<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 29, 1997
REGISTRATION NO. 333-38491
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------------------
HALTER MARINE GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 13085 INDUSTRIAL SEAWAY ROAD 75-2656828
(State or other jurisdiction of GULFPORT, MISSISSIPPI 39503 (I.R.S. Employer
incorporation or organization) (601) 896-0029 Identification No.)
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
</TABLE>
----------------------------
JOHN DANE III
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HALTER MARINE GROUP, INC.
13085 INDUSTRIAL SEAWAY ROAD
GULFPORT, MISSISSIPPI 39503
(601) 896-0029
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------------
Copies of all communications, including all communications to the agent for
service, should be sent to:
MAUREEN O'CONNOR SULLIVAN R. JAY TABOR
VICE PRESIDENT AND GENERAL COUNSEL BAKER & BOTTS, L.L.P.
HALTER MARINE GROUP, INC. 2001 ROSS AVENUE
13085 INDUSTRIAL SEAWAY ROAD SUITE 700
GULFPORT, MISSISSIPPI 39503 DALLAS, TEXAS 75201
(601) 896-0029 (214) 953-6500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: From time to time after the effective date of this Registration
Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
PROSPECTUS
HALTER MARINE GROUP, INC.
$185,000,000
4 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2004 AND
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
This Prospectus relates to the offering by certain securityholders (the
"Selling Securityholders") of up to an aggregate of $185,000,000 of 4 1/2%
Convertible Subordinated Notes due 2004 (the "Notes"), of Halter Marine Group,
Inc., a Delaware corporation ("Halter" or the "Company"), and the 5,873,016
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock"), that are issuable upon conversion of the Notes (the "Shares" and
together with the Notes, the "Securities") at a current conversion rate of
31.746 shares per $1,000 principal amount of Notes (equivalent to a conversion
price of $31.50 per share (the "Conversion Price")), subject to adjustment in
certain events. The Notes are convertible at the option of the holders into
shares of Common Stock at any time at or before maturity, unless previously
redeemed or repurchased. The Notes were originally issued by the Company on
September 15, 1997 in a private placement. The conversion rate and the
Conversion Price set forth above reflect an adjustment to give effect to a
three-for-two stock split effected pursuant to a stock dividend (the "Stock
Split") declared by the Board of Directors of the Company on September 29, 1997,
to the holders of record of Common Stock as of October 15, 1997. The Stock
Split was effected on October 31, 1997.
Interest on the Notes is payable semiannually in cash in arrears on March 15
and September 15 of each year, commencing on March 15, 1998. The Notes are
redeemable, in whole or in part, at the option of the Company, at any time on or
after September 15, 2000, at the redemption prices set forth herein, plus all
accrued and unpaid interest and liquidated damages, if any, to the date of
redemption. The Company will be required to offer to purchase the Notes upon a
Change of Control (as defined herein) at a redemption price of 100% of the
principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase. There can be no assurance that the
Company will have available financial resources necessary to repurchase the
Notes in such circumstances.
The Notes are general, unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness (as defined
herein). In addition, the Notes are structurally subordinated to all
liabilities (including trade payables) of the Company's subsidiaries. The
Indenture (as defined herein) does not restrict the incurrence of Senior
Indebtedness or other indebtedness by the Company or its subsidiaries. At
September 30, 1997, the Company had no amounts of Senior Indebtedness
outstanding, but the Company's subsidiaries had approximately $29.7 million of
indebtedness, trade payables and other accrued liabilities outstanding. In
addition, at such date, the Company would have had available borrowing capacity
of approximately $127 million (subject to customary borrowing conditions) under
its prior senior credit facility (the "Old Credit Facility"). The Old Credit
Facility was replaced by a new credit facility (the "New Credit Facility") as of
October 31, 1997 which provides for borrowings of up to $150 million.
Indebtedness under the New Credit Facility constitutes Senior Indebtedness.
The Selling Securityholders may from time to time sell the Securities offered
hereby to or through one or more underwriters, directly to other purchasers or
through agents in ordinary brokerage transactions, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale, prices related to
then prevailing market prices or at negotiated prices. See "Plan of
Distribution." The distribution of the Notes is not subject to any underwriting
agreement. The Company will not receive any of the proceeds from the sale of
any of the Notes or the Shares offered by the Selling Securityholders hereunder.
All expenses of registration incurred in connection with this offering are being
borne by the Company, but all selling and other expenses incurred by the Selling
Securityholders will be borne by such Selling Securityholders. None of the
Securities offered pursuant to this Prospectus have been registered prior to the
filing of the Registration Statement of which this Prospectus is a part.
On December 22, 1997, the closing sale price of the Common Stock on the
American Stock Exchange (the "AMEX") (where it trades under the symbol "HLX")
was $24 3/4 per share. The Notes have been approved for listing on the AMEX.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
The date of this Prospectus is December 29, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information filed by the Company with
the Commission can be inspected and copied at the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained from the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Such reports, proxy and information statements and other
information can also be inspected at the offices of the American Stock Exchange,
Inc., 86 Trinity Place, New York, New York 10016. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants (including the Company) that file
electronically with the Commission. The address of the Commission's Web site is
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Securities offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information
pertaining to the Securities and the Company, reference is made to the
Registration Statement. Statements contained herein concerning the provisions
of any document are not necessarily complete and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference. Copies of the Registration
Statement and the exhibits may be inspected, without charge, at the offices of
the Commission, or obtained at prescribed rates from the Public Reference
Section of the Commission at the address set forth above.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS: ALL STATEMENTS OTHER THAN
STATEMENTS OF HISTORICAL FACT CONTAINED IN THIS PROSPECTUS ARE FORWARD-LOOKING
STATEMENTS. FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS GENERALLY ARE
ACCOMPANIED BY WORDS SUCH AS "ANTICIPATE," "BELIEVE," "ESTIMATE" OR "EXPECT" OR
SIMILAR STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, NO ASSURANCE CAN BE
GIVEN THAT SUCH EXPECTATIONS WILL PROVE CORRECT. FACTORS THAT COULD CAUSE THE
COMPANY'S RESULTS TO DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN SUCH
FORWARD-LOOKING STATEMENTS ARE DISCLOSED IN THIS PROSPECTUS, INCLUDING WITHOUT
LIMITATION IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
PROSPECTUS AND UNDER "RISK FACTORS." ALL FORWARD-LOOKING STATEMENTS IN THIS
PROSPECTUS ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS IN THIS PARAGRAPH.
1
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE COMPANY'S GENERAL COUNSEL, 13085 INDUSTRIAL SEAWAY ROAD, GULFPORT,
MISSISSIPPI 39503 WHOSE TELEPHONE NUMBER IS (601) 896-0029.
The following documents filed with the SEC (File No. 1-12159) are
incorporated by reference into this Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997;
2. The Company's Annual Report on Form 10-K/A for the fiscal year ended
March 31, 1997;
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997;
4. The Company's Current Report on Form 8-K filed July 31, 1997;
5. The Company's Current Report on Form 8-K/A filed July 31, 1997;
6. The Company's Current Report on Form 8-K filed August 14, 1997;
7. The Company's Current Report on Form 8-K filed August 27, 1997;
8. The Company's Current Report on Form 8-K filed September 10, 1997;
9. The Company's Current Report on Form 8-K filed September 16, 1997;
10. The Company's Current Report on Form 8-K filed September 30, 1997;
11. The Company's Current Report on Form 8-K filed October 7, 1997;
12. The Company's Current Report on Form 8-K/A filed October 21,
1997;
13. The Company's Current Report on Form 8-K filed November 12, 1997;
14. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997; and
15. The description of the Company's Common Stock contained in Item 1 of
the Registration Statement on Form 8-A/A filed with the Commission on
September 25, 1996, including any amendment or report filed for the
purpose of updating such description filed with the Commission pursuant
to Section 13 of the Exchange Act.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated herein by reference and shall be a
part hereof from the date of filing of such documents.
Any statement contained in this Prospectus or in documents incorporated by
reference or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus, or in any other subsequently filed
document which also is or is deemed to be incorporated herein by reference,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed to constitute a part of this Prospectus except as
so modified or superseded.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered, upon written
or oral request of any such person, a copy of any or all of the documents
incorporated by reference herein, other than exhibits to such documents not
specifically incorporated by reference. Requests for such copies should be
directed to the Company's General Counsel, 13085 Industrial Seaway Road,
Gulfport, Mississippi 39503 whose telephone number is (601) 896-0029.
2
<PAGE>
THE COMPANY
The Company is a leading provider of new construction, modification and
repair services for ocean-going vessels and mobile offshore rigs used for oil
and gas drilling and production and offshore construction. The Company is the
seventh largest shipbuilder, and largest builder of small to medium sized ocean-
going ships and barges and inland tow boats, in the United States. The Company,
which has built more than 2,000 vessels in the past 40 years, specializes in the
construction, repair and conversion of a wide variety of vessels for the
commercial and governmental markets. The Company has recently entered the
construction, modification and repair market for mobile offshore rigs as a
result of its acquisition of Texas Drydock, Inc. ("TDI"), which was completed in
May 1997.
The Company has 20 shipyards (including one that is idle but that is
scheduled to be reopened) which are strategically located along the Gulf Coast
from Texas to Florida. The Company's multiple shipyards employ advanced
manufacturing techniques, including modular construction and zone outfitting
methods, and provide the Company significant flexibility and efficiency in
manufacturing a wide variety of vessels. The Company believes that these
factors, together with its large and experienced engineering team and work
force, make the Company one of the most versatile and cost-efficient
shipbuilders in the United States.
Prior to September 1996, the Company was a wholly owned subsidiary of
Trinity Industries, Inc. ("Trinity"). On September 26, 1996, the Company
completed an initial public offering (the "IPO") of Common Stock pursuant to
which approximately 18.7% of the Common Stock, after the exercise of the
underwriters' overallotment option, was sold to the public. On March 31, 1997,
Trinity distributed to its stockholders, in a tax-free transaction (the "Trinity
Distribution"), all of the Common Stock held by Trinity (approximately 81.3% of
the Common Stock). In connection with the IPO and the Trinity Distribution
(collectively, the "Separation from Trinity"), the Company and Trinity entered
into various agreements for the purpose of establishing the terms governing
their on-going arrangements and relationships after the IPO.
The Company's corporate offices are located at 13085 Industrial Seaway
Road, Gulfport, Mississippi 39503, and its telephone number at such offices is
(601) 896-0029.
3
<PAGE>
RISK FACTORS
Prospective investors should carefully consider and evaluate the following
factors, together with the information and financial data set forth elsewhere in
this Prospectus, before making an investment in the Securities.
