 11. Executive Compensation...................................... 70 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 70 Item 13. Certain Relationships and Related Transactions.............. 70 Item 14. Principal Accounting Fees and Services...................... 70 PART IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................................... 71 SIGNATURES............................................................ 73 EXHIBIT INDEX......................................................... 74
i Certain statements in this Form 10-K and its Exhibits ("Form 10-K") contain or may contain information that is forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors, including, without limitation, the risks described in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Factors" of this Form 10-K. Readers should carefully review this Form 10-K in its entirety, including, but not limited to, Crowley Maritime Corporation's consolidated financial statements and the notes thereto. The Company undertakes no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof. Unless otherwise indicated, dollar amounts are stated in thousands of dollars, except for per share amounts. PART I ITEM 1. BUSINESS Unless otherwise noted, references to "the Company", "we", "our" or "us" means Crowley Maritime Corporation, a Delaware corporation, and its subsidiaries. Our principal executive offices are located at 155 Grand Avenue, Oakland, California 94612, and our telephone number is (510) 251-7500. The Company's web site is http://www.crowley.com. Information contained on the Company's web site is not a part of this report. COMPANY OVERVIEW We provide diversified transportation services in domestic and international markets by means of four operating lines of business: Liner Services; Ship Assist and Escort Services; Oil and Chemical Distribution and Transportation Services; and Energy and Marine Services. Liner Services provides scheduled marine transportation services between designated ports, certain complementary inland transportation services, terminal operations, vessel management for third parties, and varied logistics management services. Ship Assist and Escort Services provides ship assist, tanker escort, docking, fire fighting and oil spill response services primarily in ports located on the west coast of the continental United States and in Alaska. Ship Assist and Escort Services also provides emergency towing services. Oil and Chemical Distribution and Transportation Services transports crude oil, petroleum products and chemicals among ports on the east and west coasts of the United States, Alaska, the Gulf of Mexico and Puerto Rico. This segment also manages vessels for third party owners, operates tank farms and distributes and sells fuel oil in Alaska. Energy and Marine Services provides specialized services to companies engaged in the exploration, production and distribution of oil and gas, including project management and logistics, inventory control and emergency response services. Energy and Marine Services also charters tugs, barges and other equipment to third parties for a wide array of services, including towing, transportation and other specialized services. The Company supports all four of its segments by providing corporate services, supervising construction of new vessels and owning vessels which are chartered for use in our operating lines of business. The Company arranges most of the insurance required for its operations through its captive insurance company. The Company employs approximately 4,000 people and provides its services using a fleet of more than 270 vessels, consisting of RO/RO (roll on roll off) vessels, LO/LO (lift on lift off) vessels, tankers, tugs and barges. Our land-based facilities and equipment include terminals, warehouses, tank farms, office buildings, trucks, trailers, containers, chassis, cranes and other specialized vehicles. The grandfather of our current President, Mr. Thomas B. Crowley, Jr., began our business on the San Francisco Bay in 1892. The business was incorporated in the State of Delaware as "Crowley Maritime Corporation" on December 1, 1972. The present structure, in which Crowley Maritime Corporation is a holding company for our lines of business, was put in place in 1992. 1 The Company is predominantly owned by certain members of the Crowley family and Company employees and its shares do not trade on any national securities exchange or in any established trading market. See "Item 5. Market for Registrant's Common Equity and Related Stockholder Matters" and Risk Factors in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations". The following table lists the Company's owned, managed and chartered vessels as of December 31, 2003:
NUMBER CLASS OF VESSEL OF VESSELS - --------------- ---------- OWNED VESSELS Tank Ships................................................ 3 580' Triple Deck Barges................................... 4 730' Triple Deck Barges................................... 5 Integrated Tug and Barges................................. 2 Articulated Tugs and Barges............................... 4 Off Shore Tugs............................................ 58 Tractor Type Tugs......................................... 15 Near Shore/River Tugs..................................... 12 1,000-5999 DWT Barges..................................... 23 6,000-20,000 DWT Barges................................... 40 CHARTERED VESSELS Oil Spill Recovery Vessels................................ 57 Tank Ships................................................ 1 LO/LO Ships............................................... 3 RO/RO Ships............................................... 11 Miscellaneous Barges...................................... 5 MANAGED VESSELS............................................. 28 --- TOTAL VESSELS............................................... 271 ===
From time to time, the Company may transfer vessels between the Company's lines of business to meet changing business needs. Specifically, the Ship Assist and Escort Services, Oil and Chemical Distribution and Transportation Services and Energy and Marine Services use tugs and barges for their operations which, depending upon market conditions, may be shifted and redeployed by the Company among different geographical locations and among the different lines of business. It is the Company's practice to regularly monitor the demands for the services of each of these lines of business and to transfer tugs and barges among them based upon prevailing market conditions. In addition to using tugs and barges (including articulated and integrated tug/barges), Oil and Chemical Distribution and Transportation Services also uses a fleet of tankers which, as a general matter, are not well suited for use by either Ship Assist and Escort Services or Energy and Marine Services. For additional information about the Company's lines of business, see "Item 1. Business -- Liner Services", "Item 1. Business -- Ship Assist and Escort Services", "Item 1. Business -- Oil and Chemical Distribution and Transportation Services", and "Item 1. Business -- Energy and Marine Services" below, and Note 20 of the Notes to the Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data". For segment financial information concerning our revenues, operating profits and long-lived assets, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 20 of the Notes to the Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data." 2 LINER SERVICES Liner Services provides scheduled marine transportation services between designated ports for the carriage of cargo including containers, trailers, vehicles and oversized cargo, and performs logistics, warehousing, distribution and special cargo handling services, including the carriage of apparel, refrigerated perishable goods and hazardous materials. At December 31, 2003, Liner Services provided service to approximately 25 countries in the Caribbean, Central America and South America with 34 ocean going ships, tugs and barges capable of carrying approximately 11,820 twenty foot equivalent units, or TEUs. Liner Services also leases space for approximately 660 TEU's on three vessels under vessel sharing agreements. Liner Services owns or leases approximately 40,000 pieces of intermodal equipment, including containers, trailers and chassis. THE PUERTO RICO AND CARIBBEAN ISLANDS SERVICE Our Puerto Rico and Caribbean Islands service provides scheduled liner services between: - ports in the United States North Atlantic and ports in Puerto Rico, and - ports in the United States South Atlantic and ports in Puerto Rico, U.S. Virgin Islands, certain Caribbean Islands and the Bahamas. The Puerto Rico service uses nine triple-deck RO/RO barges. Five of these barges are 730 feet in length, with an average capacity of 924 TEUs. The remaining four barges are 580 feet in length with an average capacity of 617 TEUs. The nine barges are towed by a fleet of ten offshore tugs owned by us. This service also uses one barge for additional dock space. Departures are normally scheduled for three or four times a week from Jacksonville, Florida and once a week from Pennsauken, New Jersey. This service also provides third party vessel management services for eight vessels for the United States government. The Caribbean Islands service calls on two ports in the Virgin Islands, three ports in the Caribbean and also provides service to various other ports through connecting carriers. This service uses two time chartered LO/LO vessels. The average capacity of these vessels is 530 TEUs. Departures are scheduled from Jacksonville and Port Everglades, Florida once a week. The Bahamas service uses a time chartered RO/RO vessel having a capacity of approximately 191 TEUs. This service has two scheduled departures a week from Jacksonville and Port Everglades, Florida to Nassau, Bahamas. THE LATIN AMERICA SERVICE Our Latin American Service provides scheduled liner services between: - ports in the United States South Atlantic and ports in the Northern Zone of Central America, the Southern Zone of Central America, the Dominican Republic, Haiti, Mexico and Cuba; and - ports in the Gulf of Mexico and ports in the Northern Zone of Central America, the Northern Coast of South America and Cuba. The United States South Atlantic to the Northern Zone of Central America service employs three time chartered RO/RO vessels with an average capacity of 340 TEUs. This service has three weekly sailings between Port Everglades, Florida and ports in Guatemala and Honduras with overland services to Nicaragua and El Salvador. The United States South Atlantic to the Southern Zone of Central America service employs: (a) two time chartered RO/RO vessels with an average capacity of 380 TEUs that provides weekly service between Port Everglades, Florida and Costa Rica, Panama and Guatemala northbound; and (b) one time chartered RO/RO vessel with a capacity of 140 TEUs that provides weekly service between Port Everglades and Costa Rica. The Gulf of Mexico to the Northern Zone of Central America service employs three time chartered RO/RO vessels, with an average capacity of 320 TEUs. This service: (a) has three weekly sailings from Gulfport, 3 Mississippi to Honduras and Guatemala with overland services to Nicaragua and El Salvador; and (b) calls upon Cuba three or four times a month depending on cargo demand. The United States South Atlantic to the Dominican Republic service: (a) employs one time chartered RO/RO vessel, with an average capacity of 320 TEU's; and (b) purchases a minimum of 160 TEUs aboard other vessels under a Vessel Slot Purchase Agreement. The service has two sailings a week between Port Everglades, Florida and the Dominican Republic and one sailing a week between Port Everglades, Florida and Haiti. The United States South Atlantic to Mexico service employs one time chartered LO/LO vessel with a capacity of 280 TEUs. The service offers one sailing every ten days from Jacksonville and Port Everglades, Florida to Progresso and Veracruz, Mexico and Havana, Cuba. The Gulf Latin America Service is operated under a vessel sharing agreement with Lykes Lines Limited LLC, a subsidiary of Canadian Pacific Ltd., APL Limited as agent for and on behalf of American President Lines, Ltd. and TMM Lines Limited, LLC. Three LO/LO vessels with an aggregate capacity of approximately 1,100 to 1,300 TEUs are chartered in and managed by Lykes for this service between ports in Houston, Texas and ports in Mexico, Costa Rica, Colombia, Venezuela and the Dominican Republic. The Company pays for and uses approximately 20% of the total container space in this service. The vessel sharing agreement expires on May 31, 2004 and we have notified our partners that we will not participate in the vessel sharing agreement after that date. The charters for the vessels used in the services described above expire between 2004 and 2008. Vessels of the type time chartered by the Company for these services have been readily available and it has not been difficult to charter new vessels or renew the charters for existing vessels. Liner Services provides logistics services in Venezuela, Panama, Costa Rica, Honduras, Guatemala, El Salvador and the United States. Logistics services include: - freight forwarding, customs clearance and non-vessel owning common carrier and warehousing services; - trucking in the United States, the Northern part of South America and Central America; - providing facilities, including trailer containers and chassis, trailer and container yards, warehouses and distribution centers; and - other logistics optimization activities intended to create efficiencies in the carriage of goods. In December 2003, the Company approved a plan to sell the Logistics operations of its Liner Services segment in Venezuela and completed the sale in February 2004. At December 31, 2003, Liner Services owned or leased, on a long-term basis, marine terminals and container yards in the locations listed in the table below. In those ports where the Company does not own or lease terminals or container yards, it depends upon common use terminals. 4 MARINE TERMINALS AND CONTAINER YARDS
LOCATION ACRES - -------- ----- Pennsauken, New Jersey...................................... 59.0 Jacksonville, Florida....................................... 89.0 Port Everglades, Florida.................................... 68.5 San Juan, Puerto Rico....................................... 79.0 St. Thomas, Virgin Islands.................................. 5.0 Limon, Costa Rica........................................... 7.0 Heredia, Costa Rica......................................... 2.8 San Salvador, El Salvador................................... 2.3 Guatemala City, Guatemala................................... 5.4 San Pedro Sula, Honduras.................................... 8.6 Tegucigalpa, Honduras....................................... 4.4 Panama City, Panama......................................... 9.6 Valencia, Venezuela......................................... 5.5
The Company also leases warehouse and distribution space in several locations in Northern South America, Central America and the United States as listed in the table below. WAREHOUSE AND DISTRIBUTION SPACE
LOCATION SQUARE FEET - -------- ----------- Jacksonville, Florida....................................... 12,500 Miami, Florida.............................................. 84,885 Buena Vista, Honduras....................................... 20,659 Guatemala City, Guatemala................................... 37,535 Export Salva, El Salvador................................... 24,582 Las Cumbres, Panama......................................... 32,293 Valencia, Venezuela......................................... 80,000 Bogota, Colombia............................................ 2,422
SHIP ASSIST AND ESCORT SERVICES Ship Assist and Escort Services provides ship assist, tanker escort, docking and related services in San Diego, Los Angeles and Long Beach, California, Puget Sound, Washington and Valdez, Alaska. Included within its fleet are 28 tugs ranging in length from 85 feet to 150 feet with between 3,500 and 10,192 brake horsepower, and 62 barges of various sizes, capacities and capabilities. In addition to providing ship assist and escort services, the tugs and barges based in Valdez, Alaska are also capable of providing fire fighting and oil spill response services and are predominantly used for these response services. The tugs operating in San Diego, Los Angeles and Long Beach, California and Puget Sound, Washington primarily provide assistance to large tankers and container vessels as they enter and depart from west coast harbors. Numerous vessels which call upon or trade between United States ports are precluded, due to their size, the nature of their cargo or by the application of local regulations from coming within certain distances of the docks where they load or discharge their cargoes without the assistance of one or more tugs. The number of tugs required and the distance at which they must be engaged vary depending upon the port which is called. According to certain regulations intended to protect the environment which apply to ports located in Alaska, Washington and California, tankers loaded with full or partial cargoes of oil are not permitted to enter or leave these ports unless they are escorted by one or more tugs. These tugs are equipped to assume control of the tankers escorted by them in the event that the tankers lose navigational control due to the loss of power or 5 otherwise. In certain cases, these escort tugs are tethered to the tankers that they escort. In certain cases they operate without a tether, but within a prescribed distance of the escorted tanker. Our escort tugs typically relinquish responsibility for escorted tankers either at the time that the tankers have passed beyond the jurisdictional boundaries of the port or when the tankers have been met by docking tugs. Our Ship Assist and Escort tugs generally employ three to six crew members and are available 24 hours a day, seven days a week to respond to calls for their services. All of our tugs are constructed of steel and each is powered by one or more diesel engines. After our ship assist tugs have met the vessel which they will be assisting as it approaches or departs from its designated dock, the assisted vessel generally decreases the use of its own propulsion system and relies upon our tugs for the maneuvers required to tie up and depart from a dock safely. All of our tugs are fitted and equipped with special fenders and other equipment which allows them to maintain contact with the vessel which is being served without damaging its hull. Depending upon the demand for their services, it is our practice to keep between two and seven tugs positioned in the ports which we serve. We currently provide various marine services to the Alyeska Pipeline Service Company ("Alyeska") pursuant to a long-term master time charter and other related agreements. Alyeska is owned by a group of major oil companies or their subsidiaries, including BP Pipelines (Alaska) Inc., Phillips Transportation Alaska, Inc. and ExxonMobil Pipeline Company. Our relationship with Alyeska began in the early 1970s during construction of the Trans-Alaska Pipeline and we have had formal agreements with Alyeska since 1994. Under the master time charter, Alyeska may, pursuant to separate charter orders which set forth the specific terms and conditions of each time charter, time charter from us either our vessels or vessels owned by third parties as required to provide tanker assist services, tanker escort services, ship docking and other related services needed by the oil companies to transport crude oil by tanker from Alaska to the continental United States. Each of the vessels chartered to Alyeska is manned and operated by us. Under our agreements with Alyeska, we also provide the oil companies with various shore-side services. As of December 31, 2003, 17 vessels owned by us, consisting of 10 tugs, 2 line boats and 5 barges, are under time charter to Alyeska. The tugs currently chartered to Alyeska are also capable of providing fire fighting and oil spill response services. We have also bareboat chartered from Prince William Sound Corporation nine vessels and 48 mini-barges which are time chartered by us to Alyeska for oil spill, oil recovery and emergency response services. A number of these vessels are on standby throughout Prince William Sound solely for emergency response to oil spills. Unlike the vessels that we own, the vessels owned by Prince William Sound Corporation may only be used by Alyeska. Because our tugs, line boats and barges chartered to Alyeska are capable of performing similar services for other companies in other geographical locations, in the event that Alyeska decided that it did not require some or all of these vessels for its operations in Alaska, the Company could redeploy the vessels not required by Alyeska to other locations. OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES The oil, chemical and petrochemical industries based in the United States require various forms of transportation to supply them with the raw materials required for their plants and to distribute their finished products. While companies engaged in these industries employ numerous forms of transportation, including trucks, railroads and pipelines, certain distribution patterns and requirements make the use of ocean going vessels the most efficient means of transportation. The ocean going vessels used by Oil and Chemical Distribution and Transportation Services consist of tugs, barges (including articulated and integrated tug/barges) and tankers. In each case, the vessels are made of steel and contain a series of tanks, valves, pumps, generators and other equipment required for the carriage of liquid cargoes. All of our barges (including articulated and integrated tug/barges) and tankers are equipped with pumps which are capable of discharging the cargoes which have been loaded by shore based facilities. While our towed barges contain the power generation systems necessary to operate both the pumps required to discharge cargo and other equipment, they have no means of self propulsion and depend upon our tugs to be moved between ports. Although there are no accommodation spaces on our barges and they are not manned while being towed between ports, our ocean going tugs used to tow these barges are equipped with 6 living quarters and typically employ a crew of seven. As a general rule, and depending upon the horsepower of the tug which is being used for the tow, our barges typically maintain sea speeds of between 7 and 12 knots per hour. Oil and Chemical Distribution and Transportation Services uses four newly constructed articulated tug/barge units. Unlike our oil barges which are towed by steel cables connected to tugs, our articulated tug/barge units are powered by specially designed tug boats which, through mechanical connections that utilize two large cylindrical pins, are connected to special fittings located in notches at the rear of their respective barges. Although the connection between these specially designed tugs and barges is not permanent and the tugs may operate independently of their barges, once the connection has been made, the tugs and barges operate as a single unified vessel. Our articulated tug/barge units employ a crew of eight and are capable of operating at speeds of up to 12 knots per hour. Our tankers are powered by steam turbine or diesel propulsion systems and are capable of propelling themselves at speeds of up to approximately 15 knots per hour. Our integrated tug/barge units are powered by diesel engines and are capable of propelling themselves at speeds of up to 14 knots per hour. Each of our tankers and each of our integrated tug/barge units is equipped with living quarters for its crew members. Our tankers typically employ a crew of approximately 28. Our integrated tug/barge units typically employ a crew of approximately 18. Our tanker used for the carriage of crude oil is designed and equipped only to carry one type of cargo. Our tankers and integrated tug/barge units used for the carriage of petroleum products are capable of carrying up to eleven types of cargo simultaneously. Our tanker used for the carriage of chemicals can carry up to 26 different cargoes at the same time. THE PETROLEUM SERVICE Petroleum Services either owns or leases numerous vessels used for the carriage of crude oil and petroleum products. Among these vessels is a fleet of 21 petroleum barges with capacities of up to 16,550 long tons which are primarily towed by 14 tugs owned by us. The barges and other specially designed vessels carry crude oil and petroleum products among refineries and storage terminals on the West Coast of the United States and Alaska. Petroleum Services also owns and/or operates four tank farms in western Alaska with a cumulative storage capacity of approximately 459,000 barrels of petroleum product. A number of our oil barges are used to carry petroleum products purchased for our account to and among various Alaskan ports. A number of these barges also carry, together with the product owned by us, product owned by third parties. The fuel which is purchased by us and carried aboard our barges is sold directly from our vessels and tank farms to customers in western Alaska who are the ultimate consumers. The Company has been engaged in discussions with Northland Holdings, Inc. concerning a possible purchase by the Company of all the stock or assets of Yukon Fuel Company and/or Service Oil & Gas, Inc. as well as certain vessels and other assets used in Yukon Fuel Company 's fuel distribution business in Alaska. For further details, refer to "Liquidity and Capital Resources" included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." MARINE TRANSPORT CORPORATION Marine Transport Corporation ("MTC"), a wholly owned subsidiary acquired by the Company in 2001, either owns or leases numerous vessels used for the carriage of crude oil, petroleum products and chemicals. Among these vessels are 4 tankers and 2 integrated and 4 articulated tug/barges with capacities of up to approximately 135,000 long tons. The barges, tankers and other specially designed vessels carry crude oil, petroleum products and chemicals: - among refineries and storage terminals on the East Coast and West Coast of the United States, Alaska and the Gulf of Mexico; and - among ports in Puerto Rico and the Gulf of Mexico. 7 MTC also provides vessel management services for 20 vessels belonging to other owners, including commercial companies and the United States government. ENERGY AND MARINE SERVICES The vessels primarily used by Energy and Marine Services consist of flat deck barges designed for the carriage of heavy loads and tugboats of different sizes and capabilities. Our flat deck barges are unmanned and require the use of our tugs to be moved between job locations. Energy and Marine Services provides specialized services to companies engaged, on a worldwide basis, in the exploration, production and distribution of oil and gas. Permanent areas of operation extend from Prudhoe Bay, Alaska to Pedernales, Venezuela and west to the Russian Far East. These services are traditionally provided through specialized marine transportation projects which use assets either owned by the Company or chartered by the Company from the world market as needed. We also offer turnkey project management for major infrastructure projects as well as logistics and inventory control services for the oil and gas industry. Past projects range from sea lifting supplies to Alaska for the Trans-Alaska oil pipeline, to delivery of oversized modules for oil and gas exploration and production in Africa, Asia and the Americas. Energy and Marine Services also provides salvage services, charters vessels to third parties, and transports petroleum products under term contracts. Due to our extensive network of facilities, our large fleet of vessels and active services over a large geographic area, Energy and Marine Services is able to respond quickly to a variety of situations, including emergencies, and assemble to customer specifications unique configurations of marine equipment which are otherwise unavailable. To provide this service, we use 31 tugs, 41 barges, and 2 crewboats and occupy approximately 15 acres of shore side terminals located in Seattle, Washington. During 2002 and/or 2003, Energy and Marine Services was involved in the following projects: - providing assistance for the installation of several platforms in the Gulf of Mexico used for oil exploration; - supporting diving and oil recovery operations off the coast of California; - transporting oil exploration cargo from the United States to Sakhalin Island, Russia, and between ports in Russia; - transporting cranes from the United States West Coast to the Gulf of Mexico via the Panama Canal; - transporting oilfield equipment from Korea to Alaska; - transporting oilfield equipment from the Gulf of Mexico to Argentina; and - commencing removal of drilling platform structures in Russia and demobilization of excess materials to the United States. CORPORATE SERVICES Corporate services include supervising the construction of new vessels, providing engineering services internally, owning vessels which are chartered by our operating lines of business and providing insurance coverage. The Company's risk management and insurance program is structured to allow it to self-insure a multiple of predictable claims based on historical loss/claim experience and to insure more significant claims in Beacon Insurance Company Ltd., which is a wholly-owned subsidiary. Beacon Insurance Company Ltd. retains a layer of risk/losses and purchases reinsurance in the international insurance markets to cover catastrophic casualties and a multiple of major claims. In addition, the program is structured to ensure compliance with federal, state and local insurance regulations. Corporate services also provides accounting, legal, human resources, information technology and purchasing support. 8 SEASONALITY Revenues from Liner Services' trade between Puerto Rico and the United States have historically increased during the latter part of the third quarter and the early part of the fourth quarter of each year in anticipation of increased holiday sales by our customers and declined during the first quarter of each year. The activities of Ship Assist and Escort Services are generally not affected by seasonal factors. The carriage of chemicals and petroleum products among ports in the United States and Puerto Rico by the vessels used by Oil and Chemical Distribution and Transportation Services usually experiences a slight downturn during the summer months because of customer inventory adjustments and refinery shutdowns. The activities of our barges used by Oil and Chemical Distribution and Transportation Services to transport fuel to Alaska tend to increase during the second and third quarters of each year and decline during the first and fourth quarters. It is our practice to redeploy those barges which cannot be used in Alaska during the first and fourth quarters of each year to other areas in which operations are not restricted by weather conditions. The activities of Energy and Marine Services conducted in Alaska and Russia tend to increase during the second and third quarters of each year and decline during the first and fourth quarters. For quarterly financial information concerning our revenues, operating profits, net income and earnings per share, see Note 21 of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data." CUSTOMERS Many of our services are provided in response to discrete customer requests for short-term services. For this reason, customers that account for a significant portion of revenues in one fiscal year may represent an immaterial portion of revenues in subsequent years. In general, the Company does not depend upon a single customer or a small group of customers, the loss of which would have a material adverse effect on its consolidated financial condition, results of operations, or cash flows. However, the failure to obtain contracts for a significant number of services could, in the aggregate, have a material adverse effect on our financial condition, results of operations, or cash flows. Ship Assist and Escort Services derives a material amount of its revenues from a group of contracts with Alyeska. In the event that Alyeska decided not to renew a substantial number of these contracts and the Company was not able successfully to redeploy the vessels used for these contracts to other locations, the decision by Alyeska could have a material adverse effect on the results of Ship Assist and Escort Services. No material portion of the Company's business is subject to renegotiation of profits by the United States government or termination of contracts or subcontracts at the election of the United States government. COMPETITION The competition faced by our operating lines of business is intense. The principal methods of competition in the Company's business are price, service, experience and quality of equipment. The Company believes that its pricing is competitive and that the quality of its services, experience and equipment is among the highest in the industry. A number of our competitors have capital resources greater than those of the Company and, from time to time, may use those resources either to lower rates or acquire equipment which, in either case, may provide a competitive advantage over the Company. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Factors" below. Each of our operating lines of business participates from time to time in markets in which there are more vessels than the market can support at a profitable level. While we try to shift our tugs, barges, tankers and other vessels away from those markets in which there is a surplus of capacity to markets in which the supply of and demand for vessels is more balanced, our competitors tend to engage in similar practices. Over time, these practices by our competitors may undermine the effectiveness of our efforts to deploy our vessels to more balanced markets. 9 LINER SERVICES The services offered by Liner Services between the United States and Puerto Rico currently compete with three principal other carriers: Horizon Lines, Trailer Bridge and Sea Star Line, LLC. The services offered by Liner Services between the United States and Central America currently compete with three principal carriers: Maersk/Sealand, Seaboard, and American President Line. We believe our share of these markets in 2003 was substantial. Major competitors for Logistics services include: United Parcel Service, EXEL, Maersk Logistics, APL Logistics, Sovereign Logistics and Customs and Trade. SHIP ASSIST AND ESCORT SERVICES Our principal competitor for providing ship assist, tanker escort, docking and lightering services on the West Coast of the United States is Foss Maritime. Numerous other public or privately held companies are also a source of competition. In Southern California, major competitors are Foss Maritime and Millennium Towing Company. In Puget Sound, our major competitor is Foss Maritime. We believe that we had a substantial share of each of the Southern California and Puget Sound markets in 2003. OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES We are a major carrier of petroleum products by barge in Alaska and by barge and tanker on the United States West Coast, East Coast, and the Gulf of Mexico. Major competitors in the barge trade are Sause Brothers, Foss Maritime, SeaCoast, Maritrans, Moran and Leevac. Oil companies and independent owners that operate vessels and other modes of petroleum transportation, including pipelines, also compete with our barges for petroleum cargo. Our vessels primarily compete in the carriage of chemicals against certain United States railroads, Allied Towing Corp., and Seabulk International. Our vessels primarily compete in the carriage of petroleum products against certain United States railroads, Seabulk International, American Heavylift Shipping Co., United States Shipping LLC, Maritrans Inc., Keystone Shipping Co. and K-Sea Transportation Partners L.P. ENERGY AND MARINE SERVICES Our principal United States based competitors for providing energy and marine services: (a) in the Gulf of Mexico include Tidewater, Edison Chouest, Delta Towing, Dolphin Towing, Harvey Gulf Marine, McDonough Marine Service and Otto Candies Marine Transportation and Towing; and (b) on the West Coast are Foss, Seacoast and Sause Brothers. West Coast transportation companies such as Lynden and Northland Services compete with us for general cargo moves, and to a lesser extent, for general towing and emergency services. Among our principal foreign competitors are Seacor Smit, Seaspan and Seaspan Cyprus, Ltd., Anchor Marine Transport of Great Britain, ITC Towing of the Netherlands and Fairplay Towing. Competitors also include segments of the heavy lift shipping industry such as Dockwise and Blue Marlin. In providing logistics services, our primary competitors include ASCO, Sembcorp, Maersk, and S.D.V. Oilfield, which have an international presence. Further competition, primarily for government work, comes from qualified small businesses. In addition to the competitive factors described above, the expenses of Energy and Marine Services may be higher than those of certain competitors who provide similar services with nonunion labor. GOVERNMENT REGULATION The operation of our vessels is subject to regulation under various federal laws and international conventions, as interpreted and implemented by the United States Coast Guard, as well as certain state and local laws. Our vessels are required to meet construction and repair standards established by the American Bureau of Shipping, a private organization, and/or the United States Coast Guard, and to meet operational, security and safety standards presently established by the United States Coast Guard. The United States Coast Guard licenses our seagoing supervisory personnel and certifies our seamen and tankermen. 10 Our United States marine operations are also subject to regulation by various United States federal agencies, including the Surface Transportation Board (the successor federal agency to the Interstate Commerce Commission), the Maritime Administration, the Customs Service, the Federal Maritime Commission and the Coast Guard. These regulatory authorities have broad powers over operational safety, tariff filings of freight rates, certain mergers, contraband, environmental contamination, financial reporting and homeland, port and vessel security. Our common and contract motor carrier operations are regulated by the United States Surface Transportation Board and various state agencies. The Company's drivers, including owner-operators, also must comply with the safety and fitness regulations promulgated by the Department of Transportation, including certain regulations for drug testing and hours of service. The officers and unlicensed crew members employed aboard the Company's vessels must also comply with numerous safety and fitness regulations promulgated by the United States Coast Guard, including certain regulations for drug testing and hours of service. JONES ACT Section 27 of the Merchant Marine Act of 1920, commonly called the Jones Act, is a federal law that restricts maritime transportation between United States ports to vessels built and documented in the United States and owned and operated by United States citizens. Because we carry cargo between United States ports, we are subject to the provisions of this law. Other cabotage laws require all United States vessels to be manned by United States citizens. The United States Coast Guard and American Bureau of Shipping maintain the most stringent regime of vessel inspection in the world, which tends to result in higher regulatory compliance costs for United States flag operators than for owners of vessels registered under foreign flags. Our marine transportation business which is conducted between United States ports is protected from foreign competition by the Jones Act. While there have been unsuccessful attempts in the past to broaden access to the Jones Act trade and to modify, limit or abolish the Jones Act, we believe it is unlikely that the Jones Act will be rescinded or materially modified in the foreseeable future. Nonetheless, there can be no assurance that the Jones Act will not be modified or rescinded. ENVIRONMENTAL REGULATION All of the Company's operations are subject to various federal, state and local environmental laws and regulations implemented principally by the Environmental Protection Agency, the United States Department of Transportation, the United States Coast Guard and state environmental regulatory agencies. These regulations govern the management of hazardous wastes, discharge of pollutants into the air, surface and underground waters, including rivers, harbors and the 200-mile exclusive economic zone of the United States, and the disposal of certain substances. We are currently involved in the remediation of eleven properties and have budgeted approximately $4.7 million to be spent over the next ten years on these projects. The contamination at these properties is the result of historic operations. We believe that our operations are in material compliance with current environmental laws and regulations. OIL POLLUTION ACT OF 1990 The Oil Pollution Act of 1990 ("OPA 90") established an extensive regulatory and liability regime intended to protect the environment from oil spills. OPA 90 applies to owners and operators of facilities operating near navigable waters and owners, operators and bareboat charterers of vessels operating in United States waters, which include the navigable waters of the United States and the 200-mile exclusive economic zone of the United States. Although it applies in general to all vessels, for purposes of establishing liability limits, financial responsibility and response planning requirements, OPA 90 distinguishes tank vessels (which include our chemical and petroleum product tankers, our crude oil carriers and our oil barges) from "other vessels" (which include our tugs and the RO/RO and LO/LO vessels used by Liner Services). As a result of certain oil spills by other shipping companies which received international publicity, our single hulled tankers and barges are subject to heightened scrutiny by our customers and various regulatory bodies. 11 Under OPA 90, owners and operators of facilities and owners, operators and bareboat charterers of vessels are "responsible parties" and are jointly, severally and strictly liable for removal costs and damages arising from oil spills relating to their facilities and vessels, unless the spill results solely from the act or omission of a third party, an act of God or an act of war. Damages are defined broadly to include: - natural resources damages and the costs of assessment thereof; - damages for injury to, or economic losses resulting from the destruction of, real and personal property; - the net loss of taxes, royalties, rents, fees and profits by the United States government, and any state or political subdivision thereof; - lost profits or impairment of earning capacity due to property or natural resources damage; - the net costs of providing increased or additional public services necessitated by a spill response, such as protection from fire, safety or other hazards; and - the loss of subsistence use of natural resources. For facilities, the statutory liability of responsible parties is limited to $350 million. For tank vessels, the statutory liability of responsible parties is limited to the greater of $1,200 per gross ton or $10 million ($2 million for a vessel of 3,000 gross tons or less) per vessel; for any "other vessel" such liability is limited to the greater of $600 per gross ton or $500,000 per vessel. Such liability limits do not apply, however, to an incident proximately caused by violation of federal safety, construction or operating regulations or by the responsible party's gross negligence or willful misconduct, or if the responsible party fails to report the incident or provide reasonable cooperation and assistance as required by a responsible official in connection with oil removal activities. Although we currently maintain the maximum available pollution liability insurance coverage that is available through the international Protection & Indemnity Insurers, a catastrophic spill could result in liability in excess of available insurance coverage, resulting in a material adverse effect on our business. Under OPA 90, with certain limited exceptions, all newly built or converted oil tankers operating in United States waters must be built with double hulls, and existing single-hull double-side or double-bottom vessels must be phased out over time, unless retrofitted with double hulls. As a result of this phase-out requirement, as interpreted by the United States Coast Guard, the vessels listed below must stop carrying petroleum and petroleum products over the next five years if they are not retrofitted with double hulls beginning with the listed year.
NUMBER OF NUMBER OF YEAR OWNED SHIPS OWNED BARGES - ---- ----------- ------------ 2004........................................................ -- 1 2005........................................................ -- 1 2006........................................................ 1 2 2007........................................................ -- -- 2008........................................................ -- --
In addition to those vessels listed above, we own 19 other vessels which, during the six year period beginning in 2009, will need to be retrofitted with double hulls in order to continue to carry petroleum or petroleum products in United States waters. While the Company has not completed its study of what it would cost to make such vessels comply with OPA 90 or to replace non-complying vessels with new or used complying vessels, we believe that the cost would represent a material capital expenditure. OPA 90 expanded pre-existing financial responsibility requirements and requires vessel owners, operators and bareboat charterers to establish and maintain with the United States Coast Guard evidence of insurance or qualification as a self-insurer or other evidence of financial responsibility sufficient to meet their potential liabilities under OPA 90. Coast Guard regulations also implement the financial responsibility requirements of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, which imposes liability for discharges of hazardous substances such as chemicals, in an amount equal to $300 per gross ton, 12 thus increasing the overall amount of financial responsibility from $1,200 to $1,500 per gross ton. We have obtained "Certificates of Financial Responsibility" pursuant to the Coast Guard Regulations for our product and chemical carriers through self-insurance and commercial insurance. OPA 90 also amended the federal Water Pollution Control Act to require the owner or operator of certain facilities and tank vessels to prepare facility or vessel response plans and to contract with oil spill removal organizations to remove to the maximum extent practicable a worst-case discharge. We have complied with these requirements. OPA 90 does not prevent individual states from imposing their own liability regimes with respect to oil pollution incidents occurring within their boundaries, and many states have enacted legislation providing for unlimited liability for oil spills. Some states have issued regulations addressing oil spill liability, financial responsibility, and vessel and facility response planning requirements. We do not anticipate that such legislation or regulations will have any material impact on our operations. We believe we are currently in compliance in all material respects with the environmental laws and regulations to which our operations are subject. We are currently working with different state and federal agencies through agreed upon orders, decrees or voluntary actions on the remediation of the eleven impacted properties mentioned above. We are unaware of any material pending or threatened litigation or other judicial, administrative or arbitration proceedings against us occasioned by any alleged non-compliance with such laws or regulations. The risks of substantial costs, liabilities and penalties are, however, inherent in marine operations, and there can be no assurance that significant costs, liabilities or penalties will not be incurred by or imposed on us in the future. TITLE XI Title XI of the Merchant Marine Act of 1936 permits the Secretary of Transportation, acting through the Maritime Administration, to provide a United States government guarantee of the repayment of certain loans arranged for the construction, reconstruction or reconditioning of vessels constructed, reconstructed or reconditioned in the United States. Debt guaranteed pursuant to Title XI can have a term of up to twenty five years and interest rates are generally more favorable than rates available from commercial lenders. CAPITAL CONSTRUCTION FUND Pursuant to Section 607 of the Merchant Marine Act of 1936, we have entered into a Capital Construction Fund Agreement with the Maritime Administration acting for the United States of America. The Capital Construction Fund program allows United States citizens who are owners and operators of United States flag vessels to accumulate the capital necessary to modernize and expand their fleets by deferring federal income taxes on vessel earnings deposited into the fund. Moneys deposited by us into our Capital Construction Fund must be used to acquire, construct or reconstruct United States flag vessels built in United States shipyards. Any vessel which we may acquire, construct or reconstruct using Capital Construction Fund funds may only be used in the United States foreign, non-contiguous domestic or Great Lakes trade. INTERNATIONAL Our vessels that operate internationally are subject to various international conventions, including certain safety, environmental and construction standards. Among the more significant conventions are: (i) the International Convention for the Prevention of Pollution from Ships 1973, 1978 Protocol, (ii) the International Convention on the Safety of Life at Sea, 1978 Protocol, including the International Management Code for the Safe Operation of Ships and for Pollution Prevention, which went into effect for tank vessels on July 1, 1998, and (iii) the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as amended in 1995. These conventions govern oil spills and other matters related to environmental protection, worker health and safety, and the manning, construction and operation of vessels. As a general matter, surveys and inspections are performed by internationally recognized classification societies. 13 Although we believe we are in substantial compliance with all applicable requirements, the risks of incurring substantial compliance costs and liabilities and penalties for noncompliance are inherent in some of our offshore operations and there can be no assurance that such costs, liabilities and penalties will not be incurred by or imposed on us in the future. EMPLOYEES As of December 31, 2003, we had 3,999 employees, including 1,593 employed on vessels and 2,406 employed at our domestic and foreign offices and other land-based facilities. Approximately 2,425 of the Company's employees are employed under the terms of 36 separate collective bargaining agreements with 12 different unions which, among other things, set forth the wages and benefits of these employees. These agreements have expiration dates ranging from 2004 to 2008. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company are as follows:
NAME AGE PRINCIPAL OCCUPATIONS AND BUSINESS EXPERIENCE - ---- --- --------------------------------------------- Thomas B. Crowley, 37 Chairman of the Board, President and Chief Executive Jr. ................. Officer of the Company since July 1994 William A. Pennella.... 59 Vice Chairman of the Board of Directors of the Company since September 2000; Executive Vice President of the Company since January 1996 Albert M. Marucco...... 62 Vice President and Treasurer of the Company since November 1982 Richard L. Swinton..... 56 Vice President, Tax and Audit of the Company since September 2000; Controller of the Company from August 1994 to September 2000 William P. Verdon...... 63 Senior Vice President and General Counsel of the Company since April 1992
ITEM 2. PROPERTIES Our corporate headquarters and executive offices are located at 155 Grand Avenue, Oakland, California 94612, where we lease approximately 15,800 square feet pursuant to a lease which expires in 2008. Liner Services conducts its operations from offices located at 9487 Regency Square Boulevard, Jacksonville, Florida 32225, a 100,000 square foot building owned by the Company. The operations of Ship Assist and Escort Services and the operations of Energy and Marine Services are primarily conducted from offices located at 1102 Southwest Massachusetts Street, Pier 17, Seattle, Washington 98134, where we lease approximately 40,000 square feet pursuant to a lease which expires in 2022. The operations of Oil and Chemical Distribution and Transportation Services are primarily conducted from our offices located at 1200 Harbor Boulevard, Weehawken, New Jersey 07087-0901, where we lease approximately 16,500 square feet pursuant to a lease which expires in 2004, and our offices located at Pier 17, in Seattle, Washington. Beginning May 2004, our operations located at Weehawken, New Jersey will be moved to 100 Lighting Way, Secaucus, New Jersey 07094, where we will lease approximately 14,030 square feet pursuant to a lease which expires in 2010. We also maintain additional facilities in the United States and abroad to support our businesses, including warehouse facilities and dock facilities in Jacksonville, Florida, Port Everglades, Florida, Pennsauken, New Jersey, Valdez, Alaska, Seattle, Washington, and San Juan, Puerto Rico, some of which serve as ports-of-call for many customers. In addition, we maintain strategically dispersed operating bases, and offices in Houston, Texas, Long Beach, California, Atlanta, Georgia, New Orleans, Louisiana, Vancouver, Washington, and Rye Brook, New York. 14 We believe that all of our facilities and equipment are in good condition, well maintained and able to support our current operations. For additional information concerning our properties, see the information concerning our fleet of vessels and certain other properties as set forth in "Item 1. Business" of this Form 10-K. ITEM 3. LEGAL PROCEEDINGS ASBESTOS LITIGATION The Company is currently a defendant with respect to approximately sixteen thousand maritime asbestos cases and other toxic tort cases, most of which were filed in the Federal Courts in Ohio, Michigan, California and New Jersey. Additional cases were filed in the Territorial Court of the Virgin Islands and in state courts in Utah, Pennsylvania, Texas, and Louisiana. Each of the cases, filed on behalf of a seaman or his personal representative, alleges injury or illness based upon exposure to asbestos or other toxic substances and sets forth a claim based upon the theory of negligence under the Jones Act and on the theory of unseaworthiness under the General Maritime Law. Pursuant to an order issued by the Judicial Panel on Multidistrict Litigation dated July 29, 1991, all Federal cases were transferred to the United States District Court for the Eastern Division of Pennsylvania for pretrial processing. On May 1, 1996, the cases were administratively dismissed by Judge Charles R. Weiner, subject to reinstatement in the future. At present, it is not known how long the process will require. It is also not known whether Judge Weiner will be able to develop a plan which will result in settlement of the cases. If he is unsuccessful, upon reinstatement, it is expected that the cases will be remanded to the Ohio and Michigan courts. The Company has insurance coverage that reimburses it for a substantial portion of the: (a) costs incurred defending against asbestos claims; and (b) amounts the Company pays to settle claims or honor judgments by courts. The coverage is provided by a large number of insurance policies written by dozens of insurance companies that wrote the policies over a period of many years. The amount of insurance coverage depends on the nature of the alleged exposure to asbestos, the specific subsidiary against which an asbestos claim is asserted and the terms and conditions of the specific policy. The uncertainties of asbestos claim litigation make it difficult to accurately predict the results of the ultimate resolution of these claims. By their very nature, civil actions relating to toxic substances vary according to the fact pattern of each case, the applicable jurisdiction and numerous other factors. This uncertainty is increased by the possibility of adverse court rulings or new legislation affecting the asbestos claim litigation or the settlement process. Accordingly, we cannot predict the eventual number of such cases or their final resolution. The full impact of these claims and proceedings in the aggregate continues to be unknown. During 2003, there were 44 claims reinstated related to these asbestos claims. The Company has accrued $813 as an estimate of the ultimate outcome of this litigation. The Company has also recorded a receivable from its insurance companies of $479 related to these claims. While it is not feasible accurately to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in some of these cases could have a material adverse effect on our financial condition, operating results or cash flows. Prior to 2001, the Company recorded its asbestos-related reserves based on its best estimate of the total cost of the outstanding claims. These estimates were based on actual costs for settled claims, evidence of liability and damages as well as industry data regarding the ultimate cost of outstanding asbestos litigation. During 2001, it became clear based on consultation with legal counsel and upon the lack of progress since the cases were administratively dismissed that the ultimate outcome of the outstanding cases was uncertain and that the accrual of loss contingency requirements of Statement of Financial Accounting Standards No. 5 "Accounting for Contingencies" were not met due to the unreliability of the loss estimate. As a result, the Company was no longer able to estimate the amount of probable loss or range of probable loss relating to these asbestos cases and reversed $4,321 of asbestos-related reserves. This was recorded as a reduction to claims expense in general and administrative expenses in 2001. 15 ENVIRONMENTAL LITIGATION Environmental costs represent reclamation costs expended by the Company. Environmental expenditures for reclamation costs that benefit future periods are capitalized. Expenditures that relate to remediating an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when the Company's responsibility for remedial efforts is deemed probable and the costs can be reasonably estimated. The ultimate future environmental costs, however, will depend on the extent of the contamination of property and the Company's share of remediation. Historically, actual provisions for environmental costs have not differed materially from accrued amounts. During 2003 and 2002, the Company reached agreements with its insurance underwriters to settle all costs incurred to date and any future costs related to environmental remediation resulting from occurrences prior to 1986. The amounts of the settlements were $1,000 and $5,324, in 2003 and 2002, respectively, net of unrecoverable amounts due to insolvency of certain underwriters. Both of these settlements were collected during 2003. As a result of these settlements, the Company increased its estimated liabilities by $3,095 in 2002 for any remaining environmental remediation. The Company also recognized $1,000 and $2,229 as a reduction to claims expense in 2003 and 2002, respectively. Refer to "Item 8. Financial Statements and Supplementary Data" for additional information. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the fourth quarter of 2003. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS No established public trading market exists for our common stock. Shares of our common stock are neither listed on any national securities exchange, nor presently traded on any public stock exchange or in any other public market and there are no plans, proposals, arrangements or understandings with any person with regard to the development of a public trading market in our common stock. Although quotations for shares of our common stock may be obtained in the Pink Sheets (a centralized quotations service that collects and publishes market maker quotes for over-the-counter securities), because secondary market activity for shares of our common stock has been limited and sporadic, such quotations may not accurately reflect the price or prices at which purchasers or sellers would currently be willing to purchase or sell such shares. The following table shows the range of high and low closing bid prices (in dollars per share) for our common stock, as reported in the Pink Sheets, for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
HIGH LOW ------ ------ FISCAL YEAR ENDED DECEMBER 31, 2003 Fourth Quarter(1)........................................... $1,036 $1,036 Third Quarter(1)............................................ $1,036 $1,030 Second Quarter.............................................. $1,100 $1,030 First Quarter(1)............................................ $1,207 $1,100 FISCAL YEAR ENDED DECEMBER 31, 2002 Fourth Quarter.............................................. $1,222 $1,207 Third Quarter(1)............................................ $1,230 $1,215 Second Quarter.............................................. $1,225 $1,202 First Quarter(1)............................................ $1,219 $1,205
16 - --------------- (1) No trades during this quarter As of March 1, 2004, we had 487 stockholders of record of our voting common stock and one holder of record of our Class N non-voting common stock. We pay no dividends on our common stock and do not anticipate declaring or paying cash dividends on our common stock in the foreseeable future. We currently intend to retain future earnings to finance operations and fund the growth of our business. Any payment of future dividends will be at the discretion of our board of directors and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends and other factors that our board of directors may deem relevant. Payment of cash dividends on our common stock is currently prohibited by the terms of certain agreements to which the Company is a party. (See Note 12 to the Company's Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data".) ITEM 6. SELECTED FINANCIAL DATA The following table presents summary consolidated financial and operating data for the Company. The data presented in this table are derived from the audited financial statements of the Company. You should read the consolidated financial statements and the notes thereto in "Item 8. Financial Statements and Supplementary Data" for a further explanation of the financial data summarized here. You should also read "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations", which describes a number of factors which have affected our financial results. In December 2003, the Company approved a plan to sell the Logistics operations of its Liner Services segment in Venezuela. In February 2004, the Company sold its Logistics operations for $1,506. Accordingly, all financial information in "Item 6. Selected Financial Data" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" have been restated to present the Venezuela operations separately from continuing operations. 17 SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, ----------------------------------------------------- 2003 2002 2001 2000 1999 -------- -------- -------- -------- --------- STATEMENT OF OPERATIONS DATA: Operating revenues.......................... $978,007 $972,857 $992,935 $795,384 $ 767,734 Operating income............................ 42,208 40,624 42,001 41,270 11,484 Income (loss) from continuing operations before discontinued operations and cumulative effect of change in accounting principle................................. 14,418 18,336 20,125 20,505 (5,750) Loss from discontinued operations, net of tax benefit............................... (1,177) (1,064) (44) (252) (28,743) Cumulative effect of change in accounting principle, net of tax benefit............. (420) -- -- -- -- Net income (loss)........................... 12,821 17,272 20,081 20,253 (34,493) Preferred stock dividends................... (1,575) (1,666) (1,849) (2,031) (2,213) Net income (loss) attributable to common shareholders.............................. $ 11,246 $ 15,606 $ 18,232 $ 18,222 $ (36,706) Basic Earnings Per Common Share: Income (loss) from continuing operations before discontinued operations and cumulative effect of change in accounting principle................................. $ 94.64 $ 122.56 $ 134.46 $ 136.71 $ (58.70) Loss from discontinued operations........... (8.67) (7.82) (0.32) (1.86) (211.88) Cumulative effect of change in accounting principle................................. (3.10) -- -- -- -- -------- -------- -------- -------- --------- Net income (loss)........................... $ 82.87 $ 114.74 $ 134.14 $ 134.85 $ (270.58) ======== ======== ======== ======== ========= Diluted Earnings Per Common Share: Income (loss) from continuing operations before discontinued operations and cumulative effect of change in accounting principle................................. $ 89.03 $ 112.44 $ 122.41 $ 124.23 $ (58.70) Loss from discontinued operations........... (7.27) (6.55) (0.27) (1.56) (211.88) Cumulative effect of change in accounting principle................................. (2.59) -- -- -- -- -------- -------- -------- -------- --------- Net income (loss)........................... $ 79.17 $ 105.89 $ 122.14 $ 122.67 $ (270.58) ======== ======== ======== ======== ========= AS OF DECEMBER 31, ----------------------------------------------------- 2003 2002 2001 2000 1999 -------- -------- -------- -------- --------- BALANCE SHEET DATA: Current assets.............................. $369,734 $232,726 $200,618 $261,582 $ 244,352 Non current assets.......................... 640,916 650,568 603,248 428,938 414,222 -------- -------- -------- -------- --------- Total assets................................ $1,010,650 $883,294 $803,866 $690,520 $ 658,574 ======== ======== ======== ======== ========= Current liabilities......................... $213,378 $192,077 $199,661 $178,432 $ 190,826 Other non current liabilities............... 115,732 107,268 98,000 74,034 61,296 Long-term debt.............................. 381,803 296,019 224,017 172,407 155,871 Redeemable preferred stock.................. -- -- 2,367 4,739 7,109 Stockholders' equity........................ 299,737 287,930 279,821 260,908 243,472 -------- -------- -------- -------- --------- Total liabilities, redeemable preferred stock and stockholders' equity............ $1,010,650 $883,294 $803,866 $690,520 $ 658,574 ======== ======== ======== ======== =========