RISKS ASSOCIATED WITH LEVERAGE
The Company's recent acquisitions have significantly increased the
Company's leverage. At September 30, 1997, the Company had (i) total long-term
indebtedness of $188.7 million, of which $185 million is represented by the
Notes, (ii) stockholders' equity of $106.5 million and (iii) available borrowing
capacity of approximately $127 million (subject to customary borrowing
conditions) under the Company's Old Credit Facility. The Old Credit Facility
was replaced by the New Credit Facility as of October 31, 1997, which provides
for borrowings of up to $150 million. In addition, the Indenture does not
restrict the incurrence of additional indebtedness by the Company or its
subsidiaries. The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including (i) the ability of the Company
to obtain any necessary financing in the future for working capital, capital
expenditures, debt service requirements or other purposes may be limited; (ii) a
substantial portion of the Company's cash flows from operations must be
dedicated to the payment of the principal of and interest on its indebtedness
and will not be available for other purposes; (iii) the Company's level of
indebtedness could limit its flexibility in planning for, or reacting to,
changes in its business or in economic conditions; and (iv) the Company's level
of indebtedness will make it more vulnerable in the event of a downturn in its
business.
The Company's ability to pay interest and principal on the Notes and to
satisfy its other debt obligations will depend upon its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond its control,
as well as the availability of revolving credit borrowings under the New Credit
Facility. The Company anticipates that its net cash provided by operating
activities, together with the balance of the net proceeds from the sale of the
Notes, funds available under the New Credit Facility and the potential issuance
of industrial revenue bonds, will be sufficient to meet its operating expenses,
and working capital, capital expenditures and debt service requirements, through
at least fiscal 1999. However, if the Company is unable to service its debt, it
will be forced to pursue one or more alternative strategies such as selling
assets, curtailing any expansion, restructuring or refinancing its indebtedness
or seeking additional equity capital. There can be no assurance that any of
these strategies could be effected on terms satisfactory to the Company, if at
all.
DEPENDENCE ON CONDITIONS IN THE OFFSHORE OIL AND GAS DRILLING INDUSTRY
A significant portion of the Company's current contracts relate to the
construction of offshore support vessels and the construction, repair and
conversion of mobile offshore rigs. Customer demand for offshore support
vessels and mobile offshore rigs is dependent on, among other things, the level
of activity in offshore oil and gas exploration, development and production,
particularly in the Gulf of Mexico where many of the offshore support vessels
manufactured by the Company and the substantial majority of the mobile offshore
rigs modified or repaired by the Company have been put into service. The level
of activity in offshore oil and gas exploration, development and production is
affected by such factors as prevailing oil and gas prices, expectations about
future prices, the cost of exploring for, producing and delivering oil and gas,
the sale and expiration dates of available offshore leases, the discovery rate
of new oil and gas reserves in offshore areas, local and international political
and economic conditions, technological advances and the ability of oil and gas
companies to generate or otherwise obtain funds for capital expenditures.
Although the Company believes there will be an increase in demand for offshore
support vessels and mobile offshore rigs, the Company cannot predict future
levels of activity in offshore oil and gas exploration, development and
production.
RISKS ASSOCIATED WITH CONTRACTUAL PRICING IN THE SHIPBUILDING AND MOBILE
OFFSHORE RIG INDUSTRY
Most of the contracts entered into by the Company, whether commercial or
governmental, are fixed-price contracts under which the Company retains all cost
savings on completed contracts but is also liable for the full amount of all
cost overruns. The Company attempts to cover anticipated increased costs of
labor and materials through an estimation of such costs, which is reflected in
the original price. Despite these attempts, however, the revenue, cost and
gross profit realized on a fixed-price contract will often vary from the
estimated amounts because of many factors, including changes in job conditions
and variations in labor and equipment productivity over the term of the
contract.
4
<PAGE>
These variations and the risks generally inherent in the shipbuilding and mobile
offshore rig industry may result in gross profits realized by the Company being
different from those originally estimated and may result in the Company
experiencing reduced profitability or losses on projects. Depending on the size
of the project, these variations from estimated contract performance could have
a significant effect on the Company's operating results for any particular
fiscal quarter or year.
Many of the Company's contracts contain provisions requiring the payment by
the Company of liquidated damages in the event that the Company fails to meet
specified performance deadlines. There can be no assurance that the Company
will not be required to make payments to customers under such liquidated damages
provisions or that the requirement to make such payments will not have a
material adverse effect on the Company's operating results.
In addition, the Company uses the percentage of completion method to
account for its contracts in process. Under this method, revenue from
construction contracts are measured by the percentage of labor hours incurred as
compared to estimated total labor hours for each contract. The timing of
recognition of revenue and expenses for financial reporting purposes may differ
materially from the timing of actual cash flows from contract payments received
and expenses paid. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined. To the extent that such
provisions result in a loss or a reduction or elimination of previously reported
profits with respect to a project, the Company would recognize a charge against
current earnings, which could be material.
DEPENDENCE ON MANAGEMENT
The Company believes that its success to date is attributable to, and its
future performance will depend to a significant extent upon, the efforts and
abilities of John Dane III, the Company's Chairman, President and Chief
Executive Officer and its other current executive officers. The Company does
not have employment agreements with any of its executive officers. However,
John Dane III has entered into a noncompetition agreement with the Company. The
loss of the services of one or more of the Company's executive officers could
have a material adverse effect on the Company.
LIMITATION ON AVAILABILITY OF TRAINED SHIPYARD WORKERS
Shipyards located in certain portions of southern Louisiana, including the
Company's Lockport, Louisiana facility, are experiencing severe shortages of
skilled shipyard labor as a result of recent labor demands brought about by
increases in offshore drilling activities, the construction of offshore drilling
rigs and crewing of offshore vessels. This labor shortage has resulted in
increased costs of labor, and limitations on production capacity, for shipyards
in such portions of southern Louisiana, including the Company's Lockport
facility. While the Company's other shipyards are not currently experiencing
severe labor shortages, these shipyards are faced with limitations on the
availability of skilled labor that could limit the Company's ability to increase
production to the extent the Company might otherwise desire. No assurances can
be given regarding whether severe shortages will be experienced at these
shipyards in the future.
MATTERS RELATING TO SEPARATION FROM TRINITY
Prior to the IPO, which was completed on September 26, 1996, the Company
operated as a wholly owned subsidiary of Trinity and from time to time relied
upon Trinity to provide credit and other financial support, services and
assistance. As a result, the Company has a limited independent operating
history. In addition, in connection with the Separation from Trinity, the
Company entered into various agreements with Trinity for the purpose of
establishing the terms governing their on-going arrangements and relationships.
The terms of such agreements were negotiated between affiliated parties, do not
reflect arms'-length dealings and may not be as favorable to the Company as
terms that would be available in similar agreements with unrelated third
parties. Such agreements provide, among other things, for certain prohibitions
on the ability of the Company to compete in Trinity's businesses.
Trinity obtained a private letter ruling from the Internal Revenue Service
(the "IRS") to the effect that the Trinity Distribution would be treated as a
tax-free transaction. The agreements entered into between the Company and
Trinity in connection with the Separation from Trinity provide that the Company
will not take actions which could jeopardize the tax-free status of the Trinity
Distribution and that the Company will indemnify Trinity for any damages
resulting from actions by the Company that have the effect of destroying the
tax-free status of the Trinity Distribution.
5
<PAGE>
If the tax-free status of the Trinity Distribution were destroyed as a result of
actions taken by the Company, such indemnification obligation would have a
material adverse effect on the Company. The Company has obtained an opinion from
a nationally recognized accounting firm to the effect that the sale of the Notes
and the issuance of Common Stock upon conversion of the Notes will not affect
the tax-free status of the Trinity Distribution. Such opinion is not binding on
the IRS.
HIGHLY COMPETITIVE INDUSTRY
The shipbuilding and mobile offshore rig industry is highly competitive.
During the 1990's, the U.S. shipbuilding industry has been characterized by
substantial excess capacity because of the significant decline in U.S. Navy
shipbuilding spending and the difficulties experienced by U.S. shipbuilders in
competing successfully for international commercial projects against foreign
shipyards, many of which are heavily subsidized by their governments. As a
result of these factors, competition by U.S. shipbuilders for domestic
commercial projects has increased significantly. Such increased competition has
resulted in substantial pressure on pricing and profit margins.
Contracts for the construction of vessels, and for the construction,
conversion and repair of mobile offshore rigs, are usually awarded on a
competitive bid basis. Although the Company believes customers consider, among
other things, the availability and technical capabilities of equipment and
personnel, efficiency, condition of equipment, safety record and reputation,
price competition is currently a primary factor in determining which qualified
bidder is awarded a contract.
Private U.S. shipbuilders generally fall into two categories: (i) the six
largest shipbuilders capable of building large scale vessels for the U.S. Navy
and (ii) other shipyards that build small to medium sized vessels for
governmental and commercial markets. Each of the six largest shipbuilders is
substantially larger than the Company. The Company does not compete for U.S.
Navy large vessel construction projects. The Company competes for U.S.
government shipbuilding contracts on small to medium sized vessels principally
with approximately six to 12 U.S. shipbuilders, which may include one or more of
the six largest shipbuilders. The Company competes for domestic commercial
shipbuilding contracts principally with approximately ten to 15 U.S.
shipbuilders. The number and identity of competitors on particular projects
vary greatly, depending on the type of vessel and size of project. The Company
competes for mobile offshore rig construction, conversion and repair contracts
principally with two major U.S. competitors.
In connection with the Separation from Trinity, the Company entered into an
agreement with Trinity that prohibits the Company, for a period of four years
after completion of the IPO (which period will be extended under certain
circumstances), from engaging in any and all businesses and operations conducted
prior to the date of the IPO by Trinity or any of its subsidiaries other than
the Company Businesses (as defined herein), which include the construction and
repair of inland hopper barges and inland tank barges. Under the terms of this
agreement, the four-year noncompetition period is extended for a period of time
equal to any period during which the Company is constructing inland hopper
barges under an arrangement with Trinity. Under special arrangements with
Trinity, the Company has built a limited number of such vessels. Revenue
related to this business were $13.3 million, $26.2 million and $19.9 million for
fiscal years 1995, 1996 and 1997, respectively. Because the Company has
continuously been constructing such barges under an arrangement with Trinity
since the IPO, the four-year noncompetition period has not yet begun to run.
"Company Businesses" means the business and operations conducted prior to the
date of the IPO by Trinity and certain of its subsidiaries that consist of (i)
the construction, repair and conversion of ocean-going and inland vessels (other
than inland hopper barges and inland tank barges and the construction of
accessories for such barges) and (ii) the production of any component of or
accessory to any ocean-going or inland vessel being constructed by the Company
or any of its subsidiaries.
OPERATING RISKS
The Company's activities involve the fabrication and refurbishment of large
steel structures, the operation of cranes and other heavy machinery and other
operating hazards that can cause personal injury or loss of life, severe damage
to and destruction of property and equipment and suspension of operations. The
failure of the structure of a vessel or mobile offshore rig after it leaves the
Company's shipyard can result in similar injuries and damages. Litigation
arising from any such occurrences may result in the Company being named as a
defendant in lawsuits asserting large claims. In addition, due to their
proximity to the Gulf of Mexico, the Company's facilities are subject to the
possibility of physical damage caused by hurricanes or flooding. Although the
Company maintains such
6
<PAGE>
insurance protection as it considers economically prudent, there can be no
assurance that any such insurance will be sufficient or effective under all
circumstances or against all hazards to which the Company may be subject. A
successful claim for which the Company is not fully insured could have a
material adverse effect on the Company.
LEGISLATIVE PROPOSALS TO MODIFY PROVISIONS OF JONES ACT
Pursuant to the requirements of the Merchant Marine Act of 1920 (the "Jones
Act"), all vessels transporting products between U.S. ports must be constructed
in U.S. shipyards, owned and crewed by U.S. citizens and registered under U.S.
law. Many customers elect to have vessels constructed at U.S. shipyards, even
if such vessels are intended for international use, in order to maintain
flexibility to use such vessels in the U.S. coastwise trade in the future. The
Company believes that substantially all of its revenue from U.S. commercial
shipbuilding contracts (which represented 41.1% of the Company's total revenue
for fiscal 1997) results from the sale of vessels capable of being used for U.S.
coastwise trade. In 1997, proposed legislation was introduced in Congress to
modify the provisions of the Jones Act to eliminate the requirement that ships
be constructed in the United States for U.S. coastwise trade. Similar bills
seeking to rescind or substantially modify the Jones Act and eliminate or
adversely affect the competitive advantages it affords to U.S. shipbuilders have
been introduced in Congress from time to time and are expected to be introduced
in the future. Although management believes it is unlikely that the Jones Act
requirements will be rescinded or materially modified in the foreseeable future,
there can be no assurance that this will not occur. Many foreign shipyards are
heavily subsidized by their governments and, as a result, there can be no
assurance that the Company would be able to effectively compete with such
shipyards if they were permitted to construct vessels for use in the U.S.
coastwise trade. The repeal of the Jones Act, or any amendment of the Jones Act
that would eliminate or adversely affect the competitive advantages provided to
U.S. shipbuilders, could have a material adverse effect on the Company's
business, financial condition and results of operations.
DEPENDENCE ON GOVERNMENT CONTRACTS
The Company builds vessels for the U.S. Navy, foreign nations and state and
local governments. Revenue derived from government customers accounted for
approximately 53% of the Company's total revenue in fiscal 1997. There can be no
assurance that the Company will be successful in obtaining new government
contracts, many of which are subject to strict competitive bidding requirements.
Purchases of vessels by governments, including the U.S. Government, generally
are subject to the uncertainties inherent in their respective budgeting and
appropriations processes, which are affected by political events over which the
Company has no control. Revenue derived from commercial (including energy) and
government customers accounted for approximately 61% and 34%, respectively, of
the Company's total revenue for the six months ended September 30, 1997.
Revenue derived from the construction of U.S. Navy vessels accounted for
approximately 37.4% of the Company's total revenue in fiscal 1997. With the end
of the Cold War and the pressure of domestic budget constraints, overall U.S.
Navy spending for new vessel construction has declined significantly since 1991.
U.S. Navy shipbuilding is expected to continue to decline during the remainder
of the decade. Although the Company believes that the small to medium sized
U.S. Navy vessels for which it competes are less likely to be cut back and, in
some cases, do not require specific Congressional appropriations, the Company
generally expects revenue and gross profit attributable to its current and any
future U.S. Navy contracts to decline over the next several years. Such
decreases, if not offset by increased revenue and profit from contracts with
other customers, could have a material adverse effect on the Company's business,
financial condition and results of operations.
IMPACT OF ENVIRONMENTAL LAWS
The Company is subject to extensive and changing federal, state and local
laws (including common law) and regulations designed to protect the environment
("Environmental Laws"). The Company from time to time is involved in
administrative and other proceedings under Environmental Laws involving its
operations and facilities. Environmental Laws could impose liability for
remediation costs or result in civil or criminal penalties in cases of non-
compliance. Compliance with Environmental Laws increases the Company's costs of
doing business. Additionally, Environmental Laws have been subject to frequent
change; therefore, the Company is unable to predict the future costs or other
future impact of Environmental Laws on its operations. There can be no
assurance that the Company will not incur material liability related to the
Company's operations and properties under Environmental Laws.
7
<PAGE>
SUBORDINATION OF NOTES
The Notes are subordinated in right of payment to all existing and future
Senior Indebtedness, and are structurally subordinated to all liabilities
(including trade payables) of the Company's subsidiaries. The Indenture does
not restrict the incurrence of Senior Indebtedness or other indebtedness by the
Company or its subsidiaries. By reason of such subordination, in the event of
the insolvency, bankruptcy, liquidation, reorganization, dissolution or winding
up of the business of the Company, the assets of the Company will be available
to pay the amounts due on the Notes only after all Senior Indebtedness has been
paid in full and, therefore, there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. As of September 30,
1997, the Company had no amounts of Senior Indebtedness outstanding, but the
Company's subsidiaries had approximately $29.7 million of indebtedness, trade
payables and other accrued liabilities outstanding. In addition, at such date,
the Company had available borrowing capacity of approximately $127 million
(subject to customary borrowing conditions) under the Old Credit Facility. The
New Credit Facility, which replaced the Old Credit Facility provides for
borrowings of up to $150 million. Indebtedness under the New Credit Facility
constitutes Senior Indebtedness. See "Description of Notes--Subordination."
SHARES AVAILABLE FOR FUTURE SALE
As of December 19, 1997, there were 28,516,561 shares of Common Stock
issued and outstanding. The Company maintains a shelf registration statement to
cover resales of 835,484 shares of Common Stock by the selling stockholders
described therein, which were issued as "restricted securities" within the
meaning of Rule 144 under the Securities Act in connection with certain
acquisitions.
In addition, the Company maintains a shelf registration statement for the
Notes and the Common Stock issuable upon conversion of the Notes in which this
Prospectus is included. An aggregate of 5,873,016 shares of Common Stock are
currently reserved for issuance upon conversion of the Notes.
An aggregate of 3,591,400 shares of Common Stock are currently reserved for
issuance pursuant to the Company's Amended and Restated 1996 Stock Option and
Incentive Plan (the "Stock Option and Incentive Plan"). As of December 19,
1997, there were 2,783,900 shares of Common Stock issuable upon the exercise of
options granted under the Stock Option and Incentive Plan, 66,900 of which were
immediately exercisable. The Company has registered all shares of Common Stock
issuable under its Stock Option and Incentive Plan pursuant to a registration
statement on Form S-8 filed with the Securities and Exchange Commission.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock could be subject to significant
fluctuations in response to the Company's operating results, changes in earnings
estimated by securities analysts or the Company's ability to meet those
estimates, publicity regarding the shipbuilding and mobile offshore rig industry
and other factors, some of which may be beyond the Company's control. There can
be no assurance that the market price of the Common Stock will not decline below
the price at which the shares of the Common Stock are currently being traded.
In addition, the stock markets have from time to time experienced extreme price
and volume volatility. These fluctuations may be unrelated to the operating
performance of particular companies whose shares are traded. Market
fluctuations may adversely affect the market price of the Common Stock.
LIMITATIONS ON REPURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
offer to purchase the Notes. If a Change of Control were to occur, there can be
no assurance that the Company would have sufficient financial resources, or
would be able to arrange financing, to pay the repurchase price for all Notes
tendered by holders thereof. In addition, the Company's repurchase of the Notes
as a result of a Change of Control will be prohibited by the terms of the New
Credit Facility and may be prohibited or limited by, or create an event of
default under, the terms of other agreements related to borrowings which the
Company may enter into from time to time. Failure of the Company to purchase
tendered Notes would constitute an Event of Default under the Indenture. See
"Description of Notes--Repurchase of Notes at the Option of the Holder Upon a
Change of Control."
8
<PAGE>
FACTORS AFFECTING TRADING PRICES OF NOTES
The Notes have been approved for listing on the AMEX. Future trading
prices of the Notes will depend on many factors, including, among other things,
prevailing interest rates, the Company's operating results, the Common Stock
price and the market for similar securities. Depending on prevailing interest
rates, the market for similar securities and other factors, including the
financial condition of the Company, the Notes may trade at a discount from their
principal amount.
CERTAIN ANTI-TAKEOVER EFFECTS
The Restated Certificate of Incorporation of the Company (the
"Certificate"), the Bylaws of the Company (the "Bylaws"), the Company's
Preferred Stock Purchase Rights (the "Rights") and applicable provisions of the
Delaware General Corporation Law (the "DGCL"), contain various provisions that
may hinder, delay or prevent the acquisition of control of the Company without
the approval of the Board of Directors of the Company. Certain provisions of
the Certificate and the Bylaws, among other things, (i) authorize the issuance
of "blank check" preferred stock, (ii) divide the Board of Directors of the
Company into three classes, the members of which serve for three-year terms,
(iii) establish advance notice requirements for director nominations and
stockholder proposals to be considered at annual meetings and (iv) prohibit
stockholder action by written consent. In addition, the Company has entered
into a Stockholder Rights Agreement with The Bank of New York, as rights agent,
pursuant to which each share of Common Stock has attached one Right which will
initially trade together with such share. The Rights would cause substantial
dilution to a person or group that attempts to acquire the Company on terms not
approved in advance by the Board of Directors of the Company. In addition,
Section 203 of the DGCL imposes certain restrictions on mergers and other
business combinations between the Company and any holder of 15% or more of the
Common Stock.
DIVIDEND POLICY
The Company has not paid, and does not anticipate paying in the foreseeable
future any cash dividends on the Common Stock. In addition, the New Credit
Facility restricts the payment of dividends.
9
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for each of the periods
indicated is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
- ----------------------------------------- -------------------
PRO FORMA PROFORMA
1993 1994 1995 1996 1997 1997 1996 1997 1997
- ----- ----- ---- ---- ---- --------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
16.6x 17.7x 7.7x 7.3x 9.2x 3.3x 5.2x 6.9x 4.5x
</TABLE>
For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes, plus fixed charges. Fixed
charges consist of interest expenses on all indebtedness and amortization of
deferred financing costs. The pro forma information for the year ended March
31, 1997 gives effect to (i) the acquisition of TDI by the Company and (ii) the
initial sale of the Notes and the use of the net proceeds therefrom as if these
transactions had occurred on April 1, 1996. The pro forma information for the
six months ended September 30, 1997 gives effect to the initial sale of the
Notes and the use of the net proceeds therefrom as if these transactions had
occurred on April 1, 1996.
USE OF PROCEEDS
The Company will not receive any of the proceeds from any resales of the
Notes or the Shares by the Selling Securityholders pursuant to this Prospectus.
See "Selling Securityholders" for a list of those persons and entities receiving
the proceeds from the sales of the Notes or the Shares.