18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following presentation of Management's Discussion and Analysis ("MD&A") of the Company's financial condition, results of operations and cash flows should be read in conjunction with the consolidated financial statements, accompanying notes thereto and other financial information appearing elsewhere in this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. These statements are based on current expectations and assumptions which management believes are reasonable and on information currently available to management. These forward-looking statements are identified by words such as "estimates," "expects," "anticipates," "plans," "believes," and other similar expressions. The Company's actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below under "Risk Factors" and elsewhere in this Form 10-K. EXECUTIVE SUMMARY Crowley Maritime Corporation is a diverse transportation company with global operations. We have four business segments: Liner Services; Ship Assist and Escort Services; Oil and Chemical Distribution and Transportation Services; and Energy and Marine Services. Each segment is capital intensive and requires the periodic renewal or replacement of the assets used by it. While all of our segments are primarily engaged in maritime transportation and services related to maritime transportation, each segment serves a different market with separate and distinct customers. Certain markets are primarily based in the United States and certain markets are based overseas. In most cases, each segment uses equipment that has been specially designed and constructed to meet the needs of that particular segment. By operating in four distinct markets, we diversify the nature of our capital investments and hope to minimize the impact that any economic downturn or other unforeseen adverse event may have upon one or more of our segments at any particular time. In 2003: (a) Our consolidated operating revenues increased to $978,007 from $972,857 in 2002; (b) Our consolidated operating income increased to $42,208 from $40,624 in 2002; and (c) Our net income attributable to common shareholders decreased to $11,246 ($82.87 basic earnings per common share and $79.17 diluted earnings per common share) from $15,606 ($114.74 basic earnings per common share and $105.89 diluted earnings per common share) in 2002. The increases in consolidated operating revenues and consolidated operating income were due to new revenues generated by two transportation management companies that we acquired, higher prices for fuel sold by us in Alaska, the operation of four new vessels, an increase in demand for our services provided to the offshore oil exploration industry in the Gulf of Mexico and an increase in the number of containers carried by us between the United States and Puerto Rico and Latin America. Year over year, asset recoveries increased substantially. The decrease in net income attributable to common shareholders was due to a decrease in interest income, an increase in interest expense, an increase in income tax expense and the loss from discontinued operations in Venezuela. We are continually looking for companies to acquire or assets to build that will complement or strengthen our existing businesses. As part of these efforts, we: (1) purchased Marine Transport Corporation in 2001; (2) took delivery of four newly built articulated tug/barge units in 2002; (3) purchased one transportation management company in 2001 and a second in 2002; and (4) have been in negotiations since the middle of 2003 to purchase a fuel distribution company located in Alaska. In 2004, we sold our logistics business based in Venezuela. To be certain that we have the financial resources required for any project that meets our criteria, we maintain a revolving line of credit that may provide up to $95,000 and in December, we received proceeds of $115,000 from a term loan which can be used for general corporate purposes, acquisitions and/or other corporate projects. In 2003, we replaced approximately $49,000 of construction financing arranged for two new vessels with long-term debt, with an annual interest rate of 4.96%, guaranteed by the United States Government. At December 31, 2003, the Company had cash and cash equivalents of approximately $160,000 and long-term debt in the amount of $435,000. 19 CRITICAL ACCOUNTING POLICIES The preparation of the consolidated financial statements, upon which this MD&A is based, requires management to make estimates which impact those consolidated financial statements. The most critical of these estimates and accounting policies relate to the long-lived asset depreciation, amortization and impairment, goodwill, revenue recognition, and litigation and environmental reserves. In particular, the accounting for these areas requires significant judgments to be made by management. Different assumptions in the application of these policies could result in material changes in the Company's consolidated financial position or consolidated results of operations. For a more complete discussion of these and other accounting policies, see Note 1 to the Company's consolidated financial statements in "Item 8. Financial Statements and Supplementary Data". LONG-LIVED ASSET DEPRECIATION, AMORTIZATION AND IMPAIRMENT The Company monitors expenditures for long-lived assets to determine their appropriate useful lives. This determination is based on historical experience with similar assets and the assets' expected use in the Company's business. The determination of the assets' depreciable life can significantly impact the financial statements. In addition, the Company depreciates property and equipment, less estimated salvage value, using the straight-line method as such method is considered to be the most appropriate systematic and rational method to allocate the cost of property and equipment over the period in which it is to be in use. The Company assesses recoverability of the carrying value of the asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value. Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. GOODWILL Goodwill represents the excess costs of acquired companies over the fair value of their net tangible assets. In accordance with Statement of Financial Accounting Standards ("SFAS") 142, "Goodwill and Other Intangible Assets," goodwill deemed to have an indefinite life is not amortized, but is subject to annual impairment testing. The identification and measurement of goodwill impairment involves the estimation of the fair value of reporting units. The estimates of fair value of reporting units are based on the best information available as of the date of the assessment; the assessment primarily incorporates management assumptions about expected future cash flows and contemplate other valuation techniques. Future cash flows can be affected by changes in industry or market conditions or the rate and extent to which anticipated synergies or cost savings are realized with newly acquired entities. Although no goodwill impairment has been recorded to date, there can be no assurances that future goodwill impairments will not occur. REVENUE RECOGNITION The Company's accounting policies for revenue recognition are predicated on the type of service provided. The common carrier services included in Liner Services are recognized ratably over each voyage by load and discharge port. The Company's logistics services and Ship Assist and Escort Services are recognized as services are provided. Revenues from the Oil and Chemical Distribution and Transportation Services and Energy and Marine Services are recognized ratably over the length of the contract. Estimated losses are provided at the time such losses become evident. The Company's recognition of revenue includes estimates of the total costs incurred for each service and the total billings to perform the service that impacts the estimated operating margin. While the Company has processes in place to assist in developing these estimates, if the Company experiences significantly higher costs or a significant decrease in estimated billings, the Company's financial position, results of operation and cash flows could be materially impacted. 20 LITIGATION AND ENVIRONMENTAL RESERVES The Company monitors its outstanding litigation (including unasserted claims). The Company estimates the expected probable loss (if any) of each claim or potential claim. If a range of probable loss is determined, the Company records a reserve at the low end of the range, unless there are indications that another amount within the range better approximates the expected loss. The determination of whether a litigation reserve is necessary is based on internal analysis by management, consultation with the Company's general counsel and, when necessary, consultations with external counsel. The Company's litigation reserves are a significant estimate that can and does change based on management's evaluation of the Company's existing and potential litigation liabilities. The Company is a defendant with respect to numerous maritime asbestos cases and other toxic tort cases. The Company is unable to predict the ultimate outcome of this litigation and an estimate of the amount or range of potential loss. In addition, the Company is responsible for environmental remediation relating to contamination of property. Liabilities are recorded when the responsibility for such remediation is considered probable and the costs can be reasonably estimated. The ultimate future environmental costs however will depend upon the extent of contamination and the future costs of remediation. The ultimate resolution of these litigation and environmental liabilities could have a material impact on the Company's financial position, results of operations and cash flows. See "Item 3. Legal Proceedings" and Notes 17 and 18 to the Company's Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data." RESULTS OF OPERATIONS The following table sets forth: (a) operating revenues and operating income for Liner Services, Ship Assist and Escort Services, Oil and Chemical Distribution and Transportation Services, and Energy and Marine Services for the years ended December 31, 2003, 2002 and 2001; and (b) other income and expenses not specifically attributable to these operating segments. Other income and expenses include interest income, interest expense, and minority interest in consolidated subsidiaries. The Company evaluates the performance of its operating segments based upon the operating income of the segment, excluding interest income and expense and income taxes. See the Company's Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" for further information. Included in operating income of all four of our segments are allocations for corporate services, which include vessel acquisition, accounting, legal, human resources, information technology, insurance services and purchasing support. Vessel acquisitioncharges represent an allocation of the utilized vessels, depreciation and amortization based on intercompany bareboat charters. Other corporate services are allocated based upon various assumptions, depending on the type of cost being allocated. Asset charges (recoveries) are allocated to the segment that last used the asset. The Company changed its method of accounting for goodwill to conform to SFAS 142. See Note 1 of the Company's consolidated financial statements in "Item 8. Financial Statements and Supplementary Data." 21 SEGMENT OPERATING REVENUE AND OPERATING INCOME AND OTHER INCOME AND EXPENSES (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------ 2003 2002 2001 -------- -------- -------- Operating revenues Liner Services............................................ $578,554 $530,393 $493,160 Ship Assist and Escort Services........................... 73,665 70,504 71,313 Oil and Chemical Distribution and Transportation Services............................................... 255,540 283,383 353,004 Energy and Marine Services................................ 70,248 88,577 75,458 -------- -------- -------- Total operating revenues.................................... 978,007 972,857 992,935 -------- -------- -------- Operating income (loss): Liner Services............................................ 20,946 18,219 (1,645) Ship Assist and Escort Services........................... 9,746 13,637 11,109 Oil and Chemical Distribution and Transportation Services............................................... 25,059 6,682 33,373 Energy and Marine Services................................ (13,543) 2,086 (836) -------- -------- -------- Total operating income...................................... 42,208 40,624 42,001 -------- -------- -------- Other income (expense): Interest income........................................... 363 688 2,116 Interest expense.......................................... (21,330) (15,482) (15,674) Minority interest in consolidated subsidiaries............ 1,762 629 1,249 Other income.............................................. 115 177 233 -------- -------- -------- Income from continuing operations before income taxes....... 23,118 26,636 29,925 Income tax expense.......................................... (8,700) (8,300) (9,800) -------- -------- -------- Income from continuing operations before discontinued operations and cumulative effect of change in accounting principle................................................. 14,418 18,336 20,125 Discontinued operations: Loss from operations (net of $700, $600 and $0 of tax benefit in 2003, 2002 and 2001, respectively).......... (1,177) (1,064) (44) -------- -------- -------- Income before cumulative effect of change in accounting principle................................................. 13,241 17,272 20,081 Cumulative effect of change in accounting principle, net of tax benefit of $257....................................... (420) -- -- -------- -------- -------- Net income.................................................. $ 12,821 $ 17,272 $ 20,081 ======== ======== ========
22 COMPARISON OF FISCAL YEAR 2003 TO FISCAL YEAR 2002 Operating income for 2003 was favorably impacted by an increase in container and noncontainer volume shipped in the Puerto Rico and Caribbean Islands Service, an increase in resale fuel activity, and the addition of the four articulated tug/barge units (the "ATB's") to the Oil and Chemical Distribution and Transportation Services This was partially offset by reduced activities from operations in Russia provided by Energy and Marine Services. Consolidated operating revenues increased $5,150 or .5%, to $978,007 in 2003 from $972,857 in 2002. This increase was primarily attributed to: (a) an increase in revenues due to the acquisition of two transportation management companies; (b) an increase in fuel prices for the Company's resale fuel; (c) an increase in revenues from operation of the ATB's (d) an increase in vessel activity in the Gulf of Mexico; and (e) an increase in the Company's container and non-container volume. The increase was partially offset by decreases from: (a) the sale of MTL Petrolink Corp. on May 15, 2002; (b) fewer vessels operating as a result of vessel disposals and (c) a decrease in revenues earned from the vessel outfitting and mobilization and the transportation of oil exploration cargo to Sakhalin Island, Russia. Consolidated operating expenses increased $4,234 or .5%, to $848,982 in 2003 from $844,748 in 2002. The increase is primarily attributed to: (a) an increase in labor, fuel, transportation, and repair and maintenance costs on the Company's equipment and vessels; and (b) increased expenses associated with the purchase of two transportation management companies. This increase was partially offset by decreases from the sale of MTL Petrolink Corp. on May 15, 2002 and fewer vessels operating as a result of vessel disposals. Consolidated general and administrative expenses decreased $1,854 or 5.6%, to $31,447 in 2003 from $33,301 in 2002. This decrease was primarily attributable to a change in cash surrender value of split-dollar life insurance, offset by an increase in payroll related costs. Consolidated depreciation and amortization expense increased $6,773 or 12.5%, to $60,753 in 2003 from $53,980 in 2002 primarily as the result of depreciation relating to the operation of the ATB's during 2003 and additional depreciation recognized as a result of the consolidation of a Variable Interest Entity ("VIE"), (see Note 2 of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data"). The increase was also attributed to an increase in dry-dock amortization of $2,871 as a result of amortized dry-dock costs for ten vessels in 2003 compared with nine vessels in 2002. These increases were partially offset by the effect of no depreciation for vessels sold in 2003 and 2002. Consolidated asset recoveries, net increased $5,587 to a recovery of $5,383 in 2003 from a charge of $204 in 2002. The gains during 2003 resulted from the sale of ten vessels, land, surplus properties and equipment and were partially offset by a writeoff of vessel improvements. During 2002, four vessels and various equipment were sold; one vessel was destroyed by fire (resulting in a gain net of incurred costs from involuntary conversion) and certain impairment charges were recognized on vessels designated for disposal. As a result, the consolidated operating income increased $1,584 or 3.9%, to $42,208 in 2003 from $40,624 in 2002. Interest income decreased $325 or 47.2%, to $363 in 2003 compared with $688 in 2002. This decrease was due to a decrease in the Company's average cash and cash equivalents during this period and lower interest rates in 2003. Interest expense increased $5,848 or 37.8%, to $21,330 in 2003 compared with $15,482 in 2002. This is a result of lower capitalized interest on the construction of the ATB's during 2003 as compared with 2002 and additional interest expense on vessel financings. The minority interest in consolidated subsidiaries increased $1,133 to income of $1,762 in 2003 compared with $629 in 2002. This increase is due to a joint venture in which the Company had a 75% ownership interest. In December 2003, the Company acquired the remaining 25% of this joint venture. The joint venture partner paid the Company $3,234 in order to exit the joint venture. The total loss of the joint venture in 2003 was $7,800. 23 Income tax expense increased $400 or 4.8%, to $8,700 in 2003 compared with $8,300 in 2002. The effective tax rate was 37.6% for 2003 and 31.2% for 2002. Loss from discontinued operations increased $113 or 10.6%, to $1,177 ($8.67 basic loss per common share and $7.27 diluted loss per common share) in 2003 compared with $1,064 ($7.82 basic loss per common share and $6.55 diluted loss per common share) in 2002. As a result, net income attributable to common shareholders decreased $4,360 to $11,246 ($82.87 basic earnings per common share and $79.17 diluted earnings per common share) in 2003 from $15,606 ($114.74 basic earnings per common share and $105.89 diluted earnings per common share) in 2002. The Company provides diversified transportation services in the United States domestic and international markets. The Company is organized to provide services in four lines of business: Liner Services; Ship Assist and Escort Services; Oil and Chemical Distribution and Transportation Services and Energy and Marine Services (see "Item 1. Business".) The following is a discussion of the results of operations by the Company's lines of business. LINER SERVICES Operating revenues from our Liner Services segment increased $48,161 or 9.1%, to $578,554 in 2003 from $530,393 in 2002. The increase in revenues is primarily attributable to a 7.0% increase in container and noncontainer volume and an increase of 102.4% in other logistical service revenues. This increase was offset by a .2% decrease in average revenue per TEU ("average revenue"). The average revenue decrease was a result of competitive pressures in Latin America, which was partially offset by rate increases from the Puerto Rico and Caribbean Islands Service. The Company's container and noncontainer volume during 2003 and 2002 was 581,955 TEUs and 543,866 TEUs, respectively. The increase in other logistical service revenues was primarily due to revenues earned from the acquisition of a transportation service provider and a transportation management company specializing in the apparel industry purchased in October 2002 and July 2003, respectively. Operating expenses increased $43,767 or 9.1%, to $527,151 in 2003 compared with $483,384 in 2002. These expenses consist primarily of fuel costs, purchased transportation costs, equipment costs, maintenance and repair costs and labor costs. The increase in operating expenses is directly attributable to the increase in container and non-container volume, as noted above, and increased expenses associated with the purchase of a transportation service provider and a transportation management company specializing in the apparel industry. Depreciation and amortization increased $3,219 or 45.3%, to $10,329 in 2003 compared with $7,110 in 2002. The increase was directly attributable to an increase in dry-dock amortization of $2,948. Liner Services amortized dry-dock costs for six vessels in 2003 compared with four vessels in 2002. Dry dock costs are amortized over a period to the next scheduled dry-dock but not in excess of three years. There was also an increase in amortization of management contracts and customer lists. Asset charges (recoveries), net increased $1,545 to a recovery of $993 in 2003 compared with a charge of $552 in 2002. Liner Services recorded an impairment charge on two vessels in 2002. These impairment charges were offset by gains on disposals of two vessels and equipment during 2003 and disposals of equipment in 2002. As a result, the operating income from Liner Services increased $2,727 to $20,946 in 2003 from operating income of $18,219 in 2002. SHIP ASSIST AND ESCORT SERVICES Operating revenues from our Ship Assist and Escort Services segment increased $3,161 or 4.5%, to $73,665 in 2003 compared with $70,504 for 2002. The increase was directly attributable to an increase in rates which included a fuel surcharge to cover rising fuel prices, higher vessel volumes in North Puget Sound, and increased utilization in Valdez. Overall vessel utilization was 72% compared with 73% during 2003 and 2002, respectively. 24 Operating expenses increased $6,768 or 12.3%, to $61,846 in 2003 compared with $55,078 during 2002. The increase was directly attributable to an increase in vessel related costs due to increased labor, fuel, and repairs and maintenance costs of vessels and an increase in property taxes. As a result, operating income for Ship Assist and Escort Services in 2003 decreased $3,891 to $9,746 compared with $13,637 for 2002. OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES Operating revenues from our Oil and Chemical Distribution and Transportation Services segment decreased $27,843 or 9.8%, to $255,540 in 2003 compared with $283,383 for 2002. The decrease was directly attributable to the sale of MTL Petrolink Corp. on May 15, 2002, and a decrease in the number of vessels in service in 2003 compared with 2002. This decrease was partially offset by: (a) an increase in revenue earned in 2003 from an increase in resale fuel prices; (b) the operation of three ATB's placed in service during the third and fourth quarters of 2002 and one ATB placed in service during the second quarter of 2003; and (c) an overall increase in vessel utilization (69% in 2003 compared with 67% in 2002). Operating expenses decreased $41,445 or 16.4%, to $211,454 during 2003 compared with $252,899 during 2002. This decrease was primarily attributable to the expenses which were not incurred due to the sale of MTL Petrolink Corp. on May 15, 2002, and a decrease in the number of vessels in service during 2003 compared with 2002. The decrease was partially offset by an overall increase in vessel utilization and increased expenses in 2003 related to an increase in resale fuel prices, the operation of three ATB's placed in service during 2002 and one ATB placed in service in 2003. Depreciation and amortization decreased $1,513 or 9.4%, to $14,506 during 2003 compared with $16,019 during 2002. The decrease was directly attributable to a decrease in depreciation of $1,712, which was caused by the sale of vessels and partially offset by additional depreciation recognized as a result of the consolidation of the VIE. This decrease was partially offset by an increase in dry-dock amortization for vessels of $743. Dry-dock costs were amortized for four vessels during 2003 and three vessels during 2002. Dry-dock costs are amortized over a period to the next scheduled dry-dock, but not in excess of three years. Asset charges (recoveries), net increased $2,233 to a recovery of $1,788 in 2003 compared with charges of $445 in 2002. These gains resulted from the sale of three vessels and land during 2003. During 2002, two vessels and various equipment were sold; and one vessel was destroyed by fire, resulting in a gain net of incurred costs from involuntary conversion. In 2002, an agreement was reached to sell a vessel in 2003. An impairment analysis was performed which resulted in a charge of $4,239 in 2002. As a result, the operating income of Oil and Chemical Distribution and Transportation Services increased $18,377 to $25,059 in 2003 compared with $6,682 for 2002. ENERGY AND MARINE SERVICES Operating revenues from our Energy and Marine Services segment decreased $18,329 or 20.7%, to $70,248 in 2003 compared with $88,577 for 2002. The decrease was directly attributable to a reduction from the revenues earned from: (a) the vessel outfitting and mobilization and the transportation of oil exploration cargo to Sakhalin Island, Russia; and (b) government and commercial contract activity on the West Coast. This decrease was partially offset by increased vessel activity in the Gulf of Mexico. Overall vessel utilization increased to 46% in 2003 compared to 45% in 2002. Vessel utilization in this segment is very volatile and it is impacted by oil exploration activity and general economic conditions. We believe that the operating revenues for our Energy and Marine Services will increase in 2004 as we have been awarded some additional work in Russia. Operating expenses increased $2,048 or 2.0%, to $103,054 during 2003 compared with $101,006 in 2002. The increase was directly attributable to: (a) mobilization and outfitting costs for vessels moving to the Gulf of Mexico; and (b) increases in vessel related costs due to increased labor and repairs and maintenance costs on tugs and barges in 2003. The increase was partially offset by decreases in one-time outfitting charges in 2002 related to the Sakhalin Island project. 25 Depreciation and amortization increased $718 or 6.3%, to $12,205 during 2003 compared with $11,487 during 2002. The increase was the result of a catch-up in depreciation for a reactivated vessel that was previously classified as held for sale and depreciation on vessel refurbishments completed in 2002. Asset charges (recoveries), net increased $1,809 to a recovery of $2,602 in 2003 compared with a recovery of $793 in 2002. These gains resulted from the sale of five vessels and land improvements, which were partially offset by a writedown of vessel improvements during 2003 compared with the sale of two vessels and land during 2002. As a result, operating loss for Energy and Marine Services increased $15,629 to $13,543 in 2003 compared with operating income of $2,086 for 2002. COMPARISON OF FISCAL YEAR 2002 TO FISCAL YEAR 2001 Operating income for 2002 was favorably impacted by the decline in vessel capacity in the Puerto Rican trades as a result of the consolidation of two competitors. This was partially offset by a downturn in the Oil and Chemical Distribution and Transportation market caused by economic conditions and the sale of MTL Petrolink Corp. Consolidated operating revenues decreased $20,078 or 2.0%, to $972,857 in 2002 from $992,935 in 2001. The decrease is primarily attributed to a downturn in the market for Oil and Chemical Distribution and Transportation Services caused by economic conditions and the sale of MTL Petrolink Corp. during 2002. This was offset by the decline in vessel capacity in the Puerto Rican trades as a result of the consolidation of two competitors. In May 2002, the Company sold all of the outstanding common stock of MTL Petrolink Corp. (a subsidiary of MTC) for $18,638. The Company decided to sell MTL Petrolink Corp. subsequent to its acquisition of MTC. In its allocation of the purchase price of MTC, the Company made no effort separately to determine the fair value of MTL Petrolink Corp. The Company recorded the excess of the sales price, net of selling costs, over the net asset value of MTL Petrolink Corp. as a purchase price adjustment resulting in a reduction to goodwill in the amount of $3,345. Included in the selling price of MTL Petrolink Corp. was a $500 escrow deposit which was received during 2003. This amount, net of income taxes of $189, also reduced goodwill. During 2002, the Company took delivery of four newly constructed ATB's, the SEA RELIANCE/ Barge 550-1, the SOUND RELIANCE/Barge 550-2, the OCEAN RELIANCE/Barge 550-3, and the COASTAL RELIANCE/Barge 550-4. The first three units were placed into service in 2002 and the fourth unit was placed in service in 2003. These units are being operated by Oil and Chemical Distribution and Transportation Services. Consolidated operating expenses decreased $31,903 or 3.6%, to $844,748 in 2002 from $876,651 in 2001. The decrease is primarily attributed to the sale of MTL Petrolink Corp. during 2002. Consolidated general and administrative expenses increased $5,228 or 18.6%, to $33,301 in 2002 from $28,073 in 2001. The increase is primarily attributable to a $4,342 reduction in asbestos related claim reserves recorded in 2001 due to the uncertainty of successful litigation by the claimants. Refer to "Item 3. Legal Proceedings" and Note 18 of the consolidated financial statements in "Item 8. Financial Statements and Supplementary Data." Consolidated depreciation and amortization expense increased $2,923 or 5.7%, to $53,980 in 2002 from $51,057 in 2001. The increase is primarily attributable to an increase in dry-dock amortization of $4,321 as a result of amortized dry-dock costs for nine vessels in 2002 compared with five vessels in 2001. This increase was partially offset by not recording amortization of goodwill in 2002 as a result of the Company adopting SFAS 142, "Goodwill and Other Intangible Assets". Consolidated asset charges (recoveries), net increased $5,051 or 104.2%, to a charge of $204 in 2002 from a recovery of $4,847 in 2001. This was primarily attributed to an impairment charge of $5,487 on vessels designated for disposal. 26 As a result, the consolidated operating income decreased $1,377 or 3.3%, to $40,624 in 2002 from $42,001 in 2001. Interest income decreased $1,428 or 67.5%, to $688 in 2002 compared with $2,116 in 2001. This decrease was due to a decrease in the Company's average cash and cash equivalents during this period and lower interest rates in 2002. Interest expense decreased $192 or 1.2%, to $15,482 in 2002 compared with $15,674 in 2001. This is a result of higher capitalized interest on the construction of the ATB's during 2002 as compared with 2001, which was offset by additional interest expense on new vessel financings and borrowings under the Company's revolving credit agreement. The minority interest in consolidated subsidiaries decreased $620 to income of $629 in 2002 compared with income of $1,249 in 2001. This decrease is due to a joint venture which the Company had a 75% ownership interest in the joint venture. In December 2003, the Company acquired the remaining 25% of this joint venture. The total loss of the joint venture in 2002 was $2,777. Income tax expense decreased $1,500 or 15.3%, to $8,300 in 2002 compared with $9,800 in 2001. The effective tax rate was 31.2% for 2002 and 32.7% for 2001. Loss from discontinued operations increased $1,020, to $1,064 ($7.82 basic loss per common share and $6.55 diluted loss per common share) in 2002 compared with $44 ($0.32 basic loss per common share and $0.27 diluted loss per common share) in 2001. As a result, net income attributable to common shareholders decreased $2,626 to $15,606 ($114.74 basic earnings per common share and $105.89 diluted earnings per common share) in 2002 from $18,232 ($134.14 basic earnings per common share and $122.14 diluted earnings per common share) in 2001. The following is a discussion of the results of operations of each or our lines of business. LINER SERVICES Operating revenues from our Liner Services segment increased $37,233 or 7.5%, to $530,393 in 2002 from $493,160 in 2001. The increase in revenues is primarily attributable to a 9.6% increase in container and noncontainer volume and an increase of 56.4% in other logistical service revenues. This increase was offset by a 4.8% decrease in average revenue per TEU ("average revenue") due to competitive pressures in our Puerto Rico and Caribbean Islands Service and Latin America Service. The Company's container and noncontainer volume during 2002 and 2001 was 543,866 TEUs and 496,074 TEUs, respectively. The increase in other logistical service revenues was primarily due to revenues earned from the acquisition of a transportation service provider purchased in October 2002. Operating expenses increased $12,124, or 2.6%, to $483,384 in 2002 compared with $471,260 in 2001. These expenses consist primarily of fuel costs, purchased transportation costs, equipment costs, maintenance and repair costs and labor costs. The increase in operating expenses is directly attributable to the increase in container and non-container volume, as noted above. Depreciation and amortization increased $387, or 5.8%, to $7,110 in 2002 compared with $6,723 in 2001. The increase in depreciation was due to an increase in dry-dock amortization for additional vessels dry-docked in 2002, which was partially offset by the sale of container and trailer equipment in 2001. Asset charges (recoveries), net decreased $160 to a charge of $552 in 2002 compared with a charge of $392 in 2001. Liner Services recorded an impairment charge on 2 vessels in 2002 and 2001 of $763 and $484, respectively. These impairment charges were offset by gains on various equipment disposals of $211 in 2002 and $92 in 2001. As a result, the operating income from Liner Services increased $19,864 to $18,219 in 2002 from an operating loss of $1,645 in 2001. 27 SHIP ASSIST AND ESCORT SERVICES Operating revenues from our Ship Assist and Escort Services segment decreased $809 or 1.1%, to $70,504 in 2002 compared with $71,313 for 2001. The decrease was directly attributable to a decrease in activity in Puget Sound, Washington and Los Angeles and Long Beach, California. Overall vessel utilization was 72% compared with 73% during 2002 and 2001, respectively. Operating expenses decreased $4,525 or 7.6%, to $55,078 in 2002 compared with $59,603 during 2001. The decrease was directly attributable to the decrease in vessel related costs due to decreased utilization hours, with the largest component being a decrease in fuel and crewing expenses. As a result, operating income for Ship Assist and Escort Services in 2002 increased $2,528 to $13,637 compared with $11,109 for 2001. OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES Operating revenues from our Oil and Chemical Distribution and Transportation Services segment decreased $69,621 or 19.7%, to $283,383 in 2002 compared with $353,004 for 2001. The decrease was directly attributable to the sale of MTL Petrolink Corp. on May 15, 2002, and an overall decrease in vessel utilization (67% compared with 77%). As a result of the sale of MTL Petrolink Corp., only 4.5 months of the results of its operations were included in the Company's consolidated results in 2002 as opposed to 10.5 months of operations which were included in the Company's consolidated results in 2001. Due to uncertainty surrounding the sale of MTL Petrolink Corp. and the time which was required to conclude the sale, some of its customers chose to use other lightering companies during the months preceding the conclusion of the sale. The loss of these customers, combined with an overall decline in the market, adversely affected the results of MTL Petrolink Corp. which, in turn, adversely affected the results of Oil and Chemical Distribution and Transportation Services. The decrease in vessel utilization is a result of declining oil and trading activity among West Coast suppliers and the 2001 reopening of the Olympic Pipeline. The decrease was offset by an increase based upon: (a) the acquisition of MTC on February 7, 2001, which provided additional revenue due to its inclusion in operations for a full quarter during the first quarter of 2002; and (b) revenue earned from the operations of three ATB's placed in service during 2002. Operating expenses decreased $46,976 or 15.7%, to $252,899 during 2002 compared with $299,875 during 2001. This decrease was primarily attributable to reduced expenses associated with MTL Petrolink Corp., reduced activity due to declining oil shipments as discussed above and a decrease in vessel related costs due to decreased vessel utilization. The decrease was offset by: (a) the acquisition of MTC in 2001, which resulted in the inclusion of a full 12 months of expenses in the Company's operations in 2002 versus the inclusion of only 10.5 months of expenses in 2001; and (b) expenses related to the operation of three ATB's placed in service during 2002. Depreciation and amortization increased $1,021 or 6.8%, to $16,019 during 2002 compared with $14,998 during 2001. The increase was directly attributable to the acquisition of MTC, which resulted in additional depreciation expense in 2002 because MTC's operations were included for a full 12 months in 2002 versus 10.5 months in 2001, and an increase in dry-dock amortization for vessels dry-docked in 2002. This increase was partially offset by a decrease arising from the sale of MTL Petrolink Corp. in 2002, a decrease from not recording goodwill amortization in 2002, in accordance with SFAS 142, and an increase in the number of operating vessels that became fully depreciated in 2002. Asset charges (recoveries), net decreased $2,050 to charges of $445 in 2002 compared with recoveries of $1,605 in 2001. In July 2002, a fire occurred in the engine room of one of the tankers used by Oil and Chemical Distribution and Transportation Services. As a result of the fire, the extensive damages caused by it and the short remaining useful life of the vessel, management decided not to repair the vessel. The Company has received insurance proceeds based upon the damage to the vessel caused by the fire. Accordingly, the Company has recognized a gain net of incurred costs from involuntary conversion of $3,897. Also, in December 2002, an agreement was entered into to sell a vessel. An impairment analysis was performed which 28 resulted in a charge of $4,239 in 2002. During 2002, two vessels and miscellaneous equipment were sold for a loss of $103. During 2001, three vessels and miscellaneous equipment were sold for a gain of $1,605. As a result, the operating income of Oil and Chemical Distribution and Transportation Services decreased $26,691 to $6,682 in 2002 compared with $33,373 for 2001. ENERGY AND MARINE SERVICES Operating revenues from our Energy and Marine Services segment increased $13,119 or 17.4%, to $88,577 in 2002 compared with $75,458 for 2001. The increase was directly attributable to: (a) a strong exploration season during 2002 in Alaska and non-recurring demobilization and contract termination fees related to contracts performed in Hawaii, Alaska, and South America; and (b) the commencement of services under new contracts with a global service provider to transport oil exploration cargo from the United States to Sakhalin Island, Russia, and between ports in Russia. This increase in revenue was partially offset by a decrease in vessel utilization. Vessel utilization during 2002 was 45% compared with 53% during 2001. Vessel utilization is very volatile and it is impacted by oil exploration activity and general economic conditions. Operating expenses increased $9,686 or 10.6%, to $101,006 during 2002 compared with $91,320 in 2001. The increase was directly attributable to the higher level of activity during 2002 as noted above, and was offset by the decrease in vessel utilization. Depreciation and amortization decreased $1,295 or 10.1%, to $11,487 during 2002 compared with $12,782 during 2001. The decrease was directly attributable to an increase in the number of operating vessels, terminals and equipment that became fully depreciated in 2002. Asset charges (recoveries), net decreased $2,847 to a recovery of $793 in 2002 compared with a recovery of $3,640 in 2001. Energy and Marine Services sold two vessels and land for a gain of $1,243 in 2002. Energy and Marine Services also performed an impairment analysis on five vessels and recorded a charge of $450 in 2002. During 2001, five vessels, land and facilities and miscellaneous assets were sold for a gain of $3,640. As a result, operating income for Energy and Marine Services increased $2,922 to $2,086 in 2002 compared with an operating loss of $836 for 2001. LIQUIDITY AND CAPITAL RESOURCES The following schedule summarizes contractual obligations and other contractual commitments as of December 31, 2003:
PAYMENTS DUE BY PERIOD ------------------------------------------------------------- CONTRACTUAL OBLIGATIONS TOTAL 2004 2005 - 2006 2007 - 2008 THEREAFTER - ----------------------- --------- -------- ----------- ----------- ---------- Long-term debt................ $ 434,650 $ 52,847 $ 72,841 $ 67,486 $241,476 Operating leases.............. 254,075 60,020 92,115 56,999 44,941 Sublease receipts............. (233,521) (97,113) (111,824) (22,663) (1,921) Environmental costs........... 4,728 830 1,383 758 1,757 Fuel purchases(1)............. 29,866 29,866 -- -- -- Other contractual commitments(2).............. 14,084 11,173 2,784 127 -- --------- -------- --------- -------- -------- Total contractual obligations................. $ 503,882 $ 57,623 $ 57,299 $102,707 $286,253 ========= ======== ========= ======== ========
- --------------- (1) The Company has a contract with a fuel supplier where the Company has agreed to purchase approximately 750 barrels of fuel during 2004, at market value. Under the terms of the contract, the Company can extend the contract for one year. The Company purchased 772 barrels of fuel at a market price of $27,633 during 2003 under this contract. The estimated value of the fuel to be purchased in 2004 is $29,866 at December 31, 2003. The Company may negotiate a greater or lesser quantity of fuel if 29 future business conditions change. The Company has designated this contract as a normal purchase and not as a hedge for financial statement purposes as the Company has not agreed to the price of the fuel. (2) Other contractual commitments are related to remaining spending on the construction of two vessels, leasehold improvements under an operating lease and software maintenance agreements.
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD ---------------------------------------------------------- OTHER COMMERCIAL COMMITMENTS TOTAL 2004 2005 - 2006 2007 - 2008 THEREAFTER - ---------------------------- ------- ------- ----------- ----------- ---------- Standby letters of credit........ $33,068 $33,068 $ -- $ -- $ --
LIQUIDITY The Company's ongoing liquidity requirements arise primarily from its need to fund working capital, to acquire, construct, or improve equipment, to make investments and to service debt. Management believes that cash flows from operations will provide sufficient working capital to fund the Company's operating needs. In 2003 and previous years, the Company has used Title XI financing for the acquisition, construction and improvement of vessels. As of December 31, 2003, the repayment of approximately $214 million of the Company's outstanding indebtedness is guaranteed by the United States government pursuant to Title XI. Management believes that funds needed for the acquisition and construction of vessels will continue to be available through Title XI and bank financing. In addition, the Company has generated significant proceeds from the disposition of certain assets and believes that additional proceeds will be generated as it sells older assets and continues to modernize its fleet. The Company has been engaged in discussions with Northland Holdings, Inc. concerning a possible purchase by the Company of all the stock or assets of Yukon Fuel Company ("Yukon") and/or Service Oil & Gas, Inc. as well as certain vessels and other assets used in Yukon's fuel distribution business in Alaska. The Company anticipates a cash purchase price of approximately $72,000 (depending on the level of working capital and other adjustments at closing.) The parties have not arrived at a definitive agreement concerning the terms of any such transaction and there can be no assurance that these discussions will lead to such an agreement or a purchase of such stock or assets by the Company. Any such transaction is subject to, among other things, the negotiation, execution and delivery of a definitive acquisition agreement, completion by the Company of its due diligence investigation, approval of such agreement by the board of directors of the Company, receipt of necessary consents from certain lenders to the Company, satisfactory resolution of pending litigation, and the parties' joint determination that such a transaction could be effected in compliance with applicable state and federal antitrust laws. On November 20, 2003, a lawsuit was filed in the Superior Court for the State of Alaska, Second Judicial District at Nome, against the Company, its wholly owned subsidiary, Crowley Marine Services, Inc., Yukon and Northland Holdings, Inc. by certain cooperatives and associations located in Western Alaska. The complaint in this litigation alleges violations or threatened violations by defendants of Alaska's antitrust and unfair trade practices statutes in connection with the foregoing possible acquisition. Plaintiffs in this litigation are seeking declaratory and injunctive relief which would prevent completion of such transaction. The Company believes that the lawsuit is without merit. On February 27, 2004, the court stayed the proceedings at the defendants' request pending the outcome of an investigation by the Attorney General of Alaska as to whether the proposed transaction violates such Alaska statutes. Depending upon the outcome of this investigation and further proceedings in the litigation, the Company may close the proposed acquisition despite the pending litigation, but reserves the right not to do so. Off-Balance Sheet Arrangements As of December 31, 2003, the Company does not have any off-balance sheet arrangements as defined by Item 303(a)(4) of Securities and Exchange Commission Regulation S-K. Comparison of the Financial Condition as of December 31, 2003 and December 31, 2002 At December 31, 2003, the Company's cash and cash equivalents totaled $160,625 ($43,355 at December 31, 2002). Net cash provided by continuing operations was $61,642 for 2003 compared with $34,221 in 2002. 30 Net cash provided by discontinued operations was $1,013 in 2003 compared with net cash used of $2,575 in 2002. Net cash used in investing activities of continuing operations was $32,561 in 2003 compared with $87,529 in 2002. The decrease reflects a decrease in capital expenditures ($19,247 in 2003 compared with $96,825 in 2002) associated with the construction and modernization of assets of the Company. The Company spent $30,366 for nine vessel dry-dockings during 2003 compared with $11,787 spent on six vessel dry-dockings during 2002. The Company received proceeds from asset dispositions of $10,451 during 2003 compared with $9,679 received during 2002. The Company received the balance of the purchase price of $500 from the sale of MTL Petrolink Corp. during 2003. This amount, net of income taxes of $189, reduced goodwill. The Company received proceeds of $18,138 from the sale of MTL Petrolink Corp. in 2002. In 2003, the Company purchased a transportation management company specializing in the apparel industry for $3,357. In 2002, the Company purchased the assets of a transportation services provider for $2,986. The Company assumed cash of $1,915 from the consolidation of the VIE effective January 1, 2003; however, the Company does not have access to this cash and accordingly it has been disclosed as restricted cash in the consolidated financial statements. In 2002, the Company paid net premiums of $2,700 for split-dollar life insurance policies. In 2003, the Company received reimbursement from an employee of $7,508 of the total net premiums paid by the Company on these policies. In 2003, the Company purchased life insurance policies on a member of the Board of Directors life, with a cash surrender value of $1,894 at December 31, 2003. Net cash provided by financing activities was $87,176 in 2003 compared with $66,212 in 2002. This increase was a result of higher principal payments on long-term debt ($82,835 in 2003, which includes the repayment of $49,394 of construction financing used for two ATB's, compared with long-term debt in the amount of $75,238 in 2002) and an increase in the proceeds from issuance of debt. In 2002, proceeds in the amount of $127,534 were received to finance the construction of four ATB's. In 2003, the Company received proceeds of $205,909 from permanent financings to refinance the construction financing for two of the ATB's ($60,909) and for general corporate purposes, acquisitions, and other capital expenditures ($145,000). The Company borrowed $50,000 and repaid $25,000 on its Revolving Credit Agreement in 2002 and borrowed an additional $20,000 and repaid $45,000 in 2003. The Company paid $6,568 of debt issuance costs during 2002 compared with $866 during 2003. The Company paid $7,967 in 2003 upon maturity of a rate lock agreement. The Company redeemed the remaining $2,367 of its Redeemable Preferred Class B stock during 2002. CAPITAL RESOURCES Management plans to continue its efforts to modernize the Company's fleet of vessels. Many of the tugs and barges and a number of the tankers used in Oil and Chemical Distribution and Transportation Services are more than two-thirds through their estimated useful lives. Federal regulations currently require the phase-out of single hull oil barges and of single hull tankers beginning in 2003. Four of the Company's barges and one of the Company's tankers will be retired between 2004 and 2006. In addition, nineteen of the Company's single hull oil barges will be retired between 2009 and 2015. Accordingly, the Company is consulting with its customers and developing plans where justified by business prospects, either to refurbish the existing fleet of tugs, barges and tankers, thereby extending their useful lives, or to purchase used equipment or build new equipment which complies with current federal regulations. In July 2003, the Company purchased the stock of a transportation management company specializing in the apparel industry for $3,357. This purchase price will be adjusted for certain working capital adjustments and payments based on earnings. In October 2002, the Company purchased the assets of a transportation services provider for $2,986. These acquisitions are included in our Liner Services segment. In December 2003, the Company entered into an agreement to acquire the 25% minority interest in a joint venture which was accounted for using the purchase method of accounting. The Company received approximately $3,234 and recorded the excess of fair value of acquired net assets over cost, totaling approximately $5,944, as a reduction to the fair value of the vessels, the joint ventures only long-term assets. For information concerning our debt including our revolving credit agreement and certain borrowings which we made in 2003, see Note 12 of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data." 31 RESTRICTIVE COVENANTS For information concerning our restrictive covenants see Note 12 of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data." TRANSACTIONS WITH SPECIAL PURPOSE ENTITY In January 1997, MTC entered into a transaction with an unconsolidated Variable Interest Entity ("VIE") for the sale/leaseback of a vessel that MTC time chartered to a third party. The Company adopted Financial Accounting Standards Board Interpretation No. 46, "Consolidation of Variable Interest Entities" and determined that it is the primary beneficiary of the VIE and, as a result, consolidated the VIE effective January 1, 2003. For additional discussion of the VIE, refer to Note 2 to the Company's consolidated financial statements in "Item 8. Financial Statements and Supplementary Data". EFFECTS OF INFLATION The Company does not consider inflation to be a significant risk to the cost of doing business in the current or foreseeable future. Inflation has a moderate impact on operating expenses, including fuel, dry-docking expenses and corporate overhead. Refer to Risk Factors included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." RECENT ACCOUNTING PRONOUNCEMENTS For a complete discussion of new account pronouncements, see Note 1 to the Company's consolidated financial statements in "Item 8. Financial Statements and Supplementary Data". RISK FACTORS If any of the following risks actually occur, our business, financial condition, operating results or cash flows could be materially adversely affected. DEMAND FOR OUR SERVICES DEPENDS ON FACTORS BEYOND OUR CONTROL Demand for our services is dependent on a number of factors beyond our control, including: - worldwide demand for chemicals and petroleum products and other cargo shipped by our customers; - local and international political and economic conditions and policies; and - weather conditions. We have high fixed costs, and downtime or low productivity due to reduced demand or other causes can have a significant negative effect on our operating results. LINER SERVICES IS SUBJECT TO ECONOMIC FACTORS AND THE CYCLICAL NATURE OF ITS BUSINESS Economic factors affecting the geographic regions in which Liner Services are provided and cyclical business patterns experienced by this part of the maritime shipping industry have caused the earnings of Liner Services to vary in the past and are likely to cause similar variations in the future. There is no assurance that Liner Services will be able to redeploy its vessels from less profitable markets into other markets or uses. See "Item 1. Business -- Liner Services". FLUCTUATION OF FUEL PRICES Economic and political factors can affect fuel prices. The Company's operations may be impacted due to the timing and our ability to pass these changes in fuel prices to our customers. 32 ENERGY AND MARINE SERVICES ARE FREQUENTLY PROVIDED FOR DISCRETE PROJECTS Energy and Marine Services frequently provides many of its services in response to discrete customer projects or in response to emergency conditions and its contracts are generally short-term, usually terminating within one year. Accordingly, customers which account for a significant portion of operating revenues and operating income in one fiscal year may represent an immaterial portion of revenues in subsequent fiscal years. See "Item 1. Business -- Energy and Marine Services". THE COMPANY FACES INTENSE COMPETITION THAT COULD ADVERSELY AFFECT ITS ABILITY TO INCREASE ITS MARKET SHARE AND ITS REVENUES Our businesses operate in highly competitive industries. These intense levels of competition could reduce our revenues, increase our expenses and reduce our profitability. In addition to price, service, experience and reputation, important competitive factors include safety record, ability to meet the customer's schedule, customers' national flag preference, operating conditions, capability and intended use, complexity of logistical support needs and presence of equipment in the appropriate geographical locations. Many of our major competitors are diversified multinational companies. Some of these companies have financial resources and operating staffs substantially larger than ours. As a result, they may be better able to compete in making vessels available more quickly and efficiently, meeting the customer's schedule and withstanding the effect of declines in market prices. They may also be better able to weather a downturn in our customers' industries. As a result, we could lose customers and market share to these competitors. THE COMPANY MAY INCUR SIGNIFICANT COSTS, LIABILITIES AND PENALTIES IN COMPLYING WITH GOVERNMENT REGULATIONS Government regulation, such as international conventions, federal, state and local laws and regulations in jurisdictions where the Company's vessels operate or are registered have a significant impact on our operations. These regulations relate to worker health and safety, the manning, construction and operation of vessels, homeland, port and vessel security, and oil spills and other aspects of environmental protection. Risks of incurring substantial compliance costs and liabilities and penalties for non-compliance, particularly with respect to environmental laws and regulations, are inherent in the Company's business. If this happens, it could have a substantial negative impact on the Company's profitability and financial position. The Company cannot predict whether it will incur such costs or penalties in the future. See "Item 1. Business -- Government Regulation". OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES EMPLOYS A NUMBER OF TANKERS AND BARGES WHICH, IN THEIR PRESENT CONDITION, WILL NOT BE PERMITTED TO CARRY PETROLEUM PRODUCTS IN UNITED STATES WATERS AS OF CERTAIN DATES OCCURRING OVER THE NEXT THREE YEARS. SEE "ITEM 1. BUSINESS -- ENVIRONMENTAL REGULATION" In the event that the Company is not able to replace or rebuild those tankers and barges which it currently uses to carry crude oil or petroleum products, it could become impossible for Oil and Chemical Distribution and Transportation Services to continue to transport crude oil and petroleum products at current levels for its current customers between ports in the United States. Should this occur, it could have a substantial negative impact on the profitability of Oil and Chemical Distribution and Transportation Services. MARINE-RELATED RISKS COULD LEAD TO THE DISRUPTION OF OUR SERVICES AND ADDED LIABILITIES The operation of our vessels is subject to various risks, including catastrophic marine disaster, adverse weather and sea conditions, capsizing, grounding, mechanical failure, collision, oil, chemical and other hazardous substance spills and navigation errors. These risks could endanger the safety of our personnel, our vessels, the cargo we carry, the equipment under tow and other property, as well as the environment. If any of 33 these events was to occur, the Company could be held liable for resulting damages. In addition, the affected vessels could be removed from service and would not be available to generate revenue. THE COMPANY IS A DEFENDANT IN NUMEROUS ASBESTOS-RELATED LAWSUITS The Company is a defendant in numerous lawsuits filed on behalf of current, retired or deceased seamen seeking damages for unspecified asbestos-related injuries or diseases as a result of occupational exposure to fibers emitted from asbestos-containing products in the course of employment aboard vessels owned or operated by the Company. See Note 18 to our Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data". Additional litigation relating to these matters may be commenced in the future. While it is not feasible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could have a material adverse effect on our financial condition, operating results or cash flows. INSURANCE COVERAGE MAY NOT PROTECT THE COMPANY FROM ALL OF THE LIABILITIES THAT COULD ARISE FROM THE RISKS INHERENT IN ITS BUSINESSES The Company maintains insurance coverage against the risks related to its operations. There can be no assurance, however, that its 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. While our vessels are not trading in the areas of the potential war zone, a terrorist attack on one or more of our vessels anywhere in the world could have a material adverse effect on our financial condition, results of operations or cash flows. Although we currently maintain the maximum available War Risk and Terrorism liability insurance coverage that is available through the international Protection & Indemnity Insurers, a catastrophic occurrence could result in liability in excess of available insurance coverage, resulting in a material adverse affect on our business. WE DEPEND ON ATTRACTING AND RETAINING QUALIFIED, SKILLED EMPLOYEES TO OPERATE OUR BUSINESSES AND PROTECT OUR KNOW-HOW Our results of operations depend in part upon our business know-how. We believe that protection of our know-how depends in large part on our ability to attract and retain highly skilled and qualified personnel. Any inability we experience in the future to hire, train and retain a sufficient number of qualified employees could impair our ability to manage and maintain our businesses and to protect our know-how. We require skilled employees who may have to perform physically demanding work. As a result of the volatility of our customers' industries, particularly the oil and petrochemical industries, and the demanding nature of the work, potential employees may choose to pursue employment in fields that offer a more desirable work environment at wage rates that are competitive with ours. With a reduced pool of workers, it is possible that we will have to raise wage rates to attract workers from other fields and to retain our current employees. If we are not able to increase the rates we charge our customers to compensate for wage-rate increases, our operating results may be adversely affected. THE COMPANY IS HEAVILY DEPENDENT ON UNIONIZED LABOR The Company's operations are heavily dependent on unionized labor, both in the United States and in foreign markets. Maintenance of satisfactory labor relations is important to our operations. At December 31, 2003, approximately 61% of the Company's employees were members of unions. A protracted strike or similar action by a union could have a material adverse effect on our results of operations or financial condition. See "Item 1. Business -- Employees". 34 WE MAY NOT BE ABLE TO NEGOTIATE COLLECTIVE BARGAINING AGREEMENTS ON TERMS FAVORABLE TO THE COMPANY The Company has collective bargaining agreements with 12 different unions. These agreements will expire through 2008. There is no assurance that we will be able to negotiate new collective bargaining agreements on terms favorable to the Company upon expiration of the agreements. If the Company is not able to negotiate favorable terms, it may be at a competitive disadvantage. See "Item 1. Business -- Employees". THERE ARE CERTAIN RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS Substantial amounts of our operating revenues are derived from our foreign operations. (See Note 20 to the Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data".) These operations are subject to various conditions and potential events associated with and inherent in the conduct of business with foreign nations. These include, without limitation, political instability, vessel seizure, nationalization of assets, fluctuating currency values, hard currency shortages, controls of currency exchange, the repatriation of income or capital, import-export quotas, and other forms of public and governmental regulation, all of which are beyond our control. While it is not possible to predict whether any of these conditions will develop or events will occur, the development or occurrence of any one or more of them could have a material adverse affect on our financial condition, results of operations or cash flows. While we do business in many countries outside of the United States, substantially all such business is denominated in United States dollars. For additional information about our foreign operations, see Note 20 of the Notes to the Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data". OTHER BUSINESS RISKS Other risks which may affect our operations and revenues include our ability to: - manage our costs effectively; - finance our operations and construct new vessels on acceptable terms; - charter our vessels on acceptable terms; and - manage these risks successfully. THERE IS NO ESTABLISHED PUBLIC TRADING MARKET FOR OUR STOCK There is no established public trading market for our capital stock and none is expected to develop in the foreseeable future. We do not intend to apply for listing of any shares of our capital stock on any securities exchange. We also will not seek to have any of our shares quoted on an interdealer quotations system. Accordingly, no assurances can be given as to the liquidity of our shares and the ability of the holders of our shares to sell them in secondary market transactions, or as to the prices at which such shares may be sold. MR. CROWLEY CAN EXERCISE CONTROL OVER ALL MATTERS REQUIRING STOCKHOLDER APPROVAL AND COULD MAKE DECISIONS ABOUT OUR BUSINESS THAT CONFLICT WITH OTHER STOCKHOLDERS' INTERESTS As of March 17, 2004, Thomas B. Crowley, Jr., the Chairman of the Board of Directors, President and Chief Executive Officer of the Company, owns or is deemed to own approximately 64.7% of our outstanding common stock, 100% of our Class N common stock, and approximately 99.9% of our outstanding Series A preferred stock. This ownership gives Mr. Crowley approximately 77.7% of the total votes attributable to our outstanding voting stock as of March 17, 2004. Because the Series A preferred stock is entitled to vote along with the shares of common stock, Mr. Crowley's stock ownership means that he is able to exercise control over all matters requiring stockholder approval even if other stockholders oppose them. As a result, Mr. Crowley controls all matters affecting the Company, including: - the composition of our board of directors and, through it, any determination with respect to our business direction and policies, including the appointment and removal of officers; 35 - any determinations with respect to mergers or other business combinations; - our acquisition or disposition of assets; - our financing arrangements; and - the payment of dividends on our stock. Mr. Crowley and his family are the beneficiaries of certain split-dollar life insurance agreements. The Board of Directors has approved these agreements in furtherance of its belief that preserving Crowley family control and the closely held nature of the Company is beneficial to the Company's stockholders and will maximize stockholder value over the long-term. The Board of Directors has long been concerned that short-term and long-term estate tax and other obligations of certain Crowley family stockholders could lead to an unrelated third party gaining a highly influential and potentially detrimental position with respect to the business and management of the Company. Such circumstances also could lead to stock falling into the hands of speculative investors who may later attempt to disrupt Company affairs in order to encourage the Company to take action favorable to such investors, yet not in the best interests of the Company and remaining stockholders. The Board of Directors also has been concerned that should the Company receive a request to purchase shares held by such stockholders or their estates in lieu of a possible sale to such investors, the Company would be unable to effect such a purchase without negatively impacting its results of operations, financial condition or cash flows. In this regard, the split-dollar life insurance agreements enable Mr. Crowley and certain trusts for the benefit of his descendants to purchase most, if not all, of such shares without involving the Company. The Company expects that following the death of Mrs. Molly M. Crowley, the net proceeds of the policies of insurance on the life of Mrs. Crowley will be used by Mr. Crowley and the trusts under his control to purchase shares of Common Stock held by the Thomas B. Crowley Marital Trust so that this trust can pay applicable estate taxes. Essentially, the split dollar life insurance agreements enable Mr. Crowley and his family to retain ownership of shares and control of the Company under circumstances when certain of such shares otherwise might have to be sold to a third party to pay applicable estate taxes. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk from changes in interest rates and foreign currency exchange rates which may adversely affect the results of our operations and financial condition. The Company's policy is not to use financial instruments for trading purposes or other speculative purposes. A discussion of the Company's credit risk and the fair value of financial instruments is included in Note 14 of the Company's consolidated financial statements. See "Item 8. Financial Statements and Supplementary Data." The Company's debt is primarily in fixed interest rate instruments. While the fair value of these debt instruments will vary with changes in interest rates, the Company has fixed most of its cash flow requirements and its operations are not significantly impacted by interest rate fluctuations. The Company leases certain equipment under operating leases which are subject to interest rate risk. Payments under these leases are adjusted based on a variable interest rate. At the end of the lease term, the Company may purchase the equipment by paying the amount remaining under the lease, sell the equipment and repay an amount remaining under the lease, or renegotiate the lease to extend the term. If the Company was to purchase the equipment, the Company would be at risk that the fair value of the equipment may be less than the amount required to purchase it. 36 The following table provides information about the Company's non-trading financial instruments sensitive to changes in interest rates at December 31, 2003. For debt obligations, the table presents principal cash flows and corresponding weighted average interest rates by expected maturity dates. For operating leases, the table presents future minimum lease payments and corresponding weighted average interest rates by expected payment dates. Weighted average variable rates are based on rates in place at the reporting date.