10
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth the name of each Selling Securityholder and
relationship, if any, with the Company and (i) the amount of Notes owned by each
Selling Securityholder as of the most recent date for which the Company obtained
such information from the respective Selling Securityholder, (ii) the maximum
amount of Notes which may be offered for the account of such Selling
Securityholder under this Prospectus, (iii) the amount of Common Stock owned by
each Selling Securityholder as of the most recent date for which the Company
obtained such information from the respective Selling Securityholder, and (iv)
the maximum amount of Common Stock which may be offered for the account of such
Selling Securityholder under this Prospectus.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL COMMON STOCK
AMOUNT OF AMOUNT OF NOTES OWNED PRIOR COMMON STOCK
NAME OF SELLING SECURITYHOLDER NOTES OWNED OFFERED HEREBY TO OFFERING (1) OFFERED HEREBY (2)
------------------------------ ------------ --------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Argent Classic Convertible
Arbitrage Fund, L.P.................... $2,000,000 $2,000,000 63,492 63,492
Argent Classic Convertible
Arbitrage Fund (Bermuda), Ltd.......... $4,500,000 $4,500,000 142,857 142,857
Carrigaholt Capital (Bermuda) L.P...... $750,000 $750,000 23,809 23,809
The Class 1C Company, Ltd.............. $750,000 $750,000 23,809 23,809
McMahan Securities Co. L.P............. $1,172,000 $1,172,000 37,206 37,206
LLT Limited............................ $250,000 $250,000 7,936 7,936
Public Employees' Retirement
Association of Colorado................ $750,000 $750,000 46,106 23,809
Paloma Securities L.L.C................ $1,750,000 $1,750,000 70,905 55,555
Silverton International Fund
Limited................................ $500,000 $500,000 15,873 15,873
OCM Convertible Trust.................. $3,165,000 $3,165,000 100,476 100,476
OCM Convertible Limited
Partnership............................ $150,000 $150,000 4,761 4,761
Delta Air Lines Master Trust........... $1,590,000 $1,590,000 50,476 50,476
State Employees' Retirement Fund
of the State of Delaware............... $690,000 $690,000 21,904 21,904
State of Connecticut Combined
Investment Funds....................... $2,260,000 $2,260,000 71,746 71,746
Vanguard Convertible Securities
Fund, Inc.............................. $1,670,000 $1,670,000 53,015 53,015
Hughes Aircraft Company Master
Retirement Trust....................... $875,000 $875,000 27,777 27,777
Partner Reinsurance Company Ltd........ $230,000 $230,000 7,301 7,301
Chrysler Corporation Master
Retirement Trust....................... $1,950,000 $1,950,000 61,904 61,904
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL COMMON STOCK
AMOUNT OF AMOUNT OF NOTES OWNED PRIOR COMMON STOCK
NAME OF SELLING SECURITYHOLDER NOTES OWNED OFFERED HEREBY TO OFFERING (1) OFFERED HEREBY (2)
------------------------------ ------------ --------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Combined Insurance
Company of America..................... $670,000 $670,000 21,269 21,269
TQA Arbitrage Fund L.P................. $250,000 $250,000 7,936 7,936
TQA Leverage Fund L.P.................. $250,000 $250,000 7,936 7,936
TQA Vantage Fund Ltd................... $500,000 $500,000 15,873 15,873
TQA Vantage Plus Fund Ltd.............. $250,000 $250,000 7,936 7,936
Alexandra Global Investment Fund
1, Ltd(3).............................. $2,850,000 $2,850,000 90,476 90,476
The Kettering Medical Center
Funded Depreciation Account(4)........ $125,000 $125,000 3,968 3,968
RJR Nabisco, Inc. Defined Benefit
Master Trust(4)........................ $700,000 $700,000 22,222 22,222
Delta Airlines Master Trust(4)......... $1,700,000 $1,700,000 53,968 53,968
Calamos Convertible Fund
Calamos Investment Trust(5)............ $230,000 $230,000 7,301 7,301
Port Authority of Allegheny
County Retirement and Disability
Allowance Plan for the Employees
Represented by Local 85 of the
Amalgamated Transit Union(4)........... $800,000 $800,000 25,396 25,396
Champion International Corp.
Master Retirement Trust(4)............. $700,000 $700,000 22,222 22,222
Calamos Growth and Income Fund
Calamos Investment Trust (5)........... $230,000 $230,000 7,301 7,301
The Dow Chemical Company
Employees' Retirement Plan(4).......... $1,250,000 $1,250,000 39,682 39,682
Unifi, Inc. Profit Sharing Plan &
Trust(4)............................... $255,000 $255,000 8,095 8,095
Deeprock & Co.......................... $500,000 $500,000 15,873 15,873
Bank of America Pension Plan........... $2,000,000 $2,000,000 63,492 63,492
Arkansas PERS.......................... $1,310,000 $1,310,000 41,587 41,587
ICI American Holdings.................. $455,000 $455,000 14,444 14,444
ZENECA Holdings........................ $455,000 $455,000 14,444 14,444
Delaware PERS.......................... $1,125,000 $1,125,000 35,714 35,714
PRIM Board............................. $1,765,000 $1,765,000 56,031 56,031
Starvest Discretionary................. $415,000 $415,000 13,174 13,174
State of Oregon/SAIF Corporation....... $3,500,000 $3,500,000 111,111 111,111
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL COMMON STOCK
AMOUNT OF AMOUNT OF NOTES OWNED PRIOR COMMON STOCK
NAME OF SELLING SECURITYHOLDER NOTES OWNED OFFERED HEREBY TO OFFERING (1) OFFERED HEREBY (2)
------------------------------ ------------ --------------- ------------------ ------------------
<S> <C> <C> <C> <C>
State of Oregon Equity................. $5,000,000 $5,000,000 158,730 158,730
Valley Insurance Company............... $100,000 $100,000 3,174 3,174
Nalco Chemical Co. Retirement.......... $225,000 $225,000 7,142 7,142
Kapiolani Medical Center............... $165,000 $165,000 5,238 5,238
Hawaiian Airlines Pension Plan for
Salaried Employees..................... $20,000 $20,000 634 634
Retirement Plan for Pilots of
Hawaiian Airlines...................... $115,000 $115,000 3,650 3,650
Hawaiian Airlines Pension Plan -
IAM.................................... $75,000 $75,000 2,380 2,380
United National Insurance(6)........... $65,000 $65,000 2,063 2,063
Lincoln National Convertible
Securities Fund(6)..................... $1,445,000 $1,445,000 45,873 45,873
Weirton Trust(6)....................... $435,000 $435,000 13,809 13,809
Walker Art Center(6)................... $170,000 $170,000 5,396 5,396
Bancroft Convertible Fund, Inc......... $375,000 $375,000 11,904 11,904
Ellsworth Convertible Growth and
Income Fund, Inc....................... $375,000 $375,000 11,904 11,904
Investments, L.P....................... $3,000,000 $3,000,000 95,238 95,238
Investments, LDC....................... $1,000,000 $1,000,000 31,746 31,746
Allstate Insurance Company............. $1,500,000 $1,500,000 67,269(7) 47,619
Orrington Investments Limited
Partnership............................ $650,000 $650,000 20,634 20,634
Orrington International Fund LTD....... $350,000 $350,000 11,111 11,111
LDG, Limited (8)....................... $500,000 $500,000 15,873 15,873
Forest Fulcrum Fund, L.P............... $4,725,000 $4,725,000 150,000 150,000
Forest Global Convert Fund Series
A5..................................... $4,175,000 $4,175,000 132,539 132,539
Forest Global Performance Fund
Series B1.............................. $100,000 $100,000 3,174 3,174
Forest Global Performance Fund
Series B2.............................. $75,000 $75,000 2,380 2,380
Forest Global Performance Fund
Series B3.............................. $75,000 $75,000 2,380 2,380
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL COMMON STOCK
AMOUNT OF AMOUNT OF NOTES OWNED PRIOR COMMON STOCK
NAME OF SELLING SECURITYHOLDER NOTES OWNED OFFERED HEREBY TO OFFERING (1) OFFERED HEREBY (2)
------------------------------ ------------ --------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Forest Global Performance Fund
Series B5.............................. $125,000 $125,000 3,968 3,968
Forest Performance Fund................ $75,000 $75,000 2,380 2,380
Forest Performance Greyhound........... $125,000 $125,000 3,968 3,968
Fox Family Foundation.................. $75,000 $75,000 2,380 2,380
Fox Family Portfolio................... $200,000 $200,000 6,349 6,349
Chase Securities, Inc.................. $1,000,000 $1,000,000 31,746 31,746
Provident Life and Accident
Insurance Company...................... $1,250,000 $1,250,000 39,682 39,682
Highmark Convertible Securities
Fund................................... $300,000 $300,000 9,523 9,523
Donaldson, Lufkin & Jenrette
Securities Corporation................. $9,200,000 $9,200,000 292,063 292,063
Bank of Tokyo-Mitsubishi Trust
Co. as TTEE for Convertible Bond
Fund Trust, Collective Trust........... $100,000 $100,000 3,174 3,174
San Diego County Convertible........... $1,470,000 $1,470,000 46,666 46,666
Dunham & Associates Fund III........... $8,000 $8,000 253 253
San Diego City Retirement.............. $348,000 $348,000 11,047 11,047
Dunham & Associates Fund II............ $17,000 $17,000 539 539
Boston Museum of Fine Art.............. $46,000 $46,000 1,460 1,460
Nicholas-Applegate Income &
Growth Fund............................ $1,451,000 $1,451,000 46,063 46,063
Baptist Health......................... $111,000 $111,000 3,523 3,523
SBC Warburg Dillon Read Inc............ $5,800,000 $5,800,000 184,126 184,126
Swiss Bank Corporation-London
Branch................................. $4,000,000 $4,000,000 126,984 126,984
Wake Forest University................. $273,000 $273,000 8,666 8,666
Engineers Joint Pension Fund........... $174,000 $174,000 5,523 5,523
Federated Equity Funds, on behalf
of its Federated Capital
Appreciation Fund(9)................... $300,000 $300,000 9,523 9,523
Massachusetts Mutual Life
Insurance Company(10).................. $1,200,000 $1,200,000 38,095 38,095
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL COMMON STOCK
AMOUNT OF AMOUNT OF NOTES OWNED PRIOR COMMON STOCK
NAME OF SELLING SECURITYHOLDER NOTES OWNED OFFERED HEREBY TO OFFERING (1) OFFERED HEREBY (2)
------------------------------ ------------ --------------- ------------------ ------------------
<S> <C> <C> <C> <C>
MassMutual Participation
Investors(11).......................... $75,000 $75,000 2,380 2,380
MassMutual Corporate
Investors(11).......................... $150,000 $150,000 4,761 4,761
MassMutual Corporate Value
Partners Limited(11)(12)............... $300,000 $300,000 9,523 9,523
MassMutual High Yield Partners
LLC(11)(12)............................ $375,000 $375,000 11,904 11,904
Highbridge International,
LDC(13)................................ $5,000,000 $5,000,000 15,873 15,873
CFW-C, L.P............................. $11,000,000 $11,000,000 349,206 349,206
------------ ------------ --------- ---------
Subtotal............................... $116,550,000 $116,550,000 3,614,393 3,557,096
Unnamed holders of Notes or any
future transferees, pledges, donees
or successors of or from any such
unnamed holders (14)................... $68,450,000 $68,450,000 2,258,623(15) 2,315,920
------------ ------------ --------- ---------
Total.................................. $185,000,000 $185,000,000 5,873,016 5,873,016
============ ============ ========= =========
</TABLE>
- ---------------------------
(1) Includes the shares of Common Stock into which the Notes held by such
Selling Securityholder are convertible at the Conversion Price. The
Conversion Price and the number of shares of Common Stock issuable upon
conversion of the Notes are subject to adjustment under certain
circumstances. See "Description of Notes -- Conversion Rights."