EXPECTED FISCAL YEAR OF MATURITY AT DECEMBER 31, 2003: (DOLLARS IN THOUSANDS) ----------------------------------------------------------------------- FAIR 2004 2005 2006 2007 2008 THEREAFTER TOTAL VALUE ------- ------- ------- ------- ------- ---------- -------- -------- Long-term debt: Fixed rate............ $36,347 $22,984 $14,183 $14,266 $16,378 $158,292 $262,450 $276,871 Average interest rate.............. 6.7% 6.1% 5.8% 5.7% 5.6% 5.8% Variable rate......... $16,500 $17,253 $18,421 $18,421 $18,421 $ 83,184 $172,200 $172,200 Average interest rate.............. 2.6% 2.7% 2.6% 2.6% 2.6% 2.5% Operating leases: Variable rate......... $ 9,497 $23,698 $ 679 $ -- $ -- $ -- $ 33,874 $ 33,874 Average interest rate.............. 3.1% 4.0% 4.5% -- -- --
In May 2002, the Company entered into a rate lock agreement to fix at 5.45% the underlying benchmark rate on the permanent financing arranged for the construction of two ATB's. The permanent financing, which consists of debt guaranteed pursuant to Title XI of the Merchant Marine Act of 1936, was concluded on January 16, 2003. Because the rate lock agreement was designated as a cash flow hedge, the changes in the fair value of the borrowings subject to the agreement were recognized in other comprehensive income (loss) until the debt was funded. Effective upon the funding of the debt on January 16, 2003, the amount recorded in other comprehensive income (loss) was recognized as an adjustment to interest expense over the term of the underlying debt agreement using the effective interest method. The Company's liability under the rate lock agreement was fixed on January 16, 2003 and resulted in a payment to a financial institution in the amount of $7,967. In February 2003, the Government of Venezuela introduced restrictions on the exchange of Venezuelan bolivars (VEB) for U.S. dollars, established the official rate of exchange ("Official Rate") at 1,600 VEB, and made exchanges for U.S. dollars subject to Government approval. The Company has continued to translate the financial results for its Venezuela operations using the Official Rate of 1,600 VEB, with a resulting adjustment to other comprehensive income. As a result of the Venezuelan government currency restrictions, the VEB's that were exchanged for U.S. dollars during 2003 were exchanged at 1,600 VEB. The Venezuelan government has publicly stated that certain measures are being considered, such as an increase in the Official Rate. In February 2004, the Government of Venezuela increased the official rate to 1,920 VEB. The Company is uncertain as to the amount of currency that will be approved for transfer, the timing of such transfers and the exchange rate that would apply to such transfers. At December 31, 2003, the Company's net assets in Venezuela have been translated to approximately $3,198 using an exchange rate of 1,600 VEB. The impact of an increase of 320 VEB to 1,920 VEB in the exchange rate would result in a decrease in other comprehensive income of approximately $270 at December 31, 2003. Any future increases in the exchange rate would result in realized losses on currency exchange transactions. The Company's market risk exposure has not changed materially since December 31, 2003. 37 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA TABLE OF CONTENTS
Independent Auditors' Report................................ 39 Consolidated Statements of Operations for the Years Ended December 31, 2003, 2002 and 2001.......................... 40 Consolidated Balance Sheets as of December 31, 2003 and 2002...................................................... 41 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2003, 2002 and 2001.............. 42 Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2002 and 2001.......................... 43 Notes to Consolidated Financial Statements for the Years Ended December 31, 2003, 2002 and 2001.................... 44 Schedule II -- Valuation and Qualifying Accounts............ 69
38 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Crowley Maritime Corporation Oakland, California We have audited the accompanying consolidated balance sheets of Crowley Maritime Corporation and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed in the Table of Contents at Item 8. These financial statements and financial statement schedule are the responsibility of the Corporation's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. We conducted our audits 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Crowley Maritime Corporation and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 2 to the consolidated financial statements, the Company consolidated a Variable Interest Entity effective January 1, 2003 in accordance with the adoption of Financial Accounting Standards Board Interpretation No. 46, "Consolidation of Variable Interest Entities." DELOITTE & TOUCHE LLP Certified Public Accountants Jacksonville, Florida March 9, 2004 39 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2003 2002 2001 -------- -------- -------- OPERATING REVENUES.......................................... $978,007 $972,857 $992,935 EXPENSES: Operating................................................. 848,982 844,748 876,651 General and administrative................................ 31,447 33,301 28,073 Depreciation and amortization............................. 60,753 53,980 51,057 Asset charges (recoveries), net........................... (5,383) 204 (4,847) -------- -------- -------- 935,799 932,233 950,934 -------- -------- -------- OPERATING INCOME............................................ 42,208 40,624 42,001 OTHER INCOME (EXPENSE): Interest income........................................... 363 688 2,116 Interest expense.......................................... (21,330) (15,482) (15,674) Minority interest in consolidated subsidiaries............ 1,762 629 1,249 Other income.............................................. 115 177 233 -------- -------- -------- (19,090) (13,988) (12,076) -------- -------- -------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES....... 23,118 26,636 29,925 Income tax expense.......................................... (8,700) (8,300) (9,800) -------- -------- -------- INCOME FROM CONTINUING OPERATIONS BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE................................................. 14,418 18,336 20,125 Discontinued operations: Loss from operations (net of $700, $600 and $0 of tax benefit in 2003, 2002 and 2001, respectively)........... (1,177) (1,064) (44) -------- -------- -------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE................................................. 13,241 17,272 20,081 Cumulative effect of change in accounting principle, net of tax benefit of $257....................................... (420) -- -- -------- -------- -------- NET INCOME.................................................. 12,821 17,272 20,081 Preferred stock dividends................................... (1,575) (1,666) (1,849) -------- -------- -------- NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS.............. $ 11,246 $ 15,606 $ 18,232 ======== ======== ======== Basic earnings per common share: Income from continuing operations before discontinued operations and cumulative effect of change in accounting principle............................................... $ 94.64 $ 122.56 $ 134.46 Loss from discontinued operations......................... (8.67) (7.82) (0.32) Cumulative effect of change in accounting principle....... (3.10) -- -- -------- -------- -------- Net income................................................ $ 82.87 $ 114.74 $ 134.14 ======== ======== ======== Diluted earnings per common share: Income from continuing operations before discontinued operations and cumulative effect of change in accounting principle............................................... $ 89.03 $ 112.44 $ 122.41 Loss from discontinued operations......................... (7.27) (6.55) (0.27) Cumulative effect of change in accounting principle....... (2.59) -- -- -------- -------- -------- Net income................................................ $ 79.17 $ 105.89 $ 122.14 ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 40 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2003 AND 2002 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
2003 2002 ---------- -------- ASSETS Cash and cash equivalents................................... $ 160,625 $ 43,355 Receivables, net............................................ 156,877 142,916 Prepaid expenses and other assets........................... 48,744 41,401 Current assets of discontinued operations................... 3,488 5,054 ---------- -------- TOTAL CURRENT ASSETS........................................ 369,734 232,726 Receivable from related party............................... 10,531 16,936 Goodwill.................................................... 44,786 45,097 Intangibles, net............................................ 15,447 14,211 Other assets................................................ 47,482 21,429 Long-term assets of discontinued operations................. 709 1,288 Property and equipment, net................................. 521,961 551,607 ---------- -------- TOTAL ASSETS................................................ $1,010,650 $883,294 ========== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities.................... $ 95,695 $ 98,680 Accrued payroll and related expenses........................ 40,303 38,838 Insurance claims payable.................................... 14,360 11,370 Unearned revenue............................................ 6,631 9,529 Current liabilities of discontinued operations.............. 3,542 4,303 Current portion of long-term debt........................... 52,847 29,357 ---------- -------- TOTAL CURRENT LIABILITIES................................... 213,378 192,077 Deferred income taxes....................................... 89,541 76,770 Other liabilities........................................... 18,754 19,532 Long-term liabilities of discontinued operations............ 5,363 6,398 Minority interests in consolidated subsidiaries............. 2,074 4,568 Long-term debt, net of current portion...................... 381,803 296,019 ---------- -------- TOTAL LIABILITIES........................................... 710,913 595,364 ---------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred class A convertible stock, $100 par value, 315,000 shares issued, authorized and outstanding................. 31,500 31,500 Common voting stock, $.01 par value, 4,485,000 shares authorized; 89,404 and 89,710 shares issued and outstanding, respectively................................. 1 1 Class N common non-voting stock, $.01 par value, 54,500 shares authorized; 46,138 shares outstanding.............. -- -- Additional paid-in capital.................................. 67,334 67,540 Retained earnings........................................... 206,956 195,994 Accumulated other comprehensive loss, net of tax benefit of $3,392 and $3,997, respectively........................... (6,054) (7,105) ---------- -------- TOTAL STOCKHOLDERS' EQUITY.................................. 299,737 287,930 ---------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $1,010,650 $883,294 ========== ========
The accompanying notes are an integral part of the consolidated financial statements. 41 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
PREFERRED CLASS A CLASS N CONVERTIBLE STOCK COMMON STOCK COMMON STOCK ADDITIONAL OTHER ------------------- ------------------ ------------------ PAID-IN RETAINED COMPREHENSIVE SHARES PAR VALUE SHARES PAR VALUE SHARES PAR VALUE CAPITAL EARNINGS LOSS ------- --------- ------ --------- ------ --------- ---------- -------- ------------- December 31, 2000..... 315,000 $31,500 88,708 $1 46,138 -- $66,076 $163,331 $ -- Stock purchased by employee benefit plans............... -- -- 2,010 -- -- -- 2,012 -- -- Stock retired from employee benefit plans............... -- -- (221) -- -- -- (135) (166) -- Stock retired from Tender Offer........ -- -- (521) -- -- -- (237) (793) -- Preferred stock dividends........... -- -- -- -- -- -- -- (1,849) -- Net income............ -- -- -- -- -- -- -- 20,081 -- ------- ------- ------ -- ------ ---- ------- -------- ------- December 31, 2001..... 315,000 31,500 89,976 1 46,138 -- 67,716 180,604 -- Stock retired from employee benefit plans............... -- -- (266) -- -- -- (176) (216) -- Preferred stock dividends........... -- -- -- -- -- -- -- (1,666) -- Comprehensive Income: Net income.......... -- -- -- -- -- -- -- 17,272 -- Other comprehensive loss: Foreign currency translation adjustments, net of tax benefit of $831......... -- -- -- -- -- -- -- -- (1,477) Rate lock agreement, net of tax benefit of $3,166....... -- -- -- -- -- -- -- -- (5,628) Total comprehensive income.............. -- -- -- -- -- -- -- -- -- ------- ------- ------ -- ------ ---- ------- -------- ------- December 31, 2002..... 315,000 31,500 89,710 1 46,138 -- 67,540 195,994 (7,105) Stock retired from employee benefit plans............... -- -- (306) -- -- -- (206) (284) -- Preferred stock dividends........... -- -- -- -- -- -- -- (1,575) -- Comprehensive Income: Net income.......... -- -- -- -- -- -- -- 12,821 -- Other comprehensive loss: Foreign currency translation adjustments, net of tax benefit of $102......... -- -- -- -- -- -- -- -- 159 Rate lock agreement, net of tax benefit of $501......... -- -- -- -- -- -- -- -- 892 Total comprehensive income.............. -- -- -- -- -- -- -- -- -- ------- ------- ------ -- ------ ---- ------- -------- ------- December 31, 2003..... 315,000 $31,500 89,404 $1 46,138 $ -- $67,334 $206,956 $(6,054) ======= ======= ====== == ====== ==== ======= ======== ======= TOTAL -------- December 31, 2000..... $260,908 Stock purchased by employee benefit plans............... 2,012 Stock retired from employee benefit plans............... (301) Stock retired from Tender Offer........ (1,030) Preferred stock dividends........... (1,849) Net income............ 20,081 -------- December 31, 2001..... 279,821 Stock retired from employee benefit plans............... (392) Preferred stock dividends........... (1,666) Comprehensive Income: Net income.......... Other comprehensive loss: Foreign currency translation adjustments, net of tax benefit of $831......... Rate lock agreement, net of tax benefit of $3,166....... Total comprehensive income.............. 10,167 -------- December 31, 2002..... 287,930 Stock retired from employee benefit plans............... (490) Preferred stock dividends........... (1,575) Comprehensive Income: Net income.......... Other comprehensive loss: Foreign currency translation adjustments, net of tax benefit of $102......... Rate lock agreement, net of tax benefit of $501......... Total comprehensive income.............. 13,872 -------- December 31, 2003..... $299,737 ========
The accompanying notes are an integral part of the consolidated financial statements. 42 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS)
2003 2002 2001 -------- -------- --------- OPERATING ACTIVITIES: Net income................................................ $ 12,821 $ 17,272 $ 20,081 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of change in accounting principle, net................................................... 420 -- -- Depreciation and amortization........................... 60,753 53,980 51,057 Amortization of deferred gain on the sale and leaseback of vessels............................................ (2,679) (2,679) (2,746) Asset charges (recoveries), net......................... (5,383) 204 (4,847) Change in cash surrender value of life insurance........ (1,103) 1,739 1,524 Deferred income tax provision........................... 6,516 1,967 2,006 Changes in current assets and liabilities: Receivables, net...................................... (9,982) (13,870) 18,764 Prepaid expenses and other............................ (2,406) (1,387) (573) Accounts payable and accrued liabilities.............. 5,940 (22,695) (6,852) Accrued payroll and related expenses.................. 1,466 186 (10,652) Other................................................... (4,721) (496) (231) -------- -------- --------- Net cash provided by continuing operations............ 61,642 34,221 67,531 Net cash provided by (used in) discontinued operations......................................... 1,013 (2,489) (3,105) -------- -------- --------- Net cash provided by operating activities............. 62,655 31,732 64,426 -------- -------- --------- INVESTING ACTIVITIES: Property and equipment additions.......................... (19,247) (96,825) (107,933) Dry-docking costs......................................... (30,366) (11,787) (2,867) Proceeds from asset dispositions.......................... 10,451 9,679 6,500 Proceeds from sale of MTL Petrolink Corp., net of cash sold.................................................... 500 18,138 -- (Deposits) withdrawals of restricted funds................ (1,544) (1,557) 694 Acquisitions, net of cash acquired........................ (123) (2,986) (40,389) Cash assumed from consolidation of Variable Interest Entity.................................................. 1,915 -- -- Directors life insurance.................................. (1,894) -- -- Receipts (payments) on receivable from related party...... 7,508 (2,700) (2,979) Receipts on notes receivable, net......................... 239 509 111 -------- -------- --------- Net cash used in continuing operations................ (32,561) (87,529) (146,863) Net cash provided by (used in) discontinued operations......................................... -- (86) 7,920 -------- -------- --------- Net cash used in investing activities................. (32,561) (87,615) (138,943) -------- -------- --------- FINANCING ACTIVITIES: Proceeds from issuance of debt............................ 205,909 127,534 43,058 Borrowings on Revolving Credit Agreement.................. 20,000 50,000 12,500 Repayments on Revolving Credit Agreement.................. (45,000) (25,000) (14,000) Payments on long-term debt................................ (82,835) (75,238) (36,872) Debt issuance costs....................................... (866) (6,568) (1,003) Payment of rate lock agreement............................ (7,967) -- -- Payment of preferred stock dividends...................... (1,575) (1,757) (1,941) Redemption of preferred stock............................. -- (2,367) (2,372) Proceeds from issuance of common stock.................... -- -- 2,012 Retirement of stock....................................... (490) (392) (1,331) -------- -------- --------- Net cash provided by financing activities............... 87,176 66,212 51 -------- -------- --------- Net increase (decrease) in cash and cash equivalents.... 117,270 10,329 (74,466) Cash and cash equivalents at beginning of year.......... 43,355 33,026 107,492 -------- -------- --------- Cash and cash equivalents at end of year................ $160,625 $ 43,355 $ 33,026 ======== ======== =========
The accompanying notes are an integral part of the consolidated financial statements. 43 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS Crowley Maritime Corporation, operating through its subsidiaries (the "Company"), is comprised of four principal business segments: Liner Services; Ship Assist and Escort Services; Oil and Chemical Distribution and Transportation Services; and Energy and Marine Services. The Liner Services segment consists of scheduled common carrier services and logistic services. The Ship Assist and Escort Services segment provides ship assist, tanker escort, docking and related services. The Oil and Chemical Distribution and Transportation Services segment uses vessels for the carriage of crude oil, petroleum products and chemicals. This segment also owns and/or operates four tank farms and provides vessel management services to third parties. The Energy and Marine Services segment provides specialized services to companies engaged, on a worldwide basis, in the exploration, production and distribution of oil and gas. The Company operates in the United States, Mexico, Central America, South America, the Caribbean, Russia, and other international markets. In December 2003, the Company approved a plan to sell the operations of its Liner Services segment in Venezuela. Accordingly, the Company's previously reported consolidated financial statements and related notes for 2002 and 2001 have been restated to present the Venezuela operations separate from continuing operations (refer to Discontinued Operations in Note 4). PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Crowley Maritime Corporation and all majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The Company has joint ventures that it maintains more than a 50% ownership interest in and maintains effective control over their operations. Based on this, the Company consolidates these joint ventures and records minority interests for the partners' ownership interests in the joint ventures. RELATED PARTY Thomas B. Crowley, Jr., President, Chief Executive Officer, and Chairman of the Board of Directors and principal shareholder, has the ability to control operations through his beneficial ownership of a majority of the Company's common shares. RECLASSIFICATION Certain items in prior year's consolidated financial statements have been reclassified to conform with the current year presentation. CASH AND CASH EQUIVALENTS The Company considers all highly liquid securities primarily invested in overnight repurchase agreements with original maturities of three months or less to be cash equivalents. These securities are stated at cost, which approximates fair value. At December 31, 2003, the Company has restricted cash and cash equivalents of $4,032. This restricted cash and cash equivalents is used in the operation of certain vessels which the Company manages for an unrelated third party and for use by a Variable Interest Entity (refer to Note 2). 44 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) GOODWILL Goodwill represents the excess costs of acquired companies over the fair value of their net tangible assets. With the acquisition of Marine Transport Corporation ("MTC") on February 7, 2001, goodwill was recorded and amortized on the straight-line method over 20 years. Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards 142, "Goodwill and Other Intangible Assets" and no longer amortizes goodwill but is required to annually evaluate goodwill for impairment. The Company identified no impairment as a result of its evaluation of goodwill during 2003 and 2002. The Company performs an annual test of goodwill unless an event occurs or circumstances change that would reduce the fair value of MTC below its carrying amount. The proforma effects of not amortizing goodwill had this Statement been adopted as of January 1, 2001 are as follows:
2001 ------- Net income, as reported..................................... $20,081 Goodwill amortization....................................... 2,310 ------- Adjusted net income......................................... $22,391 ======= Basic earnings per common share............................. $151.13 Diluted earnings per common share........................... $136.38
INTANGIBLES Deferred financing costs are amortized on the effective interest method over the terms of the related financing. The weighted average amortization period for deferred financing costs is 19 years. Non-compete agreements and customer lists are amortized over 5 years. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Renewals and refurbishments which extend asset useful lives are capitalized while normal repair and maintenance expenditures are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: floating equipment (15 to 25 years); other operating equipment (5 to 20 years); and buildings (5 to 25 years). Leasehold improvements are depreciated over the lesser of their estimated useful lives or the remaining lease term. Interest is capitalized in conjunction with the construction and refurbishment of vessels. The Company assesses recoverability of the carrying value of a long-lived asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value. Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the asset's carrying amount. INTERNAL USE SOFTWARE Costs related to the development of internal use software other than those incurred during the application development stage are expensed as incurred. Costs considered to be in the application development stage include design, coding, installation of hardware and testing. Costs capitalized during this stage include: external direct costs of materials and services consumed in developing or obtaining the software; payroll and 45 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) payroll-related costs for employees directly associated with the project; and interest costs incurred during development. DRY-DOCKING Dry-docking costs for major vessels are deferred and amortized over the estimated period between dry-dockings. Dry-docking inspections are required generally every two to three years for regulatory purposes to demonstrate that a vessel meets standards established by the U.S. Coast Guard and the American Bureau of Shipping. Amortization expense of the dry-docking costs was $8,912, $6,040, and $1,718, in 2003, 2002 and 2001 respectively. REVENUE RECOGNITION The Company's accounting policies for revenue recognition are predicated on the type of service provided. The common carrier services included in Liner Services are recognized ratably over each voyage by load and discharge port. The Company's logistics services and Ship Assist and Escort Services are recognized as services are provided. Revenues from the Oil and Chemical Distribution and Transportation Services and Energy and Marine Services are recognized ratably over the length of the contract. Estimated losses are recognized at the time such losses become evident. Costs related to the shipment of goods under long-term contracts are expensed as incurred. INCOME TAXES The Company accounts for certain income and expense items for financial reporting differently than for income tax purposes. The deferred tax liabilities or assets are determined based on differences between the financial statement carrying values and the tax bases of assets and liabilities. Deferred tax assets and liabilities are determined based on current enacted tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be settled or realized. EARNINGS PER COMMON SHARE Basic earnings per common share is computed by dividing net income attributable to common shareholders by the weighted average number of shares of Common Stock and Class N Common Stock outstanding during each year. Shares issued during the year and shares reacquired during the year are weighted for the portion of the year that they were outstanding. Diluted earnings per common share is computed by giving effect to all potentially dilutive common shares, which are Preferred Class A Convertible Stock, that were outstanding during the period. INSURANCE The Company is self-insured for marine, liability, cargo and medical coverages. Reinsurance is obtained to cover losses in excess of certain limits. Provisions for losses are determined on the basis of claim adjusters' evaluations and other estimates including those for salvage and subrogation recoveries. Such provisions and any related claim receivables are recorded when insured events occur. The determinations of such estimates and the establishment of the related reserves are continually reviewed and updated; however, the actual provisions and claims receivable have not differed materially from accrued estimated amounts. Any adjustments resulting from these reviews are reflected in current operations. 46 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ENVIRONMENTAL COSTS Environmental costs represent reclamation costs filed against the Company. Environmental expenditures for reclamation costs that benefit future periods are capitalized. Expenditures that relate to remediating an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when the Company's responsibility for environmental remedial efforts is deemed probable and the costs can be reasonably estimated. The ultimate future environmental costs, however, will depend on the extent of contamination of property and the Company's share of remediation responsibility. FOREIGN CURRENCY TRANSLATION For non-U.S. subsidiaries whose functional currency is not the U.S. dollar, the results of operations are translated from local currencies into U.S. dollars using average exchange rates during each period. Assets and liabilities are translated using exchange rates at the end of each period. Translation gains and losses on assets and liabilities are reported as a separate component of stockholders' equity as other comprehensive income (loss) and are not included in the determination of net income (loss). DERIVATIVE FINANCIAL INSTRUMENTS The Company does not invest in derivatives for trading or speculative purposes. From time to time, as part of its risk management strategy, the Company uses derivative financial instruments, such as rate lock agreements, to manage exposures to interest rate risk. These instruments are accounted for as cash flow hedges with unrealized gains and losses recorded in other comprehensive income (loss). The amount paid by the Company on maturity of a rate lock agreement is recognized as an adjustment to interest expense over the term of the underlying debt obligation. The Company recognized $567 as an adjustment to interest expense in 2003. 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. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues, expenses, and disclosure of contingent assets and liabilities during the reporting period. Actual results may differ from these estimates. NEW ACCOUNTING STANDARDS In December 2003, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 104 ("SAB 104"), which deals with revenue recognition accounting issues. SAB 104 revised and rescinded portions of Staff Accounting Bulletin No. 101 in order to make the interpretive guidance consistent with the current authoritative accounting and auditing guidance and SEC rules and regulations. Statement of Financial Accounting Standards 149, "Amendment to Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS 149"), addresses certain decisions made by the Financial Accounting Standards Board as part of the Derivatives Implementation Group process. In general, SFAS 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" addresses how an issuer classifies and measures certain financial instruments with characteristics of 47 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) both liabilities and equity. The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003, and otherwise are effective July 1, 2003. The Company adopted SFAS 149 and SFAS 150 on July 1, 2003 and SAB 104 in December 2003. The adoption of these standards did not have a material impact on the Company's financial position, results of operations or cash flows. NOTE 2 -- CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE In January 1997, Marine Transport Corporation ("MTC"), a wholly owned subsidiary of the Company, arranged a transaction with an unconsolidated Variable Interest Entity (the "VIE") by which MTC: (a) sold a vessel to the VIE; (b) time chartered the vessel back from the VIE; and (c) time chartered the vessel to a third party. As consideration for the sale of the vessel, MTC received from the VIE a total of: (a) approximately $40,000 in cash; and (b) a note receivable for $9,000. After considering certain characteristics of the note receivable, it was subsequently recorded at its estimated net realizable value of $3,000. In August of 1999, MTC negotiated the termination of the time charters and arranged a series of bareboat charters for the vessel with periods that extend through November 2006. In January of 2000, MTC received approximately $25,000 from the VIE after the VIE borrowed certain additional amounts from its lenders. Of the approximately $25,000 which was accounted for as debt, $14,395 was outstanding at December 31, 2002. Prior to the adoption of Financial Accounting Standards Board Interpretation No. 46, "Consolidation of Variable Interest Entities" (the "Interpretation"), the Company followed: (a) EITF 90-15, "Impact of Nonsubstantive Lessors, Residual Value Guarantees, and Other Provisions in Leasing Transactions"; and (b) EITF 96-21, "Implementation Issues in Accounting for Leasing Transactions Involving Special-Purpose Entities" in determining not to consolidate the VIE. In 1997, an unrelated third party (the "Foundation") capitalized the VIE with a substantive equity payment of $1,500, which represented more than 3% of the total funding of the VIE, in exchange for the beneficial interests in the VIE. The Interpretation clarified the accounting treatment of certain entities in which equity investors do not have: (a) the characteristics of a controlling financial interest; or (b) sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company adopted the Interpretation and determined that it is the primary beneficiary of the VIE and consolidated the VIE effective January 1, 2003. The Company determined that the total third party equity investment in the VIE at risk, as defined in paragraph 5 of the Interpretation, is $0. While the Foundation capitalized the VIE with a substantive equity payment during 1997, the $1,500 used for that payment was donated to the Foundation by MTC just before it was invested by the Foundation in the VIE. Because the $1,500 was donated to the Foundation, the Company concluded that the Foundation does not, according to the Interpretation, have any equity investment at risk. As a result of recording the assets and liabilities of the VIE at their fair value, a cumulative effect of change in accounting principle of $420, net of a $257 deferred tax benefit, ($3.10 basic earnings per common share and $2.59 diluted earnings per common share) has been recorded in the Consolidated Statements of Operations. Prior year consolidated financial statements have not been restated as a result of the consolidation of the VIE. 48 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) The consolidation of the VIE resulted in recording of the following assets and liabilities based upon their fair values as of January 1, 2003: Cash and cash equivalents................................... $ 1,915 Deferred taxes.............................................. 257 Property and equipment...................................... 14,097 Other liabilities........................................... (3,512) Minority interest........................................... (1,977) Long-term debt.............................................. (11,200) -------- Cumulative effect of change in accounting principle......... $ (420) ========
As a result of the consolidation of the VIE, the outstanding balance of $25,595 at January 1, 2003 of long-term debt due the VIE's lenders has been consolidated with the Company's financial statements and is treated as if it is the Company's debt. As of December 31, 2003, the outstanding balance of this debt is $21,079. The debt is payable in monthly installments through January 2006 and bears interest at interest rates ranging from 5.0% to 8.35%. As of December 31, 2003, the debt is collateralized by: (a) the VIE's vessel with a net book value of $11,104; (b) all other VIE assets of $1,936; and (b) an assignment of the vessel's earnings. Notwithstanding the accounting requirement to consolidate the VIE's debt with the Company's financial statements, the VIE's lender's have no recourse to the general credit of the Company. NOTE 3 -- ACQUISITIONS AND SALES OF BUSINESSES On February 7, 2001, the Company acquired all of the outstanding shares of MTC for a total cost of approximately $49,130. The acquisition of MTC was accounted for as a purchase and, accordingly, the Consolidated Statements of Operations include the operating results of MTC beginning February 7, 2001. The purchase price was allocated to the assets acquired and liabilities assumed based on the estimated relative fair values. Goodwill of $50,752 was recognized for the amount of the excess of the purchase price paid over the fair market value of the net assets acquired. The purchase price of the acquisition of MTC was allocated to the assets purchased and the liabilities assumed based upon the relative fair values on the date of acquisition as follows: Cash........................................................ $ 8,740 Other current assets........................................ 33,129 Other assets................................................ 9,354 Goodwill.................................................... 50,752 Property and equipment...................................... 68,768 Current liabilities......................................... (41,980) Other liabilities........................................... (27,838) Long-term debt.............................................. (51,795) -------- $ 49,130 ========
In May 2002, the Company sold all of the outstanding common stock of MTL Petrolink Corp. (a subsidiary of MTC) for $18,638. The Company decided to sell MTL Petrolink Corp. subsequent to its acquisition of MTC. In its allocation of the purchase price of MTC, the Company made no effort to separately determine the fair value of MTL Petrolink Corp. The Company recorded the excess of the sales price, net of selling costs, over the net asset value of MTL Petrolink Corp. as a purchase price adjustment resulting in a 49 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) reduction to goodwill in the amount of $3,345. Included in the selling price of MTL Petrolink Corp. is a $500 escrow deposit which was received during 2003. This amount, net of income taxes of $189, also reduced goodwill. In July 2003, the Company purchased the stock of a transportation management company specializing in the apparel industry. In October 2002, the Company purchased the assets of a transportation services provider. These acquisitions are included in our Liner Services segment. The purchase prices consisted of the following:
2003 2002 ------- ------ Accounts receivable......................................... $ 2,395 $ 861 Property and equipment...................................... 453 99 Non-compete agreement/customer list......................... 2,372 2,026 Accrued payroll and related expenses........................ (1,863) -- ------- ------ Purchase price, net of cash acquired...................... $ 3,357 $2,986 ======= ======
The purchase price of the transportation management company will be adjusted for certain working capital adjustments and payments based on earnings. In December 2003, the Company entered into an agreement to assume ownership of the 25% minority interest in a joint venture which was accounted for using the purchase method of accounting. The Company received cash of approximately $3,234 and recorded fair value in excess of the cost of the acquired net assets, approximately $5,944, as a reduction to the fair value of vessels, the joint ventures only long-term assets. The following unaudited pro forma results of operations for the years ended December 31, 2003, 2002, and 2001, are presented as if the above acquisitions and sales had been completed on January 1, 2001. The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results do not include any anticipated cost savings or other effects of the planned integration of the Company and the above acquisitions and sales, and are not necessarily indicative of the results which would have occurred if the business combinations had been in effect on the dates indicated, or which may result in the future.
2003 2002 2001 -------- -------- -------- Operating revenues................................... $985,569 $962,103 $929,153 Net income........................................... $ 13,044 $ 18,297 $ 12,488 Basic earnings per common share...................... $ 84.52 $ 122.28 $ 78.28 Diluted earnings per common share.................... $ 80.54 $ 112.20 $ 75.32
NOTE 4 -- DISCONTINUED OPERATIONS In December 2003, the Company approved a plan to sell the Logistics operations of its Liner Services segment in Venezuela. As a result, the Company has ceased depreciation on the assets and classified them as discontinued operations in the Consolidated Balance Sheets. The Company performed an impairment analysis of these assets based on the estimated sales price and has recognized an impairment charge of $404 to write down those assets to fair value; this impairment charge is included in discontinued operations loss from operations in the 2003 Consolidated Statements of Operations. In February 2004, the Company sold its Venezuelan Logistics operations for $1,506. 50 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) The Venezuelan operations have been reflected as discontinued operations in the accompanying Consolidated Statements of Operations. Discontinued operations for the years ended December 31 are summarized as follows:
2003 2002 2001 ------- ------- ------ Operating revenues....................................... $ 4,049 $ 5,047 $7,648 ======= ======= ====== Loss from continuing operations before taxes............. $(1,877) $(1,664) $ (44) Income tax benefit....................................... 700 600 -- ------- ------- ------ Net loss from discontinued operations.................... $(1,177) $(1,064) $ (44) ======= ======= ======
On April 1, 1999, the Company adopted a plan to sell its South America trade lanes, river barging operations, related subsidiaries, vessels and certain other assets. Related to the sale, the Company adopted a strategy to exit operations of several other South America operations. The combined assets and liabilities of the above discontinued operations included in the Company's Consolidated Balance Sheets at December 31, 2003 and 2002 are as follows:
2003 2002 ------ ------ Cash and cash equivalents................................... $ 138 $ 220 Receivables, net............................................ 2,943 4,430 Prepaid expenses and other assets........................... 407 404 ------ ------ Current assets of discontinued operations................... $3,488 $5,054 ====== ====== Property and equipment, net................................. $ 709 $1,288 ------ ------ Long-term assets of discontinued operations................. $ 709 $1,288 ====== ====== Accounts payable and accrued liabilities.................... $3,183 $4,291 Accrued payroll and related expenses........................ 359 12 ------ ------ Current liabilities of discontinued operations.............. $3,542 $4,303 ====== ====== Other long-term liabilities................................. $5,363 $6,398 ------ ------ Long-term liabilities of discontinued operations............ $5,363 $6,398 ====== ======
51 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) NOTE 5 -- RECEIVABLES Receivables consist of the following at December 31, 2003 and 2002:
2003 2002 -------- -------- Trade receivables........................................... $135,861 $126,869 Less allowance for doubtful accounts...................... (8,163) (6,993) -------- -------- Trade receivables, net...................................... 127,698 119,876 -------- -------- Other receivables........................................... 30,137 24,884 Less allowance for doubtful accounts...................... (958) (1,844) -------- -------- Other receivables, net...................................... 29,179 23,040 -------- -------- $156,877 $142,916 ======== ========
Other receivables include insurance claims receivable from third party reinsurance companies, tax claims receivables, pollution claims receivables and rebillable charges to customers for vessel management services and other services. NOTE 6 -- RECEIVABLE FROM RELATED PARTY The Company has entered into a Split Dollar Life Insurance Agreement ("Agreement") with the Company's President, Chief Executive Officer, Chairman of the Board, and principal shareholder (the "Employee") whereby the Company pays the premiums on certain life insurance policies ("Policies") of the Employee and a related Director. Upon death of the insureds, the Company will receive the total paid for premiums under the policies, net of certain payments made by or on behalf of the Employee. If the Company and the Employee terminate the Agreement, the Company will be paid an amount equal to the lesser of the Policy cash surrender value or the amounts of premiums paid by the Company reduced by certain payments made by or on behalf of the Employee. The Company has accounted for this receivable at the lower of the net premium payments made or the cash surrender value of the Policies. The receivable is non-interest bearing and is stated at the amount the Company is entitled to receive under the agreement. Net premiums paid in 2002 and 2001 were $2,700, and $2,979, respectively. In December 2003, the Company and the Employee reached a settlement agreement whereby three of the Policies were cancelled and the Employee reimbursed the Company $7,508 which represented the total amount of net premiums paid by the Company on those Policies. In order to reimburse the Company, the Employee obtained a personal loan. The Company is not obligated to pay this loan and has not guaranteed repayment of this loan. However, the Company has agreed to reimburse the Employee the interest on the loan. NOTE 7 -- DIRECTORS LIFE INSURANCE In December 2003, the Company purchased life insurance policies which insure the life of a member of the Board of Directors. The Company is the owner and beneficiary of the policies. Accordingly, the Company has recorded the cash surrender value of the policies of $1,894 in Other Assets in the Consolidated Balance Sheet as of December 31, 2003. 52 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) NOTE 8 -- INTANGIBLES The gross carrying amount and accumulated amortization of the Company's intangible assets other than goodwill as of December 31, 2003 are as follows:
GROSS CARRYING ACCUMULATED NET BOOK AMOUNT AMORTIZATION VALUE -------- ------------ -------- Deferred loan costs................................... $14,703 $3,031 $11,672 Non-compete agreement................................. 2,026 507 1,519 Customer Lists........................................ 2,493 237 2,256 ------- ------ ------- $19,222 $3,775 $15,447 ======= ====== =======
Amortization expense recorded on the intangible assets for the years ended December 31, 2003 2002, and 2001 was $2,049, $2,147, and $1,268, respectively. The amortization expense for each of the five succeeding fiscal years ending December 31 is as follows: 2004........................................................ $1,884 2005........................................................ 1,838 2006........................................................ 1,794 2007........................................................ 1,631 2008........................................................ 1,019
NOTE 9 -- PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 2003 and 2002:
2003 2002 ---------- ---------- Floating equipment.......................................... $ 878,215 $ 865,092 Other operating equipment................................... 118,685 120,117 Buildings, leasehold improvements and other................. 89,016 81,669 Construction in progress.................................... 3,685 38,529 ---------- ---------- 1,089,601 1,105,407 Less accumulated depreciation and amortization.............. (570,741) (555,357) ---------- ---------- 518,860 550,050 Restricted cash and cash equivalents........................ 3,101 1,557 ---------- ---------- Total property and equipment................................ $ 521,961 $ 551,607 ========== ==========
Restricted cash and cash equivalents included in property and equipment represent funds for the future purchase of property and equipment currently restricted by lenders. Depreciation and amortization of property and equipment was $51,200, $47,300, and $46,542 for the years ended December 31, 2003, 2002, and 2001, respectively. Capitalized interest is recorded as part of the asset to which it relates and is amortized over the estimated useful life of the asset. Interest of $627, $4,489, and $1,584, was capitalized in 2003, 2002, and 2001, respectively. 53 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) NOTE 10 -- ASSET CHARGES (RECOVERIES), NET The components of asset charges (recoveries), net for the years ended December 31, 2003, 2002, and 2001 are as follows:
2003 2002 2001 ------- ------- ------- Gain on involuntary conversion.......................... $ -- $(3,897) $ -- Impairment charge on vessels............................ -- 5,487 484 Gain on asset sales..................................... (5,383) (1,386) (5,331) ------- ------- ------- $(5,383) $ 204 $(4,847) ======= ======= =======
In July 2002, a fire occurred in the engine room of one of the Company's tankers. As a result of the fire, the extensive damages caused by it and the short remaining useful life of the vessel, management decided not to repair the vessel. The Company received insurance proceeds based upon the damage to the vessel caused by the fire. The net book value of the vessel was $2,009. Accordingly, the Company recognized a gain net of incurred costs from involuntary conversion of $3,897. The Company has certain vessels it has designated as surplus and has implemented a plan to dispose of them. The Company evaluated the recoverability of its carrying value of these vessels and as a result recorded a write down of $5,487, and $484 in 2002 and 2001, respectively. The net book value of these vessels at December 31, 2003 is $3,672. NOTE 11 -- LEASES AND LEASE COMMITMENTS The Company leases and subleases vessels on both a time charter and bareboat charter basis. It also leases and subleases terminals, office facilities, and operating equipment. Future minimum annual rental payments and receipts required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2003 are summarized as follows:
PAYMENTS RECEIPTS -------- -------- 2004........................................................ $ 60,020 $ 97,113 2005........................................................ 60,631 74,634 2006........................................................ 31,484 37,190 2007........................................................ 29,225 11,800 2008........................................................ 27,774 10,863 Thereafter.................................................. 44,941 1,921 -------- -------- $254,075 $233,521 ======== ========
Total rental expense for all leases, including short-term leases, was approximately $135,000, $146,000, and $172,000 for the years ended December 31, 2003, 2002, and 2001, respectively. Certain lease agreements contain restrictive covenants which require the maintenance of minimum amounts of net worth. Furthermore, a vessel with a net book value of $9,562 at December 31, 2003 has been pledged as collateral for certain equipment leases. 54 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) NOTE 12 -- LONG-TERM DEBT Long-term debt consists of the following at December 31, 2003 and 2002:
2003 2002 -------- -------- United States Government-guaranteed ship-financing bonds and notes (Title XI), collateralized by vessels with a net book value of $255,122 at December 31, 2003, bearing interest from 4.96% to 8.125%, payable in installments through 2027.............................................. $214,049 $220,770 Debt collateralized by vessels with a net book value of $108,610 at December 31, 2003, bearing interest from 2.64% to 8.35%, payable in installments through 2013............ 205,567 60,589 Debt collateralized by containers and chassis with a net book value of $3,568 at December 31, 2003, bearing interest from 8.83% to 9.87%, payable in installments through 2004.............................................. 834 4,780 Industrial revenue bonds, with variable interest rates of 1.05% to 1.10% at December 31, 2003, principal balance of $10,200 payable in installments beginning in 2006 through 2013, and $4,000 payable in 2014.......................... 14,200 14,200 Revolving Credit Agreement collateralized by vessels with a net book value of $60,933 at December 31, 2003, bearing interest of 2.94% at December 31, 2003 based on LIBOR plus 1.375%.................................................... -- 25,000 Other....................................................... -- 37 -------- -------- 434,650 325,376 Less current portion........................................ (52,847) (29,357) -------- -------- $381,803 $296,019 ======== ========
The Company's $115,000 Amended and Restated Credit Agreement (the "Revolving Credit Agreement") has been extended to February 15, 2005. Borrowing rates are based on either Eurodollar or Bank Base rates. There were no borrowings outstanding under the Revolving Credit Agreement at December 31, 2003. Outstanding letters of credit totaled $33,068 at December 31, 2003, leaving $81,932 borrowing capacity under the Revolving Credit Agreement. In January 2003, the Company issued bonds in the amount of $60,909, which are guaranteed pursuant to Title XI of the Merchant Marine Act of 1936 by the United States Department of Transportation, Maritime Administration. The bonds bear interest at a fixed rate of 4.96% and are payable in semiannual installments through 2027. The proceeds from the bonds were used to: (a) refinance the construction financing arranged to build two articulated tug/barge units ("ATB's"), the OCEAN RELIANCE/Barge 550-3 and COASTAL RELIANCE/Barge 550-4; and (b) reimburse the Company for expenditures incurred for their construction. In May 2002, the Company entered into a rate lock agreement to fix at 5.45% the underlying benchmark rate on the permanent financing arranged for the construction of these two ATB's. The permanent financing, which consists of debt guaranteed pursuant to Title XI of the Merchant Marine Act of 1936, was concluded on January 16, 2003. Because the rate lock agreement was designated as a cash flow hedge, the changes in the fair value of the borrowings subject to the agreement were recognized in other comprehensive income (loss) until the debt was funded. Effective upon the funding of the debt on January 16, 2003, the amount recorded in other comprehensive income (loss) is recognized as an adjustment to interest expense over the term of the underlying debt agreement using the effective interest method. The Company's liability under the rate lock 55 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) agreement was fixed on January 16, 2003 and resulted in a payment to a financial institution in the amount of $7,967. In October 2003, the Company received proceeds in the amount of $30,000 from a loan from two financial institutions. The loan is scheduled to be repaid in 24 quarterly installments of $1,250 plus interest at LIBOR plus 1.5%. The loan is collateralized by four vessels with a net book value of $21,770 at December 31, 2003. In December 2003, the Company received proceeds of $115,000 from a loan with several financial institutions. The loan is scheduled to be repaid in 23 quarterly installments of $2,875 with a balloon payment of $48,875 in December 2009. Interest is due quarterly at LIBOR plus 1.5%. The loan is collateralized by twenty five vessels with a net book value of $31,999 at December 31, 2003. In February 2004, the Company redeemed $10,366 of Title XI financial bonds at a price ranging from $100.871 to $101.161. Accordingly, this debt has been classified as current debt in the Consolidated Balance Sheet as of December 31, 2003. The Company's financing agreements contain restrictive covenants which require, among other things: (a) maintenance of a net debt (as defined in such agreements) to stockholders' equity ratio which shall not exceed 2.5 to 1; (b) reduction of debt with the proceeds generated by the sale of any vessels; (c) a maximum net debt (as defined in such agreements) to earnings before interest, taxes, depreciation and amortization ratio not to exceed 6.0 to 1 in 2003 and 2004; and (d) maintenance of an interest coverage ratio of 3.5 to 1. The Company is limited to $60,000 of capital expenditures for a calendar year, not including amounts expended for articulated tug/barge units, which are limited to total expenditures of $210,000. While the Company is prohibited from repurchasing shares of any class of capital stock or declaring or paying any dividend, it may repurchase common stock from employee stock ownership plans and pay dividends in any twelve-month period at a combined cost not to exceed $10,000. At December 31, 2003, the Company was in compliance with all covenants under its financing and leasing arrangements. Annual scheduled payments for long-term debt as of December 31, 2003 are as follows: 2004........................................................ $ 52,847 2005........................................................ 40,237 2006........................................................ 32,604 2007........................................................ 32,687 2008........................................................ 34,799 Thereafter.................................................. 241,476 -------- $434,650 ========
Total interest expense, including capitalized interest, for the years ended December 31, 2003, 2002, and 2001 was $21,957, $19,971, and $17,258, respectively. In February 2004, the Company amended its Revolving Credit Agreement. The $95,000 Second Amended and Restated Credit Agreement expires in February 2009. Borrowing rates are based on either Eurodollar or Bank Base rates. The Company's $95,000 Second Amended and Restated Credit Agreement contains restrictive covenants which require, among other things: (a) maintenance of a leverage ratio (as defined in such agreement) which shall not exceed 3.25 in 2004, 3.0 in 2005, 2.75 in 2006 and 2.5 in 2007 and thereafter; and (b) a maximum total debt (as defined by such agreement) to earnings before interest, taxes, 56 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) depreciation, amortization and rent expense (as defined by such agreement) not to exceed 3.25 in 2004 and 2005 and 3.0 in 2006 and thereafter. NOTE 13 -- INCOME TAXES The income tax provision (benefit) on income from continuing operations includes the following for the years ended December 31, 2003, 2002, and 2001:
2003 2002 2001 ------ ------ ------ Current: Federal.................................................. $ (961) $2,991 $4,836 State.................................................... 48 1,660 1,038 Foreign.................................................. 3,097 1,682 1,920 ------ ------ ------ Total current......................................... 2,184 6,333 7,794 ------ ------ ------ Deferred: Federal.................................................. 5,843 1,859 1,848 State.................................................... 673 108 158 ------ ------ ------ Total deferred........................................ 6,516 1,967 2,006 ------ ------ ------ $8,700 $8,300 $9,800 ====== ====== ======
A reconciliation of the federal statutory income tax rate for 2003, 2002, and 2001 of 35%, and the provision for federal, foreign, and state taxes on income is as follows for the years ended December 31, 2003, 2002, and 2001:
2003 2002 2001 ------- ------- ------- Federal income tax on income at the statutory rate of 35%................................................... $ 8,091 $ 9,323 $10,474 Excess of book over tax depreciation on assets constructed with CCF.................................. 862 668 1,238 State and foreign income tax less federal income tax benefit............................................... 629 (449) 853 Goodwill amortization................................... -- -- 808 Valuation allowance on foreign tax credit carryforwards......................................... -- -- (1,739) Nondeductible expenses.................................. 77 888 1,008 Net change in tax reserves.............................. (1,029) (1,666) (2,826) Federal tax benefit of state tax settlement............. -- (630) -- Other................................................... 70 166 (16) ------- ------- ------- $ 8,700 $ 8,300 $ 9,800 ======= ======= =======
57 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) The net deferred income tax assets (liabilities) shown below, both current and noncurrent, result from the tax effects of the following temporary differences at December 31, 2003 and 2002:
2003 2002 --------- -------- Deferred tax assets: Non-deductible reserves................................... $ 21,807 $ 20,997 Foreign subsidiaries...................................... 6,771 4,481 Foreign currency translation adjustment................... 730 831 Treasury lock agreement................................... 2,663 3,166 Tax credits............................................... 7,787 2,996 --------- -------- 39,758 32,471 Valuation allowance....................................... (5,172) -- --------- -------- 34,586 32,471 --------- -------- Deferred tax liabilities: Excess of book over tax bases of depreciable assets....... (97,747) (95,236) Other..................................................... (10,960) (3,525) --------- -------- (108,707) (98,761) --------- -------- Net deferred tax liability................................ (74,121) (66,290) Current portion -- asset.................................. 15,420 10,480 --------- -------- $ (89,541) $(76,770) ========= ========
Under its agreement with the U.S. Government, the Company is allowed to make deposits to the Capital Construction Fund ("CCF") of earnings and gains from qualified operations without payment of federal taxes. CCF cash and marketable securities are restricted to provide for the replacement of vessels, additional vessels, or improvement of vessels within strict guidelines established by the U.S. Maritime Administration for use of these funds. Any withdrawals of funds for purposes other than those permitted will result in a taxable event, equivalent to the statutory tax rate. The Company has $4,900 of restricted CCF Funds at December 31, 2003 which is classified in Other Assets in the Consolidated Balance Sheet. Taxes on CCF deposits and earnings made prior to January 1, 1993 are being recognized over the remaining lives of the assets purchased with qualified CCF withdrawals. At December 31, 2003, 2002, and 2001, the difference between the book carrying value and the tax bases of assets as a result of these past deposits for which the Company has not provided taxes, is approximately $16,000, $19,000, and $21,000, respectively. The Company has alternative minimum tax credit carryforwards of approximately $7,787, which have no expiration date, available to offset future federal taxes. Valuation allowances have been recorded against certain deferred tax assets. Each item has been reviewed for expected utilization using a "more likely than not" approach based on the character of the item, the associated taxing jurisdiction, the relevant history of the item, and identified actions under the control of the Company. NOTE 14 -- FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value amounts of financial instruments have been determined by the Company using available market information and valuation methodologies. However, considerable judgment is required in 58 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) interpreting market data to develop the estimates of fair value. In addition, costs of refinancing and/or prepayment penalties have not been considered. Accordingly, the estimates presented are not indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amount. The methods and assumptions used to estimate the fair value of each class of financial instruments, which potentially subject the Company to concentrations of credit risk, are set forth below: - Cash and cash equivalents, marketable securities, and cash held in the Capital Construction Fund -- The Company places its temporary cash investments with high credit quality financial institutions and, by policy, limits the amount of credit exposure to any one financial institution. The carrying amounts reported in the Consolidated Balance Sheet for these items approximate fair value at December 31, 2003 and 2002. - Trade receivables -- Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base, and their dispersion across many diverse industries and geographies. The carrying amounts reported in the Consolidated Balance Sheet for trade receivables approximate fair value at December 31, 2003 and 2002. - Long-term debt -- Valuations for long-term debt are determined based on borrowing rates currently available to the Company for loans with similar terms and maturities. At December 31, 2003, the estimated fair value of the Company's debt, with a carrying value of $434,650 is $449,071. At December 31, 2002, the estimated fair value of the Company's debt, with a carrying value of $325,376, was $347,250. NOTE 15 -- STOCKHOLDERS' EQUITY PREFERRED STOCK Dividends on preferred class A convertible stock are cumulative at 5% per annum, payable annually on July 1st. Cumulative dividends in arrears bear interest at a rate determined by the Board of Directors between 8% and 12%, inclusive, compounded annually. There are no dividends in arrears at December 31, 2003. These shares, together with unpaid cumulative dividends and interest, if any, are convertible to common stock at a conversion price of $1,200 per share, subject to specified anti-dilution adjustments. Shares may be redeemed, at the Company's option, for $100 per share plus unpaid cumulative dividends and interest. 59 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) EARNINGS PER COMMON SHARE The computations of the numerator and denominator for calculating basic and diluted earnings per common share for the years ended December 31, 2003, 2002, and 2001 are as follows:
2003 2002 2001 -------- -------- -------- Numerator: Income from continuing operations before discontinued operations and cumulative effect of change in accounting principle............................... $ 14,418 $ 18,336 $ 20,125 Less preferred dividends........................... (1,575) (1,666) (1,849) -------- -------- -------- Income for basic earnings per common share from continuing operations before discontinued operations and cumulative effect of change in accounting principle............................ 12,843 16,670 18,276 Loss from discontinued operations.................... (1,177) (1,064) (44) Cumulative effect of change in accounting principle.......................................... (420) -- -- -------- -------- -------- Net income for basic earnings per common share..... 11,246 15,606 18,232 Plus preferred dividends........................... 1,575 1,575 1,575 -------- -------- -------- Net income for diluted earnings per common share... $ 12,821 $ 17,181 $ 19,807 ======== ======== ======== Denominator: Basic weighted average shares...................... 135,702 136,010 135,920 Effect of dilutive securities -- convertible preferred stock................................. 26,250 26,250 26,250 -------- -------- -------- Diluted weighted average shares.................... 161,952 162,260 162,170 ======== ======== ========
NOTE 16 -- EMPLOYEE BENEFIT PLANS The Company contributes to Company and multi-employer pension plans covering substantially all employees. The Company sponsors the Crowley Retirement Income System Plan (the "CRISP"). The CRISP is a profit sharing plan designed to provide eligible employees with retirement, death and disability benefits. The Company contributes 3% of eligible earnings to participants' accounts and matches 50% of employee contributions up to 6%. The Company has a deferred compensation plan for which the participants and annual contributions, if any, are determined by the Board of Directors. For each year's contribution, participants become fully vested after five years, upon attaining age 65, upon death, or other financial criteria as established by the Board of Directors. Funds for each years' contribution may be distributed, at the participant's election, upon becoming 100% vested, at attainment of age 65 or upon retirement. Contributions are placed in an irrevocable trust available only to the participants and the Company's creditors. The Company also sponsors the Crowley Maritime Corporation Retirement Stock Plan ("RSP"). Contributions to the RSP are made by the Company based on an annual determination made by the Board of Directors. If stock is contributed, the stock is valued at the stock's non-marketable fair value, as determined by an independent appraisal. The RSP purchased 2,010 shares of stock in 2001. At December 31, 2003, 2002, and 2001, the plan held 9,372, 9,482, and 9,572 shares of common stock, respectively. Vesting occurs upon completion of five years of credited service or upon the attainment of age 65, disability retirement or death. In the event of termination prior to becoming vested, the participant's account balance is forfeited and 60 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) reallocated to active participants. Distribution to participants are made as soon as practicable following the participant's death, disability retirement or termination of Company employment after attainment of age 65. All other vested participants are eligible for distribution on the earlier of the third calendar quarter of the third Plan Year that follows the Plan Year in which the participant terminates Company employment verses the attainment of age 65. All distributions to a participant are in the form of a single, lump sum payment in the form of shares of Company stock. Upon the date of distribution and for the immediately succeeding ten days, such shares of Company stock shall be subject to the Company's right to repurchase such shares for cash equal to their fair market value determined as of the Valuation Date that coincides with or immediately precedes the date of distributions. The Company also sponsors the Stock Savings Plan ("SSP"), an employee stock ownership plan which holds 4,873 shares of common stock at December 31, 2003, all of which are fully vested. Participants in this plan have the option to sell their stock to the Company at the common stock's marketable fair value, as determined by an independent appraisal, upon retirement, death or after a break in service. No contributions were made during the years ended December 31, 2003, 2002, and 2001. Pursuant to collective bargaining agreements with labor unions representing the Company's sea-going personnel, contributions are also made to various defined benefit and defined contribution pension and welfare plans, including some multi-employer plans, in accordance with their terms. Expenses included in operations under the Company's benefit plans are as follows for the years ended December 31, 2003, 2002 and 2001:
2003 2002 2001 ------- ------- ------- Company benefit plans................................... $ 5,439 $ 4,473 $ 4,341 Multi-employer plans.................................... 9,707 10,081 9,478 ------- ------- ------- $15,146 $14,554 $13,819 ======= ======= =======
NOTE 17 -- ENVIRONMENTAL COSTS The Company's estimates for environmental remediation costs include labor costs, equipment rental, engineering consulting fees and material costs. Estimates for environmental remediation are based on the phase of the remedial action, the type of technology being used, the experience of the type of technology used and on the environmental consultant's experience or personal experience. Other costs, such as legal and regulatory oversight, are based on experience with similar remedial projects in the same geographic region as the site in question. The recorded liabilities for the estimated future environmental costs at December 31, 2003 and 2002 are approximately $4,728 and $5,048, respectively. The estimated annual payments for future environmental costs as of December 31, 2003 are as follows: 2004........................................................ $ 830 2005........................................................ 804 2006........................................................ 579 2007........................................................ 354 2008........................................................ 404 Thereafter.................................................. 1,757 ------ $4,728 ======
The actual provision for environmental costs have not differed materially from the amounts recorded. 61 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) NOTE 18 -- COMMITMENTS AND CONTINGENCIES The Company is subject to various foreign and domestic legal and regulatory rules and certain proceedings arising therefrom in the conduct of normal business activities. In the opinion of management, resolution of these matters will not have a material adverse or beneficial effect on the Company's consolidated financial condition or results of operations. During 2003 and 2002, the Company reached agreements with its insurance underwriters to settle all costs incurred to date and any future costs related to environmental remediation resulting from occurrences prior to 1986. The amounts of the settlements were $1,000 and $5,324, in 2003 and 2002, respectively, net of unrecoverable amounts due to insolvency of certain underwriters. Both of these settlements were collected during 2003. As a result of these settlements, the Company increased its estimated liabilities by $3,095 in 2002 for any remaining environmental remediation. The Company also recognized $1,000 and $2,229 as a reduction to claims expense in 2003 and 2002, respectively. The Company is currently a defendant with respect to approximately sixteen thousand maritime asbestos cases and other toxic tort cases, most of which were filed in the Federal Courts in Ohio, Michigan, California and New Jersey. Additional cases were filed in the Territorial Court of the Virgin Islands, and in state courts in Utah, Pennsylvania, Texas, and Louisiana. Each of the cases, filed on behalf of a seaman or his personal representative, alleges injury or illness based upon exposure to asbestos or other toxic substances and sets forth a claim based upon the theory of negligence under the Jones Act and on the theory of unseaworthiness under the General Maritime Law. Pursuant to an order issued by the Judicial Panel on Multidistrict Litigation dated July 29, 1991, all Federal cases were transferred to the United States District Court for the Eastern Division of Pennsylvania for pretrial processing. On May 1, 1996, the cases were administratively dismissed by Judge Charles R. Weiner, subject to reinstatement in the future. At present it is not known how long the process will require. It is also not known whether Judge Weiner will be able to develop a plan which will result in settlement of the cases. If he is unsuccessful, upon reinstatement, it is expected that the cases will be remanded to the Ohio and Michigan courts. The Company has insurance coverage that reimburses it for a substantial portion of the: (a) costs incurred defending against asbestos claims; and (b) amounts the Company pays to settle claims or honor judgments by courts. The coverage is provided by a large number of insurance policies written by dozens of insurance companies over a period of many years. The amount of insurance coverage depends on the nature of the alleged exposure to asbestos, the specific subsidiary against which an asbestos claim is asserted and the terms and conditions of the specific policy. The uncertainties of asbestos claim litigation make it difficult to accurately predict the results of the ultimate resolution of these claims. By their very nature, civil actions relating to toxic substances vary according to the fact pattern of each case, the applicable jurisdiction and numerous other factors. This uncertainty is increased by the possibility of adverse court rulings or new legislation affecting the asbestos claim litigation or the settlement process. Accordingly, we cannot predict the eventual number of such cases or their final resolution. The full impact of these claims and proceedings in the aggregate continues to be unknown. During 2003, there were 44 claims reinstated related to these asbestos claims. The Company has accrued $813 as an estimate of the ultimate outcome of this litigation. The Company has also recorded a receivable from its insurance companies of $479 related to these claims. While it is not feasible accurately to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in some of these cases could have a material adverse affect on our financial condition, operating results or cash flows. 62 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Prior to 2001, the Company recorded its asbestos-related reserves based on its best estimate of the total cost of the outstanding claims. These estimates were based on actual costs for settled claims, evidence of liability and damages as well as industry data regarding the ultimate cost of outstanding asbestos litigation. During 2001, it became clear based on consultation with legal counsel and upon the lack of progress since the cases were administratively dismissed that the ultimate outcome of the outstanding cases was uncertain and that the accrual of loss contingency requirements of Statement of Financial Accounting Standards No. 5 "Accounting for Contingencies" were not met due to the unreliability of the loss estimate. As a result, the Company was no longer able to estimate the amount of probable loss or range of probable loss relating to these asbestos cases and reversed $4,321 of asbestos-related reserves. This was recorded as a reduction to claims expense in general and administrative expenses in 2001. The Company is also party to numerous long-term contracts for shipment of goods for other parties. Several of these contracts include clauses under which contract prices may change if certain economic events occur, primarily increases or decreases in certain components of vessel operating costs. These contracts are subject to audit by the cargo owners. Management has estimated the applicable amount of revenue to record for these contracts and, although it is at least reasonably possible that contract prices will change in the near term, management believes that it has accounted for these contracts appropriately. It is management's opinion that adjustments, if any, will not have a material adverse impact on the Company's consolidated financial condition, results of operations or cash flows. At December 31, 2003, the Company is obligated under contractual commitments for the completion of construction of two vessels, leasehold improvements under an operating lease, and software maintenance agreements totaling approximately $15,302. Payments of approximately $1,218 have been made through December 31, 2003. The Company has a contract with a fuel supplier where the Company has agreed to purchase approximately 750 barrels of fuel during 2004, at market value. Under the terms of the contract, the Company can extend the contract for one year. The Company purchased 772 barrels of fuel at a market price of $27,633 during 2003 under this contract. The estimated value of the fuel to be purchased in 2004 is $29,866 at December 31, 2003. The Company may negotiate a greater or lesser quantity of fuel if future business conditions change. The Company has designated this contract as a normal purchase and not as a hedge for financial statement purposes as the Company has not agreed to the price of the fuel. NOTE 19 -- ADDITIONAL CASH FLOW INFORMATION Interest paid, net of amounts capitalized, and income tax payments (refunds) for the years ended December 31, 2003, 2002 and 2001 are as follows:
2003 2002 2001 ------- ------- ------- Interest................................................ $18,022 $12,328 $13,514 Income taxes............................................ (4,913) 10,680 1,405
NOTE 20 -- FINANCIAL INFORMATION BY SEGMENT AND GEOGRAPHIC AREA SEGMENT INFORMATION Segment information has been prepared in accordance with Statement of Financial Accounting Standards 131, "Disclosures about Segments of an Enterprise and Related Information." Segments were determined based on the types of services provided by each segment. Accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in Note 1. Performance of the 63 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) segments is evaluated on operating revenue and operating income. The Company accounts for intersegment revenue and transfers at cost. The Company provides diversified transportation services in domestic and international markets by means of seven operating segments: Puerto Rico and Caribbean Liner Service; Latin America Liner Service; Crowley Logistics; Ship Assist and Escort Services; Petroleum Services; Marine Transport Corporation; and Energy and Marine Services. The Company has aggregated Puerto Rico and Caribbean Liner Service, Latin America Liner Service and Crowley Logistics into one reportable segment called Liner Services. The Company has also aggregated Petroleum Service and Marine Transport Corporation into one reportable segment called Oil and Chemical Distribution and Transportation Services. These operating segments are aggregated based on their long-term financial performance, their products and services and their class of customers being similar. Liner Services provides ocean transportation services for the carriage of cargo between two geographic areas: (1) ports in the United States and ports in Puerto Rico and certain eastern Caribbean islands; and (2) ports in the United States and ports in Mexico, Central America, the Northern Coast of South America and certain Western Caribbean islands. The Liner Services segment provides a broad range of transportation services including the carriage of containers, trailers, vehicles and oversized cargo known as "NIT service", cargo on a door-to-door basis known as "intermodal service", logistics, warehousing and distribution services, special cargo handling, including the carriage of apparel, refrigerated or perishable goods and hazardous materials, and vessel management services for third parties including the United States Government. The Liner Services Segment also provides minor sub-assembly services to one or more of its customers. Ship Assist and Escort Services segment provides ship assist, tanker escort, docking and related services, and fire fighting and oil spill response through contracts of affreightment, and voyage, time and bareboat charters for periods ranging from a single voyage to long-term arrangements. Oil and Chemical Distribution and Transportation Services segment owns or leases numerous vessels used for the carriage of crude oil, petroleum products and chemicals. This segment also owns and/or operates four tank farms and provides vessel management services to third parties for which it receives fees. Energy and Marine Services segment provides specialized services to companies engaged, on a worldwide basis, in the exploration, production and distribution of oil and gas. These services are traditionally provided through specialized marine transportation projects which use assets either owned by the Company or chartered from the world market as needed. This segment also offers turnkey project management for major infrastructure projects as well as logistics and inventory control services for the oil and gas industry. Other segment includes corporate services. Corporate services provides accounting, legal, human resources, information technology, purchasing support, insurance services and vessel acquisition to the Company's operating segments and allocates 100% of their associated costs to the operating segments. Asset charges (recoveries) are allocated to the segment that last used the asset. The table below summarizes certain financial information of the Company's segments and reconciles such information to the consolidated financial statements for the years ended December 31, 2003, 2002, and 2001. The Company does not segregate assets or expenditures for long lived assets by reporting segment; therefore these amounts are reported in Other. Additionally, the Company does not allocate interest expense, interest income, or income taxes to operating segments. Accordingly, such amounts are included in Other. 64 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
OIL AND SHIP CHEMICAL ASSIST DISTRIBUTION ENERGY AND AND AND LINER ESCORT TRANSPORTATION MARINE SEGMENT CONSOLIDATED SERVICES(4) SERVICES SERVICES(3) SERVICES TOTAL OTHER(3) ELIMINATION TOTAL ----------- -------- -------------- -------- -------- ---------- ----------- ------------ 2003 Operating revenues...... $578,554 $73,665 $255,540 $ 70,248 $978,007 -- -- $ 978,007 Intersegment revenues... -- 762 -- 32,225 32,987 $ 99,218 $(132,205) -- Depreciation and amortization.......... 10,329 44 14,506 12,205 37,084 23,669 -- 60,753 Operating income (loss)................ 20,946 9,746 25,059 (13,543) 42,208 -- -- 42,208 Loss on discontinued operations, net of tax benefit............... (1,177) -- -- -- (1,177) -- -- (1,177) Assets.................. -- 1,010,650 1,010,650 Total expenditures for additions to long-lived assets..... -- 19,247 19,247 2002(1) Operating revenues...... $530,393 $70,504 $283,383 $ 88,577 $972,857 -- -- $ 972,857 Intersegment revenues... -- 1,159 -- 28,983 30,142 $ 97,116 $(127,258) -- Depreciation and amortization.......... 7,110 36 16,019 11,487 34,652 19,328 -- 53,980 Operating income........ 18,219 13,637 6,682 2,086 40,624 -- -- 40,624 Loss on discontinued operations, net of tax benefit............... (1,064) -- -- -- (1,064) -- -- (1,064) Assets.................. -- 883,294 883,294 Total expenditures for additions to long-lived assets..... -- 96,825 96,825 2001(2) Operating revenues...... $493,160 $71,313 $353,004 $ 75,458 $992,935 -- $ 992,935 Intersegment revenues... 1,294 1,735 -- 26,956 29,985 $ 84,400 $(114,385) -- Depreciation and amortization.......... 6,723 36 14,998 12,782 34,539 16,518 -- 51,057 Operating income (loss)................ (1,645) 11,109 33,373 (836) 42,001 -- -- 42,001 Loss on discontinued operations, net of tax benefit............... (44) -- -- -- (44) -- -- (44) Assets.................. -- 803,866 803,866 Total expenditures for additions to long-lived assets..... -- 107,933 107,933
- --------------- (1) MTL Petrolink Corp. was sold on May 15, 2002 as disclosed in Note 2. (2) Marine Transport Corporation was purchased on February 7, 2001, as discussed in Note 2. (3) During 2003, the Company contributed a subsidiary from the Oil and Chemical Distribution and Transportation Services segment to the Other segment. Intersegment revenues and depreciation and amortization expenses have been restated for the years ended December 31, 2002 and 2001 to reflect this transaction. There was no effect on the operating income of either of these segments. (4) The Liner Services segment has been restated in 2002 and 2001 for discontinued operations. See Note 4. 65 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) GEOGRAPHIC AREA INFORMATION Revenues are attributed to the United States and to all foreign countries based on the port of origin for the ocean transportation of the carriage of cargo and the location of service provided for all other operations. Revenues from external customers attributable to an individual country, other than the United States, were not material for disclosure. The Company has restated its foreign revenues for the years ended December 31, 2002 and 2001, to include certain foreign revenues previously classified as United States revenue. Operating revenue from external customers and property and equipment, net information by geographic area are summarized as follows:
UNITED ALL FOREIGN CONSOLIDATED STATES COUNTRIES TOTAL -------- ----------- ------------ 2003 Operating revenues................................. $839,205 $138,802 $978,007 Property and equipment, net........................ 518,040 3,921 521,961 2002 Operating revenues................................. $838,779 $134,078 $972,857 Property and equipment, net........................ 546,854 4,753 551,607 2001 Operating revenues................................. $872,100 $120,835 $992,935 Property and equipment, net........................ 505,659 4,919 510,578
66 CROWLEY MARITIME CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) NOTE 21 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) Summary data relating to the results of operations for each quarter of the years ended December 31, 2003 and December 31, 2002 follows:
QUARTER ENDED ----------------------------------------- MARCH 31 JUNE 30 SEPT. 30 DEC. 31 -------- -------- -------- -------- 2003 Operating revenues.......................................... $220,010 $240,339 $274,518 $243,140 Operating income (loss)..................................... (1,882) 8,942 18,525 16,623 Income (loss) from continuing operations before discontinued operations and cumulative effect of change in accounting principles................................................ $ (3,261) $ 2,232 $ 7,899 $ 7,548 Income (loss) from discontinued operations, net of tax...... (856) 29 77 (427) Cumulative effect of change in accounting principle, net of tax....................................................... (420) -- -- -- -------- -------- -------- -------- Net income (loss)........................................... $ (4,537) $ 2,261 $ 7,976 $ 7,121 ======== ======== ======== ======== Basic earnings (loss) per common share: Income (loss) from continuing operations before discontinued operations and cumulative effect of change in accounting principles................................ $ (26.91) $ 13.52 $ 55.17 $ 52.78 Income (loss) from discontinued operations, net of tax.... (6.30) 0.22 0.56 (3.15) Cumulative effect of change in accounting principle, net of tax.................................................. (3.09) -- -- -- -------- -------- -------- -------- Net income (loss)......................................... $ (36.30) $ 13.74 $ 55.73 $ 49.63 ======== ======== ======== ======== Diluted earnings (loss) per common share: Income (loss) from continuing operations before discontinued operations and cumulative effect of change in accounting principles................................ $ (26.91) $ 13.52 $ 48.67 $ 46.65 Income (loss) from discontinued operations, net of tax.... (6.30) 0.22 0.47 (2.64) Cumulative effect of change in accounting principle, net of tax.................................................. (3.09) -- -- -- -------- -------- -------- -------- Net income (loss)......................................... $ (36.30) $ 13.74 $ 49.14 $ 44.01 ======== ======== ======== ======== 2002(1) Operating revenues.......................................... $224,798 $236,551 $273,252 $238,256 Operating income (loss)..................................... 478 (1,945) 29,236 12,855 Income (loss) from continuing operations before discontinued operations................................................ $ (1,749) $ (2,991) $ 15,920 $ 7,156 Income (loss) from discontinued operations, net of tax...... (962) 61 136 (299) -------- -------- -------- -------- Net income (loss)........................................... $ (2,711) $ (2,930) $ 16,056 $ 6,857 ======== ======== ======== ======== Basic earnings (loss) per common share: Income (loss) from continuing operations before discontinued operations................................. $ (16.07) $ (25.21) $ 114.19 $ 49.77 Income (loss) from discontinued operations, net of tax.... (7.07) 0.44 1.00 (2.20) -------- -------- -------- -------- Net income (loss)......................................... $ (23.14) $ (24.77) $ 115.19 $ 47.57 ======== ======== ======== ======== Diluted earnings (loss) per common share: Income (loss) from continuing operations before discontinued operations................................. $ (16.07) $ (25.21) $ 98.14 $ 44.14 Income (loss) from discontinued operations, net of tax.... (7.07) 0.44 0.83 (1.84) -------- -------- -------- -------- Net income (loss)......................................... $ (23.14) $ (24.77) $ 98.97 $ 42.30 ======== ======== ======== ========
- --------------- (1) MTL Petrolink Corp. was sold on May 15, 2002 as disclosed in Note 2. 67 SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 2003 (IN THOUSANDS) ALLOWANCE FOR BAD DEBTS:
BALANCE AT CHARGED TO RECOVERIES, BALANCE AT BEGINNING COSTS AND OTHER DEDUCTIONS END OF YEAR(3) OF YEAR EXPENSES ADDITIONS CHARGEOFFS YEAR - ------- ---------- ---------- --------- ----------- ---------- 2001........................... $8,732 $2,284 $707(1) $(2,016) $9,707 2002........................... 9,707 4,717 (93)(2) (5,494) 8,837 2003........................... 8,837 4,008 -- (3,724) 9,121
- --------------- (1) Represents the allowance for doubtful accounts acquired through the acquisition of Marine Transport Corporation. (2) Represents the allowance for doubtful accounts disposed of through the sale of MTL Petrolink Corp. (3) 2002 and 2001 have been restated for discontinued operations. See Note 4 of the Notes to Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data. 2003 COMPARED WITH 2002 The Company's provision for doubtful accounts decreased $709 to $4,008 in 2003 compared with $4,717 in 2002. In 2003, two of the Company's customers filed for bankruptcy and the Company has taken legal action against three separate customers. As a result, the Company wrote-off those accounts. The Company also settled a receivable with a major customer resulting in a writeoff of a portion of the receivable. 2002 COMPARED WITH 2001 The Company's provision for doubtful accounts increased $2,433 to $4,717 in 2002 compared with $2,284 in 2001. In 2002, four of the Company's customers filed for bankruptcy and as a result, the Company wrote-off those accounts. The Company has legal action against five customers resulting in the writeoff of those accounts. The Company attributes these circumstances to a weak economy in 2002. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES The Company's management, including its principal executive officer (who is the Chief Executive Officer) and the principal financial officer (who is the Vice President, Tax and Audit), have conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based on that evaluation, the Company's principal executive officer and the principal financial officer concluded that such disclosure controls and procedures are effective, as of the end of the period covered by this Annual Report on Form 10-K, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. No change in the Company's internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the Company's fourth fiscal quarter has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 69 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) Information concerning directors of the Company appears in the Company's Proxy Statement to be filed with the Securities Exchange Commission in connection with the Company's 2004 Annual Meeting of Stockholders (the "Proxy Statement") under "Nominees for Election as Directors." This portion of the Proxy Statement is incorporated herein by reference. (b) For information with respect to Executive Officers, see "Item 1. Business -- Executive Officers of the Registrant" of this Annual Report on Form 10-K. (c) Information concerning Section 16(a) beneficial ownership reporting compliance appears in the Proxy Statement under "Section 16(a) Beneficial Ownership Reporting Compliance." This portion of the Proxy Statement is incorporated herein by reference. (d) Gary L. Depolo and Leland S. Prussia, both of whom serve on the Audit Committee of the Board of Directors of the Company, have been designated by the Board of Directors as "audit committee financial experts" (as such term has been defined in Item 401(h) of Regulation S-K of the Securities and Exchange Commission). Messrs. Depolo and Prussia are "independent" as that term is used in Rule 4200(a)(15) of the NASDAQ Stock Market's listing rules. (e) Information concerning procedures for making recommendations for director nominees appears in the Proxy Statement under "Nominating Committee." This portion of the Proxy Statement is incorporated herein by reference. (f) On October 2, 2003, we adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed with this Annual Report on Form 10-K as Exhibit 14. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is hereby incorporated by reference from the Proxy Statement under the captions "Compensation of Directors", "Compensation Committee Interlocks and Insider Participation" and "Executive Compensation". ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is hereby incorporated by reference from the Proxy Statement under the caption "Security Ownership of Certain Beneficial Owners and Management". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is hereby incorporated by reference from the Proxy Statement under the caption "Certain Relationships and Related Transactions". ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this item is hereby incorporated by reference from the Proxy Statement under the caption "Auditors". 70 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: 1. Consolidated financial statements: See Table of Contents to "Item 8. Financial Statements and Supplementary Data". 2. Consolidated financial statement schedules: Schedule II -- Valuation and Qualifying Accounts for each of the three years in the period ended December 2003. All other schedules are omitted because they are not required or the information is included in the consolidated financial statements. 3. Exhibits.
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.1 Acquisition Agreement for MTL Petrolink Corp. by and among Marine Transport Corporation, as Seller, American Eagle Tankers Inc. Limited, as Buyer, and Crowley Maritime Corporation, as Guarantor, dated April 29, 2002** 3.1 Certificate of Amendment of Restated Certificate of Incorporation of Crowley Maritime Corporation* 3.2 Certificate of Amendment of Restated Certificate of Incorporation of Crowley Maritime Corporation* 3.3 Restated Certificate of Incorporation of Crowley Maritime Corporation* 3.4 Restated By-Laws of Crowley Maritime Corporation* 4.1 Form of Common Stock certificate* 4.2 Loan Agreement Providing for a Secured Term Loan up to $115,000,000 between Crowley Marine Services, Inc., as Borrower, the Banks and Financial Institutions listed on Schedule I hereto, as Lenders, and Den Norske Bank ASA, and Crowley Maritime Corporation, as Guarantor, dated December 24, 2003 and Amendment No. 1 thereto made at March 15, 2004(1)(2) 10.1 $115,000,000 Amended and Restated Credit Agreement* 10.1.1 Amendment No. 1 to the $115,000,000 Amended and Restated Credit Agreement**** 10.1.2 $95,000,000 Second Amended and Restated Credit Agreement Dated February 27, 2004 10.2 Crowley Maritime Corporation Deferred Compensation Plan as amended and restated*# 10.3 Crowley Maritime Corporation Deferred Compensation Plan Trust Agreement as amended*# 10.4 Crowley Maritime Corporation 2001 Management Incentive Plan*# 10.5 Individual Executive Benefit Agreement between Crowley Maritime Corporation and James B. Rettig*# 10.6 Split Dollar Life Insurance Agreement between Crowley Maritime Corporation and Thomas B. Crowley, Jr. dated as of April 1, 1992*# 10.7 Amendment to Split Dollar Life Insurance Agreement between Crowley Maritime Corporation and Thomas B. Crowley, Jr. dated as of May 1, 1995*# 10.8 Second Amendment to Split Dollar Life Insurance Agreement between Crowley Maritime Corporation and Thomas B. Crowley, Jr., as Trustee of the Thomas B. Crowley, Jr. Revocable Trust u/t/a dtd. July 1, 1998 by and between Thomas B. Crowley, Jr., as trustor and as trustee, dated as of July 20, 1998*# 10.9 Split Dollar Life Insurance Agreement (1035 Exchange Policy) between Crowley Maritime Corporation and Thomas B. Crowley, Jr. dated as of July 20, 1998*# 10.10 Split Dollar Life Insurance Agreement (New Policies) between Crowley Maritime Corporation and Thomas B. Crowley, Jr. dated as of July 20, 1998*# 10.11 Split Dollar Life Insurance Agreement between Crowley Maritime Corporation, Thomas B. Crowley, Jr. and Christine S. Crowley, as Distributing Trustee of the 1998 Crowley Family Generation -- Skipping Trust u/t/d dtd/ November 12, 1998 by and between Thomas B. Crowley, Jr., as trustor and as trustee, dated as of November 24, 1998*#
71
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.12 Letter Agreement and Consents regarding $115,000,000 Amended and Restated Credit Agreement*** 10.14 Settlement Agreement, dated as of December 23, 2003, between Crowley Maritime Corporation and Thomas B. Crowley, Jr.(3) 10.15 Crowley Maritime Corporation 2004 Management Incentive Plan, dated March 10, 2004 11 Statement regarding computation of per share earnings (incorporated herein by reference to Note 15 to the Crowley Maritime Corporation Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Registration Statement) 14 Crowley Maritime Corporation Code of Ethics for Chief Executive Officer and Senior Financial Officers 21 Subsidiaries of Crowley Maritime Corporation 31.1 Rules 13a-14(a) and 15d-14a Certification (Chief Executive Officer) 31.2 Rules 13a-14(a) and 15d-14a Certification (Chief Financial Officer) 32.1 Section 1350 Certifications
- --------------- (1) Neither the Company nor its subsidiaries are parties to any other instrument with respect to long-term debt for which the securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. Copies of instruments with respect to long-term debt of lesser amounts will be provided to the Securities and Exchange Commission upon request. (2) Schedules and exhibits listed in the table of contents for this agreement have been omitted. Copies thereof will be furnished supplementally to the Securities and Exchange Commission upon request. (3) Schedule A (Policies on Life of the Survivor of Thomas B. and Molly Crowley) and Schedule B (Bank Loan) have been omitted. Copies thereof will be furnished supplementally to the Securities and Exchange Commission upon request. * Incorporated by reference to the indicated exhibit to the Company's Registration Statement on Form 10 filed April 1, 2002. ** Incorporated by reference to the indicated exhibit to Amendment No. 1 of the Company's Registration Statement on Form 10 filed June 4, 2002. *** Incorporated by reference to the indicated exhibit to the Company's Form 10-Q for the quarter ended June 30, 2002. **** Incorporated by reference to the indicated exhibit to the Company's Form 10-Q for the quarter ended September 30, 2003. # Management contract or compensatory plan or arrangement. (b) Reports on Form 8-K On October 28, 2003 and December 3, 2003, the Company furnished a report on Form 8-K pursuant to Item 9 Regulation FD Disclosure, which disclosed, respectively, acquisition discussions and related litigation commenced by third parties. 72 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CROWLEY MARITIME CORPORATION By: /s/ THOMAS B. CROWLEY, JR. ------------------------------------ Thomas B. Crowley, Jr. Chairman of the Board, President and Chief Executive Officer Date: March 18, 2004 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.
By: /s/ THOMAS B. CROWLEY, JR. Chairman of the Board, Date: March 18, 2004 ------------------------------ President and Chief Executive Thomas B. Crowley, Jr. Officer (Principal Executive Officer) By: /s/ RICHARD L. SWINTON Vice President, Tax and Audit Date: March 18, 2004 ------------------------------ (Principal Financial and Richard L. Swinton Accounting Officer) By: /s/ WILLIAM A. PENNELLA Vice Chairman of the Board Date: March 18, 2004 ------------------------------ and Executive Vice President William A. Pennella By: /s/ PHILIP E. BOWLES Director Date: March 17, 2004 ------------------------------ Philip E. Bowles By: /s/ MOLLY M. CROWLEY Director Date: March 18, 2004 ------------------------------ Molly M. Crowley By: /s/ GARY L. DEPOLO Director Date: March 17, 2004 ------------------------------ Gary L. Depolo By: /s/ EARL T. KIVETT Director Date: March 17, 2004 ------------------------------ Earl T. Kivett By: /s/ LELAND S. PRUSSIA Director Date: March 18, 2004 ------------------------------ Leland S. Prussia By: /s/ CAMERON W. WOLFE, JR. Director Date: March 17, 2004 ------------------------------ Cameron W. Wolfe, Jr.
73 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 Acquisition Agreement for MTL Petrolink Corp. by and among Marine Transport Corporation, as Seller, American Eagle Tankers Inc. Limited, as Buyer, and Crowley Maritime Corporation, as Guarantor, dated April 29, 2002** 3.1 Certificate of Amendment of Restated Certificate of Incorporation of Crowley Maritime Corporation* 3.2 Certificate of Amendment of Restated Certificate of Incorporation of Crowley Maritime Corporation* 3.3 Restated Certificate of Incorporation of Crowley Maritime Corporation* 3.4 Restated By-Laws of Crowley Maritime Corporation* 4.1 Form of Common Stock certificate* 4.2 Loan Agreement Providing for a Secured Term Loan up to $115,000,000 between Crowley Marine Services, Inc., as Borrower, the Banks and Financial Institutions listed on Schedule I hereto, as Lenders, and Den Norske Bank ASA, and Crowley Maritime Corporation, as Guarantor, dated December 24, 2003, and Amendment No. 1 thereto made as of March 15, 2004(1)(2) 10.1 $115,000,000 Amended and Restated Credit Agreement* 10.1.1 Amendment No. 1 to the $115,000,000 Amended and Restated Credit Agreement**** 10.1.2 $95,000,000 Second Amended and Restated Credit Agreement Dated February 27, 2004 10.2 Crowley Maritime Corporation Deferred Compensation Plan as amended and restated*# 10.3 Crowley Maritime Corporation Deferred Compensation Plan Trust Agreement as amended*# 10.4 Crowley Maritime Corporation 2001 Management Incentive Plan*# 10.5 Individual Executive Benefit Agreement between Crowley Maritime Corporation and James B. Rettig*# 10.6 Split Dollar Life Insurance Agreement between Crowley Maritime Corporation and Thomas B. Crowley, Jr. dated as of April 1, 1992*# 10.7 Amendment to Split Dollar Life Insurance Agreement between Crowley Maritime Corporation and Thomas B. Crowley, Jr. dated as of May 1, 1995*# 10.8 Second Amendment to Split Dollar Life Insurance Agreement between Crowley Maritime Corporation and Thomas B. Crowley, Jr., as Trustee of the Thomas B. Crowley, Jr. Revocable Trust u/t/a dtd. July 1, 1998 by and between Thomas B. Crowley, Jr., as trustor and as trustee, dated as of July 20, 1998*# 10.9 Split Dollar Life Insurance Agreement (1035 Exchange Policy) between Crowley Maritime Corporation and Thomas B. Crowley, Jr. dated as of July 20, 1998*# 10.10 Split Dollar Life Insurance Agreement (New Policies) between Crowley Maritime Corporation and Thomas B. Crowley, Jr. dated as of July 20, 1998*# 10.11 Split Dollar Life Insurance Agreement between Crowley Maritime Corporation, Thomas B. Crowley, Jr. and Christine S. Crowley, as Distributing Trustee of the 1998 Crowley Family Generation -- Skipping Trust u/t/d dtd/ November 12, 1998 by and between Thomas B. Crowley, Jr., as trustor and as trustee, dated as of November 24, 1998*# 10.12 Letter Agreement and Consents regarding $115,000,000 Amended and Restated Credit Agreement*** 10.14 Settlement Agreement, dated as of December 23, 2003, between Crowley Maritime Corporation and Thomas B. Crowley, Jr.(3) 10.15 Crowley Maritime Corporation 2004 Management Incentive Plan, dated March 10, 2004 11 Statement regarding computation of per share earnings (incorporated herein by reference to Note 15 to the Crowley Maritime Corporation Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of this Registration Statement)
74
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 14 Crowley Maritime Corporation Code of Ethics for Chief Executive Officer and Senior Financial Officers 21 Subsidiaries of Crowley Maritime Corporation 31.1 Rules 13a-14(a) and 15d-14a Certification (Chief Executive Officer) 31.2 Rules 13a-14(a) and 15d-14a Certification (Chief Financial Officer) 32.1 Section 1350 Certifications
- --------------- (1) Neither the Company nor its subsidiaries are parties to any other instrument with respect to long-term debt for which the securities authorized thereunder does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. Copies of instruments with respect to long-term debt of lesser amounts will be provided to the Securities and Exchange Commission upon request. (2) Schedules and exhibits listed in the table of contents for this agreement have been omitted. Copies thereof will be furnished supplementally to the Securities and Exchange Commission upon request. (3) Schedule A (Policies on Life of the Survivor of Thomas B. and Molly Crowley) and Schedule B (Bank Loan) have been omitted. Copies thereof will be furnished supplementally to the Securities and Exchange Commission upon request. * Incorporated by reference to the indicated exhibit to the Company's Registration Statement on Form 10 filed April 1, 2002. ** Incorporated by reference to the indicated exhibit to Amendment No. 1 of the Company's Registration Statement on Form 10 filed June 4, 2002. *** Incorporated by reference to the indicated exhibit to the Company's Form 10-Q for the quarter ended June 30, 2002. **** Incorporated by reference to the indicated exhibit to the Company's Form 10-Q for the quarter ended September 30, 2003. # Management contract or compensatory plan or arrangement. 75 EX-4.2 3 y93312exv4w2.txt LOAN AGREEMENT EXHIBIT 4.2 ----------------------------------------------------- LOAN AGREEMENT PROVIDING FOR A SECURED TERM LOAN OF UP TO $115,000,000 CROWLEY MARINE SERVICES, INC., as Borrower, AND The Banks and Financial Institutions listed on Schedule I hereto, as Lenders, AND DEN NORSKE BANK ASA, acting through its New York branch, as Administrative Agent and Security Trustee, AND CROWLEY MARITIME CORPORATION, as Guarantor ----------------------------------------------------- December 24, 2003 TABLE OF CONTENTS
Page ---- 1. DEFINITIONS AND ACCOUNTING TERMS.............................................. 1 1.01. Certain Defined Terms................................................ 1 1.02. Computation of Time Periods.......................................... 19 1.03. Accounting Terms..................................................... 19 2. AMOUNTS AND TERMS OF THE ADVANCES............................................. 19 2.01. The Loan............................................................. 19 2.02. Making the Loan...................................................... 19 2.03. Fees................................................................. 20 (a) Upfront Fees................................................ 20 (b) Agents' Fees................................................ 20 2.04. Interest............................................................. 20 (a) Scheduled Interest.......................................... 20 (b) Default Interest............................................ 21 2.05. Repayments........................................................... 21 2.06. Prepayments.......................................................... 21 (a) Optional.................................................... 21 (b) Mandatory. Sale or Loss of Vessel........................... 22 2.07. Pro Rata Treatment................................................... 22 2.08. Increased Costs...................................................... 22 2.09. Illegality........................................................... 23 2.10. Payments and Computations............................................ 23 2.11. Taxes................................................................ 24 2.12. Sharing of Payments, Etc............................................. 26 2.13. Use of Proceeds...................................................... 27 3. CONDITIONS TO LENDING........................................................ 27 3.01. Conditions Precedent................................................. 27 (a) Corporate Authority......................................... 27 (b) The Agreement............................................... 27 (c) The Notes................................................... 27 (d) The Creditors............................................... 28 (e) Fees........................................................ 28 (f) Environmental Actions....................................... 28 (g) Legal Opinions.............................................. 28 (h) Officer's Certificate....................................... 28 (i) Vessel Documents............................................ 28 (j) Security Documents.......................................... 29 (k) Vessel Appraisals........................................... 29 (l) ISM DOC..................................................... 29
Page ---- (n) Vessel Liens................................................ 29 3.02. Further Conditions Precedent......................................... 29 (a) Drawdown Notice............................................. 29 (b) Representations and Warranties True......................... 30 (c) No Default.................................................. 30 (d) No Material Adverse Effect.................................. 30 3.03. Breakfunding Costs................................................... 30 3.04. Satisfaction after Drawdown.......................................... 30 4. REPRESENTATIONS AND WARRANTIES................................................ 30 4.01. Representations and Warranties....................................... 30 (a) Financial Condition; Ownership.............................. 30 (b) No Change................................................... 31 (c) Corporate Existence; Compliance with Law.................... 31 (d) Corporate Power; Authorization; Enforceable Obligations..... 31 (e) No Legal Bar................................................ 31 (f) No Material Litigation...................................... 32 (g) No Default.................................................. 32 (h) Ownership of Property; Liens................................ 32 (i) No Burdensome Restrictions.................................. 32 (j) Taxes....................................................... 32 (k) Federal Margin Regulations.................................. 33 (l) ERISA Matters............................................... 33 (m) Investment Company Act...................................... 33 (n) Subsidiaries................................................ 33 (o) Environmental Matters....................................... 34 (p) Vessels..................................................... 35 (q) Equity Ownership............................................ 35 (r) Compliance with ISM Code and ISPS Code...................... 35 (s) Threatened Withdrawal of DOC or SMC......................... 35 (t) Insurance................................................... 35 (u) Foreign Trade Control Regulations........................... 35 (v) Indebtedness................................................ 36 (w) Payment Free of Taxes....................................... 36 (x) No Proceedings to Dissolve.................................. 36 (y) Solvency.................................................... 36 (z) Survival.................................................... 36 5. COVENANTS OF THE LOAN PARTIES................................................. 36 5.01. Affirmative Covenants................................................ 36 (a) Financial Statements........................................ 36 (b) Certificates; Other Information............................. 37 (c) Vessel Valuations........................................... 38 (d) Payment of Obligations...................................... 39 (e) Conduct of Business and Maintenance of Existence............ 39
iii
Page ---- (f) Maintenance of Property; Insurance.......................... 39 (g) Inspection of Property; Books and Records; Discussions...... 39 (h) Notices..................................................... 40 (i) Environmental Laws.......................................... 41 (j) Joint Venture Separateness.................................. 42 (k) Further Assurances.......................................... 42 (l) ISM Code and ISPS Code Matters.............................. 43 5.02. Negative Covenants................................................... 43 (a) Limitation on Indebtedness.................................. 43 (b) Limitation on Liens......................................... 44 (c) Limitation on Guaranty Obligations.......................... 46 (d) Limitations on Fundamental Changes.......................... 46 (e) Limitation on Sale of Assets................................ 47 (f) Limitation on Dividends and Other Payments.................. 48 (g) Limitation on Investments, Loans and Advances............... 48 (h) Transactions with Affiliates................................ 49 (i) Sale and Leaseback.......................................... 49 (j) Negative Pledge Agreements.................................. 49 (k) Joint Ventures.............................................. 50 (l) Change of Class or Ownership................................ 50 (m) Change of Control........................................... 50 (n) Ownership of Borrower....................................... 50 (o) Ownership of Material Subsidiaries.......................... 50 5.03. Financial Covenants.................................................. 50 (a) Net Debt to EBITDA Ratio.................................... 51 (b) Interest Coverage Ratio..................................... 51 (c) Consolidated Net Worth...................................... 51 5.04. Asset Maintenance.................................................... 51 6. EVENTS OF DEFAULT............................................................. 51 6.01. Events of Default.................................................... 51 7. GUARANTY...................................................................... 54 7.01. Guaranty............................................................. 54 7.02. Obligations Unconditional............................................ 55 7.03. Reinstatement........................................................ 56 7.04. Subrogation.......................................................... 56 7.05. Remedies............................................................. 56 7.06. Instrument for the Payment of Money.................................. 56 7.07. Continuing Guarantee................................................. 56 8. THE ADMINISTRATIVE AGENT AND THE SECURITY TRUSTEE............................. 56 8.01. Authorization and Action............................................. 56 8.02. Agent's Reliance, Etc................................................ 57
iv
Page ---- 8.03. Lender Credit Decision............................................... 58 8.04. Indemnification...................................................... 58 8.05. Successor Agents..................................................... 58 9. MISCELLANEOUS................................................................. 59 9.01. Amendments, Etc...................................................... 59 9.02. Notices, Etc......................................................... 60 9.03. No Waiver; Remedies.................................................. 60 9.04. Costs and Expenses................................................... 60 9.05. Right of Set-off..................................................... 62 9.06. Binding Effect....................................................... 62 9.07. Assignments and Participations....................................... 62 9.08. Fraudulent Conveyances; Fraudulent Transfers......................... 65 9.09. Certain Changes in GAAP.............................................. 66 9.10. Confidentiality...................................................... 66 9.11. Governing Law........................................................ 66 9.12. Execution in Counterparts............................................ 66 9.13. Jurisdiction, Etc.................................................... 66 9.14. WAIVER OF JURY TRIAL................................................. 67
v Schedules Schedule I - Lenders and Commitments Schedule II - Vessels Schedule III - Existing Indebtedness; Guaranty Obligations; Liens Schedule IV - Approved Shipbrokers Schedule V - Ownership of the Guarantor Schedule VI - Disclosed Litigation Schedule VII - Subsidiaries of the Guarantor Exhibits Exhibit A - Form of Promissory Note Exhibit B - Form of Drawdown Notice Exhibit C - Form of Assignment and Acceptance Exhibit D - Form of Ship Mortgage Exhibit E - Form of Assignment of Insurances Exhibit F - Form of Compliance Certificate Exhibit G Form of Assignment of Requisition Compensation vi LOAN AGREEMENT LOAN AGREEMENT dated as of December 24, 2003 among (1) CROWLEY MARINE SERVICES, INC., a corporation organized and existing under the laws of State of Delaware, as borrower (the "Borrower"), (2) CROWLEY MARITIME CORPORATION, a corporation organized and existing under the laws of State of Delaware, as guarantor ("CMC" or the "Guarantor"), (3) the banks and financial institutions and other institutional lenders listed on Schedule I hereto, as lenders (together with any assignee pursuant to Section 9.07, the "Lenders" and each a "Lender") and (4) Den norske Bank ASA, acting through its New York branch ("DnB") as administrative agent for the Lenders (in such capacity, the "Administrative Agent") and as security trustee (in such capacity, the "Security Trustee"). WITNESSETH THAT: WHEREAS, at the request of the Borrower, each of the Agents have agreed to serve in such capacities under the terms of this Agreement and the Lenders have agreed to provide to the Borrower a secured term loan in the amount of up to One Hundred Fifteen Million United States Dollars (US$115,000,000); NOW, THEREFORE, in consideration of the premises set forth above, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as set forth below: (II) DEFINITIONS AND ACCOUNTING TERMS (iii) Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Administrative Agent" shall have the meaning ascribed thereto in the preamble. "Affiliate" means, with respect to any Person, (a) any Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person, or (b) any Person who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person shall mean the power, direct or indirect, (i) to vote 10% or more of the securities or other interests having ordinary voting power for the election of directors of such Person or of Persons serving a similar function, or (ii) to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agent" means either the Administrative Agent or the Security Trustee, as the context requires. "Agreement" means this Loan Agreement, as amended from time to time in accordance with the terms hereof. "Applicable Rate" means any rate of interest applicable to the Loan from time to time pursuant to Section 2.04. "Asset Dispositions" has the meaning specified in Section 5.02(e). "Assignments" means the Assignment of Requisition Compensation and the Assignment of Insurances. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit C hereto. "Assignment Notice" means the notice with respect to the Assignment of Insurances substantially in the form set out in Exhibit 3 thereto. "Assignment of Insurances" means, with respect to any Vessel, an assignment of insurances in substantially the form of Exhibit E hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with this Agreement. "Assignment of Requisition means, with respect to any Vessel, an assignment Compensation" of requisition compensation in substantially the form set out in Exhibit G hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with this Agreement. "Banking Day" means a day of the year on which banks are not required or authorized by law to close in New York City, London, England or Frankfurt, Germany. "Capital Stock" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. 2 "Cash Equivalents" shall mean (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender and certificates of deposit with maturities of one year or less from the date of acquisition and overnight bank deposits of any other commercial bank having capital and surplus in excess of $200,000,000, (c) commercial paper of any issuer rated at least A-2 by Standard & Poor's Ratings Group or P-2 by Moody's Investors Service, Inc., (d) additional money market investments with maturities of one year or less from the date of acquisition rated at least A-1 or AA by Standard & Poor's Ratings Group or P-1 or Aa by Moody's Investors Service, Inc. and (e) tax-exempt debt obligations of any State of the United States or of any county or other municipal governmental subdivision of any State of the United States with maturities of one year or less from the date of acquisition rated at the highest investment grade rating by Standard & Poor's Ratings Group or by Moody's Investors Service, Inc., or publicly traded or open-end bond funds that invest exclusively in such tax-exempt debt obligations. "Change in Control" means the failure of the Crowley Family to have the power to vote or cause to be voted, directly or indirectly, in the aggregate at least 51% of the voting stock of CMC. "Classification Society" means American Bureau of Shipping. "Closing Date" means the day and year first written above. "CMC" has the meaning specified in the recital of parties to this Agreement. "Collateral" means the Vessels and all other property of the Borrower secured by, or intended to be secured by, the Security Documents and all other property that is or is intended to be subject to any Lien in favor of the Security Trustee for the benefit of the Creditors. "Commitment" means, with respect to any Lender at any time, the portion of the Loan set out opposite such Lender's name on Schedule I hereto under the caption "Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register 3 maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender's "Commitment"; "Compliance Certificate" means a certificate in the form set out in Exhibit F, or in such other form as the Administrative Agent may agree, certifying the compliance by each of the Loan Parties with all of the covenants contained herein and showing the calculations thereof, which certificate shall be executed and delivered by a Responsible Officer of CMC or the designee thereof to the Administrative Agent with sufficient copies for the other Creditors, to be distributed to the other Creditors by the Administrative Agent promptly upon receipt thereof pursuant to Section 5.01(b)(ii). "Confidential Information" means information that any Loan Party furnishes to any Agent or any Lender in a writing designated as confidential, but does not include any such information that is or becomes generally available to the public or that is or becomes available to such Agent or such Lender from a source other than the Loan Parties. "Consolidated" refers to the consolidation of accounts in accordance with GAAP. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Creditors" means the Agents and the Lenders. "Crowley Family" means all of the following Persons: (i) Thomas B. Crowley, Jr., an individual residing as of the date hereof in Oakland, California, together with all Persons who are now or hereafter relatives of such Person; and (ii) all trusts, conservatorships and estates of or for the benefit of the Persons described in clause (i) of this defined term. (For purposes of this definition, "relative" means any individual related by affinity or consanguinity within the fourth degree as determined by the common law, or any individual in a step or adoptive relationship within such fourth degree.) "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. 4 "Default Rate" means a rate per annum equal to two percent (2%) over the Applicable Rate then in effect. "Disclosed Litigation" has the meaning specified in Section 4.01(f). "DnB" has the meaning specified in the recital of parties to this Agreement. "DOC" means a document of compliance issued to an Operator in accordance with rule 13 of the ISM Code. "Dollars" and the "$" sign each means lawful money of the United States. "Drawdown Date" means the date, being a Banking Day, upon which the Borrower has requested that the Loan be made available to the Borrower, and the Loan is made, as provided in Section 2.02. "Drawdown Notice" has the meaning specified in Section 2.02. "EBITDA" means the operating income plus the sum of (a) depreciation expense and (b) amortization expense as reflected in the "Consolidated Statement of Operations" of CMC prepared in accordance with GAAP; provided that EBITDA shall be calculated on a rolling basis for the four fiscal quarters most recently ended. "Eligible Assignee" means (i) a Lender; (ii) a direct or indirect wholly owned Subsidiary of any Lender or the controlling corporation of such Lender; (iii) any commercial bank organized under the laws of the United States, or any State thereof, and having combined capital and surplus in excess of $1,000,000,000; (iv) any commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development ("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 combined capital and surplus in excess of $1,000,000,000, so long as such bank is acting through a branch or agency located in the United States, in the Cayman Islands or in the country in which it is organized or another country that is described in this clause (iv); and (v) any other Person approved by the Administrative Agent and the Borrower, such approval not 5 to be unreasonably withheld; provided, however, that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee. "Environmental Action" means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to public health, public safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "Environmental Law" means any Federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any Person that for purposes of Title IV of ERISA is a member of CMC's controlled group, or under common control with CMC, within the meaning of Section 414 of the Internal Revenue Code. "ERISA Event" means (a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met 6 with a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of CMC or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by CMC or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for the imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, a Plan. "Event(s) of Default" has the meaning specified in Section 6.01. "Existing Credit Facility" means that certain amended and restated credit facility dated as of November 2, 2001 by and among (i) CMC, as borrower, (ii) the initial lenders named therein, as initial lenders, (iii) Citicorp USA, Inc., as administrative agent and collateral agent, (iv) Citigroup Global Markets Inc. (formerly known as Salomon Smith Barney Inc.), as arranger, and (v) Citibank, N.A., as issuing bank and swing line bank, as amended, supplemented or modified from time to time. "Fair Market Value" shall mean in respect of any Vessel, the appraisal of such Vessel, on a stand alone basis, free and clear of any liens, or other encumbrances and with no value given to any pooling arrangements other than as specifically provided herein, from any ship broker listed on Schedule IV or such independent ship brokers approved by the Majority Lenders, no such appraisal to be dated more than thirty (30) days 7 prior to the date on which such appraisal is required pursuant to this Agreement. "Fee Letter" means that certain letter agreement of even date herewith entered into between the Borrower and the Administration Agent. "Financing Lease" means any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "GAAP" has the meaning specified in Section 1.03. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantor" has the meaning specified in the recital of parties to this Agreement. "Guaranty Obligation" means, as to any Person (the "guaranteeing person"), (a) any obligation of (i) the guaranteeing person or (ii) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case if such obligation is guaranteeing or in effect guaranteeing any Indebtedness, or leases, dividends or other obligations which are substitutes for or equivalents of Indebtedness (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (A) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (B) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (C) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (D) otherwise to assure or hold harmless the owner of any such primary 8 obligation against loss in respect thereof and (b) all obligations of such Person in respect of mandatory contributions to capital (including without limitation as a result of calls for capital or otherwise) of any Joint Venture of such Person; provided, however, that the term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation of any guaranteeing person shall be deemed to be the lower of (x) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made and (y) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guaranty Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guaranty Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by any Loan Party in good faith. "Hamburg Sud" means Hamburg-Sudamerikanische Dampfschiffahrts-gesellschaft Eggert & Amsinck. "Hazardous Materials" means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. "Indebtedness" of any Person at any date means, without duplication, (a) all indebtedness of such Person for borrowed money (other than current trade liabilities, customer advances and customer deposits incurred in the ordinary course of business and payable in accordance with customary practices) or which is evidenced by a note, bond, debenture or similar instrument, (b) the portion of the obligations of such Person under Financing Leases included as indebtedness on the balance sheet of such Person in accordance with GAAP, (c) the portion of the obligations of such Person in respect of acceptances issued or created for the account of such Person included as indebtedness on the balance sheet of such Person in accordance with GAAP, (d) all reimbursement or counter indemnity obligations of such Person in respect of amounts already paid under letters of 9 credit, guarantees or similar instruments backing another Person's obligations of the types described in the foregoing clauses (a), (b) and (c), and (e) the aggregate Non-Qualified Partnership Liabilities of such Person. "Initial Repayment Date" means the date which falls on the three month anniversary of the Closing Date or if such date is not a Banking Day, the next following Banking Day, unless such next following Banking Day falls in the following calendar month, in which case the Initial Payment Date shall be the immediately preceding Banking Day. "Insufficiency" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "Interest Period" means the period commencing on the Drawdown Date and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, three or six months, as the Borrower may, upon notice received by the Administrative Agent not later than 1:00 P.M. (New York City time) on the third Banking Day prior to the first day of such Interest Period, select, or such other Interest Period as the Borrower and the Administrative Agent may agree; provided, however, that: (i) the Borrower may not select any Interest Period that ends after the Termination Date; (ii) whenever the last day of any Interest Period would otherwise occur on a day other than a Banking Day, the last day of such Interest Period shall be extended to occur on the next succeeding Banking Day; provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Banking Day; (iii) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of 10 months equal to the number of months in such Interest Period, such Interest Period shall end on the last Banking Day of such succeeding calendar month; and (iv) if at the end of any then existing Interest Period, the Borrower fails to give notice of a selected Interest Period or an Event of Default shall have occurred and be continuing, the relevant Interest Period shall be one month or such other period as the Administrative Agent may select. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Investment" has the meaning specified in Section 5.02(g). "ISM Code" shall mean the International Safety Management Code for the Safe Operating of Ships and for Pollution Prevention constituted pursuant to Resolution A.741(18) of the International Maritime Organization and incorporated into the Safety of Life at Sea Convention and includes any amendments or extensions thereto and any regulation issued pursuant thereto. "ISPS Code" shall mean the International Ship and Port Facility Code adopted by the International Maritime Organization at a conference in December 2002 and amending the Safety of Life at Sea Convention and includes any amendments or extensions thereto and any regulation issued pursuant thereto. "ISSC" shall mean the International Ship Security Certificate issued pursuant to the ISPS Code. "Joint Venture" has the meaning specified in Section 5.02(k). "Lenders" means the Lenders and each Person that shall become a party hereto pursuant to Sections 9.07. "LIBOR Rate" shall mean, with respect to any Interest Period, the rate per annum determined by the Administrative Agent to be equal to the quotient (rounded upwards, if necessary, to the next higher 1/16 of 1%) of (y) (i) the rate of interest for deposits in Dollars for a period equal to the number of days in such Interest Period which appears as of 11:00 A.M., London 11 time, on the day that is two (2) Banking Days prior to the first day of such Interest Period, as displayed for Dollars on page LIBOR01 of the Reuters screen on such system or on any other system of the information vendor being designated by the British Bankers' Association to calculate the BBA Interest Settlement Rate (as defined in the British Bankers' Association Recommended Terms and Conditions dated August 1985) or (ii) if no rate is so displayed at such time, LIBOR shall be equal to the arithmetic mean (rounded upward if necessary to four decimal places) of the rates respectively quoted to the Administrative Agent by each of the Reference Banks as the offered rate for deposits of Dollars in an amount approximately equal to the amount in relation to which LIBOR is to be determined for a period equivalent to such Interest Period to prime banks in the London Interbank Market at or about 11:00 a.m. (London time) on the second LIBOR Reference Day before the first day of such period, divided by (z) a number equal to 1.00 minus the LIBOR Rate Reserve Percentage; "LIBOR Rate Reserve shall mean, for any day, the maximum percentage Percentage" (expressed as a decimal) specified from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirements (including, but not limited to, supplemental, marginal and emergency reserves) with respect to eurocurrency funding (currently referred to as "Eurocurrency Liabilities") of a member bank in such System. The LIBOR Rate shall be adjusted automatically with respect to any portion of the Loan outstanding on the effective date of any change in the LIBOR Rate Reserve Percentage, as of such effective date; "LIBOR Reference Date" shall mean the days on which banks in the London interbank market generally will provide quotations for deposits in Dollars; "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance to real property. "Loan" means the sum to be made available by the Lenders to the Borrower hereunder in a single advance on or prior to December 15, 2003 or such other date as the Lenders and the Borrower may agree, pursuant to Section 2.01 in the 12 aggregate principal amount of One Hundred and Fifteen Million Dollars ($115,000,000). "Loan Balance" means the Dollar amount of the Loan outstanding at any time. "Loan Documents" means this Agreement, the Notes and the Security Documents. "Loan Parties" means the Borrower and the Guarantor. "Loan Period" shall mean the period from the Closing Date to the Termination Date. "Majority Lenders" means at any time Lenders owed or holding in the aggregate fifty one percent (51%) in interest of the Loan at such time. "Margin" means a margin of one and five tenths of one percent (1.5%) per annum. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, condition (financial or otherwise), performance, properties or prospects of any Loan Party and its Restricted Subsidiaries taken as a whole, (b) the ability of any Loan Party and its Restricted Subsidiaries taken as a whole to perform the obligations under the Loan Documents or (c) the rights and remedies of any Agent or any Lender under any Loan Document. "Material Subsidiary" means a Subsidiary of CMC whose assets comprise of a material portion of the combined assets of, or whose revenues comprise a material portion of the combined revenue of, CMC and its Subsidiaries. "MTSA" shall mean the Maritime & Transportation Security Act, 2002, as amended, inter alia, by Public Law 107-295. "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which CMC or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of CMC or any ERISA Affiliate and at least one Person other than CMC and the ERISA Affiliates or (b) was 13 so maintained and in respect of which CMC or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Net Assets" means, as to any Loan Party or any Subsidiary at any time, the excess of (i) the total assets of such Person at such time over (ii) all net intercompany receivables owing to such Person at such time, in each case determined in accordance with GAAP. "Net Debt" means, as to CMC and its Consolidated Subsidiaries at any time, the aggregate sum (without double counting) of (i) all Indebtedness (as reflected on the consolidated balance sheet of the CMC), (ii) 300% of the amount equal to (A) the operating lease commitments shown in the footnotes to the most recent audited financial statements that are available at the end of the period delivered to the Lenders pursuant to Section 5.01(a)(i) to be contractually due in the subsequent fiscal year minus (B) that portion for which (x) Hamburg Sud is contractually obligated to pay pursuant to the Purchase Agreement and (y) in the reasonable discretion of the Administrative Agent, other entities are contractually obligated, for a period of no less than 12 months, for the sublease of the assets that are the subject of such operating lease commitments and (iii) Guaranty Obligations and contingent liabilities, minus 85% of cash and Cash Equivalents. "Net Revenue" means, as CMC or any Subsidiary of CMC for any period of determination, the excess of (i) the total revenue of such Person for such period over (ii) all intercompany revenue of such Person for such period, in each case determined in accordance with GAAP. "Net Worth" shall mean, with respect to CMC and its Subsidiaries, at any date for which a determination is to be made, the amount of Total Stockholders Equity (determined on a consolidated basis without duplication in accordance with GAAP). "Non-Qualified Partnership" means a Joint Venture, partnership or other entity in which CMC or any Restricted Subsidiary is a general partner or has general liability for the obligations of such entity, other than any Restricted Subsidiary which is a corporation and substantially all of whose assets consist of its interest in such Joint Venture, partnership or other entity. 14 "Non-Qualified Partnership of a Person at any time means, with respect to a Liability" Non-Qualified Partnership in which such Person has an interest, an amount equal to the amount by which (a) the aggregate amount of the total liabilities of such Non-Qualified Partnership at such time minus (without duplication) (i) the aggregate amount of such liabilities that are expressly agreed by the holders of such liabilities to be non-recourse to such Non-Qualified Partnership (the "Partnership Non-Recourse Liabilities") and (ii) the aggregate amount of such liabilities that are expressly agreed by the holders of such liabilities to be non-recourse to such Person (the "Partner Non-Recourse Liabilities") exceeds (b) 85% of the aggregate amount of the total tangible assets of such Non-Qualified Partnership at such time minus (without duplication) (x) the aggregate amount of the Partnership Non-Recourse Liabilities at such time and (y) the aggregate amount of the Partner Non-Recourse Liabilities at such time, as determined in accordance with GAAP. "Note(s)" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from portion of the Loan advanced by such Lender. "Obligations" means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(f). Without limiting the generality of the foregoing, the Obligations of any Loan Party under the Loan Documents include (a) the obligation to pay principal, interest (including interest accruing on or after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by such Loan Party under any Loan Document and (b) the obligation of such Loan Party to reimburse any amount in respect of any of the 15 foregoing that any Lender in its sole discretion, may elect to pay or advance on behalf of such Loan Party. "Operator" means, in respect of any Vessel, the Person who is concerned with the operation of such Vessel and falls within the definition of "Company" set out in rule 1.1.2 of the ISM Code. "Other Taxes" has the meaning set forth in Section 2.11(b). "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity of whatever nature, or a Governmental Authority. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Proceeding" has the meaning ascribed thereto in Section 6.01(f). "Pro Rata Share" of any amount means, with respect to any Lender at any time, the product of such amount times a fraction the numerator of which is the amount of such Lender's Commitment at such time and the denominator of which is the Loan Balance at such time. "Purchase Agreement" means the Sale and Purchase Agreement between Crowley American Transport, Inc. and Hamburg Sud dated as of October 18, 1999. "Reference Banks" means the Banks chosen from time to time by the British Bankers' Association for the purpose of establishing Interest Settlement Rates (as such term is defined in British Bankers' Association Recommended Terms and Conditions dated August 1985). "Register" has the meaning specified in Section 9.07(d). "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System. "Repayment Dates" means with respect to the Loan, the Initial Repayment Date and there after the dates falling at intervals of three (3) months after the Initial Repayment Date; if such Repayment 16 Date is not a Banking Day, the next following Banking Day, unless such next Banking Day falls in the following calendar month, in which case the relevant Repayment Date shall be the immediately preceding Banking Day. "Required Percentage" has the meaning specified in Section 5.04. "Requirement of Law" means as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" means the chief executive officer of any Loan Party, the president of any Loan Party , the general counsel of any Loan Party, any senior vice president of any Loan Party or any corporate vice president of any Loan Party having familiarity with the matters in respect of which such corporate vice president is acting as a Responsible Officer under this Agreement, or, with respect to financial matters, the chief financial officer of the any Loan Party, the treasurer of the any Loan Party or the chief accounting officer of any Loan Party. "Restricted Subsidiary" means each Subsidiary of CMC other than any Joint Venture. "Security Trustee" has the meaning specified in the recital of parties to this Agreement. "Security Documents" means the Ship Mortgage, the Assignment of Insurances, the Assignment of Requisition Compensation and any other agreement that creates or purports to create a Lien in favor of the Security Trustee for the benefit of the Creditors. "Ship Mortgage" means a first preferred United States Fleet Mortgage on the Vessels in substantially the form of Exhibit D hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with this Agreement. "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA Affiliate and no Person other than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower 17 or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "SMC" means the safety management certificate issued in respect of a Vessel in accordance with Rule 13 of the ISM Code. "subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate or other entity of which (or in which) more than 50% of (a) the issued and outstanding capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or a majority of other equivalent managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), or (b) the interest in the capital or profits of such limited liability company, partnership or joint venture, or (c) the beneficial interest in such trust or estate, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Subsidiary" means each and any subsidiary of CMC. "Taxes" has the meaning set forth in Section 2.11(a). "Termination Date" means such date which falls on the sixth anniversary of the Closing Date or, if such date is not a Banking Day, the Termination Date shall be the immediately preceding Banking Day. "Title XI Financing means any and all documents and agreements Agreements" executed by the Borrower or any Title XI Subsidiary evidencing obligations incurred in connection with any financing guaranteed under Title XI of the Merchant Marine Act of 1936, as amended. "Title XI Subsidiaries" means the collective reference to Crowley Liner Services, Inc., Vessel Management Services, Inc. and Crowley Marine Services, Inc. 18 "Vessels" means the Vessels listed on Schedule II hereto registered in the name of the Borrower; "Welfare Plan" means a welfare plan, as defined in Section 3(1) of ERISA. "Wholly Owned Subsidiary" means any Restricted Subsidiary of CMC, all of the outstanding equity interests in which are owned, directly or indirectly, by the Borrower or the Guarantor. "Withdrawal Liability" has the meaning specified in Part I of Subtitle E of Title IV of ERISA. (iv) Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". (v) Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles from time to time in effect in the United States ("GAAP"). (VI) AMOUNTS AND TERMS OF THE ADVANCES (vii) The Loan. Each of the Lenders, relying upon each of the representations and warranties set out in Section 4, hereby severally, and not jointly, agrees, on the terms and conditions of this Agreement, it will on the Drawdown Date make its portion of the Loan available through the Administrative Agent to the Borrower in an amount not to exceed its Commitment ratably with the other Lenders according to their respective Commitments. (viii) Making the Loan. (a) The Loan shall be made on notice, given not later than 11:00 A.M. (New York City time) on the third Banking Day prior to the date of the proposed Drawdown Date, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier. Such notice (the "Drawdown Notice") shall be by telephone, confirmed immediately in writing, or by telecopier, in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of the proposed borrowing, (ii) principal amount of the Loan to be made on such date, (iii) the initial Interest Period for the Loan and (iv) the disbursement instructions for the proceeds of the Loan. Each Lender shall, before 3:00 P.M. (New York City time) on the Drawdown Date, make available to the Administrative Agent, in same day funds, such Lender's ratable portion of the Loan. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Section 3, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's address referred to in Section 9.02. (b) The Drawdown Notice shall be irrevocable and binding on the Borrower. The Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the Drawdown Date the applicable conditions set forth in Section 3, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of 19 deposits or other funds acquired by such Lender to fund the Loan to be made by such Lender when such Loan, as a result of such failure, is not made on such date. (c) Unless the Administrative Agent shall have received notice from a Lender prior to the date of the Drawdown Date that such Lender will not make available to the Administrative Agent such Lender's ratable portion of the Loan, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the Drawdown Date in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to the Loan and (ii) in the case of such Lender, the LIBOR Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's advance as part of such Borrowing for purposes of this Agreement. (d) The failure of any Lender to make its portion of the Loan available shall not relieve any other Lender of its obligation, if any, hereunder to make its portion of the Loan available on the Drawdown Date, but no Lender shall be responsible for the failure of any other Lender to make its portion of the Loan available on the Drawdown Date. (ix) Fees (x) Upfront Fees. The Borrower shall pay to each Lender on the Closing Date an upfront fee on the Commitment of such Lender in an amount equal to (i) forty-five hundredths of one percent (0.45%) of any Commitments equal to or greater than Thirty Five Million Dollars ($35,000,000), (ii) forty hundredths of one percent (0.40%) of any Commitments equal to or greater than Thirty Million Dollars ($30,000,000) but less than Thirty Five Million Dollars ($35,000,000) or (iii) thirty-five hundredths of one percent (0.35%) of any Commitments equal to or greater than Twenty Million Dollars ($20,000,000) but less than Thirty Million Dollars ($30,000,000). (xi) Agents' Fees. The Borrower shall pay the Administrative Agent such fees for its services in such capacity the fees separately provided for in the Fee Letter. 1.04. Interest (xiii) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of the Loan Balance for the period commencing on the Drawdown Date until but not including the stated maturity thereof (whether by acceleration or otherwise) or the date of prepayment thereof at the Applicable Rate which shall be the rate per anum which is equal to the aggregate of (a) the LIBOR Rate for the relevant Interest Period plus (b) the Margin. The Applicable Rate with respect to the Loan shall be determined by the Administrative Agent 20 two Banking Days prior to the first day of each relevant Interest Period. The Administrative Agent shall promptly notify the Borrower and the Lenders in writing of the Applicable Rate and the duration of each Interest Period as and when determined. Each such determination, absent manifest error, shall be conclusive and binding upon the Borrower. (xiv) Default Interest. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on the unpaid principal amount of the Loan owing to each Lender, payable in arrears on the dates referred to in clause (c) below, at a rate per annum equal or greater to (A) the Default Rate and (B) the sum of (x) two percent (2%) plus (y) the Margin plus (z) the LIBOR Rate for overnight or weekend deposits, as applicable. In addition, the Borrower hereby promises to pay interest (to the extent that the payment of such interest shall be legally enforceable) on any overdue interest, and on any other amount payable by the Borrower hereunder which shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise), for the period commencing on the due date thereof until but not including the date the same is paid in full at the Default Rate. (c) Interest Payment Date. Except as provided in the next sentence, accrued interest on the Loan Balance shall be payable (i) on the last day of each Interest Period, except that if the Borrowers shall select an Interest Period in excess of three (3) months, accrued interest shall be payable during such Interest Period on each three (3) month anniversary of the commencement of such Interest Period and upon the last day of such Interest Period, and (ii) with each repayment of principal thereof. Interest payable at the Default Rate shall be payable from time to time on demand of the Administrative Agent. (xvi) Repayments. The Borrower agrees to repay the principal amount of the Loan with interest thereon in twenty-four (24) consecutive quarterly installments on the Repayment Dates commencing on the Initial Repayment Date, the first twenty-three (23) of which shall be in the principal amount of Two Million Eight Hundred and Seventy Five Thousand ($2,875,000) and the twenty-fourth (24) and last installment shall be in a principal amount sufficient to repay the unpaid principal amount of the Loan. Any amounts due under this Agreement not paid when due, whether by acceleration or otherwise, shall bear interest thereafter until paid at the Default Rate. (XVii) Prepayments. (xviii) Optional. The Borrower may, upon at least two Banking Days' notice to the Administration Agent (stating the proposed date and aggregate principal amount of the prepayment) prepay the principal of the Loan Balance in whole or in part together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $1,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) the Borrower shall be obligated to reimburse the Lenders or any thereof for any loss, cost or expense incurred by them as a result of a prepayment made on any day other than the last day of an Interest Period pursuant to Section 9.04(c). Prepayments made on the last day of any Interest Period shall be without penalty or premium. Any amounts received by the Lenders as a prepayment of principal of the Loan under this Section 2.06(a) shall be applied pro rata over the then remaining unpaid installments of the Loan . 21 (xix) Mandatory. Sale or Loss of Vessel Upon (i) the sale of a Vessel or (ii) the earlier of (x) ninety (90) days after the Total Loss (as such term is defined in the Ship Mortgage) of a Vessel or (y) the date on which the insurance proceeds in respect of such loss are received by the Borrower or the Security Trustee as assignee thereof, if the aggregate Fair Market Value of the remaining Vessels (based upon appraisals obtained, at the cost of the Borrower, no more than 30 days prior to the sale or loss of a Vessel) is less than 125% of the Loan Balance together with accrued and unpaid interest thereon, the Borrower shall repay an amount equal to such shortfall, such prepayment to be applied to the unpaid quarterly installments of principal in the inverse order of their maturities; provided, however, the sale proceeds or the insurance proceeds due may, at the Borrower's option, be held as cash collateral until the end of the current Interest Period and repaid on the last day of such Interest Period or repaid on any other Banking Day in which case the Borrower shall reimburse the Lenders or any thereof for any loss, cost or expense incurred by them as a result of a prepayment made on any day other than the last day of an Interest Period pursuant to Section 9.04(c). (xx) Pro Rata Treatment. The borrowing from the Lenders hereunder shall be made from the Lenders, each payment of other fees and expenses under Section 2.03 and Section 9.04 shall be made for account of the Lenders and any reduction of the amount of the Commitments shall be applied to the Commitments of the Lenders, pro rata, according to the amounts of their respective Commitments; each payment or prepayment of principal of the Loan by the Borrower shall be made for the account of the Lenders pro rata in accordance with the respective unpaid principal amounts thereof held by the Lenders; and each payment of interest on the Loan by the Borrower shall be made for the account of the Lenders pro rata in accordance with the amounts of interest due and payable to the respective Lenders. (xxi) Increased Costs. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) which compliance was not required as of the date hereof, there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining the Loan (excluding for purposes of this Section 2.08 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.11 shall govern) and (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender is organized or has its lending office or any political subdivision thereof), then the Borrower shall from time to time, within 30 days after demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; provided, however, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different lending office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. 22 (b) If any Lender determines (taking into account such Lender's, or its controlling corporation's, policies with respect to capital adequacy) that compliance, which compliance was not required as of the date hereof, with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of such type, then, within 30 days after demand by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder. A certificate as to such amounts submitted to the Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error. (xxii) Illegality. In the event that by reason of any change in any applicable law, regulation or regulatory requirement or in the interpretation thereof, a Lender has a reasonable basis to conclude that it has become unlawful for such Lender to maintain or give effect to its obligations as contemplated by this Agreement, such Lender shall inform the Administrative Agent and the Borrower to that effect, whereafter the liability of such Lender to make its Commitment available shall forthwith cease and the Borrower shall be required to repay to such Lender that portion of the Loan advanced by such Lender immediately. In any such event, but without prejudice to the aforesaid obligations of the Borrower to repay such portion of the Loan, the Borrower and the relevant Lender shall negotiate in good faith with a view to agreeing on terms for making such portion of the Loan available from another jurisdiction or otherwise restructuring such portion of the Loan on a basis which is not unlawful. (xxiii) Payments and Computations. (a) The Borrower shall make each payment hereunder and under the Notes not later than 1:00 P.M. (New York City time) on the day when due in Dollars to the Administrative Agent at its office located at 200 Park Avenue, New York, New York 10166, USA or to such other office of the Administrative Agent as the Administrative Agent may direct in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Section 2.08, 2.11 or 9.04(c)) to the Lenders for the account of their respective lending offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its lending office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. 23 (b) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder or under the Note held by such Lender, to charge from time to time against any or all of the Borrower's accounts with such Lender any amount so due. Each Lender agrees promptly to notify the Borrower after any such charge against the Borrower's accounts, provided that the failure to give such notice shall not affect the validity of such charge. (c) All computations of interest and of fees shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Banking Day, such payment shall be made on the next succeeding Banking Day, and such extension of time shall in such case be included in the computation of payment of interest or fee, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of the Loan Balance to be made in the next following calendar month, such payment shall be made on the next preceding Banking Day. (e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each such Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, as calculated by the Administrative Agent to reflect its cost of funds. (xxiv) Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.10, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and each Agent, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction under the laws of which such Lender or such Agent is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction of such Lender's applicable lending office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or any Agent, (i) the sum payable shall be increased as may be necessary so that after 24 making all required deductions (including deductions applicable to additional sums payable under this Section 2.11), such Lender or such Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) The Borrower shall indemnify each Lender and each Agent for the full amount of Taxes or Other Taxes (including, without limitation, any taxes imposed by any jurisdiction on amounts payable under this Section 2.11) imposed on or paid by such Lender or such Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Indemnification payments under this Section 2.11 shall be made within 30 days from the date such Lender or such Agent (as the case may be) makes written demand therefor, accompanied by written evidence demonstrating the payment of such Taxes or Other Taxes. (d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Administrative Agent, at its respective addresses referred to in Section 9.02, if reasonably available, the original or a certified copy of a receipt or, if no such receipt is reasonably available, other evidence of payment thereof satisfactory to the Administrative Agent. In the case of any payment hereunder or under the Notes by or on behalf of the Borrower through an account or branch outside the United States or by or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at such addresses, an opinion of counsel acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of this subsection (d) and subsection (e), the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement or on or prior to the date of the Assignment and Acceptance pursuant to which it becomes a Lender, as the case may be, and from time to time thereafter as reasonably requested in writing by the Borrower (but only so long as such Lender remains lawfully able to do so), shall provide each of the Administrative Agent and the Borrower with two original Internal Revenue Service forms W-8BEN or W-8ECI or, in the case of a Lender that has certified in writing to the Administrative Agent that it (i) is not a "bank" as defined in Section 881(c)(3)(A) of the Code, (ii) is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and (iii) is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Code), Internal Revenue Service Form W-8BEN as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender is exempt from or entitled to a reduced rate of United States withholding tax on payments 25 pursuant to the Loan Documents or, in the case of a Lender that has certified that it is not a "bank" as described above, certifying that such Lender is a foreign corporation, partnership, estate or trust. If the forms provided by a Lender at the time such Lender first becomes a party to this Agreement indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided, however, that, if at the effective date of the Assignment and Acceptance pursuant to which a Lender becomes a party to this Agreement, the Lender assignor was entitled to payments under subsection (a) of this Section 2.11 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term "Taxes" shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W-8BEN or W-8ECI (or the certificate described above), that the applicable Lender reasonably considers to be confidential, such Lender shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. (f) For any period with respect to which a Lender has failed to provide the Borrower with the appropriate form described in Section 2.11(e) (other than if such failure is due to a change in law or in the interpretation or application thereof, occurring subsequent to the date on which a form originally was required to be provided) or if such form otherwise is not required under subsection (e) of this Section 2.11 and such Lender shall not be entitled to indemnification under Section 2.11(a) or (c) with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall at the Lender's expense take such steps as the Lender shall reasonably request to assist the Lender to recover such Taxes. (g) Any Lender claiming any additional amounts payable pursuant to this Section 2.11 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. (xxv) Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Loan owing to it (other than pursuant to Section 2.08, 2.11 or 9.04(c)) in excess of its ratable share of payments on account of the Loan obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Loan owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such 26 recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.12 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. (xxvi) Use of Proceeds.. The proceeds of the Loan shall be used by the Borrower for the general corporate purposes of the Borrower. (XXVII) CONDITIONS TO LENDING (xxviii) Conditions Precedent . The obligation of each Lender to make the Loan available to the Borrower under this Agreement is subject to the satisfaction of the following conditions precedent: (xxix) Corporate Authority. The Administrative Agent shall have received the following documents in form and substance satisfactory to the Administrative Agent and its legal advisers: (i) Copies, certified as true and complete by an officer of each of the Loan Parties, of the resolutions of its board of directors evidencing approval of the Loan Documents to which each is a party and authorizing an appropriate officer or officers or attorney-in-fact or attorneys-in-fact to execute the same on its behalf, including the execution of the Drawdown Notice; (ii) Copies, certified as true and complete by an officer of each of the Loan Parties, of the certificate or articles of incorporation and by-laws or similar constituent document thereof; (iii) Certificate of the jurisdiction of incorporation or formation, as the case may be, of each Loan Party as to the good standing thereof; and (iv) A certificate signed by the Chairman, President, Vice President or Treasurer of each of the Loan Parties to the effect that (A) no Default or Event of Default shall have occurred and be continuing and (B) the representations and warranties of such Loan Party contained in this Agreement are true and correct as of the date of such certificate. (xxx) The Agreement. Each of the Loan Parties shall have duly executed and delivered this Agreement to the Administrative Agent. (xxxi) The Notes. The Borrower shall have duly executed and delivered the Notes to the Administrative Agent. 27 (xxxii) The Creditors. The Administrative Agent shall have received executed counterparts of this Agreement from each of the Lenders (or, in the case of any Lender as to which an executed counterpart shall not have been received, the Administrative Agent shall have received in form satisfactory to it a telex, facsimile or other written confirmation from such Lender of the execution of a counterpart of this Agreement by such Lender). (xxxiii) Fees. The Creditors shall have received payment in full of all fees and expenses due to each thereof pursuant to the terms hereof on the date when due including, without limitation, all fees and expenses due under Section 2.03 and Section 9.04. (xxxiv) Environmental Actions. The Lenders shall be satisfied that none of the Loan Parties is subject to any Environmental Action which could reasonably be expected to have a Material Adverse Effect. (xxxv) Legal Opinions. The Administrative Agent shall have received opinions addressed to the Agents and the Lenders from (i) Gilmartin, Poster & Shafto LLP, special counsel to the Loan Parties and (ii) Seward & Kissel LLP, special counsel to the Agents and the Lenders, in each case in such form as the Administrative Agent may require, as well as such other legal opinions as the Lenders shall have required as to all or any matters under the laws of the State of Delaware, the United States of America and the State of New York covering certain of the conditions and representations and warranties which are the subjects of Sections 3 and 4, respectively. (xxxvi) Officer's Certificate. The Administrative Agent shall have received a certificate signed by the President, Vice President or other duly authorized executive officer of each of the Loan Parties certifying that under applicable law existing on the date hereof, such Loan Party shall not be compelled by law to withhold or deduct any Taxes from any amounts to become payable to the Administrative Agent for the account of the Creditors hereunder. (xxxvii) Vessel Documents. The Administrative Agent shall have received evidence satisfactory to it and its counsel that each Vessel: (i) is in the sole and absolute ownership of the Borrower and is duly registered in the Borrower's name under United States flag, free of all liens and encumbrances of record other than the Ship Mortgage; (ii) is insured in accordance with the provisions of the Ship Mortgage and all requirements of the Ship Mortgage in respect of such insurance have been fulfilled (including, but not limited to, letters of undertaking from the insurance brokers, including confirmation notices of assignment, notices of cancellation and loss payable clauses acceptable to the Lenders); 28 (iii) is classed in the highest classification and rating for vessels of the same age and type with its Classification Society without any material outstanding recommendations; and (iv) is operationally seaworthy and in every way fit for its intended service; (xxxviii) Security Documents. The Borrower shall have executed and delivered to the Administrative Agent: (i) the Ship Mortgage on the Vessels, which shall have been recorded in accordance with the laws of the United States so as to constitute a first preferred ship mortgage under United States law; (xxxix) the Assignment of Insurances in respect of the Vessels; (xl) the Assignment of Requisition Compensation in respect of the Vessels; (xli) the Assignment Notice with respect of Vessels; and (xlii) such Uniform Commercial Code Financing Statements (Forms UCC-1) as the Administrative Agent shall require. (xliii) Vessel Appraisals. The Administrative Agent shall have received appraisals from a ship broker listed in Schedule IV, in form and substance satisfactory to the Administrative Agent, as to the Fair Market Value of each Vessel as of the Closing Date. (xliv) ISM DOC. To the extent required to be obtained by the ISM Code the Administrative Agent shall have received a copy of the DOC for the Operator of each Vessel. (n) Vessel Liens. The Administrative Agent shall have received evidence satisfactory to it and to its legal advisor that, save for the liens created by the Ship Mortgage and the Assignments, there are no liens, charges or encumbrances of any kind whatsoever on any of the Vessels except as permitted hereby or by any of the Security Documents. (o) SMC. The Administrative Agent shall have received an SMC for each Vessel other than the BULWARK, CRUSADER and MARINER. An SMC for each of the BULWARK, CRUSADER and MARINER will be provided to the Administrative Agent before February 28, 2004. (xlv) Further Conditions Precedent. On the Drawdown Date, the obligation of the Lenders to make the Loan available to the Borrower shall also be expressly conditional upon: (xlvi) Drawdown Notice. The Administrative Agent having received a Drawdown Notice in accordance with the terms of Section 2.02. 