Accordingly, the number of shares of Common Stock issuable upon conversion
of the Notes may increase or decrease from time to time.
(2) Assumes conversion into Common Stock of the full amount of Notes held by
the Selling Securityholder at the Conversion Price and the offering of such
shares by such Selling Securityholder pursuant to this Prospectus. The
Conversion Price and the number of shares of Common Stock issuable upon
conversion of the Notes is subject to adjustment under certain
circumstances. See "Description of Notes -- Conversion Rights."
Accordingly, the number of shares of Common Stock issuable upon conversion
of the Notes may increase or decrease from time to time. Fractional shares
will not be issued upon conversion of the Notes; rather, cash will be paid
in lieu of fractional shares, if any.
(3) Although Alexandra Investment Management Ltd. may be deemed to beneficially
own such securities as a result of its sole or shared power to dispose or
direct the disposition of such securities and its sole or shared power to
vote or to direct the vote of such securities, it disclaims beneficial
ownership with respect to such securities.
(4) Although Calamos Asset Management, Inc. may be deemed to beneficially own
such securities as a result of its sole or shared power to dispose or to
direct the disposition of such securities, it disclaims beneficial
ownership with respect to such securities.
(5) Calamos Asset Management, Inc. may be deemed to beneficially own such
securities as a result of its sole or shared power to dispose or to direct
the disposition of such securities.
15
<PAGE>
(6) Although Lynch & Mayer may be deemed to beneficially own such securities as
a result of its sole or shared power to dispose or to direct the
disposition of such securities, it disclaims beneficial ownership with
respect to such securities.
(7) Does not include 7,800 shares of Common Stock beneficially held by certain
qualified benefit plans maintained for the benefit of certain employees of
the Selling Securityholder, as to which such Selling Securityholder
disclaims beneficial ownership.
(8) TQA Investors L.L.C. may be deemed to beneficially own such securities as a
result of its sole or shared power to dispose or direct the disposition of
such securities.
(9) Although Federated Investors Management Company may be deemed to
beneficially own such securities as a result of its sole or shared power to
dispose or to direct the disposition of such securities and its sole or
shared power to vote or direct the vote of such securities, it disclaims
beneficial ownership with respect to such securities.
(10) Does not include $300,000 principal amount of Notes held by MassMutual
Corporate Value Partners or $375,000 principal amount of Notes held by
MassMutual High Yield Partners LLC (or the shares available upon conversion
of such principal amount of Notes). In addition, the $140,000 principal
amount of Notes held by CM Converts Fund ("CM Converts Fund") (or the
shares available upon conversion of such principal amount of Notes) and the
34,360 shares of Common Stock held by CM Small Mid Cap Fund ("CM Small
Midcap Fund"), each a separate investment account of the Selling
Securityholder, is not included.
(11) Massachusetts Mutual Life Insurance Company ("MassMutual") serves as
investment adviser to MassMutual Corporate Investors, MassMutual
Participation Investors, MassMutual Corporate Value Partners Limited and
MassMutual High Yield Partners LLC.
(12) Does not include $1,200,000 principal amount of Notes held by MassMutual
and $140,000 principal amount of Notes held by CM Converts Fund, or the
shares available upon conversion of such principal amount of Notes. Does
not include 34,360 shares of Common Stock held by CM Small Midcap Fund.
(13) Highbridge Capital Management, Inc. may be deemed to beneficially own such
securities as a result of its sole or shared power to vote or to direct the
vote of such securities and its sole or shared power to dispose or to
direct the disposition of such securities.
(14) No such holder may offer Notes pursuant to this Prospectus until such
holder is included as a Selling Securityholder in a supplement to this
Prospectus in accordance with the Registration Rights Agreement (as defined
herein).
(15) Assumes that the unnamed holders of Notes or any future transferees,
pledgees, donees or successors of or from any such unnamed holder do not
beneficially own any Common Stock other than the Common Stock issuable upon
conversion of the Notes at the Conversion Price.
Because the Selling Securityholders may, pursuant to this Prospectus, offer
all or some portion of the Notes and Common Stock they presently hold or, with
respect to Common Stock, have the right to acquire upon conversion of such
Notes, no estimate can be given as to the amount of the Notes and Common Stock
that will be held by the Selling Securityholders upon termination of any such
sales. In addition, the Selling Securityholders identified above may have sold,
transferred or otherwise disposed of all or a portion of their Notes and Common
Stock since the date on which they provided the information regarding their
Notes and Common Stock, in transactions exempt from the registration
requirements of the Securities Act. See "Plan of Distribution."
Only Selling Securityholders identified above who beneficially own the
Notes and Common Stock set forth opposite each such Selling Securityholder's
name in the foregoing table on the effective date of the Registration Statement
may sell such Notes and Common Stock pursuant to this Prospectus. The Company
may from time to time,
16
<PAGE>
in accordance with the Registration Rights Agreement, include additional Selling
Securityholders in supplements to this Prospectus.
The Company will pay the expenses of registering the Notes and Common Stock
being sold hereunder.
17
<PAGE>
DESCRIPTION OF NOTES
Set forth below is a summary of certain provisions of the Notes. The Notes
were issued pursuant to an indenture (the "Indenture") dated as of September 15,
1997, by and between the Company and U.S. Trust Company of Texas, N.A., as
trustee (the "Trustee"). The following summary of the Notes, the Indenture and
the Registration Rights Agreement dated as of September 15, 1997 among the
Company and the Initial Purchasers (the "Registration Rights Agreement") does
not purport to be complete and is subject to, and is qualified in its entirety
by, reference to all of the provisions of the Indenture and the Registration
Rights Agreement, including the definitions therein of certain terms. The
Indenture and the Registration Rights Agreement have been filed as exhibits to
the Registration Statement of which this Prospectus is a part. Capitalized
terms used herein without definition have the meanings ascribed to them in the
Indenture or the Registration Rights Agreement, as appropriate. As used in this
section, the "Company" refers to Halter Marine Group, Inc., exclusive of its
Subsidiaries. Wherever particular provisions or defined terms of the Indenture
(or the form of Note which is part thereof) or the Registration Rights Agreement
are referred to in this summary, such provisions or defined terms are
incorporated by reference as a part of the statements made and such statements
are qualified in their entirety by such reference. Certain definitions of terms
used in the following summary are set forth under "--Certain Definitions" below.
GENERAL
The Notes are general, unsecured obligations of the Company, limited in
aggregate principal amount to $185,000,000. The Notes are subordinated in right
of payment to all Senior Indebtedness, as described under "--Subordination"
below. The Notes have been issued only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof.
The Notes will mature on September 15, 2004. The Notes bear interest at
the rate per annum stated on the cover page of this Prospectus from September
15, 1997, or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semi-annually in cash in arrears on March 15
and September 15 of each year, commencing March 15, 1998, to the persons in
whose names such Notes are registered at the close of business on the March 1
and September 1 immediately preceding such Interest Payment Date. Principal of,
premium, if any, and interest on, and liquidated damages with respect to, the
Notes will be payable, the Notes will be convertible and the Notes may be
presented for registration of transfer or exchange, at the office or agency of
the Company maintained for such purpose, which office or agency shall be
maintained in the Borough of Manhattan, The City of New York. Interest is
calculated on the basis of a 360-day year consisting of twelve 30-day months.
At the option of the Company, payment of interest and liquidated damages
may be made by check mailed to the Holders of the Notes at the addresses set
forth upon the registry books of the Company. No service charge will be made
for any registration of transfer or exchange of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Until otherwise designated by the
Company, the Company's office or agency will be the corporate trust office of
the Trustee presently located in New York City.
The Indenture does not contain any financial covenants or any restrictions
on the payment of dividends, the repurchase of securities of the Company or the
incurrence of Indebtedness or Senior Indebtedness. The Indenture contains no
covenants or other provisions to afford protection to Holders of Notes in the
event of a highly leveraged transaction or a change of control of the Company,
except to the limited extent described under "--Repurchase of Notes at the
Option of the Holder Upon a Change of Control" below.
CONVERSION RIGHTS
Each Holder of Notes has the right at any time prior to the close of
business on the Stated Maturity of the Notes, unless previously redeemed or
repurchased, at the Holder's option, to convert any portion of the principal
amount thereof that is $1,000 or an integral multiple thereof into shares of
Common Stock at the Conversion Price set forth on the cover page of this
Prospectus (subject to adjustment as described below). The right to convert a
Note called for redemption or delivered for repurchase and not withdrawn will
terminate at the close of business on the Business Day immediately prior to the
Redemption Date or Repurchase Date for such Note, unless the Company
subsequently fails to pay the applicable Redemption Price or Repurchase Price,
as the case may be.
18
<PAGE>
In the case of any Note that has been converted into Common Stock after any
Record Date, but on or before the next Interest Payment Date, interest, the
stated due date of which is on such Interest Payment Date, shall be payable on
such Interest Payment Date notwithstanding such conversion, and such interest
shall be paid to the Holder of such Note who is a Holder on such Record Date.
Any Note converted after any Record Date but before the next Interest Payment
Date (other than Notes called for redemption) must be accompanied by payment of
an amount equal to the interest payable on such Interest Payment Date on the
principal amount of Notes being surrendered for conversion; provided no such
payment shall be required with respect to interest payable on September 15,
2000. No fractional shares of Common Stock will be issued upon conversion but,
in lieu thereof, an appropriate amount will be paid in cash by the Company based
on the market price of Common Stock (determined in accordance with the
Indenture) at the close of business on the day of conversion. As a result of
the foregoing provisions, Holders that surrender Notes for conversion on a date
that is not an Interest Payment Date will not receive any interest for the
period from the Interest Payment Date next preceding the date of conversion to
the date of conversion or for any later period, except for Notes that are called
for redemption.
The Conversion Price is subject to adjustment in certain events, including
(a) any payment of a dividend (or other distribution) payable in Common Stock on
any class of Capital Stock of the Company, (b) any issuance to all or
substantially all holders of Common Stock of rights, options or warrants
entitling them to subscribe for or purchase Common Stock at less than the then
current market price of Common Stock (determined in accordance with the
Indenture); provided, however, that if such rights, options or warrants are only
exercisable upon the occurrence of certain triggering events, then the
Conversion Price will not be adjusted until such triggering events occur, (c)
certain subdivisions, combinations or reclassifications of Common Stock, (d) any
distribution to all or substantially all holders of Common Stock of evidences of
indebtedness, shares of Capital Stock other than Common Stock, cash or other
assets (including securities, but excluding those dividends, rights, options,
warrants and distributions referred to above and excluding dividends and
distributions paid exclusively in cash and in mergers and consolidations to
which the third succeeding paragraph applies), (e) any distribution consisting
exclusively of cash (excluding any cash portion of distributions referred to in
(d) above, or cash distributed upon a merger or consolidation to which the third
succeeding paragraph applies) to all or substantially all holders of Common
Stock in an aggregate amount that, combined together with (i) all other such
all-cash distributions made within the then preceding 12 months in respect of
which no adjustments have been made and (ii) any cash and the fair market value
of other consideration paid or payable in respect of any tender or exchange
offer by the Company or any of its Subsidiaries for Common Stock concluded
within the preceding 12 months in respect of which no adjustment has been made,
exceeds 15% of the Company's market capitalization (defined as being the product
of the then current market price of the Common Stock times the number of shares
of Common Stock then outstanding) on the record date of such distribution, and
(f) the completion of a tender or exchange offer made by the Company or any of
its Subsidiaries for Common Stock that involves an aggregate consideration that,
together with (i) any cash and other consideration payable in a tender or
exchange offer by the Company or any of its Subsidiaries for Common Stock
expiring within the 12 months preceding the expiration of such tender or
exchange offer in respect of which no adjustment has been made and (ii) the
aggregate amount of any such all-cash distributions referred to in (e) above to
all holders of Common Stock within the 12 months preceding the expiration of
such tender or exchange offer in respect of which no adjustments have been made,
exceeds 15% of the Company's market capitalization on the expiration of such
tender or exchange offer. No adjustment of the Conversion Price will be
required to be made until the cumulative adjustments amount to 1.0% or more of
the Conversion Price as last adjusted.
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the Conversion Price, the
Holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States federal income tax as a dividend; in
certain other circumstances, the absence of such an adjustment may result in a
taxable dividend to the holders of Common Stock.
The Company, from time to time and to the extent permitted by law, may
reduce the Conversion Price by any amount for any period of at least 20 Business
Days, in which case the Company shall give at least 15 days notice of such
reduction, if the Board of Directors has made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive. The Company may, at its option, make such reductions in
the Conversion Price, in addition to those set forth above, as the Board of
Directors deems advisable to avoid or diminish any income tax to holders of
Common Stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for United States federal
income tax purposes. See "Certain United States Federal Income Tax
Consequences."
In case of any reclassification or change of outstanding shares of Common
Stock issuable upon conversion of the Notes (other than certain changes in par
value) or consolidation or merger of the Company with or into another
19
<PAGE>
Person or any merger of another Person with or into the Company (with certain
exceptions), or in case of any sale, transfer or conveyance of all or
substantially all of the assets of the Company, each Note then outstanding will,
without the consent of any Holder of Notes, become convertible only into the
kind and amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance by
a holder of the number of shares of Common Stock into which such Note was
convertible immediately prior thereto, after giving effect to any adjustment
event; provided, that if the kind or amount of securities, cash and other
property is not the same for each share of Common Stock held immediately prior
to such reclassification, change, consolidation, merger, sale, transfer or
conveyance, any Holder who fails to exercise any right of election shall receive
per share the kind and amount of securities, cash or other property received per
share by a plurality of non-electing shares.
The Company will cause all registrations to be made with, and will obtain
any approvals by, any governmental authority under any Federal or state law of
the United States that may be required on the part of the Company in connection
with the conversion of the Notes into Common Stock. If at any time during the
two-year period following the date of the original issuance of the Notes a
registration statement under the Securities Act covering the shares of Common
Stock issuable upon conversion of the Notes is not effective or is otherwise
unavailable for effecting resales of such shares, shares of Common Stock issued
upon conversion of the Notes ("Restricted Shares") may not be sold or otherwise
transferred except in accordance with or pursuant to an exemption from, or
otherwise in a transaction not subject to, the registration requirements of the
Securities Act, and, if a registration statement under the Securities Act is not
effective or is otherwise unavailable for effecting resales of such shares at
the time of a conversion, the Restricted Shares will bear a legend to that
effect. The Transfer Agent for the Common Stock will not be required to accept
for registration of transfer any Restricted Shares, except upon presentation of
satisfactory evidence that these restrictions on transfer have been complied
with, all in accordance with such reasonable regulations as the Company may from
time to time agree with the Transfer Agent. Under certain circumstances, the
holders of the Restricted Shares will be entitled to liquidated damages during
such period. See "--Registration Rights; Liquidated Damages."
SUBORDINATION
The Notes are general, unsecured obligations of the Company, subordinated
in right of payment to all existing and future Senior Indebtedness. The Notes
are structurally subordinated in right of payment to all Indebtedness and other
liabilities (including trade payables) of the Company's Subsidiaries. At
September 30, 1997, the Company had no amounts of Senior Indebtedness
outstanding, but the Company's Subsidiaries had approximately $29.7 million of
Indebtedness, trade payables and other accrued liabilities outstanding. In
addition, at such date and on such pro forma basis, the Company would have had
available borrowing capacity of approximately $127 million (subject to customary
borrowing conditions) under the Old Credit Facility. The Company has entered
into the New Credit Facility, which replaced the Old Credit Facility and
provides for borrowings of up to $150 million. Indebtedness under the New
Credit Facility will constitute Senior Indebtedness. See "Description of Credit
Facilities." The Indenture does not restrict the incurrence of Senior
Indebtedness or other Indebtedness by the Company or its Subsidiaries or the
ability of the Company to transfer assets or business operations to its
Subsidiaries, subject to the provisions described under "--Repurchase of Notes
at the Option of the Holder Upon a Change of Control" and "--Limitation on
Merger, Sale or Consolidation" below.
The Indenture provides that no payment may be made by the Company on
account of the principal of, premium, if any, interest on or liquidated damages
with respect to, the Notes, or to acquire any of the Notes (including
repurchases of Notes at the option of the Holder) for cash or property (other
than Junior Securities), or on account of the redemption provisions of the
Notes, (i) upon the maturity of any Senior Indebtedness, by lapse of time,
acceleration (unless waived) or otherwise, unless and until all principal of,
premium, if any, and interest on such Senior Indebtedness are first paid in full
(or such payment is duly provided for), or (ii) in the event of default in the
payment of any principal of, premium, if any, or interest on any Senior
Indebtedness when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise (collectively, a "Payment
Default"), unless and until such Payment Default has been cured or waived or
otherwise has ceased to exist. The payment of cash, property or securities
(other than Junior Securities) upon conversion of a Note will constitute payment
on a Note and therefore will be subject to the subordination provisions in the
Indenture.
Upon (i) the happening of an event of default (other than a Payment
Default) that permits, or would permit with (a) the passage of time, (b) the
giving of notice, (c) the making of any payment of the Notes then required to be
made or (d) any combination thereof (collectively, a "Non-Payment Default"), the
holders of Senior Indebtedness having a principal amount then outstanding in
excess of $10 million (or with respect to which Senior Indebtedness the holders
are obligated to lend in excess of $10 million principal amount) or their
representative immediately to accelerate its
20
<PAGE>
maturity and (ii) written notice of such Non-Payment Default given to the
Company and the Trustee by the holders of an aggregate of at least $10 million
outstanding principal amount (or commitments to lend up to at least $10 million
in principal amount) of such Senior Indebtedness or their representative (a
"Payment Notice"), then, unless and until such Non-Payment Default has been
cured or waived or otherwise has ceased to exist, no payment (by setoff or
otherwise) may be made by or on behalf of the Company on account of the
principal of, premium, if any, interest on or liquidated damages with respect
to, the Notes, or to acquire or repurchase any of the Notes for cash or
property, or on account of the redemption provisions of the Notes, in any such
case other than payments made with Junior Securities. Notwithstanding the
foregoing, unless (i) the Senior Indebtedness in respect of which such Non-
Payment Default exists has been declared due and payable in its entirety within
179 days after the Payment Notice is delivered as set forth above (the "Payment
Blockage Period"), and (ii) such declaration has not been rescinded or waived,
at the end of the Payment Blockage Period, the Company shall be required to pay
all sums not paid to the Holders of the Notes during the Payment Blockage Period
due to the foregoing prohibitions and to resume all other payments as and when
due on the Notes. Not more than one Payment Notice may be given in any
consecutive 365-day period, irrespective of the number of defaults with respect
to Senior Indebtedness during such period. In no event, however, may the total
number of days during which any Payment Blockage Period is or Payment Blockage
Periods are in effect exceed 179 days in the aggregate during any consecutive
365-day period.
Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a
similar proceeding or upon assignment for the benefit of creditors or any
marshaling of assets or liabilities (i) the holders of all Senior Indebtedness
will first be entitled to receive payment in full (or have such payment duly
provided for) before the Holders of the Notes are entitled to receive any
payment on account of the principal of, premium, if any, interest on and
liquidated damages with respect to, the Notes (other than Junior Securities) and
(ii) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than Junior
Securities) to which the Holders of the Notes or the Trustee on behalf of the
Holders would be entitled (by setoff or otherwise), except for the subordination
provisions contained in the Indenture, will be paid by the liquidating trustee
or agent or other person making such a payment or distribution directly to the
holders of Senior Indebtedness or their representative to the extent necessary
to make payment in full of all such Senior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution, or provision therefor,
to the holders of such Senior Indebtedness.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities) shall be
received by the Holders of the Notes or the Trustee on behalf of the Holders or
any Paying Agent at a time when such payment or distribution is prohibited by
the foregoing provisions, such payment or distribution shall be held in trust
for the benefit of the holders of Senior Indebtedness, and shall be paid or
delivered by such Holders or the Trustee or such Paying Agent, as the case may
be, to the holders of the Senior Indebtedness remaining unpaid or unprovided for
or their representative or representatives, or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or represented by
each, for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay or to provide for the payment of all such
Senior Indebtedness in full after giving effect to any concurrent payment or
distribution, or provision therefor, to the holders of such Senior Indebtedness.
No provision contained in the Indenture or the Notes will affect the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, and interest on, and liquidated damages with
respect to, the Notes. The subordination provisions of the Indenture and the
Notes will not prevent the occurrence of any Default or Event of Default under
the Indenture or limit the rights of the Trustee or any Holder of any Notes,
subject to the preceding paragraphs, to pursue any other rights or remedies with
respect to the Notes.
The Company conducts certain of its operations through its Subsidiaries.