29 (xlvii) Representations and Warranties True. The representations stated in Section 4 being true and correct as if made on the Drawdown Date. (xlviii) No Default. No Default or Event of Default having occurred and being continuing or would result from the making of the Loan. (xlix) No Material Adverse Effect. Since the Closing Date there shall have been no development or event, or any prospective development or event, which has had or is reasonably likely to have a Material Adverse Effect (l) Breakfunding Costs. In the event that, on the date specified for the making of the Loan in the Drawdown Notice, the Lenders shall not be obliged under this Agreement to make the Loan available under this Agreement, the Borrower shall indemnify and hold the Lenders fully harmless against any losses which the Lenders (or any thereof) may sustain as a result of borrowing or agreeing to borrow funds to meet the drawdown requirement of such Drawdown Notice and the certificate of the relevant Lender or Lenders shall, absent manifest error, be conclusive and binding on the Borrower as to the extent of any such losses. (li) Satisfaction after Drawdown. Without prejudice to any of the other terms and conditions of this Agreement, in the event all of the Lenders elect, in their sole discretion, to make the Loan prior to the satisfaction of all or any of the conditions referred to in Sections 3.01 and 3.02, the Borrower hereby covenants and undertakes to satisfy or procure the satisfaction of such condition or conditions within seven (7) days after the Drawdown Date (or such longer period as the Majority Lenders, in their sole discretion, may agree). (LII) REPRESENTATIONS AND WARRANTIES (liii) Representations and Warranties. To induce the Creditors to enter into this Agreement and to make the Loan Available, each of the Loan Parties hereby represents and warrants to each Creditor (which representations and warranties shall survive the execution and delivery of this Agreement and the Notes and the drawdown of the Loan) that: (liv) Financial Condition; Ownership. (i) The Consolidated balance sheets of CMC and its Subsidiaries as at December 31, 2002 and the related Consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by Deloitte & Touche, copies of which have heretofore been furnished to each Lender, present fairly the Consolidated financial condition of CMC and its Subsidiaries as at such dates, and the Consolidated results of their operations and their Consolidated cash flows for the fiscal years then ended. The unaudited Consolidated balance sheet of CMC and its Subsidiaries as at September 30, 2003 and the related unaudited Consolidated statements of income and of cash flows for the three-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, present fairly the Consolidated financial condition of CMC and its Subsidiaries as at such date, and the 30 Consolidated results of their operations and their Consolidated cash flows for the three-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods. (lvi) Schedule V sets forth, as of September 30, 2003, each owner of more than 5% of the voting stock of CMC and the percent of such voting stock owned by each Person listed on such schedule. (lvii) No Change. Since September 30, 2003 there has been no development or event nor has there been any prospective development or event, which has had or is reasonably likely to have a Material Adverse Effect. (lviii) Corporate Existence; Compliance with Law. Each Loan Party (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and authorized to do business under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to be so qualified has not had and is not reasonably likely to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith has not had and is not reasonably likely to have a Material Adverse Effect. (lix) Corporate Power; Authorization; Enforceable Obligations. Each Loan Party has or will have all necessary power and authority, and the legal right, to make, deliver and perform each Loan Document to which it is or will be a party, and to consummate the transactions contemplated thereby. Each Loan Party has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement, the Notes and the other Loan Documents to which it is a party. No consent or authorization of, filing with or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or the execution, delivery, performance, validity or enforceability of this Agreement, the Notes or the other Loan Documents. This Agreement has been and each Note and each other Loan Document will be, duly executed and delivered on behalf of each Loan Party which is a party thereto. This Agreement constitutes, and each Note and each other Loan Document when executed and delivered will constitute, a legal, valid and binding obligation of each Loan Party which is a party thereto, enforceable against them in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (lx) No Legal Bar. The execution, delivery and performance by the Loan Parties of this Agreement, the Notes and the other Loan Documents, the borrowings 31 hereunder and the use of the proceeds thereof will not violate any Requirement of Law applicable to any Loan Party or any Contractual Obligation of any Loan Party and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. (lxi) No Material Litigation. No litigation, proceeding, or, to the best of each of the Loan Parties' knowledge, investigation (in each case including, without limitation, any Environmental Action), of or before any arbitrator or Governmental Authority is pending or, to the knowledge of either Loan Party, threatened by or against CMC, the Borrower or any of the Subsidiaries or against any of their respective properties or revenues (a) with respect to this Agreement, the Notes or any other Loan Document or any of the transactions contemplated hereby, or (b) which has had or is reasonably likely to have a Material Adverse Effect. Set forth in Schedule VI is a description of the most significant pending litigations and proceedings and, to the best of CMC's and the Borrower's knowledge, investigations (the "Disclosed Litigation") involving CMC, the Borrower or any of the Subsidiaries as of the Closing Date; no such litigation, proceeding and investigation has had and is reasonably likely to have a Material Adverse Effect. (lxii) No Default. Neither of the Loan Parties nor any of the Subsidiaries are in default under or with respect to any of its Contractual Obligations in any respect which has had or is reasonably likely to have a Material Adverse Effect. (lxiii) Ownership of Property; Liens. CMC and its Restricted Subsidiaries have good title to the material properties and other assets reflected in the Consolidated balance sheet and related notes as at December 31, 2002 referred to in subsection 4.01(a) and to all material properties and assets acquired by them thereafter (other than, in each case, those assets subject to Financing Leases) except those which are no longer used or useful in the conduct of their business and except properties which singularly or in the aggregate are not material to CMC and its Consolidated Subsidiaries viewed as a whole, and none of such property is subject to any Lien except as permitted by Section 5.02(b). (lxiv) No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of CMC or any of its Subsidiaries adversely affects the business, operations or financial condition of CMC and its Subsidiaries taken as a whole to an extent that has had or is reasonably likely to have a Material Adverse Effect. (lxv) Taxes. CMC and each of its Subsidiaries have filed all United States federal and state income tax returns which are required to be filed by CMC and its Subsidiaries. Except where the failure to do so has not had and is not reasonably likely to have a Material Adverse Effect, each of CMC and its Subsidiaries has filed or caused to be filed all other tax returns which, to the knowledge of the CMC, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the CMC or its Subsidiaries, as the case may be). The charges, accruals and reserves in respect of taxes on the books of CMC and 32 its Consolidated Subsidiaries are adequate (determined in accordance with GAAP). Federal income tax returns submitted as of the Closing Date by CMC and its Subsidiaries have been audited by and settled with the Internal Revenue Service or the statute of limitations has expired for all years to and including the fiscal year ended December 31, 1999 and the results of such settlement are properly reflected in the financial statements referred to in subsection 4.01(a). As of the Closing Date, CMC knows of no proposed material tax assessment against CMC or any of its Subsidiaries. As of the Closing Date, no extension of time for the assessment of U.S. federal, state or local taxes of CMC of any of its Subsidiaries is in effect or has been requested. (lxvi) Federal Margin Regulations. No part of the proceeds of the Loan will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose. (lxvii) ERISA Matters. (i) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan. (lxix) As of the last annual actuarial valuation date, the funded current liability percentage, as defined in Section 302(d)(8) of ERISA, of each Plan exceeds 90% and there has been no material adverse change in the funding status of any such Plan since such date. (lxx) Neither CMC nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan that has had or is reasonably likely to have a Material Adverse Effect. (lxxi) Neither CMC nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no such Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, within the meaning of Title IV of ERISA. (lxxii) Except as set forth in the financial statements referred to in this Section 4.01 and in Section 5.01, CMC and its Consolidated Subsidiaries have no material liability with respect to "expected post retirement benefit obligations" within the meaning of Statement of Financial Accounting Standards No. 106. (lxxiii) Investment Company Act. The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. (lxxiv) Subsidiaries. Schedule VII lists all the Subsidiaries of CMC at the date of this Agreement. 33 (lxxv) Environmental Matters. Each of the representations and warranties set forth in paragraphs (i) through (iii) below is true and correct to the extent that the facts and circumstances giving rise to any such failure to be so true and correct have not had, and are not reasonably likely to have, a Material Adverse Effect. (lxxvi) The operations and properties of CMC and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, all past non-compliance with such Environmental Laws and Environmental Permits has been resolved without ongoing obligations or costs, and no circumstances exist that could be reasonably likely to (i) form the basis of an Environmental Action against CMC or any of its Subsidiaries or any of their properties that could have a Material Adverse Effect or (ii) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law that could have a Material Adverse Effect. (lxxvii) None of the properties currently or formerly owned or operated by CMC or any of its Subsidiaries is listed or proposed for listing on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("NPL") or on the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency ("CERCLIS") or any analogous foreign, state or local list or, to the best knowledge of CMC, is adjacent to any such property; there are no and never have been any underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed of on any property currently owned or operated by CMC or any of its Subsidiaries or, to the best of its knowledge, on any property formerly owned or operated by CMC or any of its Subsidiaries; there is no friable asbestos or asbestos-containing material on any property currently owned or operated by CMC or any of its Subsidiaries; and Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by CMC or any of its Subsidiaries or, to the best of its knowledge, any adjoining property. (lxxviii) Neither CMC nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law; and all Hazardous Materials generated, 34 used, treated, handled or stored at or transported to or from any property currently or formerly owned or operated by CMC or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in material liability to CMC or any of its Subsidiaries. (lxxix) Vessels. Upon the Drawdown Date, each Vessel: (lxxx) will be in the sole and absolute ownership of the Borrower and duly registered in the Borrower's name under United States flag, unencumbered, save and except for the Ship Mortgage, recorded against it and as permitted thereby; (lxxxi) will be classed in the highest classification and rating for vessels of the same age and type with the Classification Society without any material outstanding recommendations; (lxxxii) will be operationally seaworthy and in every way fit for its intended service; and (lxxxiii) will be insured in accordance with the provisions of the Ship Mortgage recorded against it and the requirements thereof in respect of such insurances will have been complied with; (lxxxiv) Equity Ownership. The Borrower is owned 100% by CMC; (lxxxv) Compliance with ISM Code and ISPS Code. Each Vessel other than the BULWARK, CRUSADER and MARINER and each Operator complies, to the extent applicable, with the requirements of the ISM Code and ISPS Code including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto; (lxxxvi) Threatened Withdrawal of DOC or SMC. There is no threatened or actual withdrawal of any Operator's DOC or SMC in respect of any Vessel; (lxxxvii) Insurance. Each of the Loan Parties has insured its properties and assets against such risks and in such amounts as are customary for companies engaged in similar businesses; (lxxxviii) Foreign Trade Control Regulations. To the best knowledge of each of the Loan Parties, none of the transactions contemplated herein will violate any of the provisions of the Foreign Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 500, as amended), any of the provisions of the Cuban Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 515, as amended), any of the provisions of the Libyan Assets Control Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, Part 550, as amended), any of the provisions of the Iranian Transaction Regulations of the United States of America (Title 31, Code of Federal Regulations, Chapter V, 35 Part 560, as amended), any of the provisions of the Iraqi Sanctions Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 575, as amended), any of the provisions of the Federal Republic of Yugoslavia (Serbia and Montenegro) and Bosnia Serb-controlled areas of the Republic of Bosnia and Herzegovina Assets Control Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 585 as amended) or any of the provisions of the Regulations of the United States of America Governing Transactions in Foreign Shipping of Merchandise (Title 31, Code of Federal Regulations, Chapter V, Part 505, as amended); (lxxxix) Indebtedness. Other than as disclosed in Schedule III, neither Loan Party has any Indebtedness; (xc) Payment Free of Taxes. All payments made or to be made by the Loan Parties under or pursuant to this Agreement, the Notes and the other Loan Documents shall be made free and clear of, and without deduction or withholding for an account of, any Taxes; (xci) No Proceedings to Dissolve. There are no proceedings or actions pending or contemplated by any Loan Party or, to the best knowledge of any Loan Party, contemplated by any third party, to dissolve or terminate any Loan Party. (xcii) Solvency. On the Closing Date, in the case of each of the Loan Parties, (a) the sum of its assets, at a fair valuation, does and will exceed its liabilities, including, to the extent they are reportable as such in accordance with GAAP, contingent liabilities, (b) the present fair market salable value of its assets is not and shall not be less than the amount that will be required to pay its probable liability on its then existing debts, including, to the extent they are reportable as such in accordance with GAAP, contingent liabilities, as they mature, (c) it does not and will not have unreasonably small working capital with which to continue its business and (d) it has not incurred, does not intend to incur and does not believe it will incur debts beyond its ability to pay such debts as they mature; and (xciii) Survival. All representations, covenants and warranties made herein and in any certificate or other document delivered pursuant hereto or in connection herewith shall survive the making of the Loan and the issuance of the Notes. (XCIV) COVENANTS OF THE LOAN PARTIES (xcv) Affirmative Covenants. Each of the Loan Parties hereby jointly and severally covenants and undertakes with the Lenders that, from the date hereof and so long as any principal, interest or other moneys are owing in respect of this Agreement, the Notes or any of the other Loan Documents it shall and (except in the case of delivery of financial information, reports and notices pursuant to subsections 5.01(a) and 5.01(b)) shall cause each of the Restricted Subsidiaries to: (xcvi) Financial Statements. Furnish to each Lender: (xcvii) as soon as available, but in any event within 90 days after the end of each fiscal year of CMC, a copy of the Consolidated balance sheet of CMC and its Subsidiaries (including all Joint Ventures 36 required by GAAP to be so included) as at the end of such year and the related Consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a qualification or exception arising out of the scope of the audit, by Deloitte & Touche or other independent firm of certified public accountants of nationally recognized standing; (xcviii) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of CMC, the unaudited Consolidated balance sheet of CMC and its Subsidiaries (including all Joint Ventures required by GAAP to be so included) as at the end of such quarter and the related unaudited Consolidated statements of income and retained earnings and of cash flows of CMC and its Subsidiaries (including all Joint Ventures) for the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and (xcix) as soon as available but in any event within 180 days after the end of each fiscal year of CMC, as to CMC and each Subsidiary thereof (including each Joint Ventures required by GAAP to be so included), a Consolidating balance sheet as at the end of such year and a related Consolidating statement of income for such year, certified by a Responsible Officer; all such financial statements to present fairly in accordance with GAAP, applied consistently throughout the periods reflected therein and with prior periods (except as any such inconsistency may be approved by such accountants or a Responsible Officer, as the case may be, and disclosed therein and subject, in the case of unaudited quarterly financial statements, to normal year-end audit adjustments), the Consolidated financial condition of CMC and its Subsidiaries (including all Joint Ventures required by GAAP to be so included) as at the dates of such statements, and the Consolidated results of their operations and their Consolidated cash flows for the periods then ended. Reports and financial statements required to be delivered pursuant to paragraphs (i) or (ii) of this Section 5.01(a) shall be deemed to have been delivered on the date on which the Guarantor posts such reports, or reports containing such financial statements, on a website maintained by the Guarantor on the Internet or when such reports, or reports containing such financial statements, are posted on the website of the U.S. Securities and Exchange Commission (www.sec.gov); provided that the Loan Parties shall deliver paper copies of the reports, financial statements and officer's certificates referred to in said paragraphs (i) or (ii) of this Section 5.01(a) to the Administrative Agent within five Banking Days of it being posted. (c) Certificates; Other Information. Furnish to each Lender: 37 (ci) concurrently with the delivery of the financial statements referred to in subsection 5.01(a)(i), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (cii) concurrently with the delivery of the financial statements referred to in subsections 5.01(a)(i) and 5.01(a)(ii), a Compliance Certificate of a Responsible Officer (i) stating that, to the best of such Responsible Officer's knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and in the Notes and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate, such certificate to include calculations in reasonable detail demonstrating such observance, performance and satisfaction (including, without limitation, all adjustments to any information provided in such financial statements necessary to calculate compliance with the financial covenants set forth in Section 5.03) and (ii) setting forth as of the date of such financial statements the aggregate amount of Investments in each Joint Venture and the percentage of such Joint Venture owned by either Loan Party and any Subsidiary of such Loan Party; (ciii) not later than 120 days after the beginning of each fiscal year of the Loan Parties a reasonably detailed business plan for such fiscal year; (civ) within five days after the same are sent, copies of all financial statements which CMC sends to its stockholders, and within five days after the same are filed, copies of all financial statements and reports which CMC may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; and (cv) promptly, such additional financial and other information as any Lender may from time to time reasonably request. (cvi) Vessel Valuations. Concurrently with the delivery of the financial statements referred to in subsection 5.01(a)(i), the Borrower shall obtain and, from time to time, at the request of the Lenders, the Administrative Agent shall obtain, appraisals of the Fair Market Value of the Vessels from one of the approved ship brokers listed on Schedule IV, one of such valuations in any year to be at the Borrower's cost unless obtained pursuant to Section 2.06 or if a Default or an Event of Default has occurred. In the event that the Borrower 38 fails or refuses to obtain the valuations requested pursuant to this Section 5.01(c) within ten (10) days of the Administrative Agent's request therefor, the Administrative Agent will be authorized to obtain such valuations, at the Borrower's cost, from one of the approved ship brokers listed on Schedule IV, which valuations shall be deemed the equivalent of valuations duly obtained by the Borrower pursuant to this Section 5.01(c), but the Administrative Agent's action in doing so shall not excuse any default of the Borrower under this Section 5.01(c). (cvii) Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except where (i) the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Loan Parties or their Restricted Subsidiaries, as the case may be, or (ii) the failure to pay, discharge or otherwise satisfy the same has not had and is not reasonably likely to have a Material Adverse Effect. (cviii) Conduct of Business and Maintenance of Existence. Continue to engage in business of the same general type as now conducted by CMC and its Restricted Subsidiaries taken as a whole; preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to subsection 5.02(d) or except where the failure to do so has not had and is not reasonably likely to have a Material Adverse Effect; comply with all Contractual Obligations and Requirements of Law (except to the extent that the failure to do so is not reasonably likely to have a Material Adverse Effect). (cix) Maintenance of Property; Insurance. Keep all property necessary in the business of CMC and its Restricted Subsidiaries taken as a whole in good working order and condition; maintain in effect all licenses, permits, trade names, trademarks, patents and other intellectual property necessary in the business of CMC and its Restricted Subsidiaries taken as a whole; maintain insurance on all Vessels as required by the Ship Mortgage and on all its other property in at least such amounts and against at least such risks (including public liability and product liability) as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to each Lender, upon written request, full information as to the insurance carried. (cx) Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and in all material respects in conformity with all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender and any Agent to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of CMC and its Subsidiaries with officers and employees of the CMC and its Restricted Subsidiaries and with its independent certified public accountants, provided that discussions with the independent certified accountants shall be arranged by CMC. 39 (cxi) Notices. Promptly give notice to the Administrative Agent and each Lender of: (cxii) the occurrence of any Default or Event of Default; (cxiii) (x) in any event within 20 days after the Director of Compensation and Benefits (or its equivalent) of CMC or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, a statement of the chief financial officer of CMC describing such ERISA Event and the action, if any, that CMC or any relevant ERISA Affiliate has taken and proposes to take with respect thereto and (y) in any event within three (3) Banking Days after the date any records, documents or other information must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA, a copy of such records, documents and information; (cxiv) in any event within three (3) Banking Days after receipt thereof by the Director of Compensation and Benefits (or its equivalent) of CMC or any ERISA Affiliate, copies of each notice from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (cxv) in any event within thirty (30) days after the receipt thereof by the Director of Compensation and Benefits (or its equivalent) of CMC or any ERISA Affiliate, a copy of the annual actuarial report for each Plan the funded current liability percentage (as defined in Section 302(d)(8) of ERISA) of which is less than 90% or the unfunded current liability of which exceeds $1,000,000; (cxvi) in any event within fifteen (15) days after receipt thereof by the Director of Compensation and Benefits (or its equivalent) of CMC or any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each notice concerning (A) the imposition of Withdrawal Liability by any such Multiemployer Plan, (B) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (C) the amount of liability incurred, or that may be incurred, by CMC or any ERISA Affiliate in connection with any event described in clause (A) or (B); (cxvii) promptly after any Responsible Officer has knowledge of the assertion or occurrence thereof, notice of any Environmental Action against or of any noncompliance by any Loan Party or any of their Subsidiaries with any Environmental Law or Environmental Permit that could reasonably be expected to have a Material Adverse Effect; and 40 (cxviii) any development or event (including, without limitation, any litigation, proceeding or, if known to the any Loan Party, investigation affecting such Loan Party or any of its Subsidiaries or any default in any Contractual Obligations of such Loan Party or any of its Subsidiaries), known to any Responsible Officer, which has had or is reasonably likely to have a Material Adverse Effect. Each notice pursuant to this subsection 5.01(h) shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. (cxix) Environmental Laws. (i) Compliance with Environmental Laws. Comply, and cause each of the Subsidiaries and all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits except to the extent failure to do so has not had and is not reasonably likely to have a Material Adverse Effect; obtain and renew and cause each of the Subsidiaries to obtain and renew all Environmental Permits necessary for its operations and properties except to the extent failure to do so has not had and is not reasonably likely to have a Material Adverse Effect; and conduct and cause each of the Subsidiaries to conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws except to the extent failure to do so has not had and is not reasonably likely to have a Material Adverse Effect; provided, however, that neither Loan Party nor any of the Restricted Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. (cxxi) Preparation of Environmental Reports. If an Event of Default shall have occurred and be continuing, at the request of the Administrative Agent or the Majority Lenders, provide to the Lenders within 120 days after such request, at the expense of the Borrower, an environmental site assessment report for the properties described in such request, prepared by an environmental consulting firm acceptable to the Administrative Agent or the Majority Lenders, indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials on such properties; without limiting the generality of the foregoing, if the Administrative Agent or the Majority Lenders determines at any time that a material risk exists that any such report will not be provided within the time referred to above, the Administrative Agent or the Majority Lenders, as the case may be, may retain an environmental consulting firm to prepare such report at the expense of the Borrower, and hereby grants to the Administrative 41 Agent, the Lenders, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto its properties to undertake such an assessment. (cxxii) Joint Venture Separateness. Cause each Joint Venture to (i) maintain its funds in accounts which are separate and distinct from any account maintained by any Loan Parties or any of the other Subsidiaries, (ii) maintain its own business and financial records, (iii) act pursuant to corporate resolutions or similar authority granted in accordance with the laws applicable to governance of the Joint Venture entity and with procedures required by any organizational document of the Joint Venture, (iv) document and record in its financial records each transaction between such Joint Venture, on the one hand, and any Loan Party or any of the other Subsidiaries, on the other hand, in accordance with business practices commonly employed by enterprises similar to the Joint Venture with respect to transactions with non-Affiliates, (v) conduct its business with third parties in the name of the Joint Venture and not in the name of any Loan Party or any of the other Subsidiaries and (vi) have at the time such Joint Venture commences the business of the Joint Venture capitalization adequate (in the reasonable determination of the relevant Loan Party ) to meet its reasonably anticipated business needs. (cxxiii) Further Assurances. Promptly upon the request of the Administrative Agent, or any of the Lenders through the Administrative Agent, at any time and from time to time: (cxxiv) correct, and cause each of the Subsidiaries to correct, any defect or error that may be discovered in any of the Loan Documents or in the execution, acknowledgment, filing or recordation thereof; and (cxxv) do, execute, acknowledge, deliver, record, rerecord, file, refile, register and reregister, and cause each of the Subsidiaries promptly to do, execute, acknowledge, deliver, record, rerecord, file, refile, register and reregister, any and all further acts, conveyances, pledge agreements, ship mortgages, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as the Administrative Agent, or any of the Lenders through the Administrative Agent, may reasonably require from time to time in order to (A) carry out more effectively the purposes of this Agreement, the Notes or any of the other Loan Documents, (B) subject any of the property, assets, rights or interests of any of the Loan Parties or any of the Subsidiaries included or intended to be included in the Collateral to the Liens created or now or hereafter intended to be created under any of the Security Documents, (C) perfect and maintain the validity, effectiveness and priority of any of the Security Documents or any of the Liens created or intended to be created thereunder and (D) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively to the Administrative Agent and the other Creditors the rights granted or now or hereafter intended to be granted to the 42 Administrative Agent and the other Creditors under any of the Loan Documents, or under any of the other instruments executed in connection with any such Loan Document. (cxxvi) ISM Code and ISPS Code Matters. (i) Procure that the Operator will comply with and ensure that each of the Vessels will comply with the requirements of the ISM Code, ISPS Code and MTSA in accordance with the implementation schedule thereof, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto throughout the Loan Period; and (ii) will procure that the Operator will immediately inform the Administrative Agent if there is any threatened or actual withdrawal of its DOC, SMC or ISSC or in respect of any Vessel; and (iii) will, upon the request of the Administrative Agent, provide a copy of any DOC, SMC or ISSC, as the case may be, to the Administrative Agent; (cxxvii) Negative Covenants. Each of the Loan Parties hereby jointly and severally covenants and undertakes with the Lenders that, from the date hereof and so long as any principal, interest or other moneys are owing in respect of the Agreement, the Notes and any other Loan Documents, it shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly without the written consent of the Majority Lenders (or all of the Lenders if required pursuant to Section 9.01): (cxxviii) Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (cxxix) Indebtedness in respect of the Loan, the Notes, and other obligations of the Loan Parties under this Agreement; (cxxx) (A) Indebtedness of CMC to any Restricted Subsidiary and of any Restricted Subsidiary to CMC or any other Restricted Subsidiary, and (B) Indebtedness of CMC or any Restricted Subsidiary to any Person other than a financial institution in an aggregate principal amount at any time outstanding not exceeding $5,000,000; (cxxxi) Indebtedness of CMC in principal amount outstanding at any time not to exceed $10,000,000 in the aggregate under lines of credit offered by commercial banks or other financial institutions to CMC to finance the working capital needs of CMC and the Restricted Subsidiaries; (cxxxii) Indebtedness consisting of reimbursement obligations in respect of letters of credit issued for the account of CMC or any Restricted Subsidiary in an aggregate amount not exceeding for CMC and the Restricted Subsidiaries $10,000,000 in aggregate principal amount at any time outstanding; (cxxxiii) Indebtedness of CMC to issuers of life insurance policies under which CMC is the beneficiary to the extent that such Indebtedness does not exceed at any time, in the aggregate, the lesser of (A) the cash surrender value of such policies and (B) the 43 sum of $2,000,000 plus the amount of proceeds of such Indebtedness applied to pay premiums on such life insurance policies; (cxxxiv) Indebtedness and Guaranty Obligations outstanding on the Closing Date and listed on Schedule III hereto or in connection with any amendments or refinancings thereof; provided, that, the facility amount of the Existing Credit Facility may be increased to $150,000,000; and (cxxxv) Indebtedness secured by Liens described in Section 5.02(b)(vi). (cxxxvi) Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (cxxxvii) Liens for taxes, assessments or other charges which (x) are not at the time delinquent or are thereafter payable without penalty, or (y) are being contested in good faith by appropriate proceedings, provided with respect to taxes, assessments or other charges referred to in clause (x) and clause (y), that adequate reserves with respect thereto are maintained on the books of the Loan Parties and the Restricted Subsidiaries to the extent required in conformity with GAAP; (cxxxviii) Liens in existence on the Closing Date listed on Schedule III hereto, provided that no such Lien is spread to cover any additional property or to secure any additional Indebtedness after the Closing Date except in accordance with provisions of the documents and instruments relating to the Indebtedness or other obligations secured by such Liens which (x) are in effect as of the Closing Date and (y) are described on Schedule III. (cxxxix) Liens on vessels arising in the event the use or title of such vessel is taken or requisitioned by any Governmental Authority; (cxl) Liens securing judgments of less than $7,500,000 in the aggregate as to any Loan Party and the Restricted Subsidiaries taken as a whole at any time, provided that no such Lien shall have been in existence more than thirty (30) days after the entry of the judgment, or execution thereof shall have been stayed or the payment thereof shall be covered in full by insurance on which the insurer has neither reserved the right to dispute, nor disputed, coverage; (cxli) Liens on any asset of any Loan Party or any of the Restricted Subsidiaries existing at the time such Person is merged into or 44 consolidated with any Loan Party or any of the Restricted Subsidiaries, if (x) such merger or consolidation is permitted by this Agreement, and (y) such Lien was otherwise permitted by this Agreement and was not created in contemplation of such event; provided that no such Lien is spread to cover any additional property or to secure any additional Indebtedness after the effective date of such merger or consolidation; (cxlii) Liens on vessels and related assets existing as of the Closing Date and created to secure the financing or refinancing of the construction or reconstruction of such vessels, which financing or refinancing is guaranteed under the provisions of Title XI of the Merchant Marine Act of 1936, as amended; (cxliii) Liens arising in connection with deposits of funds from time to time into the capital construction fund created pursuant to the Capital Construction Fund Agreement (no. MA-CCF-370) dated October 21, 1977, as amended, between the CMC and the United States of America, but only to the extent such Liens arise solely out of such agreement or out of borrowings of such deposits; (cxliv) Liens in favor of the Agents or the Lenders to secure any or all of the Loan Parties' Obligations created under the Loan Documents; (cxlv) Other Liens arising in the ordinary course of the business of CMC and the Restricted Subsidiaries viewed as a whole which (x) do not secure Indebtedness and (y) either (A) are being contested in good faith and with respect to which reserves are being maintained on the books of CMC and its Consolidated Restricted Subsidiaries in conformity with GAAP or (B) in the aggregate do not have, and are not reasonably likely to have, a Material Adverse Effect and will not reasonably likely materially impair the value of the Consolidated assets of CMC and its Consolidated Restricted Subsidiaries; (cxlvi) Liens on life insurance policies (including the cash surrender value thereof) securing Indebtedness permitted by subsection 5.02(a)(v); (cxlvii) Liens securing Indebtedness of any Loan Party and the Restricted Subsidiaries incurred solely in connection with the conversion into Financing Leases of operating leases of such Loan Party and the Restricted Subsidiaries that are in existence on the Closing Date on the property which is the subject of such operating lease; provided that such Liens do not at any time encumber any property other than such property, their earnings, other related assets having a value which is immaterial in relation to the value of such property, 45 and the proceeds of such property and do not secure any other Indebtedness; (cxlviii) Liens on property that is substituted for or replaces comparable property that was theretofore subject to a Lien permitted to exist under this subsection 5.2(b); (cxlix) Liens on any asset leased by any Loan Party or any of the Restricted Subsidiaries under a lease that is not a Financing Lease, securing the obligations of such Loan Party or such Restricted Subsidiary thereunder; and (cl) Liens arising out of the refinancing, extension, renewal or refunding of any Indebtedness permitted under subsection 5.02(a) and secured by any Lien permitted by this subsection 5.02(b); provided that (x) no such Lien is spread to cover any property other than the property securing such Indebtedness at the time of such refinancing, extension, renewal or refunding and (y) the principal amount of such Indebtedness is not increased to exceed the amount of the Indebtedness on the Closing Date. (cli) Limitation on Guaranty Obligations. Create, incur, assume or suffer to exist any Guaranty Obligation except: (clii) the Guaranty Obligation of the Guarantor pursuant to Section 7; (cliii) Guaranty Obligations included in Indebtedness permitted pursuant to subsection 5.02(a); (cliv) Guaranty Obligations of CMC or its Consolidated Restricted Subsidiaries in respect of primary obligations of CMC or its Consolidated Restricted Subsidiaries otherwise permitted under this Agreement; (clv) Guaranty Obligations outstanding on the Closing Date and listed on Schedule III and renewals and extensions of such existing Guaranty Obligations which do not increase the amount of the primary obligations guaranteed thereby; and (clvi) other Guaranty Obligations aggregating not in excess of the lesser of (i) $25,000,000 and (ii) 10% of the stockholders' equity (as reflected on the most recent Consolidated Balance Sheet of CMC delivered pursuant hereto), in each case, at any time outstanding. (clvii) Limitations on Fundamental Changes. (i) Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of all or 46 substantially all of the property, business or assets of CMC and its Restricted Subsidiaries taken as a whole; except that: (clviii) any Restricted Subsidiary of CMC may be merged or consolidated with or into CMC (provided that CMC shall be the continuing or surviving corporation) or with or into any one or more Wholly Owned Subsidiaries of CMC (provided that the Wholly Owned Subsidiary or Subsidiaries shall be the continuing or surviving corporation); (clix) any Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to CMC or any Wholly Owned Subsidiary of the Borrower; and (clx) any Subsidiary which is not a Loan Party may liquidate, wind up or dissolve; provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom. (clxi) Materially change or depart from the business or operating activities presently conducted by CMC and its Restricted Subsidiaries taken as a whole. (clxii) Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, to any Person other than any Loan Party or a Restricted Subsidiary ("Asset Dispositions"), except: (clxiii) Asset Dispositions in the ordinary course of business; (clxiv) Asset Dispositions in the form of the sale or discount of accounts receivable arising in the ordinary course of business to the capital construction fund created pursuant to the Capital Construction Fund Agreement (No. MA-CCF-370) dated October 21, 1977, as amended between CMC and the United States of America; (clxv) Asset Dispositions permitted by subsection 5.02(d) or subsection 5.02(i); (clxvi) Asset Dispositions in any fiscal year for cash and consideration other than cash having an aggregate value (as determined in good faith by CMC) not in excess of $25,000,000 net of (a) all legal fees, finder's fees and other similar fees and commissions paid in connection with such Asset Dispositions, (b) taxes payable in connection with or as a result of such Asset Dispositions and (c) other out-of-pocket costs incurred in connection with such Asset Dispositions; provided, however, in the case of each of clauses (a) 47 and (c) above such amounts may be deducted only to the extent that such amounts so deducted are, at the time of such Asset Disposition, paid to a Person that is not an Affiliate of such Person (or, if paid to such an Affiliate, to the extent the terms of such payment are no more favorable to such Affiliate than such terms would be in an arm's-length transaction) and are properly attributable to such transaction or to the asset that is the subject thereof; and (clxvii) The sale of any Vessel; provided that the requirements under Section 2.06 have been satisfied. (clxviii) Limitation on Dividends and Other Payments. Declare or pay any dividend (other than dividends payable solely in common stock of CMC) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of CMC, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of CMC or any Subsidiary except for, so long as after giving effect thereto no Default or Event of Default shall have occurred and be continuing, (i) common stock repurchases made in connection with employee stock ownership plans or other employee stock incentive plans, (ii) the purchase by CMC of CMC's Capital Stock from the estate of any shareholder, provided that the purchase price thereof is paid entirely with the proceeds received by CMC from life insurance maintained by it on the life of such shareholder, (iii) dividends on the CMC's Capital Stock, and (iv) the redemption, in whole or in part, of the CMC's Class B Redeemable Preferred Stock outstanding on the Closing Date, provided that the aggregate amount expended by CMC in connection with the dividends and payments described in clauses (i) through (iv) above shall not exceed $10,000,000 in any twelve-month period. (clxix) Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase or otherwise acquire any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any other Person (all the foregoing, collectively, "Investments"), except: (clxx) Investments in the form of extensions of trade credit in the ordinary course of business; (clxxi) Investments in Cash Equivalents; (clxxii) Investments in the form of loans and advances to employees of the CMC or the Restricted Subsidiaries in the ordinary course of business and consistent with past practices, and Investments in the form of loans and advances to shareholders of the CMC or trusts or similar estate planning entities of or for the benefit of any such shareholder the proceeds of which are used to pay life insurance premiums on the life of such shareholder; 48 (clxxiii) Investments by CMC in the Restricted Subsidiaries and by any Restricted Subsidiary in CMC or in any other Restricted Subsidiary; (clxxiv) Investments in the form of notes or securities received as consideration for sales of assets permitted pursuant to subsection 5.02(e); (clxxv) Investments in Joint Ventures and non-Consolidated Subsidiaries and Affiliates to the extent permitted under Section 5.02(k); (clxxvi) Investments permitted by subsection 5.02(d); (clxxvii) Investments in foreign currencies or otherwise in time deposits or other securities of foreign Governmental Authorities or other foreign Persons, if required by the action of a foreign Governmental Authority or to fund working capital requirements for the operations of CMC or any Restricted Subsidiary in a foreign country; and (clxxviii) Investments to the extent not otherwise prohibited by any other provision of Section 5.02 in the ordinary course of business in an aggregate amount outstanding at any time not to exceed $5,000,000. (clxxix) Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate or any Joint Venture unless (i) such transaction is otherwise permitted under this Agreement, (ii) such transaction is in the ordinary course of either of the Loan Parties' or such Restricted Subsidiary's business or (iii) either (x) such transaction is upon fair and reasonable terms no less favorable to such Loan Party or such Restricted Subsidiary, as the case may be, than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate or (y) such transaction taken together with all other such transactions described in this clause (iii) would not be reasonably likely to have a material adverse effect on the business, operations, condition (financial or otherwise), properties or prospects of CMC and the Subsidiaries taken as a whole. (clxxx) Sale and Leaseback. Enter into any arrangement with any Person providing for the leasing by any Loan Party or any Restricted Subsidiary of real or personal property which has been or is to be sold or transferred by any Loan Party or such Restricted Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of such Loan Party or such Restricted Subsidiary except for (i) any such arrangement permitted by subsection 5.02(a)(vi) and (ii) any such arrangement not constituting a Financing Lease. (clxxxi) Negative Pledge Agreements. Enter into or suffer to exist in favor of any Person other than the Agents or the Lenders any agreement prohibiting any Loan Party or any Restricted Subsidiary from entering into or suffering to exist any agreement that 49 prohibits or conditions the creation or assumption of any Lien upon any of its property or assets except those in favor of such Person (any such agreement, a "Negative Pledge Agreement") unless prior to entering into or the existence of such Negative Pledge Agreement the Agents, the Lenders and the Lenders are granted in writing substantially similar rights. (clxxxii) Joint Ventures. Create, acquire or permit to exist any Subsidiary that is not a Restricted Subsidiary except any Subsidiary which is a special purpose corporation, partnership, limited liability company, trust or estate or other entity created after the Closing Date by any Loan Party or any Subsidiary of any Loan Party and any Person or Persons other than any Loan Party or a Subsidiary of any Loan Party in order to conduct a common business enterprise with such Person or Persons (each such Subsidiary being a "Joint Venture"); provided that (i) the total Investments by the Loan Parties in all such Joint Ventures from the Closing Date through the Termination Date shall not exceed $25,000,000 and (ii) within 60 days of the creation or acquisition of such Joint Venture the Administrative Agent shall have received (x) written notice by the Loan Parties of the creation or acquisition of such Joint Venture, including the names of all parties to such Joint Venture, the aggregate amount of all Investments of any Loan Party and any Restricted Subsidiary which are required to be made in such Joint Venture (including any Guaranty Obligations in respect thereof) and the percentage ownership by any Loan Party and any Restricted Subsidiary in such Joint Venture and (y) a certified copy of each material formation, capitalization or organization agreement of such Joint Venture and each material shareholder or investor agreement related to the Joint Venture to which any Loan Party or any Restricted Subsidiary is a party. (clxxxiii) Accounts Receivable. Create, incur, assume or suffer to exist any Lien upon any of its accounts receivable arising in connection with, or in connection with the use of, any Vessel, whether now owned or hereafter acquired, except for the Liens created under the Security Documents and as permitted thereby. (clxxxiv) Change of Class or Ownership. Change the Classification Society of the Vessels other than to another member of the International Association of Classification Societies acceptable to the Lenders or the immediate or ultimate ownership of any Vessel; (clxxxv) Change of Control. In the case of the Guarantor, cause or permit a Change of Control. (clxxxvi) Ownership of Borrower. In the case of the Borrower, cause or permit the Borrower to be less than 100% owned by the Guarantor. (clxxxvii) Ownership of Material Subsidiaries. Cause or permit any Material Subsidiary to cease to be a Material Subsidiary. (clxxxviii) Financial Covenants. So long as any principal, interest or other moneys are owing in respect of the Agreement, the Notes and any other Loan Documents, the Guarantor shall, unless the Majority Lenders otherwise consent in writing: 50 (clxxxix) Net Debt to EBITDA Ratio. Maintain at all times a ratio of Net Debt to EBITDA of not greater than 6:00 to 1:00, as measured at the end of each fiscal quarter based on the most recent fiscal quarters for which financial information is available. (cxc) Interest Coverage Ratio. Maintain at all times a ratio of EBITDA to interest expense net of interest income (as reflected on the most recent Consolidated financial statements of the Guarantor delivered pursuant hereto) not less than 3.5:1. (cxci) Consolidated Net Worth. Maintain a Consolidated Net Worth, as measured at the end of each fiscal quarter, in an amount not less than the sum of One Hundred and Seventy Five Million Dollars ($175,000,000) plus 25% of all net income of CMC (on a consolidated basis) earned after December 31, 2003 plus 50% of all net proceeds from the sale of any equity interest in the Guarantor or any of the Subsidiaries to any Person other than the Guarantor or any of the Subsidiaries. (cxcii) Asset Maintenance. If at any time during the Loan Period, the aggregate Fair Market Value of the Vessels (to be determined annually by the appraisals delivered pursuant to Section 5.01(c)) is less than one hundred and twenty five percent (125%) of the Loan Balance together with accrued and unpaid interest thereon (such percentage herein called the "Required Percentage"), the Borrower shall, within a period of thirty (30) days following receipt by the Borrower of written notice from the Administrative Agent notifying the Borrower of such shortfall and specifying the amount thereof (which amount shall, in the absence of manifest error, be deemed conclusive and binding on the Borrowers) prepay the Loan Balance or part thereof (together with interest thereon and any monies payable in respect of such prepayment pursuant to Section 9.04(c)) as shall result in the Fair Market Value of the Vessels then mortgaged to the Security Trustee being not less than the Required Percentage. Any such prepayment shall be applied to the unpaid quarterly installments of principal in the inverse order of their maturities. (CXCIII) EVENTS OF DEFAULT (cxciv) Events of Default. If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Note when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay, or cause to be paid, as the case may be, any interest on any Note, any fee or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or which is contained in any certificate or financial statement furnished at any time under this Agreement shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) The Borrower or any other Loan Party shall default in the observance or performance of any agreement contained in Section 5.02 or Section 5.03 (other than any default 51 under subsection 5.02(b) arising out of the creation of any non-consensual Lien in violation of such subsection); or (d) Any Loan Party shall fail to perform or observe any other term, content or agreement contained in this Agreement or any other Loan Document (other than the Ship Mortgage) on its part to be performed or observed (other than as provided in paragraphs (a) through (c) of this Section), if such failure shall remain unremedied for 10 days after the earlier of the date on which (i) a Responsible Officer becomes aware of such failure or (ii) written notice thereof shall have been given to the Borrower by any Agent or any Lender Party; or (e) Any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Indebtedness of such Loan Party or such Subsidiary (as the case may be) that is outstanding in a principal amount of at least $10,000,000 either individually or in the aggregate (but excluding Indebtedness outstanding hereunder), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness or otherwise to cause, or to permit the holder thereof to cause, such Indebtedness to mature; or any such Indebtedness shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; or (f) (i) Any Loan Party or any Material Subsidiary (to the extent not a Loan Party) shall commence any case, proceeding or other action (a "Proceeding") (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or any Loan Party or any Material Subsidiary (to the extent not a Loan Party) shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Loan Party, or any Material Subsidiary (to the extent not a Loan Party) any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any Loan Party or any Material Subsidiary (to the extent not a Loan Party) any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any Loan Party or any Material Subsidiary (to the extent not a Loan Party) shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), 52 (ii) or (iii) above; or (v) any Loan Party or any Material Subsidiary (to the extent not a Loan Party) shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) Any ERISA Event shall have occurred with respect to a Plan and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of CMC and the ERISA Affiliates related to such ERISA Event) exceeds $7,500,000; or (ii) CMC or any ERISA Affiliate shall fail to pay when due any payment of any Withdrawal Liability to a Multiemployer Plan where the amount of such Withdrawal Liability, when aggregated with all other amounts required to be paid to Multiemployer Plans by CMC and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $7,500,000 or requires payments exceeding $1,500,000 per annum; or (iii) CMC or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of CMC and the ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $1,500,000, which amount is not paid when due; or (h) One or more judgments or decrees shall be entered against either of the Loan Parties or any of their respective Subsidiaries involving in the aggregate a liability of $7,500,000 or more (calculated after deducting therefrom any amount that will be paid by a recognized protection and indemnity club that is a member of the International Group Agreement or any insurer rated at least B++ by A.M. Best Company, or the equivalent thereof provided by a rating service whose ratings of insurance companies are internationally recognized, or any insurer acceptable to the Lenders if such insurer has been notified of, and has not disputed the claim made for payment of, the amount of such judgment or decree) and such judgments or decrees involving in the aggregate $7,500,000 or more shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (i) Any non-monetary judgment or order shall be rendered against any Loan Party or any of their Subsidiaries that could reasonably be expected to have a Material Adverse Effect, and there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (j) With regard to any Title XI Financing Agreement, (A) any "Payment Default" shall have occurred with respect to any of the Title XI Subsidiaries or CMC; or (B) any Secretary's Notice (as defined in, or by reference in, any Title XI Financing Agreement) shall be issued for any reason; or (C) CMC shall be required pursuant to any stock Subscription Agreement (as defined in, or by reference in, any Title XI Financing Agreement) to purchase any shares of or make any cash advances to any Title XI Subsidiaries in an amount, together with any deposit or pledge amounts described in clause (D) of this subsection, in excess of $5,000,000; or (D) any Title XI Subsidiaries or CMC shall be required to make any deposit into any Title XI Reserve Fund or to make any pledge of cash collateral (whether or not such pledge or deposit is 53 made) or any such deposit or pledge is made, in an amount, together with any subscription or cash advance amounts described in clause (C) of this paragraph (j), in excess of $5,000,000; or (k) If at any time any Loan Party or their Subsidiaries shall become liable (whether, directly or indirectly, by indemnity or contribution or otherwise) for remediation and/or environmental compliance expenses and/or fines, penalties or other charges which, in the aggregate, has had or is reasonably likely to have a Material Adverse Effect; or (l) Section 7 hereof shall cease to be in full force and effect, shall be determined by any court to be void, voidable or unenforceable, or any Loan Party shall assert any defense to any of its obligations under any Loan Document to which it is a party or otherwise contest its liability thereunder, or any such Loan Party shall rescind or revoke (or attempt to rescind or revoke) any of its obligations under any Loan Document, whether with respect to future transactions or otherwise; (m) There shall occur and be continuing an "Event of Default" as defined in any Ship Mortgage; (n) A Change in Control shall occur; (o) The Borrower shall cease to be One Hundred percent (100%) owned by CMC; or (p) Except as otherwise permitted hereunder, the Security Trustee shall cease to have a first-priority perfected security interest in any Collateral. then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the either Loan Party, automatically the entire Loan Balance (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrower, declare the entire Loan Balance (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. (CXCV) GUARANTY (cxcvi) Guaranty The Guarantor hereby irrevocably and unconditionally guarantees to each of the Creditors and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Loan made by the Lenders to the Borrower and evidenced by the Notes and all other amounts from time to time owing to the Creditors by the Borrower under this Agreement, under the Notes and under any of the Security Documents, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "CMC Guaranteed Obligations"). The Guarantor hereby further agrees that if the Borrower shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the CMC 54 Guaranteed Obligations, the Guarantor will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the CMC Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. (cxcvii) Obligations Unconditional. The obligations of the Guarantor under Section 7.01 are absolute, unconditional and irrevocable, irrespective of the value, genuiness, validity, regularity or enforceability of the obligations of the Borrower under this Agreement, the Notes or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of, or security for, any of the CMC Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 7.2 that the obligations of the Guarantor hereunder shall be absolute, unconditional and irrevocable, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantor hereunder, which shall remain absolute, unconditional and irrevocable as described above: (a) at any time or from time to time, without notice to the Guarantor, the time for any performance of or compliance with any of the CMC Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (b) any of the acts mentioned in any of the provisions of this Agreement or the Notes or any other agreement or instrument referred to herein or therein shall be done or omitted; (c) the maturity of any of the CMC Guaranteed Obligations shall be accelerated, or any of the CMC Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or the Notes or any other agreement or instrument referred to herein or therein shall be waived or any other guarantee of any of the CMC Guaranteed Obligations or any security therefor shall be released or exchanged, in whole or in part, or otherwise dealt with; or (d) any lien or security interest granted to, or in favor of, the Security Trustee or any Lender or Lenders as security for any of the CMC Guaranteed Obligations shall fail to be perfected. The Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Agent, the Security Trustee or any Lender exhaust any right, power or remedy or proceed against the Borrower under this Agreement or the Notes or any other agreement or instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the CMC Guaranteed Obligations. 55 (cxcviii) Reinstatement. The obligations of the Guarantor under this Section 7 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower in respect of the CMC Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the CMC Guaranteed Obligations, whether as a result of any Proceedings and the Guarantor agrees that it will indemnify each Creditor on demand for all reasonable costs and expenses (including, without limitation, fees of counsel) incurred by such Creditor in connection with such recission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. (cxcix) Subrogation. The Guarantor hereby irrevocably waives, but only until all amounts payable hereunder by the Guarantor to the Creditors (or any of them) have been paid in full, any and all rights to which any of them may be entitled by operation of law or otherwise, upon making any payment hereunder to be subrogated to the rights of the payee against the Borrower with respect to such payment or to be reimbursed, indemnified or exonerated by the Borrower in respect thereof. (cc) Remedies. The Guarantor agrees that, as between the Guarantor and the Lenders, the obligations of the Borrower under this Agreement and the Notes may be declared to be forthwith due and payable as provided in Section 6 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 6) for purposes of Section 7.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Guarantor for purposes of Section 7.01. (cci) Instrument for the Payment of Money. The Guarantor hereby acknowledges that the guarantee in this Section 7 constitutes an instrument for the payment of money, and consents and agrees that any Creditor, at its sole option, in the event of a dispute by the Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. (ccii) Continuing Guarantee. The guarantee in this Section 7 is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. (CCIII) THE ADMINISTRATIVE AGENT AND THE SECURITY TRUSTEE (cciv) Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent and the Security Trustee, respectively, to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to the Administrative Agent and the Security Trustee, respectively, by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to 56 any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Notes), no Agent shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that no Agent shall be required to take any action that exposes any of them to personal liability or that is contrary to this Agreement or applicable law. Each Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. (ccv) Appointment of Security Trustee. Each of the Lenders irrevocably appoints, designates and authorizes the Security Trustee to act as security trustee on its behalf with regard to (i) the security, powers, rights, titles, benefits and interests (both present and future) constituted by and conferred on the Lenders or any of them or for the benefit thereof under or pursuant to this Agreement or any of the other Loan Documents (including, without limitation, the benefit of all covenants, undertakings, representations, warranties and obligations given, made or undertaken to any Lender in this Agreement or the other Loan Documents), (ii) all moneys, property and other assets paid or transferred to or vested in any Lender or any agent of any Lender or received or recovered by any Lender or any agent of any Lender pursuant to, or in connection with, this Agreement or the other Loan Documents whether from any Loan Party or any other person and (iii) all money, investments, property and other assets at any time representing or deriving from any of the foregoing, including all interest, income and other sums at any time received or receivable by any Lender or any agent of any Lender in respect of the same (or any part thereof). The Security Trustee hereby accepts such appointment but shall have no obligations under this Agreement, under the Note or under any of the Security Documents except those expressly set forth herein and therein. (ccvi) Agent's Reliance, Etc. Neither any Agent nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each Agent: (i) may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07; (ii) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with any Loan Document; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any Loan Document on the part of any Loan Party (other than the delivery by the Loan Parties of items purporting to be deliveries by the Loan Parties pursuant to Section 3.01(a)) or to inspect the property (including the books and records) of any Loan Party; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; and (vi) shall incur no liability under or in 57 respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier) believed by it to be genuine and signed or sent by the proper party or parties. (ccvii) Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. (ccviii) Indemnification. Each Lender severally agrees to indemnify the Administrative Agent and the Security Trustee (to the extent not promptly reimbursed by the Borrower) from and against such Lender's ratable share of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Agent under the Loan Documents, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct as found in a final non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent and the Security Trustee promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by such Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, the Loan Documents, to the extent that such Agent is not reimbursed for such expenses by the Borrower. For purposes of this Section 8.03 the Lenders' respective ratable shares of any amount shall be determined, at any time, according to their ratable share of the Loan Balance at such time. The failure of any Lender to reimburse any Agent promptly upon demand for its ratable share of any amount required to be paid by the Lenders to such Agent as provided herein shall not relieve any other Lender of its obligation hereunder to reimburse such Agent for its ratable share of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse such Agent for such other Lender's ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender hereunder the agreement and obligations of each Lender contained in this Section 8.03 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents. (ccix) Successor Agents. The Administrative Agent or Security Trustee, as the case may be, may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed from such capacity as an Agent at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent or Security Trustee, as the case may be. If no successor Administrative Agent or Security Trustee, as the case may be, shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 58 days after the retiring Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Administrative Agent or Security Trustee, as the case may be. A successor Agent shall be a Lender, or if no Lender will accept appointment as such successor Agent, the successor Agent shall be an Eligible Assignee and a 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 $250,000,000. Upon the acceptance of any appointment as Administrative Agent or Security Trustee hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Administrative Agent or Security Trustee, as the case may be, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. If within 45 days after written notice is given of the retiring Agent's resignation or removal under this Section 8.04 no successor Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (a) retiring Agent's resignation or removal shall become effective, (b) the retiring Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (c) the Majority Lenders shall thereafter perform all duties of the retiring Agent under the Loan Documents until such time, if any, as Majority Lenders appoint a successor Agent as provided above. After any retiring Agent's resignation or removal hereunder as Administrative Agent or Security Trustee, as the case may be, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent or Security Trustee, as the case may be, under the Loan Documents. (CCX) MISCELLANEOUS (ccxi) Amendments, Etc. No amendment or waiver of any provision of any Loan Document, nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders affected by such amendment, waiver or comment, do any of the following: (a) waive any of the conditions specified in Section 3, (b) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder (provided that any Lender may waive, for itself, the timely payment of any amount owed to it arising from any claim by such Lender in respect of any indemnity obligation of the Borrower to such Lender pursuant to Section 2.08, 2.09 or 2.11), (d) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes or the number of Lenders, that in each case shall be required for the Lenders or any of them to take any action hereunder, (f) reduce or limit the obligations of the Guarantor under Section 7.01 or otherwise limit the Guarantor's liability with respect to the Obligations owing to the Agents, the Lenders and the Lenders, (g) decrease the Required Percentage or (h) amend this Section 9.01; and provided further that no amendment, waiver or consent shall, unless in writing and signed by each Lender in addition to the Lenders required above to take such action, affect the rights or obligations of the Lenders (in their respective capacities as Lenders) under this Agreement; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent or the Security Trustee, as the case may be, in addition to the Lenders 59 required above to take such action, affect the rights or duties of the Administrative Agent or Security Trustee in its capacity as such Agent, under this Agreement or any Note. (ccxii) Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopier) and sent by a prepaid nationally recognized overnight courier, telecopied, or delivered, if to the Guarantor, at its address at 155 Grand Avenue, Oakland, California 94612, Attention: Alberto M. Marucco, Vice President and Treasurer; if to the Borrower, c/o the Guarantor at the foregoing address; if to any Lender, at its address set out on Schedule I hereto or as specified in the Assignment and Acceptance pursuant to which it became a Lender; if to the Administrative Agent or Security Trustee, at its address at 200 Park Avenue, New York, NY 10166-0396, Attention: Nikolai Nachamkin; or, as to any Loan Party or any Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, when mailed, sent by a nationally recognized overnight courier, or telecopied, be effective when deposited in the mails, delivered to such courier, or telecopied, respectively, except that notices and communications to the Administrative Agent pursuant to Sections 2, 3 or 8 shall not be effective until received by the Administrative Agent, as the case may be. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. (ccxiii) No Waiver; Remedies. No failure on the part of any Lender, any Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. (ccxiv) Costs and Expenses. (a) The Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses of each Agent in connection with the preparation, execution, delivery, administration, modification and amendment of any Loan Document and the other documents to be delivered hereunder, including, without limitation, (i) all reasonable due diligence, collateral review, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses, (ii) the reasonable fees and expenses of counsel for the Agents with respect thereto and with respect to advising the Agents as to their respective rights and responsibilities under the Loan Documents and (iii) all reasonable expenses (including reasonable fees and expenses of counsel) of the Administrative Agent in connection with any transaction pursuant to Section 9.07(i). The Borrower further agrees to pay on demand all reasonable costs and expenses of the Agents and the Lenders, if any (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Documents and the other documents to be delivered hereunder and thereunder, including, without limitation, reasonable fees and expenses of counsel for each Agent and each Lender in connection with the enforcement of rights under this Section 9.04(a). 60 (b) The Borrower agrees to indemnify and hold harmless the Administrative Agent, Security Trustee and each Lender and each of their Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (i) the Loan, the Loan Documents, any of the transactions contemplated herein or therein or the actual or proposed use of the proceeds of the Loan or (ii) the actual or alleged presence of Hazardous Materials on any property of the Borrower or any of its Subsidiaries, any Environmental Action relating in any way to the Borrower or any of its Subsidiaries or the violation of or noncompliance with any Environmental Laws applicable to the real property owned or operated (within the meaning of any applicable Environmental Law) by the Borrower or any of its Subsidiaries, or any orders, requirements or demands of Governmental Authorities related thereto, in each case whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. The Borrower also agrees not to assert any claim against any Agent, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Loan, the actual or proposed use of the proceeds of the Loan, the Loan Documents or any of the transactions contemplated thereby. (c) If any payment of principal of the Loan Balance is made by the Borrower to or for the account of a Lender other than on the last day of the relevant Interest Period, as a result of a payment pursuant to Sections 2.06 or 2.09, acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason or by an Eligible Assignee to a Lender other than on the last day of the relevant Interest Period upon an assignment of rights and obligations under this Agreement pursuant to Section 9.07 as a result of a demand by the Borrower pursuant to Section 9.07(a) or by addition of an Additional Lender under Section 9.07, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (d) If any Loan Party fails to pay when due any cost, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and Indemnities, such amount may be paid on behalf of such Loan Party by the Administrative Agent or any Lender in its sole discretion. (e) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in Sections 2.08, 2.11 and 61 9.