Accordingly, the Company's ability to meet its cash obligations in the future
will be dependent upon the ability of its Subsidiaries to make cash
distributions to the Company. The ability of its Subsidiaries to make
distributions to the Company is and will continue to be restricted by, among
other limitations, applicable provisions of the laws of national and state
governments and may be restricted by contractual provisions. The Indenture does
not limit the ability of the Company's Subsidiaries to incur such contractual
restrictions in the future. The right of the Company to participate in the
assets of any Subsidiary (and thus the ability of Holders of the Notes to
benefit indirectly from such assets) is generally subject to the prior claims of
creditors, including trade creditors, of that Subsidiary except to the extent
that the Company is recognized as a creditor of such Subsidiary, in which case
the Company's claims would still be subject to any security interest of other
creditors of such Subsidiary. The Notes, therefore, are structurally
subordinated to creditors, including trade creditors, of
21
<PAGE>
Subsidiaries of the Company with respect to the assets of the Subsidiaries
against which such creditors have a more direct claim.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its Subsidiaries or a marshaling of assets or liabilities of the Company
and its Subsidiaries, Holders of Notes may receive ratably less than other
creditors.
REDEMPTION AT THE COMPANY'S OPTION
The Notes are not subject to redemption prior to September 15, 2000 and are
redeemable on and after such date at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days' notice to each Holder, at the
following Redemption Prices (expressed as percentages of the principal amount)
if redeemed during the 12-month period commencing September 15 of the years
indicated below, in each case (subject to the right of Holders of record on a
Record Date to receive interest due on an Interest Payment Date that is on or
prior to such Redemption Date) together with accrued and unpaid interest and
liquidated damages, if any, to, but excluding, the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- -----------
<S> <C>
2000..................................... 102.57%
2001..................................... 101.93
2002..................................... 101.28
2003..................................... 100.64
2004..................................... 100.00
</TABLE>
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
The Notes do not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first-class mail, at least 30
days and not more than 60 days prior to the date fixed for redemption (the
"Redemption Date"), to the Holder of each Note to be redeemed to such Holder's
last address as then shown upon the registry books of the Registrar. The notice
of redemption must state the Redemption Date, the Redemption Price and the
amount of accrued interest and liquidated damages, if any, to be paid. Any
notice that relates to a Note to be redeemed in part only must state the portion
of the principal amount to be redeemed and must state that on and after the
Redemption Date, upon surrender of such Note, a new Note or Notes in principal
amount equal to the unredeemed portion thereof will be issued. On and after the
Redemption Date, interest will cease to accrue on the Notes or portions thereof
called for redemption, unless the Company defaults in its obligations with
respect thereto.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
The Indenture provides that in the event that a Change of Control has
occurred, the Company is required to make an irrevocable and unconditional
(except as described below) offer (the "Repurchase Offer") to purchase all Notes
on the date (the "Repurchase Date") that is no later than 45 Business Days
(except as described below) after the occurrence of such Change of Control at a
cash price (the "Repurchase Price") equal to 100% of the principal amount
thereof, together with accrued and unpaid interest and liquidated damages, if
any, to (but excluding) the Repurchase Date. A Holder of Notes may accept the
Repurchase Offer with respect to all or a portion of its Notes (provided that
the principal amount of such Notes must be $1,000 or an integral multiple
thereof). The Repurchase Offer shall be made within 25 Business Days following
a Change of Control and shall remain open for 20 Business Days following its
commencement except to the extent that a longer period is required by applicable
law (the "Repurchase Offer Period"). Upon expiration of the Repurchase Offer
Period, the Company shall purchase all Notes tendered in response to the
Repurchase Offer. If required by applicable law, the Repurchase Date and the
Repurchase Offer Period may be extended as so required; however, if so extended,
it shall nevertheless constitute an Event of Default if the Repurchase Date does
not occur within 60 Business Days of the Change of Control.
On or before the Repurchase Date, the Company will (i) accept for payment
Notes or portions thereof properly tendered pursuant to the Repurchase Offer,
(ii) deposit with the Paying Agent cash sufficient to pay the Repurchase Price
22
<PAGE>
(together with accrued and unpaid interest and liquidated damages, if any) of
all Notes so tendered and (iii) deliver to the Trustee the Notes so accepted,
together with an officers' certificate listing the Notes or portions thereof
being purchased by the Company. The Paying Agent will promptly mail to the
Holders of Notes so accepted payment in an amount equal to the Repurchase Price
(together with accrued and unpaid interest and liquidated damages, if any), and
the Trustee will promptly authenticate and mail or deliver to such Holders a new
Note or Notes equal in principal amount to any unpurchased portion of the Notes
surrendered. Any Notes not so accepted will be promptly mailed or delivered by
the Company to the Holder thereof. The Company will publicly announce the
results of the Repurchase Offer on or as soon as practicable after the
Repurchase Date.
The phrase "all or substantially all" of the assets of the Company, as
included in the definition of Change of Control, is likely to be interpreted by
reference to applicable state law at the relevant time, and will be dependent on
the facts and circumstances existing at such time. As a result, there may be a
degree of uncertainty in ascertaining whether a sale or transfer of "all or
substantially all" of the assets of the Company has occurred.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company, and, thus, the removal of incumbent
management. The Change of Control purchase feature resulted from negotiations
between the Company and the Initial Purchasers.
The provisions of the Indenture relating to a Change of Control may not
afford the Holders of the Notes protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger, spin-off or similar
transaction that may adversely affect Holders, if such transaction does not
constitute a Change of Control. Moreover, certain events with respect to the
Company which may involve an actual change of control of the Company may not
constitute a Change of Control for purposes of the Indenture.
The Company may not have sufficient financial resources available to
fulfill its obligation to repurchase the Notes upon a Change of Control or to
repurchase other debt securities of the Company or its Subsidiaries providing
similar rights to the holders thereof. Further, the right to require the
Company to repurchase Notes as a result of the occurrence of a Change of Control
could create an event of default under Senior Indebtedness as a result of which
any repurchase could, absent a waiver, be blocked by the subordination
provisions of the Notes. Failure of the Company to repurchase the Notes when
required would result in an Event of Default with respect to the Notes whether
or not such repurchase is permitted by the subordination provisions. Any such
default would, in turn, cause a default under the New Credit Facility and may
cause a default under other Senior Indebtedness. Moreover, the Change of
Control may cause an event of default under Senior Indebtedness. As a result,
in each case, any repurchase of the Notes could, absent a waiver, be blocked by
the subordination provisions of the Notes. See "--Subordination" above.
Except as described herein, no modification of the Indenture regarding the
provisions on repurchase at the option of any Holder of a Note upon a Change of
Control that adversely affects a Holder is permissible without the consent of
the Holder of the Note so affected. In the event of a Change of Control, if
Holders of in excess of two-thirds of the outstanding aggregate principal amount
of the Notes so determine at any time following the occurrence of such Change of
Control and before the close of business on the Business Day immediately
preceding the Repurchase Date, such event shall not be treated as a Change of
Control for purposes of the Indenture. In such event, (i) the Company shall not
be required to make the Repurchase Offer, (ii) to the extent the Repurchase
Offer has already been made, such Repurchase Offer shall be deemed revoked and
(iii) to the extent any Notes have been tendered in response to any such revoked
Repurchase Offer, such tender shall be rescinded and the Notes so tendered shall
be promptly returned to the Holders thereof. For purposes of any such
determination by the Holders of the outstanding Notes, Notes held by the Company
or an Affiliate of the Company (including any Person that would become an
Affiliate of the Company (or its successor) as a consequence of the event or
series of events that otherwise would be treated as a Change of Control for
purposes of the Indenture) shall be disregarded.
To the extent applicable, the Company will comply with the provisions of
Rule 13e-4 or any other tender offer rules under the Securities Act, and will
file a Schedule 13E-4 or any other schedule required under such rules, in
connection with any offer by the Company to repurchase Notes at the option of
the Holders upon a Change of Control.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may not, directly or indirectly,
consolidate with or merge with or into, or sell, lease, convey or transfer all
or substantially all of its assets (on a consolidated basis), whether in a
single transaction or a series of related transactions, to another Person or
group of affiliated Persons (other than to its wholly
23
<PAGE>
owned Subsidiaries), unless (i) either (a) in the case of a merger or
consolidation the Company is the surviving entity or (b) the resulting,
surviving or transferee entity is a corporation organized under the laws of the
United States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of the Company in
connection with the Notes and the Indenture; and (ii) no Default or Event of
Default shall exist immediately before or after giving effect to such
transaction.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named therein as the
Company, and the Company will be released from its obligations under the
Indenture and the Notes, except as to any obligations that arise from or as a
result of such transaction.
REPORTS
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee, within 15 days after it is or would have been required to file such
with the Commission, annual and quarterly consolidated financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission if the Company were subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with respect
to annual information only, a report thereon by the Company's certified
independent public accountants as such would be required in such reports to the
Commission and, in each case, together with a management's discussion and
analysis of financial condition and results of operations as such would be so
required.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest on, or liquidated damages with respect to,
the Notes as and when due and payable and the continuance of any such failure
for 30 days, (ii) the failure by the Company to pay all or any part of the
principal of, or premium, if any on the Notes when and as the same become due
and payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, pursuant to any Repurchase Offer, (iii) the failure of the
Company to perform any conversion of Notes required under the Indenture and the
continuance of any such failure for 30 days, (iv) the failure by the Company to
observe or perform any other covenant or agreement contained in the Notes or the
Indenture and, subject to certain exceptions, the continuance of such failure
for a period of 60 days after written notice is given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Notes outstanding, (v) certain events of
bankruptcy, insolvency or reorganization in respect of the Company or any of its
Significant Subsidiaries, (vi) failure of the Company or any Significant
Subsidiary to make any payment at maturity, including any applicable grace
period, in respect of Indebtedness (other than non-recourse obligations) in an
amount in excess of $15 million and continuance of such failure for 30 days
after written notice is given to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal amount of
Notes outstanding, (vii) default by the Company or any Significant Subsidiary
with respect to any Indebtedness (other than non-recourse obligations), which
default results in the acceleration of Indebtedness in an amount in excess of
$15 million without such Indebtedness having been discharged or such
acceleration having been rescinded or annulled for 30 days after written notice
is given to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of Notes outstanding and
(viii) final unsatisfied judgments not covered by insurance aggregating in
excess of $20 million, at any one time rendered against the Company or any of
its Significant Subsidiaries and not stayed, bonded or discharged within 60
days. The Indenture provides that if a Default occurs and is continuing, the
Trustee must, within 90 days after the occurrence of such Default, give to the
Holders notice of such Default, but the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the best interest of the Holders, except in the case of a
Default in the payment of the principal of, premium, if any, or interest on or
liquidated damages with respect to, any of the Notes when due or in the payment
of any redemption or repurchase obligation.