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the Notes. (ccxv) Right of Set-off. Each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and the Note or Notes held by such Lender then due and payable. Each Lender agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its Affiliates under this Section are in addition to, and not in limitation of, other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its Affiliates may have. (ccxvi) Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and each Agent and when the Administrative Agent shall have been notified by each Lender that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, each Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. (ccxvii) Assignments and Participations. (a) Each Lender and each Agent may, with the consent of the Borrower, such consent not to be unreasonably withheld, and each Lender shall if demanded by the Borrower (following a demand by such Lender pursuant to Section 2.08 or 2.11) upon at least 5 Banking Days' notice to such Lender and the Administrative Agent, assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the portion of the Loan Balance and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under and in respect of the Loan, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof up to a maximum of $10,000,000, (iii) except in the case of an assignment of all of a Lender's rights and obligations under this Agreement, the remaining Commitment of the assigning Lender shall in no event be less than $10,000,000, (iv) each such assignment shall be to an Eligible Assignee, (v) each such assignment made as a result of a demand by the Borrower pursuant to this Section 9.07(a) shall be arranged by the Borrower after consultation with the Administrative Agent and shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement, (vi) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this 62 Section 9.07(a) unless and until such Lender shall have received one or more payments from either the Borrower or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Loan owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts then due and payable to such Lender under this Agreement and (vii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note subject to such assignment and, other for assignments other than assignments to Affiliates of the assigning Lender, a processing and recordation fee of $2,500; provided further that if such assignment is to an Eligible Assignee which is a direct or indirect wholly owned Subsidiary of any Lender or the controlling corporation of such Lender, no consent of the Borrower shall be required for such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its respective obligations under the Loan Documents or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to such Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender or Lender, as the case may be. 63 (d) The Administrative Agent shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agents and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, any Agent or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the forms such assignee is required to deliver pursuant to subsection 2.11(e) and any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Banking Days after its receipt of such notice (or, if later, the effective date of the transfer), the Borrower shall, at the request of the assigning Lender and at its own expense, execute and deliver to the Administrative Agent in exchange for the surrendered Note a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto. (f) Each Lender may sell participations to one or more banks or other entities (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, each Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder (to the extent such participant would be entitled to share therein), in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. (g) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or 64 participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information relating to the Borrower received by it from such Lender. (h) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. (ccxviii) Fraudulent Conveyances; Fraudulent Transfers. Notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, in the event that any court or other judicial body of competent jurisdiction determines that legal principles of fraudulent conveyances, fraudulent transfers or similar concepts are applicable in evaluating the enforceability against any Loan Party (for purposes of this Section 9.8 only, references to the defined term "Loan Party" shall be deemed not to include the Borrower) or its assets of this Agreement and that under such principles, this Agreement would not be enforceable against such Loan Party or its assets unless the following provisions of this Section 9.8 had effect, then, the maximum liability of each Loan Party hereunder (the "Maximum Liability Amount") shall be limited so that in no event shall such amount exceed the lesser of (i) the aggregate outstanding principal amount of the Loan and (ii) an amount equal to the aggregate, without double counting, of (a) ninety-five percent (95%) of such Loan Party's Adjusted Net Worth (as hereinafter defined) on the date hereof, or on the date enforcement of this Agreement is sought (the "Determination Date"), whichever is greater and (b) the amount of any Valuable Transfer (as hereinafter defined) to such Loan Party; provided that such Loan Party's liability under this Agreement shall be further limited to the extent, if any, required so that the obligations of such Loan Party under this Agreement shall not be subject to being set aside or annulled under any applicable law relating to fraudulent transfers or fraudulent conveyances. As used herein "Adjusted Net Worth" of the respective Loan Party shall mean, as of any date of determination thereof, an amount equal to the lesser of (a) an amount equal to the excess of (i) the amount of the present fair saleable value of the assets of such Loan Party over (ii) the amount that will be required to pay such Loan Party's probable liability on its then existing debts, including contingent liabilities (exclusive of its contingent liabilities hereunder), as they become absolute and matured, and (b) an amount equal to (i) the excess of the sum of such Loan Party's property at a fair valuation over (ii) the amount of all liabilities of such Loan Party, contingent or otherwise (exclusive of its contingent liabilities hereunder), as such terms are construed in accordance with applicable laws governing determinations of the insolvency of debtors. In determining the Adjusted Net Worth of a Loan Party for purposes of calculating the Maximum Liability Amount for such Loan Party, the liabilities of such Loan Party to be used in such determination pursuant to each clause (ii) of the preceding sentence shall in any event exclude (a) the liability of such Loan Party under this Agreement and (b) the liabilities of such Loan Party subordinated in right of payment to this Agreement. As used herein "Valuable Transfer" shall mean, in respect of such Loan Party, (a) all loans, advances or capital contributions made to such Loan Party with proceeds of the Loan, (b) all debt securities or other obligations of such Loan Party acquired from such Loan Party or retired by such Loan Party with 65 proceeds of the Loan, (c) the fair market value of all property acquired with proceeds of the Loan and transferred, absolutely and not as collateral, to such Loan Party, (d) all equity securities of such Loan Party acquired from such Loan Party with proceeds of the Loan, and (e) the value of any other economic benefits in accordance with applicable laws governing determinations of the insolvency of debtors, in each such case accruing to such Loan Party as a result of the Loan and this Agreement. (ccxix) Certain Changes in GAAP. If the Borrower defaults in the performance of any of its covenants hereunder as a sole and direct result of a change in GAAP, the Borrower and the Agents shall enter into good faith negotiations with a view towards agreeing upon an amendment to this Agreement (acceptable to the Borrower, the Agents and the Majority Lenders) within thirty days from the date of such change in GAAP, the effect of which amendment is to amend the ratios and amounts contained in such covenants or in the definitions related thereto, as the case may be, and the method of computation thereof, so that the Borrower and the Lenders are in the same position as if such change in GAAP had not occurred. During such thirty-day period of good faith negotiations a default of the type referred to in the preceding sentence shall not constitute a Default or an Event of Default hereunder. Until such amendment shall become effective and in any event if the Borrower, the Agents and the Majority Lenders fail to execute such amendment within such thirty day period of good faith negotiations, all covenant compliance determinations under this Agreement shall, from and after the date of such change in GAAP, continue to be made in accordance with GAAP in effect prior to such change, the Borrower shall provide to the Lenders such information as they may reasonably request to enable them to verify such compliance in accordance with such GAAP and the default referred to in the first sentence of this Section 9.08 shall not constitute a Default or an Event of Default hereunder. (ccxx) Confidentiality. No Agent nor any Lender shall disclose any Confidential Information to any other Person without the consent of the Borrower, other than (a) to such Agent's or such Lender's Affiliates and their officers, directors, employees, agents and advisors and, as contemplated by Section 9.07(f), to actual or prospective assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process and (c) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking. (ccxxi) Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. (ccxxii) Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. (ccxxiii) Jurisdiction, Etc. 66 (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. Each of the Loan Parties hereby agrees that service of summons or other legal process thereon may be effected by serving a copy of the summons or other legal process in any such action or proceeding on by mailing or delivering the same by hand at the address indicated for notices in Section 9.02. The service, as herein provided, of such summons or other legal process in any such action or proceeding shall be deemed personal service and accepted by the Loan Parties as such, and shall be legal and binding upon the Loan Parties for all purposes of any such action or proceeding. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. In the event that any of the Loan Parties shall not be conveniently available for such service, each Loan Party hereby irrevocably appoints the Person who then is the Secretary of the State of New York as its attorney-in-fact and agent. The Loan Parties will advise the Administrative Agent promptly of any change in address for the purpose of service of process. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to any Loan Document in the courts of any jurisdiction. (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to any Loan Document to which it is a party in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (CCXXIV) WAIVER OF JURY TRIAL. EACH OF THE LOAN PARTIES , THE AGENTS AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS, THE LOAN OR THE ACTIONS OF ANY AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. 67 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. CROWLEY MARINE SERVICES, INC., as Borrower By /s/ Albert M. Marucco ------------------------------------- Name: Albert M. Marucco Title: Vice President and Treasurer CROWLEY MARITIME CORPORATION, as Guarantor By /s/ Albert M. Marucco ------------------------------------- Name: Albert M. Marucco Title: Vice President and Treasurer DEN NORSKE BANK ASA, acting through its New York Branch, as Administrative Agent, Security Trustee and Lender By /s/ Barbara Gronquist ------------------------------------- Name: Barbara Gronquist Title: Senior Vice President By /s/ Nikolai A. Nachamkin ------------------------------------- Name: Nikolai A. Nachamkin Title: First Vice President 68 DVB BANK AG as Lender By /s/ Gorm Eikemo ------------------------------------- Name: Gorm Eikemo Title: Vice President By /s/ Camila F. Policarpio ------------------------------------- Name: Camila F. Policarpio Title: RBS LOMBARD, INC. as Lender By /s/ Michael G. Nawara ------------------------------------- Name: Michael G. Nawara Title: Senior Vice President By -------------------------------------- Name: Title: FORTIS CAPITAL CORP. as Lender By /s/ Svein Engh ------------------------------------- Name: Svein Engh Title: Managing Director By /s/ Carl Rasmussen ------------------------------------- Name: Carl Rasmussen Title: Vice President 69 NORDEA BANK NORGE ASA, GRAND CAYMAN BRANCH as Lender By /s/ Hans Chr. Kjelsrud ------------------------------------- Name: Hans Chr. Kjelsrud Title: Senior Vice President By /s/ Alison B. Barber ------------------------------------- Name: Alison B. Barber Title: Vice President 70 AMENDMENT NO. 1 TO LOAN AGREEMENT DATED DECEMBER 24, 2003 PROVIDING FOR A SECURED TERM LOAN OF UP TO $115,000,000 CROWLEY MARINE SERVICES, INC., as Borrower, AND The Banks and Financial Institutions listed on Schedule 1 to the Loan Agreement, as Lenders AND DNB NOR BANK ASA, acting through its New York branch, as Administrative Agent and Security Trustee AND CROWLEY MARITIME CORPORATION, as Guarantor March 15, 2004 AMENDMENT NO. 1 TO LOAN AGREEMENT THIS AMENDMENT NO. 1 TO LOAN AGREEMENT (this "Amendment") is made as of the 15th day of March, 2004 by and among (i) CROWLEY MARINE SERVICES, INC., a corporation organized and existing under the laws of the State of Delaware (the "Borrower"), (ii) CROWLEY MARITIME CORPORATION, a corporation organized and existing under the laws of the State of Delaware, as guarantor (the "Guarantor" and together with the Borrower, the "Loan Parties"), (iii) the banks and financial institutions whose names and addresses are set out in Schedule 1 to the Loan Agreement (together with any assignee pursuant to Section 9.07 of the Loan Agreement, the "Lenders", and each a "Lender"), (iv) DnB NOR Bank ASA (formerly known as Den norske Bank ASA), acting through its New York branch, as administrative agent for the Lenders (in such capacity the "Administrative Agent") and as security trustee for the Lenders (in such capacity the "Security Trustee"), and amends and is supplemental to the Loan Agreement dated December 24, 2003 (the "Loan Agreement") made by and among (1) the Borrower, (2) the Guarantor, (3) the Lenders, (4) the Administrative Agent and (5) the Security Trustee. WITNESSETH THAT: WHEREAS, pursuant to the Loan Agreement, the Lenders made available to the Borrower a secured term loan in the amount of up to U.S.$115,000,000 (the "Loan") the proceeds of which were utilized as provided therein; WHEREAS, the Loan Parties have requested, and the Lenders have agreed, subject to the terms and conditions herein contained to change the Initial Repayment Date (as defined in the Loan Agreement) to the date which falls on the three month anniversary of the Drawdown Date (as defined in the Loan Agreement). NOW, THEREFORE, in consideration of the premises and such other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by the parties, it is hereby agreed as follows: 1. Definitions. Unless otherwise defined herein, words and expressions defined in the Loan Agreement shall bear the same meanings when used herein. 2. Representations and Warranties. Each of the Loan Parties hereby reaffirms, as of the date hereof, each and every representation and warranty made thereby in the Loan Agreement, the Note and the Security Documents (updated mutatis mutandis). 3. No Defaults. Each of the Loan Parties hereby represents and warrants that as of the date hereof there exists no Event of Default or any condition which, with the giving of notice or passage of time, or both, would constitute an Event of Default. 4. Performance of Covenants. Each of the Loan Parties hereby reaffirms that it has duly performed and observed the covenants and undertakings set forth in the Loan Agreement and the Security Documents to which it is a party, on its part to be performed, and 2 covenants and undertakes to continue to duly perform and observe such covenants and undertakings, as amended hereby, so long as the Loan Agreement shall remain in effect. 5. Amendment to the Loan Agreement. Subject to the terms and conditions of this Amendment, the Loan Agreement is hereby amended and supplemented as follows: (a) Section 1.01 is amended as follows (i) in the definition of "Initial Repayment Date", the words "Closing Date" shall be deleted and replaced with the words "Drawdown Date"; 6. No Other Amendment. All other terms and conditions of the Loan Agreement shall remain in full force and effect and the Loan Agreement shall be read and construed as if the terms of this Amendment were included therein by way of addition or substitution, as the case may be. 7. Other Documents. By the execution and delivery of this Amendment, the Loan Parties hereby consent and agree that all references in the Note and the Security Documents to the Loan Agreement shall be deemed to refer to the Loan Agreement as further amended by this Amendment. 8. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. 9. Counterparts. This Amendment may be executed in as many counterparts as may be deemed necessary or convenient, and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed to be an original but all such counterparts shall constitute but one and the same agreement. 10. Headings; Amendment. In this Amendment, Section headings are inserted for convenience of reference only and shall be ignored in the interpretation of this Amendment. This agreement cannot be amended other than by written agreement signed by the parties hereto. [Signature pages follow] 3 IN WITNESS WHEREOF, each of the parties hereto has executed this Amendment by its duly authorized representative on the day and year first above written. CROWLEY MARINE SERVICES, INC., as Borrower By /s/ Albert M. Marucco --------------------- Name: Albert M. Marucco Title: Vice President, Treasurer CROWLEY MARITIME CORPORATION, as Guarantor By /s/ Albert M. Marucco --------------------- Name: Albert M. Marucco Title: Vice President, Treasurer DNB NOR BANK ASA, acting through its New York Branch, as Administrative Agent, Security Trustee and Lender By /s/ Berit L. Henriksen ---------------------- Name: Berit L. Henriksen Title: Executive Vice President and General Manager By /s/ Nikolai A. Nachamkin ------------------------ Name: Nikolai A. Nachamkin Title: First Vice President 4 DVB BANK AG as Lender By/s/ Richard E. Jansen --------------------- Name: Richard E. Jansen Title: Vice President By /s/ Joseph P. Devoe ------------------- Name: Joseph P. Devoe Title: Vice President RBS LOMBARD, INC. as Lender By /s/ Michael G. Nawara --------------------- Name: Michael G. Nawara Title: Sr. Vice President FORTIS CAPITAL CORP. as Lender By /s/ Carl Rasmussen ---------------------- Name: Carl Rasmussen Title: Vice President By /s/ Chr. Tobias Backer ---------------------- Name: Chr. Tobias Backer Title: Vice President 5 NORDEA BANK NORGE ASA, GRAND CAYMAN BRANCH as Lender By /s/ Alison B. Barber -------------------- Name: Alison B. Barber Title: Vice President By /s/ Martin Lunder -------------------- Name: Martin Lunder Title: Senior Vice President 6 EX-10.1.2 4 y93312exv10w1w2.txt SECOND AMENDED AND RESTATED CREDIT AGREEMENT Exhibit 10.1.2 EXECUTION COPY ================================================================================ U.S. $95,000,000 SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of February 27, 2004 Among CROWLEY MARITIME CORPORATION as Borrower and THE INITIAL LENDERS NAMED HEREIN as Initial Lenders and CITICORP USA, INC. as Administrative Agent and Collateral Agent and CITIGROUP GLOBAL MARKETS INC. as Arranger and CITIBANK, N.A. as Issuing Bank ================================================================================ Second Amended and Restated Crowley Credit Agreement Table of Contents
Page ---- Article I DEFINITIONS AND ACCOUNTING TERMS...................................................... 1 Section 1.01. Certain Defined Terms................................................ 1 Section 1.02. Computation of Time Periods.......................................... 18 Section 1.03. Accounting Terms..................................................... 18 Article II AMOUNTS AND TERMS OF THE ADVANCES.................................................... 19 Section 2.01. The Advances. (a) Revolving Credit Advances......................... 19 Section 2.02. Making the Revolving Credit Advances................................. 19 Section 2.03. Fees ................................................................ 20 Section 2.04. Termination or Reduction of the Commitments.......................... 20 Section 2.05. Repayment of Advances................................................ 21 Section 2.06. Interest ............................................................ 21 Section 2.07. Interest Rate Determination.......................................... 21 Section 2.08. Optional Conversion of Advances...................................... 22 Section 2.09. Prepayments.......................................................... 22 Section 2.10. Increased Costs...................................................... 23 Section 2.11. Illegality........................................................... 23 Section 2.12. Payments and Computations............................................ 24 Section 2.13. Taxes ............................................................... 25 Section 2.14. Sharing of Payments, Etc............................................. 26 Section 2.15. Use of Proceeds...................................................... 27 Section 2.16. Issuance of and Drawings and Reimbursement Under Letters of Credit... 27 Section 2.17. Increase in Commitments.............................................. 31 Article III CONDITIONS TO EFFECTIVENESS AND LENDING............................................. 33 Section 3.01. Conditions Precedent to Initial Extension of Credit.................. 33 Section 3.02. Conditions Precedent to Each Borrowing and Issuance, Etc............. 34 Article IV REPRESENTATIONS AND WARRANTIES....................................................... 35 Section 4.01. Representations and Warranties of the Loan Parties................... 35 Article V COVENANTS OF THE BORROWER............................................................. 40 Section 5.01. Affirmative Covenants................................................ 40 Section 5.02. Negative Covenants................................................... 45 Section 5.03. Reporting Requirements............................................... 52 Section 5.04. Financial Covenants.................................................. 55 Article VI EVENTS OF DEFAULT.................................................................... 55 Section 6.01. Events of Default.................................................... 55 Section 6.02. Actions in Respect of the Letters of Credit upon Default............. 58 Article VII BORROWER GUARANTY................................................................... 59 Section 7.01. Guaranty ............................................................ 59 Section 7.02. Guaranty Absolute.................................................... 59 Section 7.03. Waivers and Acknowledgments.......................................... 60 Section 7.04. Subrogation.......................................................... 60 Section 7.05. Continuing Guaranty.................................................. 61
Second Amended and Restated Crowley Credit Agreement ii
Page ---- Article VIII the agents......................................................................... 61 Section 8.01. Authorization and Action............................................. 61 Section 8.02. Agent's Reliance, Etc................................................ 62 Section 8.03. CUSA and Affiliates.................................................. 62 Section 8.04. Lender Party Credit Decision......................................... 62 Section 8.05. Indemnification...................................................... 62 Section 8.06. Successor Agents..................................................... 63 Article IX MISCELLANEOUS........................................................................ 64 Section 9.01. Amendments, Etc...................................................... 64 Section 9.02. Notices, Etc......................................................... 65 Section 9.03. No Waiver; Remedies, Entire Agreement................................ 65 Section 9.04. Costs and Expenses................................................... 65 Section 9.05. Right of Set-off..................................................... 67 Section 9.06. Binding Effect....................................................... 67 Section 9.07. Assignments and Participations....................................... 67 Section 9.08. Execution in Counterparts............................................ 69 Section 9.09. No Liability of the Issuing Bank..................................... 70 Section 9.10. Confidentiality...................................................... 70 Section 9.11. Release of Collateral................................................ 70 Section 9.12. Patriot Act Notification............................................. 70 Section 9.13. JURISDICTION, ETC.................................................... 71 Section 9.14. GOVERNING LAW........................................................ 71 Section 9.15. WAIVER OF JURY TRIAL................................................. 71
Second Amended and Restated Crowley Credit Agreement iii Schedules Schedule I - Commitments and Applicable Lending Offices Schedule II - Existing Letters of Credit Schedule III - Existing Indebtedness; Guaranty Obligations; Liens Schedule IV - Designated Account Parties Schedule V - Ownership of the Borrower Schedule VI - Disclosed Litigation Schedule VII - Subsidiaries of the Borrower Schedule VIII - Asset Dispositions Schedule IX - Regulated Subsidiaries Schedule X - Material Subsidiaries Schedule XI - Eligible Vessels and Barges; Eligible Physical Assets Schedule XII - Certain Environmental Matters Schedule XIII - Certain Tax Matters Schedule XIV - Deposit and Securities Accounts Schedule XV - Plans and Multiemployer Plans Exhibits Exhibit A - Form of Promissory Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Assignment and Acceptance Exhibit D - Form of Opinion of Gilmartin, Poster & Shafto, counsel to the Loan Parties Exhibit E - Form of Second Amended and Restated Subsdiary Guaranty Exhibit F - Form of Cash Collateral Agreement Exhibit G - Form of First Preferred Fleet Mortgages and Amendment No. 2 to the First Preferred Fleet Mortgages Exhibit H - Form of Second Amended and Restated Assignment of Insurances Exhibit I - Form of Second Amended and Restated Assignment of Freights and Hires Exhibit J - Form of Borrowing Base Certificate Second Amended and Restated Crowley Credit Agreement SECOND AMENDED AND RESTATED CREDIT AGREEMENT SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of February 27, 2004 among CROWLEY MARITIME CORPORATION, a Delaware corporation, as borrower (the "Borrower"), the banks, financial institutions and other institutional lenders (the "Initial Lenders") listed on the signature pages hereof, CITIBANK, N.A. ("Citibank"), as issuing bank (the "Issuing Bank"), CITICORP USA, INC. ("CUSA"), as administrative agent (together with any successor agent appointed pursuant to Article VIII, the "Administrative Agent") for the Lender Parties (as hereinafter defined) and as collateral agent (together with any successor collateral agent appointed pursuant to Article VIII, the "Collateral Agent") and CITIGROUP GLOBAL MARKETS INC., as arranger (the "Arranger"). PRELIMINARY STATEMENTS: (1) The Borrower, the Administrative Agent, the Collateral Agent, the Arranger and certain banks, financial institutions and other institutional lenders have entered into a credit agreement dated as of November 2, 2001 (the "Existing Credit Agreement"). (2) The Borrower has requested and the parties hereto have agreed to amend and restate the Existing Credit Agreement as provided herein. (3) The Borrower has requested that the Lenders (as defined herein) lend to the Borrower up to $95,000,000 to refinance the Existing Credit Agreement and to provide for ongoing working capital requirements and other general corporate purposes of the Borrower and its Subsidiaries and, from time to time, issue Letters of Credit for the benefit of the Borrower and its Subsidiaries. (4) Subject to the terms and conditions set forth herein, the Lender Parties agree to lend such amounts and extend such credit on the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS Section 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Administrative Agent" has the meaning specified in the recital of parties to this Agreement. "Administrative Agent's Account" means the account of the Administrative Agent maintained by the Administrative Agent at its office at Two Penns Way, Suite 200, New Castle, Delaware 19720, Account No. 36852248, ABA 021000089, Attention: Joseph Biado, Reference: Crowley Maritime, or such other account as the Administrative Agent shall specify in writing to the Lender Parties. "Advance" means a Revolving Credit Advance or a Letter of Credit Advance. Second Amended and Restated Crowley Credit Agreement 2 "Affiliate" means, with respect to any Person, (a) any Person (other than a Guarantor) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person, or (b) any Person who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person shall mean the power, direct or indirect, (i) to vote 10% or more of the securities or other interests having ordinary voting power for the election of directors of such Person or of Persons serving a similar function, or (ii) to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agent" means any of the Administrative Agent or the Collateral Agent. "Agreement" means this Credit Agreement, as amended from time to time in accordance with the terms hereof. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "Applicable Margin" means (i) for the period from the date hereof until the date upon which Administrative Agent receives the audited consolidated financial statements of the Borrower for the fiscal year ended December 31, 2003, 1.375% per annum in the case of Eurodollar Rate Advances, and 0.375% per annum in the case of Base Rate Advances and (ii) thereafter, a percentage per annum determined by reference to the ratio of Total Debt to EBITDAR as set forth below (in each case, as such percentage may be increased pursuant to Section 2.06(b)):
TOTAL DEBT/EBITDAR EURODOLLAR RATE RATIO BASE RATE ADVANCES ADVANCES - ---------------------------------------------------------------------------- Less than 1.5:1.0 0.125% 1.125% 1.5:1.0 or greater, 0.250% 1.250% but less than 2.0:1.0 2.0:1.0 or greater, 0.375% 1.375% but less than 2.5:1.0 2.5:1.0 or greater, 0.500% 1.500% but less than 3.0:1.0 3.0:1.0 or greater 0.675% 1.675%
For the purposes of this clause (ii), the Applicable Margin for each Base Rate Advance and each Eurodollar Rate Advance shall be determined by reference to the ratio of Total Debt to EBITDAR in effect from time to time; provided, however, that (A) no change in the Applicable Margin shall be effective until three Business Days after the date on which the Administrative Agent receives the financial statements required to be delivered pursuant to subsection 5.03(b) or 5.03(c), as the case may be, and a certificate of a Responsible Officer of the Borrower demonstrating such ratio of Total Debt to EBITDAR pursuant to such subsections, (B) the Applicable Margin shall be determined as if the ratio of Total Debt to EBITDAR were greater than or equal to 3.0 to 1 for so long as the Borrower has not submitted to the Administrative Agent the information described in clause (A) of this proviso as and when required under Section 5.03(b) or (c) and (C) no decrease in the Applicable Margin on any date shall exceed 0.25%. Second Amended and Restated Crowley Credit Agreement 3 "Arranger" has the meaning specified in the recital of parties to this Agreement. "Asset Dispositions" has the meaning specified in Section 5.02(e). "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit C hereto. "Assuming Lender" has the meaning specified in Section 2.17(d). "Assumption Agreement" has the meaning specified in Section 2.17(d)(ii). "Available Amount" of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing). "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; (b) the sum (adjusted to the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the next higher 1/16 of 1%) of (i) 1% per annum, plus (ii) the rate obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average (adjusted to the basis of a year of 360 days) being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for Citibank with respect to liabilities consisting of or including (among other liabilities) three-month U.S. dollar non-personal time deposits in the United States, plus (iii) the average during such three-week period of the annual assessment rates estimated by Citibank for determining the then current annual assessment payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. dollar deposits of Citibank in the United States; and (c) 1/2 of one percent per annum above the Federal Funds Rate. "Base Rate Advance" means, as the context may require, (i) an Advance that initially bears interest at a rate determined in reference to the Base Rate as provided in Section 2.06(a)(i), or (ii) any portion of the outstanding Advances bearing interest at a rate determined in reference to the Base Rate as provided in Section 2.06(a)(i). "Borrower Guaranteed Obligations" has the meaning set forth in Section 7.01. Second Amended and Restated Crowley Credit Agreement 4 "Borrowing" means a Revolving Credit Borrowing. "Borrowing Base " means at any time an amount equal to (a) prior to the third anniversary of the Restatement Effective Date, 80% of the most recently determined Collateral Value, (b) on and after the third anniversary of the Restatement Effective Date and until the fourth anniversary of the Restatement Effective Date, 75% of the most recently determined Collateral Value and (c) on and after the fourth anniversary of the Restatement Effective Date, 72.5% of the most recently determined Collateral Value. "Borrowing Base Availability" means at any time an amount equal to the Borrowing Base less the sum of: (a) the aggregate principal amount of all outstanding Advances, and (b) the aggregate Available Amount of all Letters of Credit then outstanding; provided, that Borrowing Base Availability shall at no time exceed the Revolving Credit Facility. "Borrowing Base Certificate" means a certificate in substantially the form of Exhibit J hereto. All calculations of Borrowing Base Availability in connection with the preparation of the Borrowing Base Certificate shall originally be made by the Borrower and certified to the Collateral Agent, provided that the Collateral Agent shall have the right to review and adjust, in the exercise of its reasonable credit judgment, any such calculation (1) to reflect its reasonable estimate of declines in value of any collateral described therein, and (2) to the extent that such calculation is not in accordance with this Agreement. "Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City or San Francisco and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "Cash Collateral Agreement" means a cash collateral agreement in substantially the form of Exhibit F. "Cash Equivalents" shall mean (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition and overnight bank deposits of any Lender and certificates of deposit with maturities of one year or less from the date of acquisition and overnight bank deposits of any other commercial bank having capital and surplus in excess of $200,000,000, (c) commercial paper of any issuer rated at least A-2 by Standard & Poor's Ratings Group or P-2 by Moody's Investors Service, Inc., (d) additional money market investments with maturities of one year or less from the date of acquisition rated at least A-1 or AA by Standard & Poor's Ratings Group or P-1 or Aa by Moody's Investors Service, Inc. and (e) tax-exempt debt obligations of any State of the United States or of any county or other municipal governmental subdivision of any State of the United States with maturities of one year or less from the date of acquisition rated at the highest investment grade rating by Standard & Poor's Ratings Group or by Moody's Investors Service, Inc., or publicly traded or open-end bond funds that invest exclusively in such tax-exempt debt obligations. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time. Second Amended and Restated Crowley Credit Agreement 5 "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency. "CFC" means an entity that is a controlled foreign corporation under Section 957 of the Internal Revenue Code. "Change in Control" means the failure of the Crowley Family to have the power to vote or cause to be voted, directly or indirectly, in the aggregate at least 51% of the voting stock of the Borrower. "Citibank " has the meaning specified in the recital of parties to this Agreement. "Collateral" means the Eligible Vessels and Barges, Eligible Physical Assets and all other property of the Borrower and its Subsidiaries secured by, or intended to be secured by, the Collateral Documents and all other property that is or is intended to be subject to any Lien in favor of the Collateral Agent for the benefit of the Secured Parties. "Collateral Agent" has the meaning specified in the recital of parties to this Agreement. "Collateral Documents" means the Ship Mortgages, the Second Amended and Restated Assignments of Freights and Hires, the Second Amended and Restated Assignments of Insurances, and any other agreement that creates or purports to create a Lien in favor of the Collateral Agent for the benefit of the Secured Parties. "Collateral Value" means, on any date for the determination the sum of Ships Value and Physical Assets Value; provided that at no time shall Physical Assets Value exceed 25% of Collateral Value. "Commitment" means, with respect to any Lender at any time, the amount set forth opposite such Lender's name on Schedule I hereto under the caption "Commitment" or, if such Lender has entered into one or more Assignments and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender's "Commitment"; provided that each Lender's Commitment may be reduced from time to time pursuant to Section 2.04. "Commitment Date" has the meaning specified in Section 2.17(b). "Commitment Fee Rate" means at any time a percentage per annum equal to 22.5% of the Applicable Margin then in effect for Eurodollar Advances. "Commitment Increase" has the meaning specified in Section 2.17(a). "Confidential Information" means information that any Loan Party furnishes to any Agent or any Lender in a writing designated as confidential, but does not include any such information that is or becomes generally available to the public or that is or becomes available to such Agent or such Lender from a source other than the Loan Parties. "Consolidated" refers to the consolidation of accounts in accordance with GAAP. Second Amended and Restated Crowley Credit Agreement 6 "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Convert", "Conversion" and "Converted" each refers to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.07 or 2.08. "Crowley Family" means all of the following Persons: (i) Thomas B. Crowley, Jr., an individual residing as of the date hereof in Oakland, California, together with all Persons who are now or hereafter relatives of such Person; and (ii) all trusts, conservatorships and estates of or for the benefit of the Persons described in clause (i) of this defined term. (For purposes of this definition, "relative" means any individual related by affinity or consanguinity within the fourth degree as determined by the common law, or any individual in a step or adoptive relationship within such fourth degree.) "CUSA" has the meaning specified in the recital of parties to this Agreement. "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Default Interest" has the meaning specified in Section 2.06(b). "Designated Account Parties" means the collective reference to the Subsidiaries and Affiliates of the Borrower listed on Schedule IV and any other Person designated by the Borrower as a Designated Account Party by written notice from the Borrower to the Administrative Agent and any Issuing Bank requested to issue a Letter of Credit for the account of such Designated Account Party. "Disclosed Litigation" has the meaning specified in Section 4.01(f). "DNB Credit Facility" means the credit facility provided to the Borrower pursuant to the terms of that certain loan agreement and any other document related thereto effecting the transactions contemplated thereby providing for a secured term loan of up to $115,000,000, dated as of December 24, 2003, among Crowley Marine Services, Inc., as borrower, Crowley Maritime Corporation, as guarantor, the banks and financial institutions and other institutional lenders party thereto, as lenders, and Den Norske Bank ASA, acting through its New York Branch, as administrative agent and as security trustee. "Dollars" and the "$" sign each means lawful money of the United States. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EBITDA" means the operating income plus the sum of (a) depreciation expense and (b) amortization expense as reflected in the "Consolidated Statement of Operations" of the Borrower prepared in accordance with GAAP; provided that EBITDA shall be calculated on a rolling basis for the four fiscal quarters most recently ended. Second Amended and Restated Crowley Credit Agreement 7 "EBITDAR" means the operating income plus the sum of (a) depreciation expense, (b) amortization expense and (c) rent or lease expense ( reduced by an amount equal to 25% of the first year of time charter commitments used in the Total Debt calculation), in each case, as reflected in the "Consolidated Statement of Operations" of the Borrower prepared in accordance with GAAP; provided that EBITDAR shall be calculated on a rolling basis for the four fiscal quarters most recently ended. "Eligible Assignee" means (i) a Lender; (ii) a direct or indirect wholly owned Subsidiary of any Lender or the controlling corporation of such Lender; (iii) any commercial bank organized under the laws of the United States, or any State thereof, and having combined capital and surplus in excess of $1,000,000,000; (iv) any commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development ("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 combined capital and surplus in excess of $1,000,000,000, so long as such bank is acting through a branch or agency located in the United States, in the Cayman Islands or in the country in which it is organized or another country that is described in this clause (iv); and (v) any other Person approved by the Administrative Agent and the Borrower, such approval not to be unreasonably withheld; provided, however, that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee. "Eligible Physical Assets" means the physical assets listed on Part B of Schedule XI hereto, as such schedule may be amended from time to time at the request of the Borrower and with the consent of the Collateral Agent, or such other physical assets acceptable to the Required Lenders provided that the Collateral Agent shall have at all times a first priority and perfected lien on each such asset. "Eligible Vessels and Barges" means the tug boats and barges listed on Part A of Schedule XI hereto, as such schedule may be amended from time to time at the request of the Borrower and with the consent of the Collateral Agent, provided that the Collateral Agent shall have at all times a first priority and perfected lien on each such tug boat or barge. "Environmental Action" means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to public health, public safety (as such alleged injury or threat of injury to public health or public safety is related to exposure to Hazardous Materials) or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "Environmental Law" means any Federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health (as it is related to exposure to Hazardous Materials), safety (as it is related to exposure to Hazardous Materials) or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. Second Amended and Restated Crowley Credit Agreement 8 "Equity Interests" means, with respect to any Person, shares of Equity Interests of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of Equity Interests of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of Equity Interests of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any Person that for purposes of Title IV of ERISA is a member of the Borrower's controlled group, or under common control with the Borrower, within the meaning of Section 414 of the Internal Revenue Code. "ERISA Event" means (a) (i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met with a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of the Borrower or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for the imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, a Plan. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "Eurodollar Rate" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing, an interest rate per annum equal to (i) the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) at which deposits in U.S. dollars appear on page 3750 (or any successor page thereto) of the Dow Jones Telerate Screen two Business Days before the first day of such Interest Period and for a term comparable to such Second Amended and Restated Crowley Credit Agreement 9 Interest Period, or (ii) if such rate does not so appear on the Dow Jones Telerate Screen on any date of determination, the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) at which deposits in U.S. dollars appear on the Reuters Screen LIBO Page two Business Days before the first day of such Interest Period and for a term comparable to such Interest Period, provided, however, that if the Reuters Screen LIBO Page is being used to determine the Eurodollar Rate at any date of determination and more than one rate is specified thereon as the London interbank offered rate for deposits in U.S. dollars, the applicable rate shall be the average of all such rates (rounded upward, if necessary, to the nearest whole multiple of 1/16 of 1% per annum), or (iii) if such rate does not so appear on either the Dow Jones Telerate Screen or Reuters Screen LIBO Page on any date of determination, then, the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum) of the rates per annum at which deposits in Dollars are offered by the principal office of Citibank in London, England, to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to Citibank's Eurodollar Rate Advance comprising part of such Borrowing and for a period equal to such Interest Period. In such circumstances, the Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing shall be determined by the Administrative Agent on the basis of the applicable rates given to and received by the Administrative Agent from Citibank two Business Days prior to the first day of such Interest Period. "Eurodollar Rate Advance" means, as the context may require, (i) a Revolving Credit Advance that initially bears interest at a rate determined in reference to the Eurodollar Rate as provided in Section 2.06(a)(ii), or (ii) any portion of the outstanding Revolving Credit Advances bearing interest at a rate determined in reference to the Eurodollar Rate as provided in Section 2.06(a)(ii). "Eurodollar Rate Tranche" is the collective reference to Eurodollar Rate Advances the Interest Periods with respect to all of which begin on the same date and end on the same later date. "Events of Default" has the meaning specified in Section 6.01. "Existing Advances" has the meaning specified in Section 2.02(a). "Existing Credit Agreement" has the meaning specified in the Preliminary Statements to this Agreement. "Existing Letters of Credit" has the meaning specified in Section 2.16(j). "Facility" means the Revolving Credit Facility or the Letter of Credit Facility. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financing Lease" means any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. Second Amended and Restated Crowley Credit Agreement 10 "Foreign Subsidiary" means a Subsidiary which is organized under the laws of a jurisdiction other than the United States or any State thereof or the District of Columbia. "GAAP" has the meaning specified in Section 1.03. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Governmental Authorization" means any authorization, approval, consent, franchise, license, covenant, order, ruling, permit, certification, exemption, notice, declaration or similar right, undertaking or other action of, to or by, or any filing, qualification or registration with, any Governmental Authority. "Group of Advances" means at any time a group of Advances consisting of (i) all Base Rate Advances outstanding at such time or (ii) Eurodollar Advances outstanding at such time constituting a single Eurodollar Rate Tranche at such time. "Guarantor" means each Material Subsidiary, other than any Regulated Subsidiary, and any Subsidiary that has an ownership interest in any of the Eligible Vessels and Barges or Eligible Physical Assets, in each case as of the Restatement Effective Date, and thereafter each Subsidiary of the Borrower that becomes a party to the Second Amended and Restated Subsdiary Guaranty pursuant to the terms hereof and thereof. "Guaranty Obligation" means, as to any Person (the "guaranteeing person"), (a) any obligation of (i) the guaranteeing person or (ii) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case if such obligation is guaranteeing or in effect guaranteeing any Indebtedness, or leases, dividends or other obligations which are substitutes for or equivalents of Indebtedness (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (A) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (B) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (C) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (D) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof and (b) all obligations of such Person in respect of mandatory contributions to capital (including without limitation as a result of calls for capital or otherwise) of any Joint Venture of such Person; provided, however, that the term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation of any guaranteeing person shall be deemed to be the lower of (x) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made and (y) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guaranty Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guaranty Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. Second Amended and Restated Crowley Credit Agreement 11 "Hazardous Materials" means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. "Hedge Agreements" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other hedging agreements. "Increase Date" has the meaning specified in Section 2.17(a). "Increasing Lender" has the meaning specified in Section 2.17(d). "Indebtedness" of any Person at any date means, without duplication, (a) all indebtedness of such Person for borrowed money (other than current trade liabilities, customer advances and customer deposits incurred in the ordinary course of business and payable in accordance with customary practices) or which is evidenced by a note, bond, debenture or similar instrument, (b) the portion of the obligations of such Person under Financing Leases included as indebtedness on the balance sheet of such Person in accordance with GAAP, (c) the portion of the obligations of such Person in respect of acceptances issued or created for the account of such Person included as indebtedness on the balance sheet of such Person in accordance with GAAP, (d) all obligations of such Person in respect of Hedge Agreements, valued at the mark-to-market value of such Hedge Agreements, which will be the unrealized loss (calculated on a net basis) on such Hedge Agreements to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreements determined by the Administrative Agent as the amount, if any, by which (i) the present value of the future cash flows to be paid by such Loan Party or Subsidiary exceeds (ii) the present value of the future cash flows to be received by such Loan Party or Subsidiary pursuant to such Hedge Agreements, (e) all reimbursement or counter indemnity obligations of such Person in respect of amounts already paid under letters of credit, guarantees or similar instruments backing another Person's obligations of the types described in the foregoing clauses (a), (b), (c) and (d), and (e) the aggregate Non-Qualified Partnership Liabilities of such Person. "Initial Extension of Credit" means the earlier to occur of the initial Borrowing and the initial issuance of a Letter of Credit hereunder (including the assumption of the Existing Advances pursuant to Section 2.02(a) and the Existing Letters of Credit pursuant to Section 2.16(j)). "Initial Lenders" has the meaning specified in the recital of parties to this Agreement. "Insufficiency" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "Interest Period" means, for each Eurodollar Rate Advance comprising part of the same Eurodollar Rate Tranche, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as the Borrower may, upon notice received by the Administrative Agent not later than 1:00 P.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: Second Amended and Restated Crowley Credit Agreement 12 (i) the Borrower may not select any Interest Period that ends after the Termination Date; (ii) Eurodollar Rate Advances comprising part of the same Borrowing shall initially belong to the same Eurodollar Rate Tranche; (iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (iv) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. With respect to Existing Advances made in accordance with Section 2.02(a) of the Existing Credit Agreement, the Interest Period in respect of such Existing Advances shall be the "Interest Period" in effect under the Existing Credit Agreement prior to the Restatement Effective Date until the end of such Interest Period. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Investment" has the meaning specified in Section 5.02(g). "Issuing Bank" means Citibank and any other Lender or Affiliate of a Lender approved by the Administrative Agent, the Borrower and such other Lender or Affiliate of such other Lender. "Joint Venture" has the meaning specified in Section 5.02(l). "L/C Cash Collateral Account" has the meaning set forth in Section 2.16. "L/C Related Documents" has the meaning specified in Section 2.16. "Lender Parties" means the Lenders and the Issuing Bank. "Lenders" means the Initial Lenders and each Person that shall become a party hereto pursuant to Section 9.07. "Letter of Credit" has the meaning specified in Section 2.16 and shall, in any case, include Existing Letters of Credit. "Letter of Credit Advance" means an advance made by any Issuing Bank or any Lender pursuant to Section 2.16(d). "Letter of Credit Agreement" has the meaning specified in Section 2.16. Second Amended and Restated Crowley Credit Agreement 13 "Letter of Credit Commitment" means, with respect to any Issuing Bank at any time, the amount set forth opposite such Issuing Bank's name on Schedule I hereto under the caption "Letter of Credit Commitment" or, if such Issuing Bank has entered into one or more Assignments and Acceptances, set forth for such Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 9.07(c) as such Issuing Bank's "Letter of Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.04. "Letter of Credit Facility" means, at any time, an amount equal to the lesser of (a) the aggregate amount of the Letter of Credit Commitments of the Issuing Banks at such time and (b) $50,000,000, in each case as such amount may be reduced at or prior to such time pursuant to Section 2.04. "Letter of Credit Fee Rate" means the Applicable Margin for Eurodollar Rate Advances as in effect from time to time. "Letter of Credit Sub-Limit" means, at any time, the lesser of (a) the Letter of Credit Facility at such time and (b) an amount equal to $50,000,000 less the sum of (i) the aggregate principal amount of the Letter of Credit Advances outstanding at such time and (ii) the aggregate Available Amount of all Letters of Credit outstanding at such time. "Leverage Ratio" means, at any time for the determination thereof, the ratio of Total Debt to total stockholders' equity (as reflected on the most recent Consolidated balance sheet of the Borrower). "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumberence to real property. "Loan Documents" means this Agreement, the Notes, the Second Amended and Restated Subsdiary Guaranty, the Collateral Documents, each Cash Collateral Agreement and each Letter of Credit Agreement. "Loan Parties" means the Borrower and each Guarantor. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, condition (financial or otherwise), performance, properties or prospects of any Loan Party and its Restricted Subsidiaries taken as a whole, (b) the ability of any Loan Party and its Restricted Subsidiaries taken as a whole to perform the obligations under the Loan Documents or (c) the rights and remedies of any Agent or any Lender under any Loan Document. "Material Subsidiary" means (i) the Subsidiaries set forth on Schedule X and (ii) each other Subsidiary of the Borrower having (x) Net Assets greater than $15,000,000 at the end of any fiscal quarter of the Borrower or (y) Net Revenue greater than $15,000,000 for the most recently ended four consecutive fiscal quarters of the Borrower, in each case as determined commencing with the fiscal quarter ending September 30, 2003. "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. Second Amended and Restated Crowley Credit Agreement 14 "Multiple Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA Affiliate and at least one Person other than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Net Assets" means, as to the Borrower or any Subsidiary of the Borrower at any time, the excess of (i) the total assets of such Person at such time over (ii) all net intercompany receivables owing to such Person at such time, in each case determined in accordance with GAAP. "Net Revenue" means, as to the Borrower or any Subsidiary of the Borrower for any period of determination, the excess of (i) the total revenue of such Person for such period over (ii) all intercompany revenue of such Person for such period, in each case determined in accordance with GAAP. "Non-Qualified Partnership" means a Joint Venture, partnership or other entity in which the Borrower or any Restricted Subsidiary is a general partner or has general liability for the obligations of such entity, other than any Restricted Subsidiary which is a corporation and substantially all of whose assets consist of its interest in such Joint Venture, partnership or other entity. "Non-Qualified Partnership Liability" of a Person at any time means, with respect to a Non-Qualified Partnership in which such Person has an interest, an amount equal to the amount by which (a) the aggregate amount of the total liabilities of such Non-Qualified Partnership at such time minus (without duplication) (i) the aggregate amount of such liabilities that are expressly agreed by the holders of such liabilities to be non-recourse to such Non-Qualified Partnership (the "Partnership Non-Recourse Liabilities") and (ii) the aggregate amount of such liabilities that are expressly agreed by the holders of such liabilities to be non-recourse to such Person (the "Partner Non-Recourse Liabilities") exceeds (b) 85% of the aggregate amount of the total tangible assets of such Non-Qualified Partnership at such time minus (without duplication) (x) the aggregate amount of the Partnership Non-Recourse Liabilities at such time and (y) the aggregate amount of the Partner Non-Recourse Liabilities at such time, as determined in accordance with GAAP. "Note" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Advances made by such Lender. "Notice of Borrowing" has the meaning specified in Section 2.02(a). "Notice of Issuance" has the meaning specified in Section 2.16. "NPL" means the National Priorities List under CERCLA. "Obligations" means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(f). Without limiting the generality of the foregoing, the Obligations of any Loan Party under the Loan Documents include (a) the obligation to pay principal, interest (including interest accruing on or after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding, Second Amended and Restated Crowley Credit Agreement 15 relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by such Loan Party under any Loan Document and (b) the obligation of such Loan Party to reimburse any amount in respect of any of the foregoing that any Lender Party, in its sole discretion, may elect to pay or advance on behalf of such Loan Party. "Other Taxes" has the meaning set forth in Section 2.13(b). "Patriot Act" has the meaning set forth in Section 9.12. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity of whatever nature, or a Governmental Authority. "Physical Asset Disposition" has the meaning specified in subsection 5.02(e)(vi). "Physical Assets Value" means the most recently appraised value of Eligible Physical Assets, such value to be determined and adjusted in a manner satisfactory to the Collateral Agent. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Pro Rata Share" of any amount means, with respect to any Lender at any time, the product of such amount times a fraction the numerator of which is the amount of such Lender's Commitment at such time and the denominator of which is the Revolving Credit Facility at such time, provided that for purposes of determining each of the foregoing numerator and denominator, each Lender's Commitment shall be equal to the amount determined pursuant to clause (i) of the definition of Commitment in this Section 1.01. "Register" has the meaning specified in Section 9.07(d). "Regulated Subsidiary" means Beacon Insurance Company Limited and each other Subsidiary that is prohibited by any applicable law, rule or regulation from entering into and performing obligations of a guarantor under a Second Amended and Restated Subsidiary Guaranty, each as listed on Schedule IX hereto as such schedule may be amended from time to time to include any future Subsidiary of the Borrower subject to such prohibition. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System. "Reimbursement Obligation" means the obligation of the Borrower or any Designated Account Party to reimburse any Issuing Bank for amounts drawn under the Letters of Credit and other amounts reimbursable by the Borrower or such Designated Account Party thereunder or under any Letter of Credit Agreement. "Required Lenders" means at any time Lenders owed or holding greater than 50% of the sum of (a) the aggregate principal amount of the Advances outstanding at such time and (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, or, if no such principal amount and no Letters of Credit are outstanding at such time, Lenders holding greater than 50% of the Revolving Credit Facility at such time. For purposes of this definition, the aggregate Second Amended and Restated Crowley Credit Agreement 16 principal amount of Letter of Credit Advances owing to the Issuing Bank and the Available Amount of each Letter of Credit shall be considered to be owed to Lenders ratably in accordance with their Commitments. "Requirement of Law" means as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" means the chief executive officer of the Borrower, the president of the Borrower, the general counsel of the Borrower, any senior vice president of the Borrower or any corporate vice president of the Borrower having familiarity with the matters in respect of which such corporate vice president is acting as a Responsible Officer under this Agreement, or, with respect to financial matters, the chief financial officer of the Borrower, the treasurer of the Borrower or the chief accounting officer of the Borrower. "Restatement Effective Date" means the date of the Initial Extension of Credit hereunder. "Restricted Subsidiary" means each Subsidiary of the Borrower or of any Subsidiary of the Borrower, other than any Joint Venture. "Revolving Credit Advance" means an advance made by any Lender pursuant to Section 2.02(a). "Revolving Credit Borrowing" means a borrowing consisting of Revolving Credit Advances of the same Type made on the same day by the Lenders, and in the case of Eurodollar Advances, having the same Interest Period. "Revolving Credit Facility" means, at any time, the aggregate amount of the Lenders' Commitments at such time. "Secured Parties" means the Agents and the Lender Parties. "Second Amended and Restated Assignment of Insurances" means, with respect to any Eligible Vessel and Barge, an assignment of insurances in substantially the form of Exhibit H hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with this Agreement. "Second Amended and Restated Assignment of Freights and Hires" means, with respect to any Eligible Vessel and Barge, an assignment of freights and hires in substantially the form of Exhibit I hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with this Agreement. "Second Amended and Restated Subsidiary Guaranty" has the meaning specified in Section 3.01(a)(ii). "Ship Mortgage" means, with respect to any Eligible Vessel and Barge, a first preferred ship mortgage, including Amendment No. 2 to the First Preferred Fleet Mortgages, in substantially the form of Exhibit G hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with this Agreement. Second Amended and Restated Crowley Credit Agreement 17 "Ships Value" means the aggregate value of all of the Eligible Vessels and Barges (except for any Eligible Vessel or Barge which has been disposed of in accordance with subsection 5.01(p)) as determined in accordance with the procedures for determining the fair market value of each vessel and barge as set forth in each Ship Mortgage, except that the value of each Eligible Vessel and Barge that suffers an Event of Loss (as defined in the applicable Ship Mortgage) shall (i) in the case any Default shall have occurred and be continuing, or shall result from such Event of Loss, be zero or (ii) in the case no Default shall have occurred and be continuing, or shall result from such Event of Loss, become zero upon the earliest of (x) the date that is 90 days after the date of such Event of Loss and (y) the date on which the insurance proceeds of such Event of Loss are paid to the Mortgagee (as defined in the Ship Mortgages) in accordance with Section 1.15 of the applicable Ship Mortgage. "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA Affiliate and no Person other than the Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which the Borrower or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Solvent" means, with respect to any Person on a particular date, that on such date (a) 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, (b) such Person does not intent to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (c) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which Person's property would be unreasonably small in relation to such business or such transaction. "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate or other entity of which (or in which) more than 50% of (a) the issued and outstanding Equity Interests or other ownership interests having ordinary voting power to elect a majority of the board of directors or a majority of other equivalent managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person (irrespective of whether at the time Equity Interests of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), or (b) the interest in the capital or profits of such limited liability company, partnership or joint venture, or (c) the beneficial interest in such trust or estate, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Taxes" has the meaning set forth in Section 2.13(a). "Termination Date" means the earliest of (i) the date of termination in whole of the Commitments pursuant to Section 2.04 or 6.01 and (ii) February 27, 2009. "Title XI Financing Agreements" means any and all documents and agreements executed by the Borrower or any Title XI Subsidiary evidencing obligations incurred in connection with any financing guaranteed under Title XI of the Merchant Marine Act of 1936, as amended. "Title XI Subsidiaries" means the collective reference to Crowley Liner Services, Inc., Vessel Management Services, Inc., Crowley Marine Services, Inc., Julius Owner Corporation and Frances Owner Corporation. Second Amended and Restated Crowley Credit Agreement 18 "Total Debt" means, as to the Borrower and its Consolidated Subsidiaries at any time, the aggregate sum of (a) all Indebtedness (as reflected on the Consolidated balance sheet of the Borrower), (b) future lease commitments (as such future lease commitments are presented in the Borrower's most recent annual consolidated financial statements that are available at the end of the period delivered to the Lenders pursuant to Section 5.03(b) or in such other statement or report that is publicly disclosed) discounted at a rate of 10% and (c) all Guaranty Obligations valued at the full amount of the underlying obligation (as reflected in the footnote to the Consolidated balance sheet of the Borrower) and other contingent liabilities. For purposes of calculating Total Debt, the total future payments under leases constituting time charters, to be reported by the Borrower pursuant to Section 5.03(b) and (c), shall be reduced by 25% prior to application of the discount referred to in clause (b) above. "Type" refers to each of the two categories of Advances, namely Advances bearing interest at the Base Rate and Advances bearing interest at the Eurodollar Rate. "Unused Commitment" means, with respect to any Lender at any time, (a) such Lender's Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Advances made by such Lender and outstanding at such time, plus (ii) such Lender's Pro Rata Share of each of (A) the aggregate Available Amount of all Letters of Credit outstanding at such time and (B) the aggregate principal amount of all Letter of Credit Advances outstanding at such time other than any such Letter of Credit Advance which, at or prior to such time, has been assigned in part to such Lender pursuant to Section 2.16(d). "Vessel or Barge Disposition" has the meaning specified in subsection 5.02(e)(vi). "Welfare Plan" means a welfare plan, as defined in Section 3(1) of ERISA. "Wholly Owned Subsidiary" means any Restricted Subsidiary of the Borrower, all of the outstanding equity interests in which are owned, directly or indirectly, by the Borrower. "Withdrawal Liability" has the meaning specified in Part I of Subtitle E of Title IV of ERISA. "Yukon Acquisition" means the Borrower's acquisition of the common stock or assets of Yukon Fuel Company and/or Service Oil & Gas, Inc. or other assets satisfactory to the Required Lenders, in each case, with the proceeds of the DNB Credit Facility. Section 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". Section 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles from time to time in effect in the United States ("GAAP"). Second Amended and Restated Crowley Credit Agreement 19 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES Section 2.01. The Advances. (a) Revolving Credit Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each a "Revolving Credit Advance") to the Borrower from time to time on any Business Day during the period from the Restatement Effective Date until the Termination Date; provided that with respect to any requested Revolving Credit Advance the amount of such Revolving Credit Advance does not exceed either such Lender's Unused Commitment at such time or such Lender's Pro Rata Share of the Borrowing Base Availability. Each Borrowing (other than any Borrowing comprised of Letter of Credit Advances deemed to be converted to Revolving Credit Advances pursuant to Section 2.16(f)(i)) shall be in an aggregate amount of $3,000,000 or an integral multiple of $100,000 in excess thereof (other than a Borrowing the proceeds of which shall be used solely to repay or prepay in full outstanding Letter of Credit Advances). Each Borrowing shall consist of Revolving Credit Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Unused Commitment, the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.09 and reborrow under this Section 2.01(a). Section 2.02. Making the Revolving Credit Advances. (a) Except as otherwise provided in Section 2.16(f)(i) in respect of Letter of Credit Advances deemed converted to Revolving Credit Advances, each Borrowing shall be made on notice, given not later than 1:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances, or the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier. Each such notice of a Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed immediately in writing, or by telecopier, in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type of Revolving Credit Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Advance. Each Lender shall, before 3:00 P.M. (New York City time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent's Account, in same day funds, such Lender's ratable portion of such Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's address referred to in Section 9.02; provided, however, that the Administrative Agent shall first make a portion of such funds equal to the aggregate principal amount of any Letter of Credit Advances made by any Issuing Bank, or, in either case, by any other Lender and outstanding on the date of such Borrowing, plus interest accrued and unpaid thereon to and as of such date, available to such Issuing Bank, as the case may be, and, in either case, such other Lenders for repayment of such Letter of Credit Advances. Effective as of the Restatement Effective Date, all "Revolving Credit Advances" outstanding under the Existing Credit Agreement (the "Existing Advances") shall automatically be deemed to be Revolving Credit Advances hereunder. (b) Anything in subsection (a) above to the contrary notwithstanding, the Eurodollar Rate Advances may not be outstanding as part of more than six separate Eurodollar Rate Tranches. (c) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any Second Amended and Restated Crowley Credit Agreement 20 loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance as part of such Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. Section 2.03. Fees. (a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender a commitment fee on the average daily Unused Commitment of such Lender during the quarter for which such commitment fee is payable, from the Restatement Effective Date in the case of each Initial Lender and from the later of such date and the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date at a rate per annum equal to the Commitment Fee Rate. Such commitment fee shall in all cases be payable in arrears quarterly on the last Business Day of each March, June, September and December, commencing on March 31, 2004, and on the Termination Date. (b) Upfront Fees. The Borrower shall pay to the Administrative Agent for the account of each Initial Lender on the Restatement Effective Date an upfront fee on the Commitment of such Initial Lender in an amount equal to 0.35% of such Initial Lender's Commitment. (c) Agents' Fees. The Borrower shall pay to the Administrative Agent for its account such fees as may from time to time be agreed between the Borrower and such agent. Section 2.04. Termination or Reduction of the Commitments. (a) The Borrower shall have the right, upon at least three Business Days' notice to the Administrative Agent, to terminate in whole or reduce ratably in part the Unused Commitments or the unused portion of the Letter of Credit Commitments, provided that each partial reduction of the Revolving Credit Facility or the Letter of Credit Facility (i) shall be in the aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii) shall be made ratably among the Lenders or the Issuing Banks, as the case may be, in accordance with their Commitments with respect to the Revolving Credit Facility or their Letter of Credit Commitment with respect to the Letter of Credit Facility, as the case may be. Second Amended and Restated Crowley Credit Agreement 21 (b) The Letter of Credit Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Letter of Credit Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility. Section 2.05. Repayment of Advances. (a) Revolving Credit Advances. The Borrower shall repay to the Administrative Agent for the ratable account of the Lenders on the Termination Date the aggregate principal amount of the Revolving Credit Advances then outstanding. Section 2.06. Interest. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender from the date such Advance is made until such principal amount shall be paid in full, at the following rates per annum: (i) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, at a rate per annum equal at all times to the sum of (x) the Base Rate in effect from time to time plus (y) the Applicable Margin in effect from time to time, payable in arrears quarterly on the last Business Day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or paid in full. (ii) Eurodollar Rate Advances. During such periods as such Advance is a Eurodollar Rate Advance, at a rate per annum at all times during each Interest Period for the Eurodollar Rate Tranche of such Advance equal to the sum of (x) the Eurodollar Rate for such Interest Period for such Eurodollar Rate Tranche plus (y) the Applicable Margin in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date each Eurodollar Rate Advance shall be Converted or paid in full. (b) Default Interest. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above ("Default Interest"), as the case may be, and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to clause (a)(i) above. Section 2.07. Interest Rate Determination. (a) If, with respect to any Eurodollar Rate Advances, the Required Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (b) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" Second Amended and Restated Crowley Credit Agreement 22 in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances. (c) Upon the occurrence and during the continuance of any Event of Default under Section 6.01(a) or Section 6.01(f), (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended. Section 2.08. Optional Conversion of Advances. The Advances included in each Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Borrowing, or in the case of Letter of Credit Advances deemed to be converted to Revolving Credit Advances pursuant to Section 2.16(f)(i), initially at the Base Rate. Thereafter, the Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 1:00 P.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.07 and 2.11, Convert all or a portion of Advances of one Type comprising the same Group of Advances into Advances of the other Type; provided, however, that any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.01(a) and no Conversion of any Advances shall result in more separate Eurodollar Rate Tranches than permitted under Section 2.02(b); and provided further that with respect to the Conversion of a portion of Advances comprising part of the same Group, such portion is allocated ratably among the Advances comprising such Group and each resulting Eurodollar Rate Tranche is in an aggregate amount of $3,000,000 or an integral multiple of $100,000 in excess thereof. Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted, (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for the Eurodollar Rate Tranche to be comprised of such Advances and (iv) the Group of Advances (or portion thereof) to which such notice applies. Each notice of Conversion shall be irrevocable and binding on the Borrower. Section 2.09. Prepayments. (a) Optional. The Borrower may, upon at least (i) three Business Days' notice in the case of Eurodollar Rate Advances and (ii) one Business Day's notice in the case of any other Advance, in each case, to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amount of the Advances in whole or ratably in part, and in the case of Eurodollar Advances together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $3,000,000 or an integral multiple of $100,000 in excess thereof and (y) in the event of any such prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 9.04(c). (b) Mandatory. The Borrower shall (i) on each Business Day, prepay an aggregate principal amount of the Advances equal to the amount by which (A) the sum of the aggregate principal amount of (x) the Advances and (y) the aggregate Available Amount of all Letters of Credit then outstanding exceeds (B) the Revolving Credit Facility on such Business Day, (ii) on each Business Day, prepay an aggregate principal amount of the Advances equal to the amount by which (A) the sum of the aggregate principal amount of (x) the Advances and (y) the aggregate Available Amount of all Letters of Credit then outstanding exceeds (B) the Borrowing Base on such Business Day, prepay all outstanding Advances, together with all accrued interest and fees. Prepayments of the Revolving Credit Facility made pursuant to this subsection (b) shall be first applied to prepay Letter of Credit Advances then outstanding until such Advances are paid in full and second applied to prepay Revolving Credit Advances then outstanding comprising part of the same Borrowings until such Advances are paid in full, in each case, together with the respective interest accrued thereon. If, after giving effect to the foregoing payments or Second Amended and Restated Crowley Credit Agreement 23 if no Advances are at such time outstanding, the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility, then the Borrower shall cash collateralize the Letters of Credit in an aggregate amount equal to such excess in accordance with arrangements reasonably satisfactory to the Administrative Agent. Section 2.10. Increased Costs. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) which compliance was not required as of the date hereof, there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances or of agreeing to issue or of issuing or maintaining Letters of Credit or of agreeing to make or of making Letter of Credit Advances (excluding for purposes of this Section 2.10 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.13 shall govern) and (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender is organized or has its Applicable Lending Office or any political subdivision thereof), then the Borrower shall from time to time, within 30 days after demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; provided, however, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender determines (taking into account such Lender's, or its controlling corporation's, policies with respect to capital adequacy) that compliance, which compliance was not required as of the date hereof, with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of such type or the issuance or maintenance of Letters of Credit (or similar contingent obligations), then, within 30 days after demand by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder or to the issuance or maintenance of any Letters of Credit. A certificate as to such amounts submitted to the Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error. Section 2.11. Illegality. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Administrative Agent that the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and demand therefor by such lender to the Borrower through the Administrative Agent (i) each Eurodollar Rate Advance will automatically, upon such demand, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower that such Lender has determined that the circumstances causing such suspension no longer Second Amended and Restated Crowley Credit Agreement 24 exist; provided, however, that before making any such demand, such Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurodollar Lending Office if the making of such a designation would allow such Lender or its Eurodollar Lending Office to continue to perform its obligations to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate Advances and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. Section 2.12. Payments and Computations. (a) The Borrower shall make each payment hereunder and under the Notes not later than 1:00 P.M. (New York City time) on the day when due in Dollars to the Administrative Agent at the Administrative Agent's Account in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Section 2.10, 2.13 or 9.04(c)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder or under the Note held by such Lender, to charge from time to time against any or all of the Borrower's accounts with such Lender any amount so due. Each Lender agrees promptly to notify the Borrower after any such charge against the Borrower's accounts, provided that the failure to give such notice shall not affect the validity of such charge. (c) All computations of interest based on the rate of interest set forth in clause (a) of the definition of "Base Rate" shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate, the Federal Funds Rate or on the rate of interest set forth in clause (b) of the definition of "Base Rate" and of fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or Letter of Credit commissions are payable. Each determination by the Administrative Agent of an interest rate, fee or Letter of Credit commission hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fee, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each such Lender shall repay to the Administrative Agent forthwith on demand such Second Amended and Restated Crowley Credit Agreement 25 amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate. Section 2.13. Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.12, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and each Agent, taxes that are imposed on its overall net income by the United States and taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction under the laws of which such Lender Party or such Agent, as the case may be, is organized or any political subdivision thereof and, in the case of each Lender Party, taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction of such Lender Party's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender Party or any Agent, (i) the sum payable by the Borrower shall be increased as may be necessary so that after the Borrower and the Administrative Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 2.13) such Lender Party or such Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make all such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (c) The Borrower shall indemnify each Lender Party and each Agent for and hold them harmless against the full amount of Taxes and Other Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.13, imposed on or paid by such Lender Party or such Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or such Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing such payment. In the case of any payment hereunder or under the Notes by or on behalf of the Borrower through an account or branch outside the United States or by or on behalf of the Borrower by a payor that is not a United States person, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at such address, an opinion of counsel acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of subsections (d) and (e) of this Section 2.13, the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender Party organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender Party, and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender Party in the case of each other Lender Party, and from time to time thereafter as requested in Second Amended and Restated Crowley Credit Agreement 26 writing by the Borrower (but only so long thereafter as such Lender Party remains lawfully able to do so), provide each of the Administrative Agent and the Borrower with two original Internal Revenue Service forms W8-ECI or W8-BEN, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or the Notes. If the forms provided by a Lender Party at the time such Lender Party first becomes a party to this Agreement indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided, however, that if, at the effective date of the Assignment and Acceptance pursuant to which a Lender Party becomes a party to this Agreement, the Lender Party assignor was entitled to payments under subsection (a) of this Section 2.13 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form W8-ECI or W8-BEN, that the applicable Lender Party reasonably considers to be confidential, such Lender Party shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information. Upon the request of the Borrower, any Lender that is a United States person and is not an exempt recipient for U.S. backup withholding purposes shall deliver to the Borrower two copies of Internal Revenue Service form W-9 (or any successor form). (f) For any period with respect to which a Lender Party has failed to provide the Borrower with the appropriate form described in subsection (e) above (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under subsection (e) above), such Lender Party shall not be entitled to indemnification under subsection (a) or (c) of this Section 2.13 with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender Party shall reasonably request to assist such Lender Party to recover such Taxes. (g) Any Lender Party claiming any additional amounts payable pursuant to this Section 2.13 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Eurodollar Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. Section 2.14. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances owing to it (other than pursuant to Section 2.10, 2.13 or 9.04(c)) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender Second Amended and Restated Crowley Credit Agreement 27 so purchasing a participation from another Lender pursuant to this Section 2.14 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. Section 2.15. Use of Proceeds. The proceeds of the Advances shall be used (a) to refinance the Existing Credit Agreement and (b) for ongoing working capital requirements and other general corporate purposes of the Borrower and its Subsidiaries, provided that such proceeds of the Advances shall not be used to make any acquisition (other than in the ordinary course of business consistent with past practices). Section 2.16. Issuance of and Drawings and Reimbursement Under Letters of Credit. (a) Letters of Credit. Each Issuing Bank severally agrees, on the terms and conditions hereinafter set forth, to issue standby and, in the sole discretion of the respective Issuing Bank, direct-pay, letters of credit (together with the Existing Letters of Credit, the "Letters of Credit") for the account of the Borrower or a Designated Account Party from time to time on any Business Day during the period from the Restatement Effective Date until 30 days before the Termination Date (i) in an aggregate Available Amount for all Letters of Credit issued by such Issuing Bank not to exceed at any time such Issuing Bank's Letter of Credit Commitment less such Issuing Bank's Letter of Credit Advances and (ii) in an Available Amount for each such Letter of Credit not to exceed the least of (x) the Letter of Credit Sub-Limit at such time, (y) the Unused Commitments of the Lenders at such time and (z) the Borrowing Base Availability at such time. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than the earlier of one year after the Termination Date and one year after the date of issuance thereof. Any Letter of Credit may, upon request of the Borrower or Designated Account Party, as the case may be, include a provision whereby such Letter of Credit may be renewed for additional consecutive periods of 12 months or less, provided that the consent of the Required Lenders and the Issuing Bank will be required for any such renewal during the continuance of a Default or Event of Default. Within the limits of the Letter of Credit Facility, and subject to the limits referred to above, the Borrower or a Designated Account Party may request the issuance of Letters of Credit under this Section 2.16(a), the Borrower may repay any Letter of Credit Advances resulting from drawings thereunder pursuant to Section 2.16(d) and the Borrower or a Designated Account Party may request the issuance of additional Letters of Credit under this Section 2.16(a). Each Letter of Credit shall be denominated in Dollars. (b) Request for Issuance. Each Letter of Credit shall be issued upon notice, given not later than 1:00 P.M. (New York City time) on the fifth Business Day prior to the date of the proposed issuance of such Letter of Credit, by the Borrower or any Designated Account Party to any Issuing Bank, which shall give to the Administrative Agent and each Lender prompt notice thereof by telecopier. Each such notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be by telephone, confirmed immediately in writing, or telecopier, specifying therein the requested (A) date of such issuance (which shall be a Business Day), (B) Available Amount of such Letter of Credit, (C) expiration date of such Letter of Credit, (D) name and address of the beneficiary of such Letter of Credit and (E) form of such Letter of Credit, and shall be accompanied by such application and agreement for letter of credit as such Issuing Bank may specify to the Borrower or such Designated Account Party for use in connection with such requested Letter of Credit (a "Letter of Credit Agreement"). If (x) the requested form of such Letter of Credit and the identity and location of the proposed beneficiary thereof is acceptable to the Issuing Bank consistent with such Issuing Bank's established policies generally applicable to the issuance of letters of credit and any applicable law and (y) it has not received notice of objection to such issuance from the Required Lenders such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the Borrower or such Designated Account Party at its office referred to in Section 9.02 or as otherwise agreed with the Borrower or such Designated Account Party in connection with such issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall Second Amended and Restated Crowley Credit Agreement 28 conflict with this Agreement, the provisions of this Agreement shall govern. Notwithstanding Section 9.07, from time to time any Issuing Bank may, by notice to the Administrative Agent and the Borrower, assign to an Affiliate of such Issuing Bank which is at such time also an Issuing Bank all or a portion of such assigning Issuing Bank's Letter of Credit Commitment hereunder. Upon the issuance of a Letter of Credit, each Lender shall be deemed to have a risk participation in such Letter of Credit to the extent of its Pro Rata Share of the Available Amount of such Letter of Credit. (c) Letter of Credit Reports. Each Issuing Bank shall furnish (A) to the Administrative Agent on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued during the previous month by such Issuing Bank and drawings during such month under all Letters of Credit, (B) to each Lender on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the preceding month and drawings during such month under all Letters of Credit issued by such Issuing Bank and (C) to the Administrative Agent and each Lender on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank. (d) Drawing and Reimbursement. The payment by any Issuing Bank of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by such Issuing Bank of a Letter of Credit Advance, which shall be a Base Rate Advance, in the amount of the Reimbursement Obligations relating to such draft as of the date of such Letter of Credit Advance. Upon written demand by such Issuing Bank, with a copy of such demand to the Administrative Agent, each Lender shall purchase from such Issuing Bank, and such Issuing Bank shall sell and assign to each such Lender, such Lender's Pro Rata Share of such outstanding Letter of Credit Advance as of the date of such purchase, by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of such Issuing Bank, by deposit to the Administrative Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Letter of Credit Advance to be purchased by such Lender; provided, that, in the case of any payment of a draft drawn under a Letter of Credit that is a direct-pay letter of credit, the applicable Issuing Bank shall not make such written demand at any time prior to the Business Day immediately following the date on which such payment is made; provided, further, that at any time prior to the date on which such written demand is made, the Borrower shall be permitted to repay the full amount of such payment on same-day notice to the Administrative Agent and the applicable Issuing Bank. Promptly after receipt of such payment, the Administrative Agent shall transfer such funds to such Issuing Bank. The Borrower hereby agrees to each such sale and assignment. Each Lender agrees to purchase its Pro Rata Share of such an outstanding Letter of Credit Advance on (i) the Business Day on which demand therefor is made by the Issuing Bank which made such Advance, provided notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by an Issuing Bank to any other Lender of a portion of a Letter of Credit Advance, such Issuing Bank represents and warrants to such Lender that such Issuing Bank is the legal and beneficial owner of such interest being assigned by it, free and clear of any liens, but makes no other representation or warranty and assumes no responsibility with respect to such Letter of Credit Advance, the Loan Documents, any Loan Party or any Designated Account Party. If and to the extent that any Lender shall not have so made the amount of such Letter of Credit Advance available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by such Issuing Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate for its account or the account of such Issuing Bank, as applicable. If such Lender shall pay to the Administrative Agent such amount for the account of such Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute a Letter of Credit Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Letter of Credit Advance made by such Issuing Bank shall be reduced by such amount on such Business Day. Second Amended and Restated Crowley Credit Agreement 29 (e) Failure to Make Letter of Credit Advances. The failure of any Lender to make the Letter of Credit Advance to be made by it on the date specified in Section 2.16(d) shall not relieve any other Lender of its obligation hereunder to make its Letter of Credit Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Letter of Credit Advance to be made by such other Lender on such date. (f) Letter of Credit Advances. (i) Upon a Lender making available to the Administrative Agent the amount of the Letter of Credit Advance pursuant to Section 2.16(d), such Letter of Credit Advance shall be deemed to be converted to a Revolving Credit Advance to the extent that at such time such Lender could make a Revolving Credit Advance pursuant to Section 2.01. The Borrower shall repay to the Administrative Agent for the account of each Issuing Bank and each Lender that has a Letter of Credit Advance that has not been converted pursuant to the immediately preceding sentence on the earliest of (i) demand, (ii) the date of the next Borrowing and (iii) the Termination Date the outstanding principal amount of each Letter of Credit Advance made by each of them. (ii) The obligations of the Borrower under this Agreement with respect to any Letter of Credit, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit, including without limitation, the obligation to repay any Advance arising from a drawing on a Letter of Credit, shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances and regardless of the use of proceeds of any drawing under any Letter of Credit or any defense related thereto: (A) any lack of validity or enforceability of this Agreement, any Note, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the "L/C Related Documents"); (B) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of the Borrower or any Designated Account Party in respect of any L/C Related Document or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; (C) the existence of any claim, set-off, defense or other right that the Borrower or any Designated Account Party may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents 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 of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; (F) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the obligations of the Borrower or any Designated Account Party in respect of the L/C Related Documents; or (G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute Second Amended and Restated Crowley Credit Agreement 30 a defense available to, or a discharge of, the Borrower, any Designated Account Party, any Guarantor or any other guarantor. (g) Letter of Credit Fees. (i) The Borrower shall pay (or in the case of a Letter of Credit issued for the account of a Designated Account Party, cause such Designated Account Party to pay) to the Administrative Agent for the account of each Lender a fee on such Lender's Pro Rata Share of the average daily aggregate Available Amount of all Letters of Credit outstanding from time to time at the Letter of Credit Fee Rate, payable in arrears quarterly on the last Business Day of each March, June, September and December commencing March 31, 2004 and on the Termination Date; provided, that the initial payment of any such fee on March 31, 2004 shall include the accrued and unpaid letter of credit fees as provided under the Existing Credit Agreement. (ii) The Borrower shall pay to each Issuing Bank a fronting fee on the terms and in the amount agreed upon between the Borrower and such Issuing Bank with respect to each Letter of Credit issued by such Issuing Bank, together with such other commissions, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as the Borrower and such Issuing Bank shall agree. (h) Limited Liability of the Issuing Banks. The Borrower (and in the case of any Letter of Credit issued for the account of a Designated Account Party, such Designated Account Party) assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither any Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit 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; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) such Issuing Bank's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. (i) Collateral Account. (i) On or before the Termination Date, the Borrower hereby agrees to deposit an amount equal to the aggregate amount available at such time to be drawn under the Letters of Credit (such aggregate amount as determined from time to time being the "Required Balance") in a cash collateral account to be established and maintained by the Administrative Agent pursuant to a Cash Collateral Agreement over which the Administrative Agent shall have sole dominion and control (the "L/C Cash Collateral Account") upon terms substantially set forth in such Cash Collateral Agreement. The Administrative Agent shall, at the Borrower's direction and without assuming any risk of loss thereof, invest the funds in the L/C Cash Collateral Account in Cash Equivalents for the account of the Borrower. All interest and other investment gains earned on such investments shall be added to the L/C Cash Collateral Account as additional collateral security for the prompt and complete payment when due of the obligations and liabilities of the Borrower and any Designated Account Party under and in respect of the Letters of Credit. On (i) the last Business Day of each calendar month, the Administrative Agent or (ii) any other date that the Borrower, the Administrative Agent or Required Lenders through the Administrative Agent shall in writing request, the Administrative Agent shall determine whether the amount on deposit on such date in the Second Amended and Restated Crowley Credit Agreement 31 L/C Cash Collateral Account (A) is greater than the Required Balance on such date (the amount of such excess being the "Excess Amount") or (B) is less than the Required Balance on such date (the amount of such deficit being the "Deficit Amount"). The Administrative Agent shall advise the Borrower on the date of determination of the existence, if any, of any Excess Amount or Deficit Amount and thereafter (i) the Borrower shall immediately upon receipt of notice from the Administrative Agent of the existence of any Deficit Amount, pay to the Collateral Agent (as defined in the Cash Collateral Agreement), as additional funds to be deposited and held in such cash collateral account, an amount equal to such Deficit Amount or (ii) upon request of the Borrower within 5 Business Days of receipt of notice from the Administrative Agent of the existence of any Excess Amount, the Administrative Agent shall instruct such Collateral Agent to release to the Borrower from the funds on deposit in the L/C Cash Collateral Account an amount equal to such Excess Amount. If at any time the Administrative Agent or such Collateral Agent determines that any funds held in the L/C Cash Collateral Account are subject to any right or claim of any Person other than such Collateral Agent, any Agent, any Issuing Bank or the Lenders, which right or claim could reasonably have the effect of reducing the value of such funds to the Lenders and the Issuing Banks, the Borrower will, forthwith upon receipt of a demand by the Administrative Agent, pay to the Collateral Agent, as additional funds to be deposited and held in such L/C Cash Collateral Account, an amount equal to the amount by which the value of such funds to the Lenders and the Issuing Banks has been reduced as determined by the Administrative Agent. (ii) The Borrower hereby grants a security interest in any amounts from time to time on deposit in the L/C Cash Collateral Account as collateral security for the prompt and complete payment when due of the obligations and liabilities of the Borrower and the Designated Account Parties under and in respect of the Letters of Credit. (iii) The Borrower, the Administrative Agent, each other Agent, each Issuing Bank and the Lenders agree that any action taken or omitted to be taken by the Administrative Agent in connection with the L/C Cash Collateral Account, if taken or omitted to be taken in good faith and with reasonable care, shall be binding upon the Borrower, each other Agent, the Issuing Banks and the Lenders and shall not create any liability on the part of the Administrative Agent to the Borrower, each other Agent, the Issuing Banks or the Lenders. (j) Existing Letters of Credit. Effective as of the Restatement Effective Date, (i) all "Letters of Credit" issued for the account of the Borrower by Citibank under the Existing Credit Agreement (such "Letters of Credit" as are outstanding thereunder on the Restatement Effective Date and set forth on Schedule II hereto being the "Existing Letters of Credit"), will be deemed to be Letters of Credit hereunder, (ii) the applications and agreements for such Existing Letters of Credit shall be deemed to be Letter of Credit Agreements hereunder and (iii) all Existing Letters of Credit shall be subject to and governed by the terms and conditions hereof. Section 2.17. Increase in Commitments. (a) The Borrower may, at any time prior to the Termination Date, with the consent of the Administrative Agent (not to be unreasonably withheld), request that the aggregate amount of the Commitments be increased by an amount equal to $5,000,000 or an integral multiple of $1,000,000 in excess thereof (each a "Commitment Increase") to be effective as of a date that is at least 90 days prior to the scheduled Termination Date then in effect (the "Increase Date") as specified in the related notice to the Administrative Agent; provided, however, that (i) in no event shall the aggregate amount of the Commitment Increases exceed $20,000,000 and (ii) on the date of any request by the Borrower for a Commitment Increase and on the related Increase Date, the applicable conditions set forth in Article III shall be satisfied. Second Amended and Restated Crowley Credit Agreement 32 (b) The Administrative Agent shall promptly notify such Eligible Assignees as it shall identify of a request by the Borrower for a Commitment Increase, which notice shall include (i) the proposed amount of such requested Commitment Increase, (ii) the proposed Increase Date and (iii) the date by which Lenders wishing to participate in the Commitment Increase must commit to an increase in the amount of their respective Commitments (the "Commitment Date"). The requested Commitment Increase shall be allocated among the Eligible Assignees willing to participate therein in such amounts as are agreed between the Borrower and the Administrative Agent. (c) Promptly following each Commitment Date, the Administrative Agent shall notify the Borrower as to the amount, if any, by which the Eligible Assignees are willing to participate in the requested Commitment Increase; provided, however, that the Commitment of each such Eligible Assignee shall be in an amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof. (d) On each Increase Date, each Eligible Assignee that is not prior to such date a Lender hereunder and accepts an offer to participate in a requested Commitment Increase in accordance with Section 2.17(c) (each such Eligible Assignee, an "Assuming Lender") shall become a Lender party to this Agreement as of such Increase Date and the Commitment of each Eligible Assignee that prior to such date is a Lender and accepts an offer to participate in such a requested Commitment Increase (an "Increasing Lender") shall be so increased by such amount as of such Increase Date; provided, however, that the Administrative Agent shall have received on or before such Increase Date the following, each dated such date: (i) (A) certified copies of resolutions of the Board of Directors of the Borrower or the Executive Committee of such Board approving the Commitment Increase and the corresponding modifications to this Agreement, (B) a consent executed by each Guarantor approving the Commitment Increase and the corresponding modifications to this Agreement and (C) an opinion of counsel for the Borrower (which may be in-house counsel), in substantially the form of Exhibit D hereto; (ii) an assumption agreement from each Assuming Lender, if any, in form and substance satisfactory to the Borrower and the Administrative Agent (each an "Assumption Agreement"), duly executed by such Eligible Assignee, the Administrative Agent and the Borrower; (iii) confirmation from each Increasing Lender of the increase in the amount of its Commitment in a writing satisfactory to the Borrower and the Administrative Agent; (iv) Notes payable to the order of the Assuming Lenders and the Increasing Lenders evidencing the aggregate indebtedness of the Borrower to such Lenders after giving effect to the applicable Commitment Increase; (v) appropriate amendments to the Ship Mortgages to reflect the Commitment Increase under this Section 2.17, together with evidence that each such amended Ship Mortgage has been duly filed and is in full force and effect as of the date of such Commitment Increase; and (vi) revised Schedule I hereto setting forth the Commitment of each Lender after giving effect to the applicable Commitment Increase. On each Increase Date, upon fulfillment of the conditions set forth in the immediately preceding sentence of this Section 2.17(d), the Administrative Agent shall notify the Lenders (including, without limitation, each Assuming Lender) and the Borrower, on or before 1:00 P.M. (New York City time), by telecopier , of the occurrence of the Commitment Increase to be effected on such Increase Date and shall record in the Second Amended and Restated Crowley Credit Agreement 33 Register the relevant information with respect to each Increasing Lender and each Assuming Lender on such date. ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING Section 3.01. Conditions Precedent to Initial Extension of Credit. The obligation of each Lender to make an Advance or of the Issuing Bank to issue a Letter of Credit on the occasion of the Initial Extension of Credit hereunder is subject to the satisfaction of the following conditions precedent before or concurrently with the Initial Extension of Credit: (a) The Administrative Agent shall have received on or before the day of the Initial Extension of Credit the following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Administrative Agent (unless otherwise specified) and (except for the Notes) in sufficient copies for each Lender Party: (i) The Notes payable to the order of the Lenders. (ii) A guaranty in substantially the form of Exhibit E hereto (together with each other guaranty and guaranty supplement delivered pursuant to Sections 5.01(j) or 5.02(q), in each case as amended, the "Second Amended and Restated Subsidiary Guaranty"), duly executed by each Guarantor. (iii) Ship Mortgages and supplements and amendments to existing Ship Mortgages, as the Collateral Agent may determine is necessary, for each Eligible Vessel and Barge listed on Schedule XI hereto, together with evidence that each such Ship Mortgage, together with any such supplement and amendment, has been duly recorded and is in full force and effect. (iv) Second Amended and Restated Assignments of Insurances for each Eligible Vessel and Barge listed on Schedule XI hereto. (v) Second Amended and Restated Assignments of Freights and Hires for each Eligible Vessel and Barge listed on Schedule XI hereto. (vi) Copy of the most recent appraisal of the value (as determined in accordance with the appraisal procedures set forth in the Ship Mortgages) required to be delivered under the terms of the Existing Credit Agreement of each Eligible Vessel and Barge listed on Schedule XI hereto by an appraiser acceptable to the Administrative Agent. (vii) In the absence of an acceptable appraisal report, a certificate of a Responsible Officer of the Borrower of the fair market value of the Eligible Physical Assets, in form and substance reasonably satisfactory to the Administrative Agent. (viii) Certified copies of the resolutions of the Board of Directors of each Loan Party approving the Agreement and each other Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with respect to the Agreement and each Loan Document to which it is or is to be a party. Second Amended and Restated Crowley Credit Agreement 34 (ix) A copy of a certificate of the Secretary of State of the jurisdiction of incorporation of each Loan Party, dated reasonably near the date of the Initial Extension of Credit, certifying (A) as to a true and correct copy of the charter of such Loan Party and each amendment thereto on file in such Secretary's office and (B) that such amendments are the only amendments to such Loan Party's charter on file in such Secretary's office, and (C) such Loan Party is duly incorporated and in good standing or presently subsisting under the laws of the State of the jurisdiction of its incorporation. (x) A certificate of each Loan Party, signed on behalf of such Loan Party by its President or a Vice President and its Secretary or any Assistant Secretary, dated the date of the Initial Extension of Credit (the statements made in which certificate shall be true on and as of the date of the Initial Extension of Credit), certifying as to (A) the absence of any amendments to the charter of such Loan Party since the date of the Secretary of State's certificate referred to in Section 3.01(a)(ix) and (B) a true and correct copy of the bylaws of such Loan Party as in effect on the date on which the resolutions referred to in Section 3.01(a)(viii) were adopted and on the date of the Initial Extension of Credit. (xi) A certificate of the Secretary or an Assistant Secretary of each Loan Party certifying the names and true signatures of the officers of such Loan Party authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder. (xii) Evidence of insurance in respect of all Collateral naming the Collateral Agent as additional insured and loss payee with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks as is required by the Ship Mortgages and as is satisfactory to the Lender Parties. (xiii) A Notice of Borrowing or Notice of Issuance, as applicable, and a Borrowing Base Certificate relating to the Initial Extension of Credit. (xiv) A favorable opinion of Gilmartin, Poster & Shafto, counsel for the Loan Parties, in substantially the form of Exhibit D hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request. (xv) Security agreements, mortgages and other collateral documents in respect of Eligible Physical Assets as reasonably requested by the Collateral Agent, together with any filings, recordations and any other documents or instruments reasonably requested by the Administrative Agent to evidence the Collateral Agent's first priority security interest in such Eligible Physical Assets. (b) The Borrower shall have paid all accrued and unpaid fees of the Agents and the Lender Parties under the Existing Credit Agreement and all accrued expenses of the Agents (including the accrued fees and expenses of counsel to the Administrative Agent) thereunder. (c) The Borrower shall have paid all accrued and unpaid fees of the Agents and the Lender Parties in connection herewith which are due and payable on or prior to the Restatement Effective Date and all accrued expenses of the Agents (including the accrued fees and expenses of counsel to the Administrative Agent) hereunder. Section 3.02. Conditions Precedent to Each Borrowing and Issuance, Etc. The obligation of each Lender to make an Advance (other than a Letter of Credit Advance made by an Issuing Second Amended and Restated Crowley Credit Agreement 35 Bank or a Lender pursuant to Section 2.16(d)) on the occasion of each Borrowing (including the Initial Extension of Credit), and the right of the Borrower or a Designated Account Party to request the issuance of Letters of Credit (including the initial issuance of Letters of Credit) shall be subject to the conditions precedent that the Restatement Effective Date shall have occurred and on the date of such Borrowing or issuance (a) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing or Notice of Issuance and the acceptance by the Borrower of the proceeds of such Borrowing or by the Borrower or such Designated Account Party of such Letter of Credit shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or issuance such statements are true): (i) the representations and warranties contained in each Loan Document are correct on and as of the date of such Borrowing or issuance, before and after giving effect to such Borrowing or issuance and to the application of the proceeds therefrom, as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a date other than the date of such Borrowing or issuance; (ii) no event has occurred and is continuing, or would result from such Borrowing or issuance or from the application of the proceeds therefrom, that constitutes a Default; (iii) since the Restatement Effective Date there shall have been no development or event, or any prospective development or event, with respect to or arising out of the reform (whether arising from any act of Congress, any regulatory or administrative law change, any determination of any court in respect of the foregoing or otherwise) of the United States Shipping Act of 1984, as amended through the Restatement Effective Date, which has had or is reasonably likely to have a Material Adverse Effect; and (iv) for each Advance or request for the issuance of any Letter of Credit, the Borrowing Base Availability is greater than zero after giving effect to such Advance or issuance; and (b) the Administrative Agent shall have received not less than three, and not more than five, Business Days prior to the date of the proposed Advance or proposed issuance a fully completed and executed Borrowing Base Certificate, as of the date of delivery. ARTICLE IV REPRESENTATIONS AND WARRANTIES Section 4.01. Representations and Warranties of the Loan Parties. Each Loan Party represents and warrants as follows: (a) Each Loan Party and each of its Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed could not be reasonably likely to have a Material Adverse Effect and (iii) has all requisite corporate power and authority (including, without limitation, all Governmental Authorizations) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Set forth on Schedule VII hereto is a complete and accurate list of all Subsidiaries of each Loan Party, showing as of the date hereof (as to each such Subsidiary) the Second Amended and Restated Crowley Credit Agreement 36 jurisdiction of its incorporation and the percentage ownership interests of each applicable Loan Party in such Subsidiary. All of the outstanding Equity Interests in each Loan Party's Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by such Loan Party or one or more of its Subsidiaries free and clear of all Liens, except those created under the Collateral Documents. (c) The execution, delivery and performance by each Loan Party of each Loan Document to which it is or is to be a party are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene such Loan Party's charter or bylaws, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default or require any payment to be made under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any Collateral. No Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which could be reasonably likely to have a Material Adverse Effect. (d) No Governmental Authorization, and no notice to or filing with, any Governmental Authority or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of any Loan Document to which it is or is to be a party, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof) or (iv) the exercise by any Agent or any Lender Party of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents. (e) This Agreement has been, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party party thereto. This Agreement is, and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms. (f) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries, including any Environmental Action, pending or threatened before any Governmental Authority or arbitrator that (i) could be reasonably likely to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) purports to affect the legality, validity or enforceability of any Transaction Document or the consummation of the Transaction, and there has been no adverse change in the status, or financial effect on any Loan Party or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule VI hereto. (g) Financial Condition; Ownership. (i) The Consolidated balance sheets of the Borrower and its Subsidiaries as at December 31, 2002 and December 31, 2001 and the related Consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by Deloitte & Touche, copies of which have heretofore been furnished to each Lender, present fairly the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates, and the Consolidated results of their operations and their Consolidated cash flows for the fiscal years then ended. The unaudited Consolidated balance sheet of the Borrower and its Subsidiaries as at September 30, 2003 and the related unaudited Consolidated statements of income Second Amended and Restated Crowley Credit Agreement 37 and of cash flows for the three-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, present fairly the Consolidated financial condition of the Borrower and its Subsidiaries as at such date, and the Consolidated results of their operations and their Consolidated cash flows for the three-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods. (ii) Schedule V sets forth, as of the Restatement Effective Date, each owner of more than 5% of the voting stock of the Borrower and the percent of such voting stock owned by each Person listed on such schedule. (h) No information, exhibit or report furnished by or on behalf of any Loan Party to any Agent or any Lender Party in connection with the negotiation and syndication of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading. (i) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance or drawings under any Letter of Credit will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. (j) Neither any Loan Party nor any of its Subsidiaries is an "investment company", or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. Neither any Loan Party nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by the Borrower, nor the consummation of the other transactions contemplated by the Transaction Documents, will violate any provision of any such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (k) Neither any Loan Party nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction that could be reasonably likely to have a Material Adverse Effect. (l) All filings and other actions necessary or desirable to perfect and protect the security interest in the Collateral created under the Collateral Documents have been duly made or taken and are in full force and effect, and the Collateral Documents create in favor of the Collateral Agent for the benefit of the Secured Parties a valid and, together with such filings and other actions, perfected first priority security interest in the Collateral, securing the payment of the Secured Obligations, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken. The Loan Parties are the legal and beneficial owners of the Collateral free and clear of any Lien, except for the liens and security interests created or permitted under the Loan Documents. (m) Each Loan Party is, individually and together with its Subsidiaries, Solvent. Second Amended and Restated Crowley Credit Agreement 38 (n) (i) Except as otherwise set forth on Part I of Schedule XII hereto, the operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, all past non-compliance with such Environmental Laws and Environmental Permits has been resolved without ongoing obligations or costs, and no circumstances exist that could be reasonably likely to (A) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any of their properties that could have a Material Adverse Effect or (B) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law. (ii) Except as otherwise set forth on Part II of Schedule XII hereto, none of the properties currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; there are no and never have been any underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or any of its Subsidiaries or, to the best of its knowledge, on any property formerly owned or operated by any Loan Party or any of its Subsidiaries; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any of its Subsidiaries; and Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries. (iii) Except as otherwise set forth on Part III of Schedule XII hereto, neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in material liability to any Loan Party or any of its Subsidiaries. (o) (i) Neither any Loan Party nor any of its Subsidiaries is party to any tax sharing agreement other than the tax sharing agreements set forth on Part I of Schedule XIII hereto. (ii) Each Loan Party and each of its Subsidiaries and Affiliates has filed, has caused to be filed or has been included in all tax returns (Federal, state, local and foreign) required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties. (iii) Set forth on Part II of Schedule XIII hereto is a complete and accurate list, as of the date hereof, of each taxable year of each Loan Party and each of its Subsidiaries and Affiliates for which Federal income tax returns have been filed and for which the expiration of the applicable statute of limitations for assessment or collection has not occurred by reason of extension or otherwise (an "Open Year"). (iv) The aggregate unpaid amount, as of the date hereof, of adjustments to the Federal income tax liability of each Loan Party and each of its Subsidiaries and Affiliates proposed by the Internal Revenue Service with respect to Open Years does not exceed $0. Set forth on Part III of Schedule XIII hereto is a complete and accurate description, as of the date hereof, of each such item that separately, for all such Open Years, together Second Amended and Restated Crowley Credit Agreement 39 with applicable interest and penalties, exceeds $0. No issues have been raised by the Internal Revenue Service in respect of Open Years that, in the aggregate, could be reasonably likely to have a Material Adverse Effect. (v) The aggregate unpaid amount, as of the date hereof, of adjustments to the state, local and foreign tax liability of each Loan Party and its Subsidiaries and Affiliates proposed by all state, local and foreign taxing authorities (other than amounts arising from adjustments to Federal income tax returns) does not exceed $0. No issues have been raised by such taxing authorities that, in the aggregate, could be reasonably likely to have a Material Adverse Effect. (vi) No "ownership change" as defined in Section 382(g) of the Internal Revenue Code, and no event that would result in the application of the "separate return limitation year" or "consolidated return change of ownership" limitations under the Federal income tax consolidated return regulations, has occurred with respect to the Borrower or the Company since December 31, 2002. (p) Neither the business nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that could be reasonably likely to have a Material Adverse Effect. (q) Set forth on Part I of Schedule III hereto is a complete and accurate list of all existing Indebtedness (other than Indebtedness under the Existing Credit Agreement), showing as of the date hereof the obligor and the principal amount outstanding thereunder. (r) Set forth on Part II of Schedule III hereto is a complete and accurate list of all Liens on the property or assets of any Loan Party or any of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan Party or such Subsidiary subject thereto. (s) Except as provided on Schedule XV hereto, neither any Loan Party nor any ERISA Affiliate has any Plan or Multiemployer Plan. (t) Set forth on Schedule XIV hereto is a complete and accurate list of all deposit and securities accounts maintained by any Loan Party or any of its Subsidiaries, showing as of the date hereof for each such account the name and address of the institution maintaining such account, the name of the account holder and the account number. (u) Since December 31, 2002 there has been no development or event nor has there been any prospective development or event, which has had or is reasonably likely to have a Material Adverse Effect. Second Amended and Restated Crowley Credit Agreement 40 ARTICLE V COVENANTS OF THE BORROWER Section 5.01. Affirmative Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, each Loan Party will: (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970. (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors. (c) Compliance with Environmental Laws. Comply, and cause each of its Subsidiaries and all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew, and cause each of its Subsidiaries to obtain and renew, all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. (d) Maintenance of Insurance. Maintain, and cause each of its Restricted Subsidiaries to maintain, insurance (including, without limitation, insurance required to be maintained under the terms of the Ship Mortgages) with responsible and reputable insurance companies or associations satisfactory to the Administrative Agent in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which any Loan Party or any of its Subsidiaries operates. (e) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its existence, legal structure, legal name, rights (charter and statutory), permits, licenses, approvals, privileges and franchises; except where the failure to do so could not reasonably be expected to adversely affect the rights and remedies of the Lender Parties under the Loan Documents. (f) Visitation Rights. At any reasonable time and from time to time, permit any of the Agents or any of the Lender Parties, or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Second Amended and Restated Crowley Credit Agreement 41 Borrower and any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants, all at the expense of the Borrower. (g) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with generally accepted accounting principles in effect from time to time. (h) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Restricted Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (i) Transactions with Affiliates. Conduct, and cause each of its Restricted Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate. (j) Covenant to Guarantee Obligations. Upon (x) the request of the Administrative Agent following the occurrence and during the continuance of a Default or (y) the formation or acquisition of any new direct or indirect Material Subsidiaries (as determined on a pro forma basis) by any Loan Party: (i) in connection with the formation or acquisition of a Subsidiary that is not (x) a CFC or (y) a Subsidiary that is held directly or indirectly by a CFC, within 10 days after such formation or acquisition, cause each such Subsidiary, and cause each direct and indirect parent of such Subsidiary (if it has not already done so), to duly execute and deliver to the Administrative Agent a guaranty or guaranty supplement, in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties' obligations under the Loan Documents, and (ii) within 10 days after such request, formation or acquisition, deliver to the Administrative Agent, upon the request of the Administrative Agent in its sole discretion, a signed copy of a favorable opinion, addressed to the Administrative Agent and the other Lender Parties, of counsel for the Loan Parties acceptable to the Administrative Agent as to (1) such guaranties and guaranty supplements being legal, valid and binding obligations of each Loan Party party thereto enforceable in accordance with their terms and (2) such other matters as the Administrative Agent may reasonably request. (k) Further Assurances. (i) Promptly upon request by any Agent, or any Lender Party through the Administrative Agent, correct, and cause each of its Subsidiaries promptly to correct, any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (ii) Promptly upon request by any Agent, or any Lender Party through the Administrative Agent, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as any Agent, or any Lender Party through the Administrative Agent, may reasonably require from time to time in order to (A) carry out more effectively the purposes of the Loan Documents, (B) to the fullest extent Second Amended and Restated Crowley Credit Agreement 42 permitted by applicable law, subject any Loan Party's or any of its Subsidiaries' properties, assets, rights or interests (in each case constituting Collateral) to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (C) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (D) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of its Subsidiaries is or is to be a party, and cause each of its Subsidiaries to do so. (l) Preparation of Environmental Reports. If an Event of Default shall have occurred and be continuing, at the request of the Administrative Agent or the Required Lenders, provide to the Lenders within 120 days after such request, at the expense of the Borrower, an environmental site assessment report for the properties described in such request, prepared by an environmental consulting firm acceptable to the Administrative Agent or the Required Lenders, indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials on such properties; without limiting the generality of the foregoing, if the Administrative Agent or the Required Lenders determines at any time that a material risk exists that any such report will not be provided within the time referred to above, the Administrative Agent or the Required Lenders, as the case may be, may retain an environmental consulting firm to prepare such report at the expense of the Borrower, and hereby grants to the Administrative Agent, the Lenders, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto its properties to undertake such an assessment. (m) Compliance with Terms of Leaseholds; Material Agreements. Make all payments and otherwise perform all obligations in respect of all leases of real property and all agreements, contracts and other arrangements material to the business of the Borrower and to which the Borrower or any of its Subsidiaries is a party, keep such leases, agreements and contracts in full force and effect and not allow such leases, agreements and contracts to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, notify the Administrative Agent of any default by any party with respect to such leases, agreements and contracts and cooperate with the Administrative Agent in all respects to cure any such default, and cause each of its Subsidiaries to do so, except, in any case, where the failure to do so, either individually or in the aggregate, could not be reasonably likely to have a Material Adverse Effect. (n) Joint Venture Separateness. Cause each Joint Venture to (i) maintain its funds in accounts which are separate and distinct from any account maintained by the Borrower or any of its other Subsidiaries, (ii) maintain its own business and financial records, (iii) act pursuant to corporate resolutions or similar authority granted in accordance with the laws applicable to governance of the Joint Venture entity and with procedures required by any organizational document of the Joint Venture, (iv) document and record in its financial records each transaction between such Joint Venture, on the one hand, and the Borrower or any of its other Subsidiaries, on the other hand, in accordance with business practices commonly employed by enterprises similar to the Joint Venture with respect to transactions with non-Affiliates, (v) conduct its business with third parties in the name of the Joint Venture and not in the name of the Borrower or any of its other Subsidiaries and (vi) have at the time such Joint Venture commences the business of the Joint Venture capitalization adequate (in the reasonable determination of the Borrower) to meet its reasonably anticipated business needs. Second Amended and Restated Crowley Credit Agreement 43 (o) Appraisal Requirements. In addition to (but without duplication) the appraisal report requirements contained in the Ship Mortgages with respect to Eligible Vessels and Barges, the Borrower, at its expense, shall deliver an appraisal report in respect of all or any portion of Collateral at the request of the Administrative Agent or any Lender (i) annually and (ii) at the end of any 90-day period during which (A) the Loan Parties have disposed of any Collateral that would cause a reduction in then current Collateral Value of 10% or more, in the aggregate, and (B) the aggregate sale price for all such Collateral represents a decrease in then current Collateral Value attributable to such Collateral of 10% or more, with such appraisal to be prepared by a nationally recognized appraisal firm and indicating the fair market value of each Vessel and Barge or Eligible Physical Asset of each Loan Party. (p) Collateral Disposition. In respect of any Eligible Vessel and Barge or Eligible Physical Asset listed on Schedule XI hereto, (i) furnish to the Administrative Agent, as soon as available but in any event no later than 10 Business Days prior to any Vessel or Barge Disposition or Physical Asset Disposition, (A) a notice of such Vessel or Barge Disposition or Physical Asset Disposition, as the case may be, and (B)(1) an appraisal of the value of the Eligible Vessel and Barge or Eligible Physical Asset that is the subject of such Vessel or Barge Disposition or Physical Asset Disposition, as the case may be, as determined in accordance with the appraisal procedures set forth in the applicable Ship Mortgage, in the case of any Eligible Vessel and Barge, or as determined in accordance with the appraisal requirements set forth in Section 5.01(o), in the case of any Eligible Physical Asset, or (2) a certificate, in form and substance satisfactory to the Administrative Agent and signed by a duly authorized officer of such Loan Party stating the agreed sale price for such Eligible Vessel and Barge or Eligible Physical Asset, as the case may be; (ii) Furnish to the Administrative Agent, on or prior to the date of any Vessel or Barge Disposition or Physical Asset Disposition, a certificate of each Loan Party, signed on behalf of such Loan Party by a duly authorized officer of such Loan Party, stating that: (A) the representations and warranties contained in each Loan Document are correct on and as of the date of such Vessel or Barge Disposition or Physical Asset Disposition, before and after giving effect to such Vessel or Barge Disposition or Physical Asset Disposition, as the case may be, and to the application of the proceeds therefrom; (B) no event has occurred and is continuing, or would result from such Vessel or Barge Disposition or Physical Asset Disposition or from the application of the proceeds therefrom, that constitutes a Default; and (C) since the Restatement Effective Date there have been no development or event, or any prospective development or event, with respect to or arising out of the reform (whether arising from any act of Congress, any regulatory or administrative law change, any determination of any court in respect of the foregoing or otherwise) of the United States Shipping Act of 1984, as amended through the Restatement Effective Date, which has had or is reasonably likely to have a Material Adverse Effect. (D) After giving effect to such Vessel or Barge Disposition or Physical Asset Disposition, the Borrower will be in compliance with Section 2.09(b). Second Amended and Restated Crowley Credit Agreement 44 (q) New Eligible Vessel and Barge. In the event the Borrower shall add any new Eligible Vessel and Barge or Eligible Physical Asset, whether or not to replace any Eligible Vessel and Barge or Eligible Physical Asset, as the case may be, that is the subject of disposal pursuant to subsection 5.02(e)(vi), the Borrower shall furnish to the Administrative Agent on or prior to the date of addition of such new Eligible Vessel and Barge or Eligible Physical Asset: (i) Ship Mortgages for such new Eligible Vessel and Barge, together with evidence that each such Ship Mortgage has been duly filed and is in full force and effect as of the date of addition of such new Eligible Vessel and Barge. (ii) Second Amended and Restated Assignments of Insurances for such new Eligible Vessel and Barge. (iii) Second Amended and Restated Assignments of Freights and Hires for such new Eligible Vessel and Barge. (iv) Appraisal of the value of such new Eligible Vessel and Barge or Eligible Physical Asset as determined in accordance with the appraisal procedures set forth in the applicable Ship Mortgage, in the case of any Eligible Vessel and Barge, and in accordance with the appraisal requirements set forth in Section 5.01(o), in the case of any Eligible Physical Asset. (v) Security agreement supplements, mortgage amendments and any other amendment or supplement to any other collateral document in respect of any new Eligible Physical Asset, including, without limitation, any filings, recordations and any other documents or instruments that would evidence the Collateral Agent's first priority security interest in such Eligible Physical Asset. (vi) Certificate of each Loan Party, signed on behalf of such Loan Party by a duly authorized officer of such Loan Party, stating that: (A) the representations and warranties contained in each Loan Document are correct on and as of the date of addition of such new Eligible Vessel and Barge or Eligible Physical Asset, before and after giving effect to addition of such new Eligible Vessel and Barge or Eligible Physical Asset, as the case may be; (B) no event has occurred and is continuing, or would result from the addition of such new Eligible Vessel and Barge or Eligible Physical Asset, that constitutes a Default; and (C) since the Restatement Effective Date there have been no development or event, or any prospective development or event, with respect to or arising out of the reform (whether arising from any act of Congress, any regulatory or administrative law change, any determination of any court in respect of the foregoing or otherwise) of the United States Shipping Act of 1984, as amended through the Restatement Effective Date, which has had or is reasonably likely to have a Material Adverse Effect. (vii) Favorable opinion of Gilmartin, Poster & Shafto, counsel for the Loan Parties, in substantially the form of Exhibit D hereto with respect to such new Eligible Vessel or Barge or Eligible Physical Asset and as to such other matters as the Administrative Agent may reasonably request. Second Amended and Restated Crowley Credit Agreement 45 (viii) Second Amended and Restated Subsdiary Guaranty duly executed by each Person who, prior to such execution, was not a Guarantor, and who has any ownership interest in such new Eligible Vessel and Barge or Eligible Physical Asset. (ix) Acknowledgment copies or stamped receipt copies of proper financing statements, duly filed on or before the day of the Initial Extension of Credit under the Uniform Commercial Code of all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the applicable Second Amended and Restated Assignments of Insurances, Second Amended and Restated Assignments of Freights and Hires and other applicable Collateral Documents. Section 5.02. Negative Covenants. Each Loan Party hereby agrees that, so long as any Advance shall remain unpaid, any Letter of Credit shall be outstanding other than any Letter of Credit in respect of which cash collateral has been deposited and is maintained in accordance with subsection 2.16(i), any Lender shall have any Commitment hereunder or any Issuing Banks shall have a Letter of Credit Commitment hereunder, such Loan Party shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (a) Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (i) Indebtedness in respect of the Advances, the Notes, the Letters of Credit and other obligations of the Borrower under this Agreement; (ii) (A) Indebtedness of the Borrower to any Restricted Subsidiary and of any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary, and (B) Indebtedness of the Borrower or any Restricted Subsidiary to any Person other than a financial institution in an aggregate principal amount at any time outstanding not exceeding $5,000,000; (iii) Indebtedness of the Borrower in principal amount outstanding at any time not to exceed $10,000,000 in the aggregate under lines of credit offered by commercial banks or other financial institutions to the Borrower to finance the working capital needs of the Borrower and its Restricted Subsidiaries; (iv) Indebtedness consisting of reimbursement obligations in respect of letters of credit (other than the Letters of Credit) issued for the account of the Borrower or any Restricted Subsidiary in an aggregate amount not exceeding for the Borrower and its Restricted Subsidiaries $10,000,000 in aggregate principal amount at any time outstanding; (v) Indebtedness of the Borrower to issuers of life insurance policies under which the Borrower is the beneficiary to the extent that such Indebtedness does not exceed at any time, in the aggregate, the lesser of (A) the cash surrender value of such policies and (B) the sum of $2,000,000 plus the amount of proceeds of such Indebtedness applied to pay premiums on such life insurance policies; (vi) Indebtedness and Guaranty Obligations outstanding on the Restatement Effective Date and listed on Schedule III hereto; and (vii) Indebtedness secured by Liens described in Sections 5.02(b)(vi) and 5.02(b)(xv). Second Amended and Restated Crowley Credit Agreement 46 (b) Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (i) Liens for taxes, assessments or other charges which (x) are not at the time delinquent or are thereafter payable without penalty, or (y) are being contested in good faith by appropriate proceedings, provided with respect to taxes, assessments or other charges referred to in clause (x) and clause (y), that adequate reserves with respect thereto are maintained on the books of the Borrower and its Restricted Subsidiaries to the extent required in conformity with GAAP; (ii) Liens in existence on the Restatement Effective Date listed on Schedule III hereto, provided that no such Lien is spread to cover any additional property or to secure any additional Indebtedness after the Restatement Effective Date except in accordance with provisions of the documents and instruments relating to the Indebtedness or other obligations secured by such Liens which (x) are in effect as of the Restatement Effective Date, (y) are described on Schedule III and (z) do not purport to cover any Collateral. (iii) Liens on vessels arising in the event the use or title of such vessel is taken or requisitioned by any Governmental Authority; (iv) Liens securing judgments of less than $7,500,000 in the aggregate as to the Borrower and its Restricted Subsidiaries taken as a whole at any time, provided that no such Lien shall have been in existence more than thirty (30) days after the entry of the judgment, or execution thereof shall have been stayed or the payment thereof shall be covered in full by insurance on which the insurer has neither reserved the right to dispute, nor disputed, coverage; (v) Liens on any asset of the Borrower or any of its Restricted Subsidiaries existing at the time such Person is merged into or consolidated with the Borrower or any of its Restricted Subsidiaries, if (x) such merger or consolidation is permitted by this Agreement, and (y) such Lien was otherwise permitted by this Agreement and was not created in contemplation of such event; provided that no such Lien is spread to cover any additional property or to secure any additional Indebtedness after the effective date of such merger or consolidation; (vi) Liens on vessels and related assets existing as of the Restatement Effective Date and created to secure the financing or refinancing of the construction or reconstruction of such vessels, which financing or refinancing is guaranteed under the provisions of Title XI of the Merchant Marine Act of 1936, as amended; (vii) Liens arising in connection with deposits of funds from time to time into the capital construction fund created pursuant to the Capital Construction Fund Agreement (no. MA-CCF-370) dated October 21, 1977, as amended, between the Borrower and the United States of America, but only to the extent such Liens arise solely out of such agreement or out of borrowings of such deposits; (viii) Liens in favor of the Agents or the Lenders to secure any or all of the Borrower's Obligations created under the Loan Documents; (ix) Other Liens arising in the ordinary course of the business of the Borrower and its Restricted Subsidiaries viewed as a whole which (x) do not secure Indebtedness and (y) either (A) are being contested in good faith and with respect to which reserves are being Second Amended and Restated Crowley Credit Agreement 47 maintained on the books of the Borrower and its Consolidated Restricted Subsidiaries in conformity with GAAP or (B) in the aggregate do not have, and are not reasonably likely to have, a Material Adverse Effect and will not reasonably likely materially impair the value of the Consolidated assets of the Borrower and its Consolidated Restricted Subsidiaries; (x) Liens on life insurance policies (including the cash surrender value thereof) securing Indebtedness permitted by subsection 5.02(a)(v); (xi) Liens securing Indebtedness of the Borrower and its Restricted Subsidiaries incurred solely in connection with the conversion into Financing Leases of operating leases of the Borrower and its Restricted Subsidiaries that are in existence on the Restatement Effective Date on the property which is the subject of such operating lease; provided that such Liens do not at any time encumber any property other than such property, their earnings, other related assets having a value which is immaterial in relation to the value of such property, and the proceeds of such property and do not secure any other Indebtedness; (xii) Liens on property that is substituted for or replaces comparable property that was theretofore subject to a Lien permitted to exist under this subsection 5.02(b); (xiii) Liens on any asset leased by the Borrower or any of its Restricted Subsidiaries under a lease that is not a Financing Lease, securing the obligations of the Borrower or such Restricted Subsidiary thereunder; (xiv) Liens arising out of the refinancing, extension, renewal or refunding of any Indebtedness permitted under subsection 5.02(a) and secured by any Lien permitted by this subsection 5.02(b); provided that (x) no such Lien is spread to cover any property other than the property securing such Indebtedness at the time of such refinancing, extension, renewal or refunding and (y) the principal amount of such Indebtedness is not increased to exceed the amount of the Indebtedness on the Restatement Effective Date; and (xv) purchase money Liens securing Indebtedness solely for the purpose of financing the acquisition, construction or improvement of property to be subject to such Liens, or Liens existing on any such property at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided, however, no such Lien shall extend to or cover any property other than the property being acquired, constructed or improved, or the proceeds or rents thereof, and no such extension, renewal or replacement shall extend to or cover any property, or the proceeds or rents thereof, not theretofore subject to the Lien being extended, renewed or replaced. (c) Limitation on Guaranty Obligations. Create, incur, assume or suffer to exist any Guaranty Obligation except: (i) the Guaranty Obligation of the Borrower pursuant to Article VII, and the Guaranty Obligations of the Guarantors under the Second Amended and Restated Subsdiary Guaranty; (ii) the Letters of Credit and other letters of credit in respect of which reimbursement obligations would be permitted by subsection 5.02(a)(iv); Second Amended and Restated Crowley Credit Agreement 48 (iii) Guaranty Obligations included in Indebtedness permitted pursuant to subsection 5.02(a); (iv) Guaranty Obligations of the Borrower or its Consolidated Restricted Subsidiaries in respect of primary obligations of the Borrower or its Consolidated Restricted Subsidiaries otherwise permitted under this Agreement, provided that Guaranty Obligations in respect of primary obligations of Restricted Subsidiaries that are not Guarantors shall not in the aggregate exceed $15,000,000; (v) Guaranty Obligations outstanding on the Restatement Effective Date and listed on Schedule III and renewals and extensions of such existing Guaranty Obligations which do not increase the amount of the primary obligations guaranteed thereby; and (vi) other Guaranty Obligations aggregating not in excess of the lesser of (i) $25,000,000 and (ii) 10% of the stockholders' equity (as reflected on the most recent Consolidated Balance Sheet of the Borrower delivered pursuant hereto), in each case, at any time outstanding. (d) Limitations on Fundamental Changes. (i) Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of all or substantially all of the property, business or assets of the Borrower and its Restricted Subsidiaries taken as a whole; except that: (A) any Restricted Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more Wholly Owned Subsidiaries of the Borrower (provided that the Wholly Owned Subsidiary or Subsidiaries shall be the continuing or surviving corporation and shall be party to the Amended and Restated Subsdiary Guaranty); (B) any Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any Wholly Owned Subsidiary of the Borrower which is a party to the Amended and Restated Subsdiary Guaranty; and (C) any Subsidiary which is not a Loan Party may liquidate, wind up or dissolve; provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom. (ii) Materially change or depart from the business or operating activities presently conducted by the Borrower and its Restricted Subsidiaries taken as a whole. (e) Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, to any Person other than the Borrower or a Guarantor ("Asset Dispositions"), except: (i) Asset Dispositions in the ordinary course of business consistent with past practices, so long as such assets do not constitute Collateral; Second Amended and Restated Crowley Credit Agreement 49 (ii) Asset Dispositions in the form of the sale or discount of accounts receivable arising in the ordinary course of business to the capital construction fund created pursuant to the Capital Construction Fund Agreement (No. MA-CCF-370) dated October 21, 1977, as amended between the Borrower and the United States of America; (iii) Asset Dispositions permitted by subsection 5.02(d) or subsection 5.02(i); (iv) Asset Dispositions in respect of the assets described in Schedule VIII; (v) Asset Dispositions in any fiscal year for cash and consideration other than cash having an aggregate value (as determined in good faith by the Borrower) not in excess of $25,000,000 net of (a) all legal fees, finder's fees and other similar fees and commissions paid in connection with such Asset Dispositions, (b) taxes payable in connection with or as a result of such Asset Dispositions and (c) other out-of-pocket costs incurred in connection with such Asset Dispositions; provided, however, in the case of each of clauses (a) and (c) above such amounts may be deducted only to the extent that such amounts so deducted are, at the time of such Asset Disposition, paid to a Person that is not an Affiliate of such Person (or, if paid to such an Affiliate, to the extent the terms of such payment are no more favorable to such Affiliate than such terms would be in an arm's-length transaction) and are properly attributable to such transaction or to the asset that is the subject thereof; and (vi) Asset Dispositions with respect to any Eligible Vessel and Barge (including dispositions pursuant to re-registrations of any Eligible Vessel and Barge in another flag in the ordinary course of business) or Eligible Physical Asset (each a "Vessel or Barge Disposition" or "Physical Asset Disposition", respectively) in compliance with Sections 5.01(p) and 5.01(q). (f) Limitation on Dividends and Other Payments. Declare or pay any dividend (other than dividends payable solely in common stock of the Borrower) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Equity Interests of the Borrower, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary except for, so long as after giving effect thereto no Default or Event of Default shall have occurred and be continuing, (i) common stock repurchases made in connection with employee stock ownership plans or other employee stock incentive plans, (ii) the purchase by the Borrower of the Borrower's Equity Interests from the estate of any shareholder, provided that the purchase price thereof is paid entirely with the proceeds received by the Borrower from life insurance maintained by it on the life of such shareholder and (iii) dividends on the Borrower's Equity Interests, provided that the aggregate amount expended by the Borrower in connection with the dividends and payments described in clauses (i) through (iv) above shall not exceed $10,000,000 in any twelve-month period. (g) Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase or otherwise acquire any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any other Person (all the foregoing, collectively, "Investments"), except: (i) Investments in the form of extensions of trade credit in the ordinary course of business; (ii) Investments in Cash Equivalents; Second Amended and Restated Crowley Credit Agreement 50 (iii) Investments in the form of loans and advances to employees of the Borrower or its Restricted Subsidiaries in the ordinary course of business and consistent with past practices, and Investments in the form of loans and advances to shareholders of the Borrower or trusts or similar estate planning entities of or for the benefit of any such shareholder the proceeds of which are used to pay life insurance premiums on the life of such shareholder; (iv) Investments by the Borrower in its Restricted Subsidiaries and by any Restricted Subsidiary in the Borrower or in any other Restricted Subsidiary; provided that the aggregate amount of Investments by the Borrower or any Material Subsidiary of the Borrower in Restricted Subsidiaries of the Borrower which are not Guarantors shall not exceed at any time the sum of (A) (x) $2,500,000 in respect of Subsidiaries which are Regulated Subsidiaries on the Restatement Effective Date, (y) $15,000,000 in respect of Regulated Subsidiaries not in existence on the Restatement Effective Date and (z) $10,000,000 in respect of all other non-Guarantor Restricted Subsidiaries plus (B) the aggregate amount of Investments in such Restricted Subsidiaries of the Borrower that are not Guarantors made in accordance with the Borrower's cash management practices in the ordinary course of business, in each case inclusive of any Investments permitted pursuant to any other clause of this subsection 5.02(g); (v) Investments in the form of notes or securities received as consideration for sales of assets permitted pursuant to subsection 5.02(e); (vi) Investments in Joint Ventures and non-Consolidated Subsidiaries and Affiliates to the extent permitted under Section 5.02(l); (vii) Investments permitted by subsection 5.02(d); (viii) Investments in foreign currencies or otherwise in time deposits or other securities of foreign Governmental Authorities or other foreign Persons, if required by the action of a foreign Governmental Authority or to fund working capital requirements for the operations of the Borrower or any Restricted Subsidiary in a foreign country; (ix) Investments made by the Borrower in consummating the Yukon Acquisition; and (x) Investments to the extent not otherwise prohibited by any other provision of Section 5.02 in the ordinary course of business in an aggregate amount outstanding at any time not to exceed $5,000,000. (h) Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate or any Joint Venture unless (i) such transaction is otherwise permitted under this Agreement, (ii) such transaction is in the ordinary course of the Borrower's or such Restricted Subsidiary's business or (iii) either (x) such transaction is upon fair and reasonable terms no less favorable to the Borrower or such Restricted Subsidiary, as the case may be, than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate or (y) such transaction taken together with all other such transactions described in this clause (iii) would not be reasonably likely to have a material adverse effect on the business, operations, condition (financial or otherwise), properties or prospects of the Borrower and the Guarantors taken as a whole. Second Amended and Restated Crowley Credit Agreement 51 (i) Sale and Leaseback. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Restricted Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Restricted Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Restricted Subsidiary except for (i) any such arrangement permitted by subsection 5.02(a)(vi) and (ii) any such arrangement not constituting a Financing Lease. (j) Non-Guarantor Subsidiaries. Create, acquire or permit to exist any Subsidiary that is not party to the Second Amended and Restated Subsdiary Guaranty, except (i) Regulated Subsidiaries, (ii) Joint Ventures, (iii) any Material Subsidiary that has become party to the Second Amended and Restated Subsdiary Guaranty within 60 days after becoming a Material Subsidiary and (iv) Subsidiaries (other than Regulated Subsidiaries and Joint Ventures) that are not Material Subsidiaries; provided that if such Subsidiaries have (x) aggregate Net Assets greater than $30,000,000 at the end of any fiscal quarter of the Borrower or (y) aggregate Net Revenue greater than $60,000,000 for a period of the most recently completed four consecutive fiscal quarters of the Borrower, one or more of such Subsidiaries shall have become party to the Second Amended and Restated Subsdiary Guaranty within 60 days after such Subsidiaries exceed such aggregate amount of Net Assets or Net Revenue so that the Subsidiaries not then party to the Second Amended and Restated Subsdiary Guaranty do not exceed such aggregate amounts. (k) Negative Pledge Agreements. Enter into or suffer to exist in favor of any Person other than the Agents, the Lenders and the Issuing Banks any agreement prohibiting the Borrower or any Restricted Subsidiary from entering into or suffering to exist any agreement that prohibits or conditions the creation or assumption of any Lien upon any of its property or assets (other than property or assets not constituting Collateral that are subject to Liens under the DNB Credit Faciliy and identified on Schedule III) except those in favor of such Person (any such agreement, a "Negative Pledge Agreement") unless prior to entering into or the existence of such Negative Pledge Agreement the Agents, the Lenders and the Issuing Banks are granted in writing substantially similar rights. (l) Joint Ventures. Create, acquire or permit to exist any Subsidiary that is not a Restricted Subsidiary except any Subsidiary which is a special purpose corporation, partnership, limited liability company, trust or estate or other entity created after the Restatement Effective Date by the Borrower or any Subsidiary of the Borrower and any Person or Persons other than the Borrower or a Subsidiary of the Borrower in order to conduct a common business enterprise with such Person or Persons (each such Subsidiary being a "Joint Venture"); provided that (i) the total Investments by the Loan Parties in all such Joint Ventures from the Restatement Effective Date through the Termination Date shall not exceed $25,000,000 and (ii) within 60 days of the creation or acquisition of such Joint Venture the Administrative Agent shall have received (x) written notice by the Borrower of the creation or acquisition of such Joint Venture, including the names of all parties to such Joint Venture, the aggregate amount of all Investments of the Borrower and any Restricted Subsidiary which are required to be made in such Joint Venture (including any Guaranty Obligations in respect thereof) and the percentage ownership by the Borrower and any Restricted Subsidiary in such Joint Venture and (y) a certified copy of each material formation, capitalization or organization agreement of such Joint Venture and each material shareholder or investor agreement related to the Joint Venture to which the Borrower or any Restricted Subsidiary is a party. (m) Accounts Receivable. Create, incur, assume or suffer to exist any Lien upon any of its accounts receivable arising in connection with, or in connection with the use of, any Second Amended and Restated Crowley Credit Agreement 52 Eligible Vessel and Barge, whether now owned or hereafter acquired, except for the Liens created under the Collateral Documents. (n) Amendments of Constitutive Documents. Amend, or permit any of its Subsidiaries to amend, its certificate of incorporation or bylaws or other constitutive documents other than amendments that could not be reasonably expected to have a Material Adverse Effect or adversely affect the interests of the Lender Parties. (o) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in (i) accounting policies or reporting practices, except as permitted by generally accepted accounting principles, or (ii) fiscal year. (p) Prepayments, Etc., of Debt. Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Debt, except (i) the prepayment of the Advances in accordance with the terms of this Agreement, (ii) the optional prepayment of debt under the DNB Credit Facility in accordance with Section 2.15 hereof and (iii) to refinance existing debt or amend, modify or change such existing debt if such amendments, modifications or changes constitute terms more favorable to the Borrower and its Subsidiaries and so long as such amendments, modifications or changes will not impair the rights and interests of the Lender Parties. (q) Partnerships, Etc. Except as otherwise expressly permitted under this Agreement, become a general partner in any new general or limited partnership, or permit any of its Subsidiaries to do so. (r) Speculative Transactions. Engage, or permit any of its Subsidiaries to engage, in any transaction involving commodity options or futures contracts or any similar speculative transactions, other than hedging arrangements entered into in the ordinary course of business consistent with past practices. Section 5.03. Reporting Requirements. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Borrower will furnish to the Agents and the Lender Parties: (a) Default Notice. As soon as possible and in any event within two days after the occurrence of each Default or any event, development or occurrence reasonably likely to have a Material Adverse Effect continuing on the date of such statement, a statement of the chief financial officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto. (b) Annual Financials. As soon as available and in any event within 120 days after the end of each fiscal year, a copy of the annual audit report for such year for the Borrower and its Subsidiaries, including therein a Consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and a Consolidated and consolidating statement of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries for such fiscal year, in each case accompanied by an opinion acceptable to the Required Lenders of Deloitte & Touche or other independent public accountants of recognized standing acceptable to the Required Lenders, together with (i) a certificate of such accounting firm to the Lender Parties stating that in the course of the regular audit of the business of the Borrower and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that Second Amended and Restated Crowley Credit Agreement 53 a Default has occurred and is continuing, or if, in the opinion of such accounting firm, a Default has occurred and is continuing, a statement as to the nature thereof, (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by such accountants in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Section 5.04, provided that in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP and (iii) a certificate of the Vice President-Finance or Treasurer of the Borrower stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto. (c) Quarterly Financials. As soon as available and in any event within 60 days after the end of each of the first three quarters of each Fiscal Year, a Consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and a Consolidated and consolidating statement of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and a Consolidated and consolidating statement of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding fiscal year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments) by the Vice President-Finance or Treasurer of the Borrower as having been prepared in accordance with GAAP, together with (i) a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto and (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by the Borrower in determining compliance with the covenants contained in Section 5.04, provided that in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP. (d) Annual Forecasts. As soon as available and in any event no later than 120 days after the end of each fiscal year, forecasts prepared by management of the Borrower, in form satisfactory to the Administrative Agent, of balance sheets, income statements and cash flow statements and annually each year thereafter on such 120th date or earlier such balance sheets, income statements and cash flow statements for the following year until the Termination Date (e) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any Governmental Authority affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(f), and promptly after the occurrence thereof, notice of any adverse change in the status or the financial effect on any Loan Party or any of its Subsidiaries of the Disclosed Litigation from that described on Schedule 4.01(f) hereto. (f) Securities Reports. Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that any Loan Party or any of its Subsidiaries sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements, that any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any national securities exchange. Second Amended and Restated Crowley Credit Agreement 54 (g) Creditor Reports. Promptly upon the furnishing thereof, notice thereof to the Administrative Agent and at the reasonable request of the Administrative Agent, copies of any financial statement or report furnished generally to the holders of debt under and pursuant to the terms of the DNB Credit Facility and not otherwise required to be furnished to the Lender Parties pursuant to any other clause of this Section 5.03. (h) Tax Certificates. Promptly, and in any event within five Business Days after the due date (with extensions) for filing the final Federal income tax return in respect of each taxable year, a certificate (a "Tax Certificate"), signed by the president or the chief financial officer of the Borrower, stating that the Borrower has paid to the Internal Revenue Service or other taxing authority the full amount that such affiliated group is required to pay in respect of Federal income tax for such year and that the Borrower and its Subsidiaries have received any amounts payable to them, and have not paid amounts in respect of taxes (Federal, state, local or foreign) in excess of the amount they are required to pay, under any tax sharing agreement listed on Part I of Schedule XIII hereto in respect of such taxable year. (i) Environmental Conditions. Promptly after the assertion or occurrence thereof, notice of any Environmental Action against or of any noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit that could (i) reasonably be expected to have a Material Adverse Effect or (ii) cause any property described in the Mortgages to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law. (j) Insurance. As soon as available and in any event within 30 days after the end of each Fiscal Year, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for each Loan Party and its Subsidiaries and containing such additional information as the Required Lenders through the Administrative Agent, may reasonably specify. (k) ERISA. (i) ERISA Events and ERISA Reports. (A) Promptly and in any event within 10 days after any Loan Party or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, a statement of the Chief Financial Officer of the Borrower describing such ERISA Event and the action, if any, that such Loan Party or such ERISA Affiliate has taken and proposes to take with respect thereto and (B) on the date any records, documents or other information must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA, a copy of such records, documents and information. (ii) Plan Terminations. Promptly and in any event within two Business Days after receipt thereof by any Loan Party or any ERISA Affiliate, copies of each notice from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan. (iii) Plan Annual Reports. Promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan. (iv) Multiemployer Plan Notices. Promptly and in any event within five Business Days after receipt thereof by any Loan Party or any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each notice concerning (A) the imposition of Withdrawal Liability by any such Multiemployer Plan, (B) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (C) the amount of liability incurred, or that may be incurred, by such Loan Party or any ERISA Affiliate in connection with any event described in clause (A) or (B). Second Amended and Restated Crowley Credit Agreement 55 (l) Other Information. Such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as any Agent, or any Lender Party through the Administrative Agent, may from time to time reasonably request. Section 5.04. Financial Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have any Commitment hereunder, the Borrower will: (a) Leverage Ratio. Maintain at all times a Leverage Ratio of not greater than the ratio set forth below during each period set forth below:
FISCAL YEAR ENDING DECEMBER 31 LEVERAGE RATIO 2004 3.25:1.00 2005 3.00:1.00 2006 2.75:1.00 2007 and thereafter 2.50:1.00
(b) Total Debt to EBITDAR Ratio. Maintain, at the end of each fiscal quarter of the Borrower, a ratio of Total Debt to EBITDAR for the four fiscal quarters ended as of the end of such quarter not greater than the ratio set forth below for each period set forth below:
FOR EACH FISCAL QUARTER DURING THE FISCAL YEAR TOTAL DEBT/EBITDAR ENDING DECEMBER 31 RATIO 2004 3.25:1.00 2005 3.25:1.00 2006 3.00:1.00 2007 and thereafter 3.00:1.00
(c) Interest Coverage Ratio. Maintain, at the end of each fiscal quarter of the Borrower, a ratio of Consolidated EBITDA to Consolidated interest expense (net of interest income) for the four fiscal quarters ended as of the end of such quarter not less than 3.50:1.0. ARTICLE VI EVENTS OF DEFAULT Section 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) (i) the Borrower shall fail to pay any principal of any Advance when the same shall become due and payable or (ii) the Borrower shall fail to pay any interest on any Advance, or any Loan Party shall fail to make any other payment under any Loan Document, in each case under this clause (ii) within 3 Business Days after the same shall become due and payable; or (b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or Second Amended and Restated Crowley Credit Agreement 56 (c) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.15, 5.01(a), (b), (d), (e), (f), (j) or (p), 5.02, 5.03 or 5.04; or (d) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 10 days after the earlier of the date on which (i) a Responsible Officer becomes aware of such failure or (ii) written notice thereof shall have been given to the Borrower by any Agent or any Lender Party; or (e) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Indebtedness of such Loan Party or such Subsidiary (as the case may be) that is outstanding in a principal amount of at least $5,000,000 either individually or in the aggregate (but excluding Indebtedness outstanding hereunder), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness or otherwise to cause, or to permit the holder thereof to cause, such Indebtedness to mature; or any such Indebtedness shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; or (f) (i) any Loan Party, Regulated Subsidiary or any Material Subsidiary (to the extent not a Loan Party) shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or any Loan Party, Regulated Subsidiary or any Material Subsidiary (to the extent not a Loan Party) shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Loan Party, Regulated Subsidiary or any Material Subsidiary (to the extent not a Loan Party) any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any Loan Party, Regulated Subsidiary or any Material Subsidiary (to the extent not a Loan Party) any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any Loan Party, Regulated Subsidiary or any Material Subsidiary (to the extent not a Loan Party) shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) any Loan Party, Regulated Subsidiary or any Material Subsidiary (to the extent not a Loan Party) shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) any ERISA Event shall have occurred with respect to a Plan and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan Second Amended and Restated Crowley Credit Agreement 57 and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Borrower and the ERISA Affiliates related to such ERISA Event) exceeds $7,500,000; or (ii) the Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Borrower and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $7,500,000 or requires payments exceeding $1,500,000 per annum; or (iii) the Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Borrower and the ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $1,500,000, which amount is not paid when due; or (h) one or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability of $7,500,000 or more (calculated after deducting therefrom any amount that will be paid by a recognized protection and indemnity club that is a member of the International Group Agreement or any insurer rated at least B++ by A.M. Best Company, or the equivalent thereof provided by a rating service whose ratings of insurance companies are internationally recognized or any insurer acceptable to the Administrative Agent, if such insurer has been notified of, and has not disputed the claim made for payment of, the amount of such judgment or decree) and such judgments or decrees involving in the aggregate $7,500,000 or more shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (i) any non-monetary judgment or order shall be rendered against the Borrower or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect, and there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (j) with regard to any Title XI Financing Agreement, (A) any "Payment Default" shall have occurred with respect to any of the Title XI Subsidiaries or the Borrower; or (B) any Secretary's Notice (as defined in, or by reference in, any Title XI Financing Agreement) shall be issued for any reason; or (C) the Borrower shall be required pursuant to any stock Subscription Agreement (as defined in, or by reference in, any Title XI Financing Agreement) to purchase any shares of or make any cash advances to any Title XI Subsidiaries in an amount, together with any deposit or pledge amounts described in clause (D) of this subsection, in excess of $5,000,000; or (D) any Title XI Subsidiaries or the Borrower shall be required to make any deposit into any Title XI Reserve Fund or to make any pledge of cash collateral (whether or not such pledge or deposit is made) or any such deposit or pledge is made, in an amount, together with any subscription or cash advance amounts described in clause (C) of this paragraph (j), in excess of $5,000,000; or (k) if at any time the Borrower or its Subsidiaries shall become liable (whether, directly or indirectly, by indemnity or contribution or otherwise) for remediation and/or environmental compliance expenses and/or fines, penalties or other charges which, in the aggregate, has had or is reasonably likely to have a Material Adverse Effect; or (l) the Amended and Restated Subsdiary Guaranty or Article VII hereof shall cease to be in full force and effect, shall be determined by any court to be void, voidable or unenforceable, or any Loan Party shall assert any defense to any of its obligations under any Loan Second Amended and Restated Crowley Credit Agreement 58 Document to which it is a party or otherwise contest its liability thereunder, or any such Loan Party shall rescind or revoke (or attempt to rescind or revoke) any of its obligations under any Loan Document, whether with respect to future transactions or otherwise; (m) there shall occur and be continuing an "Event of Default" as defined in any Ship Mortgage; (n) a Change in Control shall occur; or (o) except as otherwise permitted hereunder, the Secured Parties shall cease to have a first-priority perfected security interest in any Collateral; or (p) there shall occur and be continuing a default under or in respect of the DNB Credit Facility solely as a result of any failure to make any payments when such payment becomes due and payable thereunder; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments and the Letter of Credit Commitments shall immediately terminate and the Advances hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders (or, in the case of an Event of Default specified in paragraph (a) above, the Majority Lenders), the Administrative Agent may, or upon the request of the Required Lenders (or, in the case of an Event of Default specified in paragraph (a) above, the Majority Lenders), the Administrative Agent shall, by notice to the Borrower, declare the Commitments and the Letter of Credit Commitments to be terminated forthwith, whereupon the Commitments and the Letter of Credit Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders (or, in the case of an Event of Default specified in paragraph (a) above, the Majority Lenders), the Administrative Agent may, or upon the request of the Required Lenders (or, in the case of an Event of Default specified in paragraph (a) above, the Majority Lenders), the Administrative Agent shall, by notice of default to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. Section 6.02. Actions in Respect of the Letters of Credit upon Default. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a non-interest bearing cash collateral account opened by, and under the sole dominion and control of, the Administrative Agent an amount equal to the aggregate Available Amount of all Letters of Credit then outstanding, and the Borrower hereby grants to the Administrative Agent for the benefit of the Agents, the Issuing Banks and the Lenders a security interest in all funds so deposited to and from time to time held (in the form of cash, certificates or instruments) in the cash collateral account and proceeds thereof. The Borrower and the Administrative Agent shall thereafter enter into documentation reaffirming the grant of the security interest hereunder and otherwise relating to such cash collateral account in form and substance satisfactory to the Administrative Agent and the Borrower. The Administrative Agent shall, at the Borrower's direction and without assuming any risk of loss thereof, invest the funds in the cash collateral account in Cash Equivalents for the account of the Borrower. All interest and other investment gains earned on such investments shall be added to the cash collateral account as additional collateral security for the prompt and complete payment when due of the obligations and liabilities of the Borrower and any Designated Account Party under and in respect of the Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Second Amended and Restated Crowley Credit Agreement 59 Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the Notes. If at any time the Administrative Agent determines that any funds held in such cash collateral account are subject to any right or claim of any Person other than any Agent, any Issuing Bank or the Lenders, which right or claim could reasonably have the effect of reducing the value of such funds to the Issuing Banks and the Lenders, or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon receipt of a demand by the Administrative Agent, pay to the Administrative Agent, as additional funds in Dollars to be deposited and held in such cash collateral account, an amount equal to (a) the amount by which the value of such funds to the Lenders and the Issuing Banks has been reduced, or (b) the excess of (i) such aggregate Available Amount over (ii) the total amount of funds, if any, then held in such cash collateral account, respectively. On or after the date all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the Notes then due and payable shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower. ARTICLE VII BORROWER GUARANTY Section 7.01. Guaranty. The Borrower hereby unconditionally and irrevocably guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all Obligations of each Designated Account Party now or hereafter existing under the L/C Related Documents, whether for reimbursement of drawings under any Letter of Credit, principal, interest, fees, expenses or otherwise (such Obligations being the "Borrower Guaranteed Obligations"), and agrees to pay any and all reasonable expenses (including reasonable counsel fees and expenses) incurred by any Agent, any Issuing Bank or any Lender in enforcing any rights under the guaranty contained in this Article VII. Without limiting the generality of the foregoing, the Borrower's liability shall extend to all amounts that constitute part of the Borrower Guaranteed Obligations and would be owed by each Designated Account Party to any Agent, any Issuing Bank or any Lender under the L/C Related Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Designated Account Party. Section 7.02. Guaranty Absolute. The Borrower guarantees that the Borrower Guaranteed Obligations will be paid strictly in accordance with the terms of the L/C Related Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Agent, any Issuing Bank or any Lender with respect thereto. The Obligations of the Borrower under the guaranty contained in this Article VII are independent of the Borrower Guaranteed Obligations or any other Obligations of any other Loan Party or Designated Account Party under the L/C Related Documents, and a separate action or actions may be brought and prosecuted against the Borrower to enforce the guaranty contained in this Article VII, irrespective of whether any action is brought against any Designated Account Party or any other Loan Party or whether any Designated Account Party or any other Loan Party is joined in any such action or actions. The liability of the Borrower under the guaranty contained in this Article VII shall be irrevocable, absolute and unconditional irrespective of, and the Borrower hereby irrevocably waives, any defenses it may now or hereafter have in any way relating to, any or all of the following: (a) any lack of validity or enforceability of any L/C Related Document or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Borrower Guaranteed Obligations or any other Obligations of any Designated Account Second Amended and Restated Crowley Credit Agreement 60 Party or any Loan Party under the L/C Related Documents, or any other amendment or waiver of or any consent to departure from any L/C Related Document, including, without limitation, any increase in the Borrower Guaranteed Obligations resulting from the extension of additional credit to any Designated Account Party or any of its Subsidiaries or otherwise; (c) any taking, exchange, release or non-perfection of any collateral security, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Borrower Guaranteed Obligations; (d) any manner of application of collateral security, or proceeds thereof, to all or any of the Borrower Guaranteed Obligations, or any manner of sale or other disposition of any collateral security for all or any of the Borrower Guaranteed Obligations or any other Obligations of any Designated Account Party or any other Loan Party under the L/C Related Documents or any other assets of any Designated Account Party or any of its Subsidiaries; (e) any change, restructuring or termination of the corporate structure or existence of any Designated Account Party or any of its Subsidiaries; (f) any failure of any Agent, Issuing Bank or Lender to disclose to any Designated Account Party or the Borrower any information relating to the financial condition, operations, properties or prospects of any other Designated Account Party or any other Loan Party now or in the future known to any Agent, Issuing Bank or Lender (the Borrower waiving any duty on the part of the Agents, Issuing Banks or Lenders to disclose such information); or (g) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by any Agent, Issuing Bank or Lender that might otherwise constitute a defense available to, or a discharge of, any Designated Account Party, the Borrower or any other guarantor or surety. The guaranty contained in this Article VII shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Borrower Guaranteed Obligations is rescinded or must otherwise be returned by any Agent, Issuing Bank or Lender or any other Person upon the insolvency, bankruptcy or reorganization of the Designated Account Party or any other Loan Party or otherwise, all as though such payment had not been made. Section 7.03. Waivers and Acknowledgments. (a) The Borrower hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Borrower Guaranteed Obligations and the guaranty contained in this Article VII and any requirement that any Agent, Issuing Bank or Lender protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Designated Account Party or any other Person or any collateral security. (b) The Borrower hereby waives any right to revoke the guaranty contained in this Article VII, and acknowledges that the guaranty contained in this Article VII is continuing in nature and applies to all Borrower Guaranteed Obligations, whether existing now or in the future. (c) The Borrower acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in this Section 7.03 are knowingly made in contemplation of such benefits. Section 7.04. Subrogation. The Borrower will not exercise any rights that it may now or hereafter acquire against any Designated Account Party or any other insider guarantor that arise from Second Amended and Restated Crowley Credit Agreement 61 the existence, payment, performance or enforcement of the Borrower's Obligations under the guaranty contained in this Article VII or any other L/C Related Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Agent, Issuing Bank or Lender against any Designated Account Party or any other insider guarantor or any collateral security, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any Designated Account Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Obligations and all other amounts payable under the guaranty contained in this Article VII shall have been paid in full in cash, all Letters of Credit shall have expired or terminated and not have been renewed, all Reimbursement Obligations shall have been paid in full in cash and the Commitments and the Letter of Credit Commitments shall have expired or terminated. If any amount shall be paid to the Borrower in violation of the preceding sentence at any time prior to the later of the payment in full in cash of the Borrower Guaranteed Obligations and all other amounts payable under the guaranty contained in this Article VII and the later of (i) the Termination Date and (ii) the expiration or termination of all Letters of Credit and the payment in full in cash of all Reimbursement Obligations, such amount shall be held in trust for the benefit of the Agents, Issuing Banks and Lenders and shall forthwith be paid to the Administrative Agent to be credited and applied to the Borrower Guaranteed Obligations and all other amounts payable under the guaranty contained in this Article VII, whether matured or unmatured, in accordance with the terms of the L/C Related Documents, or to be held as collateral security for any Borrower Guaranteed Obligations or other amounts payable under the guaranty contained in this Article VII thereafter arising. If (i) the Borrower shall make payment to any Agent, Issuing Bank or Lender of all or any part of the Borrower Guaranteed Obligations, (ii) all of the Borrower Guaranteed Obligations and all other amounts payable under the guaranty contained in this Article VII shall be paid in full in cash and (iii) the Termination Date shall have occurred, all Letters of Credit shall have expired or terminated and not been renewed and all Reimbursement Obligations shall have been paid in full in cash, the Agents, Issuing Banks and Lenders will, at the Borrower's request and expense, execute and deliver to the Borrower appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Borrower of an interest in the Borrower Guaranteed Obligations resulting from such payment by the Borrower. Section 7.05. Continuing Guaranty. The guaranty contained in this Article VII is a continuing guaranty and shall (a) remain in full force and effect until the later of the payment in full in cash of the Borrower Guaranteed Obligations and all other amounts payable under the guaranty contained in this Article VII and the later of (i) the Termination Date and (ii) the expiration or termination of all Letters of Credit and the payment in full in cash of all Reimbursement Obligations, (b) be binding upon the Borrower, its successors and assigns and (c) inure to the benefit of and be enforceable by the Agents, Issuing Banks and Lenders and their successors, transferees and assigns. ARTICLE VIII THE AGENTS Section 8.01. Authorization and Action. Each Lender Party (in its capacities as a Lender and the Issuing Bank (if applicable)) hereby appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Notes), no Agent shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lender Parties and all holders of Second Amended and Restated Crowley Credit Agreement 62 Notes; provided, however, that no Agent shall be required to take any action that exposes such Agent to personal liability or that is contrary to this Agreement or applicable law. Each Agent agrees to give to each Lender Party prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. Section 8.02. Agent's Reliance, Etc. Neither any Agent nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each Agent: (a) may treat the payee of any Note as the holder thereof until, in the case of the Administrative Agent, the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, or, in the case of any other Agent, such Agent has received notice from the Administrative Agent that it has received and accepted such Assignment and Acceptance, in each case as provided in Section 9.07; (b) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender Party and shall not be responsible to any Lender Party for any statements, warranties or representations (whether written or oral) made in or in connection with the Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance, observance or satisfaction of any of the terms, covenants or conditions of any Loan Document on the part of any Loan Party or the existence at any time of any Default under the Loan Documents or to inspect the property (including the books and records) of any Loan Party; (e) shall not be responsible to any Lender Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; and (f) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or telex) believed by it to be genuine and signed or sent by the proper party or parties. Section 8.03. CUSA and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, if any, CUSA shall have the same rights and powers under the Loan Documents as any other Lender Party and may exercise the same as though it were not an Agent; and the term "Lender Party" or "Lender Parties" shall, unless otherwise expressly indicated, include CUSA in its individual capacity. CUSA and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any of its Subsidiaries and any Person that may do business with or own securities of any Loan Party or any such Subsidiary, all as if CUSA was not an Agent and without any duty to account therefor to the Lender Parties. No Agent shall have any duty to disclose any information obtained or received by it or any of its Affiliates relating to any Loan Party or any of its Subsidiaries to the extent such information was obtained or received in any capacity other than as such Agent. Section 8.04. Lender Party Credit Decision. Each Lender Party acknowledges that it has, independently and without reliance upon any Agent or any other Lender Party and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon any Agent or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. Section 8.05. Indemnification. (a) Each Lender Party severally agrees to indemnify each Agent (to the extent not promptly reimbursed by the Borrower) from and against such Lender Second Amended and Restated Crowley Credit Agreement 63 Party's ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Agent under the Loan Documents (collectively, the "Indemnified Costs"); provided, however, that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse each Agent promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 9.04, to the extent that such Agent is not promptly reimbursed for such costs and expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 8.05 applies whether any such investigation, litigation or proceeding is brought by any Lender Party or any other Person. (b) Each Lender Party severally agrees to indemnify the Issuing Bank (to the extent not promptly reimbursed by the Borrower) from and against such Lender Party's ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Issuing Bank in any way relating to or arising out of the Loan Documents or any action taken or omitted by the Issuing Bank under the Loan Documents; provided, however, that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Issuing Bank's gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse the Issuing Bank promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrower under Section 9.04, to the extent that the Issuing Bank is not promptly reimbursed for such costs and expenses by the Borrower. (c) For purposes of this Section 8.05, the Lender Parties' respective ratable shares of any amount shall be determined, at any time, according to the sum of (i) the aggregate principal amount of the Advances outstanding at such time and owing to the respective Lender Parties, (ii) their respective Pro Rata Shares of the aggregate Available Amount of all Letters of Credit outstanding at such time and (iii) the aggregate unused portions of their respective Revolving Credit Commitments at such time; provided that the aggregate principal amount of Letter of Credit Advances owing to the Issuing Bank shall be considered to be owed to the Revolving Credit Lenders ratably in accordance with their respective Revolving Credit Commitments. The failure of any Lender Party to reimburse any Agent or the Issuing Bank, as the case may be, promptly upon demand for its ratable share of any amount required to be paid by the Lender Parties to such Agent or the Issuing Bank, as the case may be, as provided herein shall not relieve any other Lender Party of its obligation hereunder to reimburse such Agent or the Issuing Bank, as the case may be, for its ratable share of such amount, but no Lender Party shall be responsible for the failure of any other Lender Party to reimburse such Agent or the Issuing Bank, as the case may be, for such other Lender Party's ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender Party hereunder, the agreement and obligations of each Lender Party contained in this Section 8.05 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents. Section 8.06. Successor Agents. Any Agent may resign at any time by giving written notice thereof to the Lender Parties and the Borrower; provided, however, that any removal of the Administrative Agent will not be effective until it has also been replaced as Collateral Agent and Letter of Second Amended and Restated Crowley Credit Agreement 64 Credit Issuing Bank and released from all of its obligations in respect thereof. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lender Parties, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent and, in the case of a successor Collateral Agent, upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Ship Mortgages, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to continue the perfection of the Liens granted or purported to be granted by the Collateral Documents, such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. If within 45 days after written notice is given of the retiring Agent's resignation or removal under this Section 8.06 no successor Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (a) the retiring Agent's resignation or removal shall become effective, (b) the retiring Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (c) the Required Lenders shall thereafter perform all duties of the retiring Agent under the Loan Documents until such time, if any, as the Required Lenders appoint a successor Agent as provided above. After any retiring Agent's resignation or removal hereunder as Agent shall have become effective, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. ARTICLE IX MISCELLANEOUS Section 9.01. Amendments, Etc. No amendment or waiver of any provision of any Loan Document, nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders affected by such amendment, waiver or comment, do any of the following: (a) waive any of the conditions specified in Section 3.01, (b) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Notes, any Reimbursement Obligation or any fees or other amounts payable hereunder (provided that any Lender may waive, for itself, the timely payment of any amount owed to it arising from any claim by such Lender in respect of any indemnity obligation of the Borrower to such Lender pursuant to Section 2.10, 2.11 or 2.13), (d) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes or of the aggregate Available Amount of outstanding Letters of Credit, or the number of Lenders, that in each case shall be required for the Lenders or any of them to take any action hereunder, (f) reduce or limit the obligations of any Guarantor under Section 1 of the Amended and Restated Subsdiary Guaranty or of the Borrower under Section 7.01 or otherwise limit any Guarantor's or the Borrower's respective liability with respect to the Obligations owing to the Agents, the Lenders and the Issuing Banks, (g) amend this Section 9.01 or (h) release all or substantially all of any cash collateral securing Reimbursement Obligations under Letters of Credit, except to the extent permitted by Section 2.16(i) in respect of Excess Amounts described therein; and provided further that no amendment, waiver or consent shall, unless in writing and signed by each Issuing Bank, in addition to the Lenders required above to take such action, affect the rights or obligations of the Issuing Banks under this Agreement; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Second Amended and Restated Crowley Credit Agreement 65 Administrative Agent or the Collateral Agent, as the case may be, in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent or Collateral Agent in its capacity as such Agent, under this Agreement or any Note. Section 9.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopier) and sent by a prepaid nationally recognized overnight courier, telecopied, or delivered, if to the Borrower, at its address at 155 Grand Avenue, Oakland, California 94612, Attention: Albert M. Marucco, Vice President and Treasurer; if to any Guarantor, c/o the Borrower at the foregoing address; if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; if to the Administrative Agent or Collateral Agent, at its address at 388 Greenwich Street, New York, New York 10013, Attention: Robert Malleck; if to any Issuing Bank, at its Notice Office specified opposite its name on Schedule I hereto; or, as to the Borrower or any Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, when mailed, sent by a nationally recognized overnight courier, or telecopied, be effective when deposited in the mails, delivered to such courier, or telecopied, respectively, except that notices and communications to the Administrative pursuant to Article II, III or VIII shall not be effective until received by the Administrative Agent, as the case may be. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. Section 9.03. No Waiver; Remedies, Entire Agreement. No failure on the part of any Lender Party or any Agent to exercise, and no delay in exercising, any right hereunder or under any Note or any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. This Agreement and the other Loan Documents constitute the entire agreement of the parties with respect hereto. Section 9.04. Costs and Expenses. (a) The Borrower agrees to pay on demand (i) all costs and expenses of each Agent in connection with the preparation, execution, delivery, administration, modification and amendment of, or any consent or waiver under, the Loan Documents (including, without limitation, (A) all due diligence, collateral review, syndication (including costs and expenses related to printing, distribution and bank meetings), transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses and (B) the reasonable fees and expenses of counsel for each Agent with respect thereto, with respect to advising such Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto) and (ii) all costs and expenses of each Agent and each Lender Party in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, or any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally (including, without limitation, the reasonable fees and expenses of counsel for the Administrative Agent and each Lender Party with respect thereto). (b) The Borrower agrees to indemnify, defend and save and hold harmless each Agent, each Lender Party and each of their Affiliates and their respective officers, directors, Second Amended and Restated Crowley Credit Agreement 66 employees, agents and advisors (each, an "Indemnified Party") from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated thereby or (ii) the actual or alleged presence of Hazardous Materials on any property of any Loan Party or any of its Subsidiaries or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 9.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party or any other Person, whether or not any Indemnified Party is otherwise a party thereto. The Borrower also agrees not to assert any claim against any Agent, any Lender Party or any of their Affiliates, or any of their respective officers, directors, employees, agents and advisors, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Loan Documents or any of the transactions contemplated by the Loan Documents. (c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender Party other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.06, 2.08 or 2.10, acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, or by an Eligible Assignee to a Lender Party other than on the last day of the Interest Period for such Advance upon an assignment of rights and obligations under this Agreement pursuant to Section 9.07 as a result of a demand by the Borrower pursuant to Section 9.07(a), or if the Borrower fails to make any payment or prepayment of an Advance for which a notice of prepayment has been given or that is otherwise required to be made, whether pursuant to Section 2.05, 2.06 or 6.01 or otherwise, the Borrower shall, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party any amounts required to compensate such Lender Party for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion or such failure to pay or prepay, as the case may be, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender Party to fund or maintain such Advance. (d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Administrative Agent or any Lender Party, in its sole discretion. (e) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Borrower contained in Sections 2.10 and 2.12 and this Section 9.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under any of the other Loan Documents. Second Amended and Restated Crowley Credit Agreement 67 Section 9.05. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01 or otherwise with the consent of the Required Lenders, each Agent and each Lender Party and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Agent, such Lender Party or such Affiliate to or for the credit or the account of the Borrower against any and all of the Obligations of the Borrower now or hereafter existing under the Loan Documents, irrespective of whether such Agent or such Lender Party shall have made any demand under this Agreement or such Note or Notes and although such Obligations may be unmatured. Each Agent and each Lender Party agrees promptly to notify the Borrower after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Agent and each Lender Party and their respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Agent, such Lender Party and their respective Affiliates may have. Section 9.06. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and each Agent and the Administrative Agent shall have been notified by each Initial Lender Party that such Initial Lender Party has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, each Agent and each Lender Party and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender Parties. Section 9.07. Assignments and Participations. (a) Each Lender, with the consent of the Borrower, each Agent and each Issuing Bank, may and, in the case of a Lender if demanded by the Borrower (following a demand by such Lender pursuant to Section 2.10 or 2.13) upon at least 5 Business Days' notice to such Lender and the Administrative Agent, will assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under and in respect of the Revolving Credit Facility, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or an assignment of all of a Lender's rights and obligations under this Agreement, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof, (iii) except in the case of an assignment of all of a Lender's rights and obligations under this Agreement, the remaining Commitment of the assigning Lender shall in no event be less than $10,000,000, (iv) each such assignment shall be to an Eligible Assignee, (v) each such assignment made as a result of a demand by the Borrower pursuant to this Section 9.07(a) shall be arranged by the Borrower after consultation with the Administrative Agent and shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement, (vi) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section 9.07(a) unless and until such Lender shall have received one or more payments from either the Borrower or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts then due and payable to such Lender under this Agreement and (vii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note subject to such assignment and a processing and Second Amended and Restated Crowley Credit Agreement 68 recordation fee of $2,500; provided further that if such assignment is to an Eligible Assignee which is a direct or indirect wholly owned Subsidiary or Affiliate of any Lender or the controlling corporation of such Lender, no consent of the Borrower shall be required for such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (b) Each Issuing Bank may assign to one or more Lenders or Affiliates of a Lender all or a portion of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided, however, that (i) except in the case of an assignment to a Person that immediately prior to such assignment was an Issuing Bank or an assignment of all of an Issuing Bank's rights and obligations under this Agreement, the amount of the Letter of Credit Commitment of the assigning Issuing Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 and shall be in an integral multiple of $1,000,000 in excess thereof, (ii) except in the case of an assignment of all of an Issuing Bank's rights and obligations under this Agreement, the remaining commitment of the assigning Issuing Bank shall in no event be less than $5,000,000, (iii) each such assignment shall be to an Eligible Assignee and (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $2,500. (c) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its respective obligations under the Loan Documents or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to such Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender or Issuing Bank, as the case may be. (d) The Administrative Agent shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive Second Amended and Restated Crowley Credit Agreement 69 and binding for all purposes, absent manifest error, and the Borrower, the Agents and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, any Agent or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the forms such assignee is required to deliver pursuant to subsection 2.13(e) and any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice (or, if later, the effective date of the transfer), the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto. (f) Each Lender may sell participations to one or more banks or other entities (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, each Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder (to the extent such participant would be entitled to share therein), in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. (g) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any Confidential Information relating to the Borrower received by it from such Lender. (h) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. Section 9.08. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the Second Amended and Restated Crowley Credit Agreement 70 same agreement. Delivery by telecopier of an executed counterpart of a signature page to this Agreement shall be effective as delivery of an original executed counterpart of this Agreement. Section 9.09. No Liability of the Issuing Bank. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit 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; (c) payment by the Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) the Issuing Bank's willful misconduct or gross negligence as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) the Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. Section 9.10. Confidentiality. Neither any Agent nor any Lender Party shall disclose any Confidential Information to any Person without the consent of the Borrower, other than (a) to such Agent's or such Lender Party's Affiliates and their officers, directors, employees, agents and advisors and to actual or prospective Eligible Assignees and participants, and then only on a confidential basis, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, Federal or foreign authority or examiner (including the National Association of Insurance Commissioners or any similar organization or quasi-regulatory authority) regulating such Lender Party, (d) to any rating agency when required by it, provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Confidential Information relating to the Loan Parties received by it from such Lender Party, (e) in connection with any litigation or proceeding to which such Agent or such Lender Party or any of its Affiliates may be a party or (f) in connection with the exercise of any right or remedy under this Agreement or any other Loan Document. Section 9.11. Release of Collateral. Upon the sale, lease, transfer or other disposition of any item of Collateral of any Loan Party (including, without limitation, as a result of the sale, in accordance with the terms of the Loan Documents, of the Loan Party that owns such Collateral) in accordance with the terms of the Loan Documents, the Collateral Agent will, at the Borrower's expense, execute and deliver to such Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents in accordance with the terms of the Loan Documents. Section 9.12. Patriot Act Notification. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the USA Patriot Act (Title III of Pub.L. 107-56 (signed into law October 26, 2001)) (the "Patriot Act"), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Loan Party in accordance with the Patriot Act. The Parent Guarantor and the Borrower shall, and shall cause each of their Subsidiaries to, provide, to the Second Amended and Restated Crowley Credit Agreement 71 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 9.13. JURISDICTION, ETC (a) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY JURISDICTION. (b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY IN ANY NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. Section 9.14. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Section 9.15. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENTS AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS, THE ADVANCES, THE LETTERS OF CREDIT OR THE ACTIONS OF ANY AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Second Amended and Restated Crowley Credit Agreement IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. CROWLEY MARITIME CORPORATION By /s/ Albert M. Marucco ----------------------------------------- Title: Vice President, Treasurer CITICORP USA, INC., as Administrative Agent and as Collateral Agent By /s/ Robert Malleck ----------------------------------------- Title: Director, New York Shipping & Logistics Second Amended and Restated Crowley Credit Agreement Lender Parties CITIBANK, N.A., as Initial Issuing Bank By /s/ Robert Malleck ------------------------------------------------ Title: Director, New York Shipping & Logistics CITICORP USA, INC., as Initial Lender By /s/ Robert Malleck ------------------------------------------------ Title: Director, New York Shipping & Logistics NORDEA BANK NORGE ASA, ACTING THROUGH ITS GRAND CAYMAN BRANCH, as Lender By: /s/ Martin Lunder ----------------------------------------------- Name: Martin Lunder Title: Senior Vice President By: /s/ Alison B. Barber ----------------------------------------------- Name: Alison B. Barber Title: Vice President DNB NOR BANK ASA, as Lender By: /s/ Barbara Gronquist ----------------------------------------------- Name: Barbara Gronquist Title: Senior Vice President By: /s/ Nikolai A. Nachamkin ----------------------------------------------- Name: Nikolai A. Nachamkin Title: First Vice President HSH NORDBANK AG, as Lender By: /s/ Hauke Tessmer ----------------------------------------------- Name: Hauke Tessmer Title: Vice President By: /s/ Oliver Hermanns ----------------------------------------------- Name: Dr. Hermanns Title: Senior Vice President Second Amended and Restated Crowley Credit Agreement EX-10.14 5 y93312exv10w14.txt SETTLEMENT AGREEMENT Exhibit 10.14 SETTLEMENT AGREEMENT This Settlement Agreement (this "Settlement Agreement") is made as of December 23, 2003, by and between CROWLEY MARITIME CORPORATION, a Delaware Corporation (the "Corporation"), and THOMAS B. CROWLEY, JR., ( "Employee"). WHEREAS, the Corporation and Employee have entered into a Split Dollar Life Insurance Agreement, dated as of April 6, 1992, the Amendment to Split Dollar Life Insurance Agreement, dated as of May 1, 1995, and the Second Amendment to Split Dollar Life Insurance Agreement (Original Policies), dated as of July 20, 1998 (collectively, the "Agreement"); WHEREAS, the policies currently subject to the Agreement are listed on Schedule A hereto (the "Policies"); WHEREAS, Employee has executed Limited Collateral Assignments (collectively, "Assignments") to secure the Corporation's right to receive the amounts payable to the Corporation pursuant to the Agreement, which Assignments are on file with each of the insurance carriers shown on Schedule A hereto; WHEREAS, the Corporation has ceased making premium payments required by the Agreement as a result of the enactment of Section 402 of the Sarbanes-Oxley Act of 2002; WHEREAS, Employee is no longer receiving the benefit of the Corporation's premium payments under the Agreement; WHEREAS, the Corporation wishes to continue to provide benefits to the Employee (as were provided under the Agreement) by making interest payments to Employee as provided herein; and WHEREAS, the parties wish to terminate the Agreement and execute this Settlement Agreement in full settlement of the rights and obligations of the parties under the Agreement. NOW, THEREFORE, in consideration of the good and valuable consideration referred to herein, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Termination of the Agreement. The Agreement and all rights and obligations of each party thereunder hereby are terminated, and the Agreement shall be of no force or effect, effective as of the date hereof. 2. Repayment of Premiums. Concurrently with the execution and delivery of this Settlement Agreement, Employee shall pay to the Corporation in cash $7,508,187, an amount equal to the total amount of premiums paid by the Corporation to date on the Policies pursuant to the Agreement reduced by payments made by Employee to the Corporation pursuant to the Agreement. 3. Release of Rights Under Assignments. The Corporation hereby releases all its rights under the Assignments. 4. Payment of Interest Costs. Until the Corporation's obligation set forth in this Section 4 is terminated as provided in Section 5 hereof, the Corporation shall pay Employee each year an amount such that on an after-tax basis (applying the highest marginal federal and state income tax rates and including Medicare taxes under Section 3101(b) of the Internal Revenue Code) the amount received by Employee will be equal to the interest cost of the "Bank Loan," as described in Schedule B attached hereto, and any refinancing thereof. Payments under this Section 4 shall be paid prior to the date the interest costs are due under the Bank Loan. With respect to the year in which a Termination Event (defined below) occurs, the Corporation shall pay an amount computed in accordance with this Section 4 with respect to the interest costs for the partial year period before the Termination Event. If the Bank Loan has not closed prior to the date of this Agreement, the Corporation shall make the payments required by this Section 4 with respect to any interim financing obtained by the Employee for the purposes of making the payment described in Section 2, including without limitation any loans from the cash surrender value of one or more of the Policies. 5. Termination of Obligation. Section 4 of this Settlement Agreement shall terminate upon the first to occur of any one of the following events (the "Termination Event"): (a) upon surrender or other termination of one or more of the Policies or one or more successor policies, unless Employee rolls over or reinvests the entire amount received upon surrender or other termination into one or more new policies on the life of Molly Crowley, including the policies received in the contemplated exchange under Section 1035 of the Internal Revenue Code for policies with death benefits reduced to approximately $35 million, as well as any policies acquired with the cash value of such policies ("successor policies"); (b) at the option of the Corporation if Employee ceases to be employed by the Corporation; (c) upon the death of Molly Crowley; or (d) bankruptcy, insolvency or dissolution of the Corporation. 6. Releases. (a) Employee, on behalf of himself and his heirs, executors, administrators, successors and assigns, does hereby irrevocably and unconditionally release, acquit and forever discharge the Corporation and its affiliates and all of its and their directors, officers and employees (collectively, the "Corporate Group") from any and all charges, complaints, grievances, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys' fees and costs actually incurred), of whatever kind or nature, known or unknown, suspected or unsuspected, joint or several ("Claims"), which Employee has had or may hereafter claim to have had, against any or all of the Corporate Group arising out, relating to 2 or in connection with the Agreement, including as to its existence, enforceability, validity, interpretation, performance, breach, damages or its termination. (b) The Corporation does hereby irrevocably and unconditionally release, acquit and forever discharge Employee and his heirs, executors, administrators, successors and assigns (collectively, the "Employee Group") from any and all Claims of whatever kind or nature, known or unknown, suspected or unsuspected, joint or several, which the Corporation has had or may hereafter claim to have had, against any or all of the Employee Group arising out, relating to or in connection with the Agreement, including as to its existence, enforceability, validity, interpretation, performance, breach, damages or its termination. (c) For the purpose of implementing a full and complete release and discharge, each of the parties expressly acknowledges that this Settlement Agreement with the general releases set forth in this Section 6 are intended to include in their effect all Claims which the parties do not know or suspect to exist in their favor at the time of execution of this Settlement Agreement, and that this Settlement Agreement and such general releases contemplate the extinguishment of all such Claims. Each of the parties expressly waives and relinquishes all rights and benefits he or it may have under Section 1542 of the California Civil Code, which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Employee represents that he has read and understands the provisions of California Civil Code Section 1542. 7. Governing Law. This Settlement Agreement shall be governed by the laws of the State of California, without regard to the conflicts of laws principles thereof. 8. Entire Agreement, Etc. The Corporation and Employee each warrant that no promise, inducement or agreement not contained or referred to herein has been made to it or him or by it or him in connection with this Settlement Agreement. This Settlement Agreement sets forth the entire agreement between the parties as to the subject matter hereof and supersedes any and all prior agreements or understandings (written or oral) between the parties. No waiver or modification of this Agreement shall be binding unless in writing and signed by the party against whom enforcement is sought. Failure or delay on the part of either party to enforce any right, power or privilege under this Settlement Agreement shall not be deemed to constitute a waiver thereof. 9. Counterparts. This Settlement Agreement may be executed in one or more counterparts, and by the different parties hereto, in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. 3 10. Binding Effect. This Settlement Agreement is binding upon and inures to the benefit of the Corporation and the Employee and their representatives, agents, servants, employees, heirs, successors, executors, administrators, attorneys, partners, insurers, stockholders, predecessors and assigns. 11. No Third Party Beneficiaries. This Settlement Agreement is for the sole benefit of the parties hereto and their permitted assigns. 12. Interpretation. When a reference is made in this Settlement Agreement to Sections, such reference shall be to a Section of this Settlement Agreement unless otherwise indicated. Whenever the words "include," "includes" or "including" are used in this Settlement Agreement, they shall be deemed to be followed by the words "without limitation." IN WITNESS WHEREOF, the parties hereto have executed this Settlement Agreement as of the date first above written. CROWLEY MARITIME CORPORATION By: /s/ Albert M. Marucco -------------------------------------- Title: Vice President and Treasurer /s/ Thomas B. Crowley, Jr. ------------------------------------------ THOMAS B. CROWLEY, JR. Employee 4 EX-10.15 6 y93312exv10w15.txt 2004 MANAGEMENT INCENTIVE PLAN Exhibit 10.15 CROWLEY MARITIME CORPORATION 2004 MANAGEMENT INCENTIVE PLAN (AS ADOPTED AND EFFECTIVE MARCH 10, 2004) 1. PURPOSE The purpose of this Plan is to motivate and reward eligible employees for good performance by making a portion of their compensation dependent on the achievement of certain Performance Goals related to the performance of Crowley Maritime Corporation (the "Company") and/or its operating units, as the case may be. This Plan is designed to ensure that the cash bonus incentives and awards under the Company's Deferred Compensation Plan (DCP) paid hereunder to executive officers of the Company are deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations and interpretations promulgated thereunder (the "Code"). 2. PARTICIPANTS The participants in this Plan shall be employees of the Company, as determined by the Committee. 3. ADMINISTRATION The Plan shall be administered by one or more committees (each a "Committee"). With respect to awards intended to constitute "qualified performance based compensation" under Code Section 162(m), the Committee shall consist solely of at least two outside directors of the Company that satisfy the requirements of Code Section 162(m). The Committee shall have the sole discretion and authority to administer and interpret this Plan in accordance with Code Section 162(m). Unless the Board of Directors ("Board") provides otherwise, the Compensation Committee of the Board shall be the Committee; provided, however, that with respect to awards intended to constitute "qualified performance based compensation" to "covered employees" under Code Section 162(m), unless the Board provides otherwise, the Executive Compensation Subcommittee of the Board shall be the Committee. 4. AMOUNT OF BONUS AND/OR DCP AWARD A participant's bonus payment and/or DCP award, if any, is based on (i) an individual target set by the Committee in writing with respect to the Performance Period and (ii) the Performance Goal or Goals for the Performance Period (increased or decreased, in each case in accordance with factors adopted by the Committee with respect to the Performance Period that relate to unusual items). However, no bonus and/or DCP award in excess of five times the annualized highest rate of base compensation paid to any executive of the Company with respect to 2003 as reported in the Company's proxy statement for the 2004 Annual Meeting will be paid to any participant with respect to a Performance Period. The Committee may also reduce an individual's maximum bonus calculated under the preceding formula in its sole discretion. This Plan's Performance Goals may include: (i) operating income as a percentage of revenue; (ii) earnings before interest and taxes, (iii) earnings before interest, taxes, depreciation and amortization; (iv) net income; (v) operating cash flow; (vi) return on assets; (vii) return on equity; (viii) return on sales; and (ix) revenue, each with respect to the Company and/or any operating unit(s) of the Company, as determined by the Committee in its sole discretion. With respect to awards not intended to constitute "qualified performance based compensation" with respect to a "covered employee" under Code Section 162(m), the Committee may also establish additional individual Performance Goals. A "Performance Period" shall be with respect to a participant, any fiscal period of the Company not exceeding thirty-six (36) months, as determined by the Committee in its sole discretion. Bonuses to be paid to participants who are not subject to the limitations of Section 162(m) may take into account other factors. The Committee, in its sole discretion, may permit a participant to defer receipt of cash that would otherwise be delivered to the participant under this Plan. Any such deferral elections shall be subject to such rules and procedures as determined by the Committee in its sole discretion. The selection and adjustment of applicable Performance Goals, and the establishment of targets, shall occur in compliance with the rules of Code Section 162(m). 5. PAYMENT OF BONUS AND/OR DCP AWARD Subject to the Committee's discretion, the payment of a bonus and/or DCP award generally requires that the participant be on the Company's payroll as of the date the bonus is to be paid. The Committee may make exceptions to this requirement in the case of retirement, death or disability, as determined by the Committee in its sole discretion. Bonus payments may be made in cash. DCP awards shall be made in conformity with the Deferred Compensation Plan. No bonus or DCP award shall be paid unless and until the Committee certifies in writing the extent to which the Performance Goal(s) applicable to a participant have been achieved or exceeded. The Committee may establish different Performance Periods for different participants, and the Committee may establish concurrent or overlapping Performance Periods. 6. EFFECTIVE DATE, AMENDMENT AND TERMINATION The Plan shall be effective upon its adoption. However, no amounts intended to be "qualified performance based compensation" under Code Section 162(m) shall be paid until the Company's stockholders have approved the Plan. The Board of Directors reserves the right to amend or terminate this Plan at any time with respect to future services of participants. Plan amendments will require stockholder approval only to the extent required by applicable law. 7. LEGAL CONSTRUCTION Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included. The granting of awards under this Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. This Plan and all awards shall be construed in accordance with and governed by the laws of the State of California, but without regard to its conflict of law provisions. Captions are provided herein for convenience only, and shall not serve as a basis for interpretation or construction of this Plan. 8. EXECUTION IN WITNESS WHEREOF, Crowley Maritime Corporation, by its duly authorized officer, has executed the Plan as the date indicated below. CROWLEY MARITIME CORPORATION By: /S/Bruce Love ------------------ Its Secretary Dated: March 10, 2004 ------------------ EX-14 7 y93312exv14.txt CODE OF ETHICS Exhibit 14 CROWLEY MARITIME CORPORATION Code of Ethics for Chief Executive Officer and ---------------------------------------------- Senior Financial Officers ------------------------- Introduction. This Code of Ethics has been adopted by the Board of Directors of Crowley Maritime Corporation to promote honest and ethical conduct, proper disclosure of financial information in the Corporation's periodic reports and compliance with applicable laws, rules, and regulations by the Corporation's Chief Executive Officer and Senior Financial Officers. Applicability. This Code of Ethics applies to the Corporation's Chief Executive Officer and Senior Financial Officers. As used herein, the term Senior Financial Officers specifically includes the Corporation's principal financial officer and controller or principal accounting officer or persons performing similar functions. Principles and Practices. In performing his or her duties, the Chief Executive Officer and Senior Financial Officers each must: (1) maintain high standards of honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (2) provide, or cause to be provided, full, fair, accurate, timely and understandable disclosure in reports and documents that the Corporation files with or submits to the Securities and Exchange Commission and in other public communications; (3) comply with applicable governmental laws, rules and regulations; and (4) promptly report violations of this Code to the Corporation's Vice President, Human Relations and its General Counsel. Compliance and Accountability. The Corporation's Vice President, Human Relations and its General Counsel will assess compliance with this Code, report material violations to the Board of Directors and recommend to the Board appropriate action. The Chief Executive Officer and Senior Financial Officers must also comply with the Business Ethics Procedure and Guideline applicable to the Corporation's officers and employees generally. Waiver. Any request for a waiver of any provision of this Code must be in writing and addressed to the Audit Committee. Any waiver of this Code of Ethics will be disclosed promptly on Form 8-K or any other means approved by the Securities and Exchange Commission. (Approved by the Board of Directors on October 2, 2003) EX-21 8 y93312exv21.txt SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF CROWLEY MARITIME CORPORATION ALASKA SUBSIDIARY Crowley Alaska, Inc. BERMUDA SUBSIDIARY Beacon Insurance Company Limited BRAZIL SUBSIDIARIES Crowley Logistics do Brasil, LTDA Crowley Marine Services do Brasil, LTDA Delta Brazil CALIFORNIA SUBSIDIARIES 8th Avenue Terminals, Inc. Crowley Launch & Tugboat Co. Marine Response Alliance LLC Red Stack Tug Co., Inc. CAYMAN ISLANDS SUBSIDIARY Crowley Caribbean, Ltd. COLOMBIAN SUBSIDIARY Coordinadora del Caribe Transmodal, S.A. COSTA RICA SUBSIDIARY Terminales y Maintenimento, S.A. DELAWARE SUBSIDIARIES American Marine Transport, Inc. Blue Coast Bareboat Company LLC Crowley Energy Support Services, Inc. Crowley Heerema Marine Services LLC Crowley Liner Services, Inc. Crowley Logistics, Inc. Crowley Marine Services, Inc. Crowley Petroleum Transportation, Inc. Frances ODS Corporation Frances Owner Corporation Intrepid Bareboat Corporation Intrepid Personnel & Provisioning, Inc. Intrepid Ship Management, Inc. Julius ODS Corporation Julius Owner Corporation Marine Chemical Carriers Company LLC Marine Chemical Navigation Company LLC Marine Chemical Steamship Company, Inc. Marine Columbia LLC Marine Navigation Company, Inc. Marine Personnel & Provisioning Company LLC Marine Sulphur Shipping Company LLC Marine Transport Corporation Marine Transport Lines, Inc. Marine Transport Management, Inc. Mormac Marine Enterprises, Inc. Mormac Marine Transport II, Inc. OMI Challenger Transport, Inc. Oswego Shipping Corporation Rover Transport, Inc. Stolt Marine Tankers LLC Vessel Management Services, Inc. EL SALVADOR SUBSIDIARIES Crowley Logistics El Salvador, S.A. de C.V. Crowley Transportes El Salvador S.A. de C.V. FLORIDA SUBSIDIARY Apparel Transportation, Inc. GUATEMALA SUBSIDIARY Crowley Logistics de Guatemala, S.A. LIBERIAN SUBSIDIARIES World Transportation Company LOUISIANA SUBSIDIARY Crowley Towing & Transportation Co. MALAYSIA SUBSIDIARY Crowley Maritime (West Malaysia) SDN.BHD. MEXICO SUBSIDIARY Crowley Logistics de Mexico S. de R.L. de C.V. NEVADA SUBSIDIARY Clean Pacific Alliance LLC NEW YORK SUBSIDIARY Courier Transport, Inc. PANAMA SUBSIDIARIES Brinkerhoff Maritime Drilling S.A. Crowley International Services, S.A. Trailmovil, S.A. PUERTO RICO SUBSIDIARIES Crowley Liner Services Puerto Rico, Inc. Trailer Marine Transportation, Inc. RUSSIA SUBSIDIARIES Crowley Far East Services LLC Crowley Sakhalin LLC Panalpina Crowley Marine Services Russian Far East Services LLC (50% owned by Crowley Far East Services LLC) VENEZUELA SUBSIDIARIES Crowley Logistics de Venezuela, S.A. Crowley Marine Services de Venezuela, S.A. EX-31.1 9 y93312exv31w1.txt CERTIFICATION EXHIBIT 31.1 CERTIFICATIONS I, Thomas B. Crowley, Jr., Chairman of the Board, President and Chief Executive Officer of Crowley Maritime Corporation, certify that: 1. I have reviewed this Annual Report on Form 10-K (the "Report") of Crowley Maritime Corporation; 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(s) 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)) 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) 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 c) 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(s) 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: March 18, 2004 /s/ Thomas B. Crowley, Jr. ----------------------------------- Thomas B. Crowley, Jr. Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) EX-31.2 10 y93312exv31w2.txt CERTIFICATION EXHIBIT 31.2 CERTIFICATIONS I, Richard Swinton, Vice President, Tax and Audit of Crowley Maritime Corporation, certify that: 1. I have reviewed this Annual Report on Form 10-K (the "Report") of Crowley Maritime Corporation; 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(s) 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)) 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) 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 c) 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(s) 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: March 18, 2004 /s/ Richard L. Swinton --------------------------------- Richard L. Swinton Vice President, Tax and Audit (Principal Financial Officer) EX-32.1 11 y93312exv32w1.txt CERTIFICATIONS EXHIBIT 32.1 CERTIFICATIONS PURSUANT TO SECURITIES EXCHANGE ACT OF 1934 RULE 13a-14(b) AND 18 U.S.C. SECTION 1350 In connection with the Annual Report on Form 10-K of Crowley Maritime Corporation (the "Company") for the fiscal year ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Thomas B. Crowley, Jr., Chairman of the Board, President and Chief Executive Officer of the Company, and Richard L. Swinton, Vice President, Tax & Audit of the Company, each certifies for the purpose of complying with Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 1350 of Chapter 63 of title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 18, 2004 /s/ Thomas B. Crowley, Jr. -------------------------------------------- Thomas B. Crowley, Jr. Chairman of the Board, President and Chief Executive Officer Date: March 18, 2004 /s/ Richard L. Swinton -------------------------------------------- Richard L. Swinton Vice President, Tax & Audit -----END PRIVACY-ENHANCED MESSAGE-----