The Indenture provides that if an Event of Default occurs and is continuing
(other than an Event of Default specified in clause (v) above with respect to
the Company), then in every such case, unless the principal of all of the Notes
shall have already become due and payable, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Notes then outstanding, by
notice in writing to the Company (and to the Trustee if given by
24
<PAGE>
Holders), may declare all principal, premium, if any, accrued interest and
liquidated damages, if any, on or with respect to the Notes to be due and
payable immediately. If an Event of Default specified in clause (v) above with
respect to the Company occurs, all principal, premium, if any, accrued interest
and liquidated damages, if any, will be immediately due and payable on all
outstanding Notes without any declaration or other act on the part of the
Trustee or the Holders. The Holders of no less than a majority in aggregate
principal amount of Notes generally are authorized to rescind such acceleration
if all existing Events of Default, other than the non-payment of the principal
of, premium, if any, and interest on, and liquidated damages with respect to,
the Notes that have become due solely by such acceleration, have been cured or
waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any default, except a default
in the payment of principal of, interest on, or liquidated damages with respect
to, any Note not yet cured, or a default with respect to any covenant or
provision that cannot be modified or amended without the consent of the Holder
of each outstanding Note affected. Subject to the provisions of the Indenture
relating to the duties of the Trustee, the Trustee is under no obligation to
exercise any of its rights or powers under the Indenture at the request, order
or direction of any of the Holders, unless such Holders have offered to the
Trustee reasonable security or indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the Notes at the time outstanding will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee.
The Indenture provides that no Holder may pursue any remedy under the
Indenture, except for a default in the payment of principal, premium, if any, or
interest or liquidated damages, if any, on the Notes, unless the Holder gives to
the Trustee written notice of a continuing Event of Default, the Holders of at
least 25% in principal amount of the outstanding Notes make a written request to
the Trustee to pursue the remedy, such Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense, the Trustee
does not comply with the request within 60 days after receipt of the request and
the offer of indemnity, and the Trustee shall not have received a contrary
direction from the Holders of a majority in principal amount of the outstanding
Notes.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding, the
Company and the Trustee are permitted to amend or supplement the Indenture or
any supplemental indenture or modify the rights of the Holders; provided, that
no such modification may, without the consent of each Holder affected thereby:
(i) change the Stated Maturity of any Note or reduce the principal amount
thereof or the rate (or extend the time for payment) of interest thereon or any
premium payable upon the redemption thereof, or change the place of payment
where, or the coin or currency in which, any Note or any premium or the interest
thereon is payable, or impair the right to institute suit for the conversion of
any Note or the enforcement of any such payment on or after the due date thereof
(including, in the case of redemption, on or after the Redemption Date), or
reduce the Repurchase Price, or alter the Repurchase Offer (other than as set
forth herein) or redemption provisions in a manner adverse to the Holders, or
(ii) reduce the percentage in principal amount of the outstanding Notes, the
consent of whose Holders is required for any such amendment, supplemental
indenture or waiver provided for in the Indenture or (iii) adversely affect the
right of such Holder to convert Notes. A supplemental indenture entered into in
compliance with the "Limitation on Merger, Sale or Consolidation" covenant would
not require the consent of the Holders of the Notes.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES
The Indenture provides that no stockholder, employee, officer, director or
partner, as such, past, present or future, of the Company or any successor
corporation shall have any personal liability in respect of the obligations of
the Company under the Indenture or the Notes by reason of his, her or its status
as such stockholder, employee, officer, director or partner.
25
<PAGE>
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the Notes in accordance with the
Indenture. The Company or Trustee may require a Holder, among other things, to
furnish appropriate endorsements, legal opinions and transfer documents, and to
pay any taxes and fees required by law or permitted by the Indenture. The
Company is not required to transfer or exchange any Notes selected for
redemption. Also, the Company is not required to transfer or exchange any Notes
for a period of 15 days before the mailing of a Repurchase Offer or notice of
redemption.
The registered holder of a Note may be treated as the owner of it for all
purposes.
BOOK ENTRY, DELIVERY AND FORM
Notes initially held by "qualified institutional buyers," as defined in
Rule 144A under the Securities Act ("QIBs"), were evidenced by one or more
global Notes (the "U.S. Global Note"), which were deposited on September 15,
1997, the date of the closing of the sale of the Notes (the "Closing Date"),
with, or on behalf of, the Depositary and registered in the name of Cede & Co.
("Cede") as the Depositary's nominee. Notes held by Persons who acquired such
Notes in compliance with Regulation S under the Securities Act (a "Non-U.S.
Person") were initially evidenced by one or more global Notes (the "Regulation S
Global Note"), which were deposited on the Closing Date with, or on behalf of,
the Depositary and registered in the name of Cede as the Depositary's nominee,
for the accounts of the Euroclear System ("Euroclear") and Cedel, S.A.
("Cedel"). Beneficial interests in the Regulation S Global Note may only be held
through Euroclear or Cedel, and any resale or transfer of such interests to U.S.
Persons shall only be permitted as described below. The U.S. Global Note and
the Regulation S Global Note are hereinafter collectively referred to as the
"Global Note." Except as set forth below, the Global Note may be transferred, in
whole or in part, only to another nominee of the Depositary or to a successor of
the Depositary or its nominee.
QIBs may hold their interests in the U.S. Global Note directly through the
Depositary if such holders are participants in the Depositary, or indirectly
through organizations which are participants in the Depositary (the
"Participants"). Transfers between Participants will be effected in the
ordinary way in accordance with the Depositary's rules and will be settled in
Federal funds.
Non-U.S. Persons may hold their interests in the Regulation S Global Note
directly through Cedel or Euroclear, or indirectly through organizations that
are participants in Cedel or Euroclear. Cedel and Euroclear will hold interests
in the Regulation S Global Note on behalf of their participants through the
Depositary. Transfers between participants in Euroclear and Cedel will be
effected in the ordinary way in accordance with their respective rules and
operating procedures.
Notes that were (i) originally issued to or transferred to institutional
"accredited investors," as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not QIBs or Non-U.S. Persons or to any other persons who
are not QIBs or Non-U.S. Persons or (ii) issued as described below were issued
in the form of registered definitive securities ("Certificated Notes"). Upon
the transfer to a QIB or Non-U.S. Person of Certificated Notes, such
Certificated Notes will, unless the Global Note has previously been exchanged
for Certificated Notes, be exchanged for an interest in the Global Note
representing the principal amount of Notes being transferred. For a description
of the restrictions on the transfer of Certificated Notes, see "Notice to
Investors."
The Depositary has advised the Company that it is a limited-purpose trust
company that was created to hold securities for its Participants and to
facilitate the clearance and settlement of transactions in such securities
between Participants through electronic book-entry changes in accounts of its
Participants (including Euroclear and Cedel). The Depositary's Participants
include securities brokers and dealers (including the Initial Purchasers), banks
and trust companies, clearing corporations and certain other organizations.
Access to the Depositary's system is also available to other entities such as
banks, brokers, dealers and trust companies (collectively, "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. QIBs may elect to hold Notes
purchased by them through the Depositary. QIBs who are not Participants may
beneficially own securities held by or on behalf of the Depositary only through
Participants or Indirect Participants. Persons that are not QIBs or Non-U.S.
Persons may not hold through the Depositary.
Pursuant to procedures established by the Depositary, (i) upon deposit of
the Global Note, the Depositary credited the accounts of Participants designated
by the Initial Purchasers with an interest in the Global Note and (ii) ownership
of the Notes evidenced by the Global Note are shown on, and the transfer of
ownership thereof are effected
26
<PAGE>
only through, records maintained by the Depositary (with respect to the
interests of Participants), the Participants and the Indirect Participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own and that security interests in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer Notes
evidenced by the Global Note will be limited to such extent. For certain other
restrictions on the transferability of the Notes, see "Notice to Investors."
So long as the Depositary or its nominee is the registered owner of a Note,
the Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by the Global Note for all purposes
under the Indenture. Except as provided below, owners of beneficial interests
in a Global Note will not be entitled to have Notes represented by such Global
Note registered in their names, will not receive or be entitled to receive
physical delivery of Certificated Notes, and will not be considered the owners
or holders thereof under the Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the Trustee
thereunder. As a result, the ability of a Person having a beneficial interest
in Notes represented by a Global Note to pledge such interest to Persons that do
not participate in the Depositary's system, or to otherwise take actions with
respect to such interest, may be affected by the lack of a physical certificate
evidencing such interest.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of Notes by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to such Notes.
Payments with respect to the principal of, premium, if any, interest on,
and liquidated damages with respect to, any Note represented by a Global Note
registered in the name of the Depositary or its nominee on the applicable record
date are payable by the Trustee to or at the direction of the Depositary or its
nominee in its capacity as the registered Holder of the Global Note representing
such Notes under the Indenture. Under the terms of the Indenture, the Company
and the Trustee may treat the Persons in whose names the Notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently,
neither the Company nor the Trustee has or will have any responsibility or
liability for the payment of such amounts to beneficial owners of Notes
(including, principal, premium, if any, interest, or liquidated damages with
respect thereto), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Note as shown
on the records of the Depositary. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes are governed by standing
instructions and customary practice and will be the responsibility of the
Participants or the Indirect Participants.
Holders who desire to convert their Notes into Common Stock pursuant to the
terms of the Notes should contact their brokers or other Participants or
Indirect Participants to obtain information on procedures, including proper
forms and cut-off times, for submitting such requests.
If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by the Depositary of
the Global Note, Certificated Notes will be issued to each person that the
Depositary identifies as the beneficial owner of the Notes represented by the
Global Note. In addition, subject to certain conditions, any Person having a
beneficial interest in a Global Note may, upon request to the Trustee, exchange
such beneficial interest for Notes in the form of Certificated Notes. Upon any
such issuance, the Trustee is required to register such Certificated Notes in
the name of such Person or Persons (or the nominee of any thereof), and cause
the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the Notes, and the Company and the Trustee may conclusively
rely on, and shall be protected in relying on, instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Notes to be issued).
GOVERNING LAW
The Indenture and the Notes provide that they are to be governed in
accordance with the laws of the State of New York.
27
<PAGE>
THE TRUSTEE
U.S. Trust Company of Texas, N.A. is the Trustee under the Indenture. A
successor Trustee may be appointed in accordance with the terms of the
Indenture.
The Indenture contains certain limitations on the rights of the Trustee, in
the event it becomes a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting interest
(as defined), it must eliminate such conflict or resign.
In case an Event of Default shall occur (and shall not be cured), the
Trustee is required to use the degree of care of a prudent person in the conduct
of his own affairs in the exercise of its powers. Subject to such provisions,
the Trustee is under no obligation to exercise any of its rights or powers under
the Indenture at the request of any of the Holders of Notes, unless they shall
have offered to the Trustee reasonable security or indemnity.
CERTAIN DEFINITIONS
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capitalized Lease Obligation" means, as to any Person, the obligation of
such Person to pay rent or other amounts under a lease to which such Person is a
party that is required to be classified and accounted for as a capital lease
obligation under GAAP.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"Change of Control" means (i) an event or series of events as a result of
which any "person" or "group" (as such terms are used in Sections 13(d)(3) and
14(d) of the Exchange Act) (excluding the Company or any wholly owned Subsidiary
thereof) is or becomes, directly or indirectly, the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not
applicable) of more than 50% of the combined voting power of the then
outstanding securities entitled to vote generally in elections of directors,
managers or trustees, as applicable, of the Company or any successor entity
("Voting Stock"), (ii) the completion of any consolidation or merger of the
Company with or into any other Person, or sale, conveyance, transfer or lease by
the Company of all or substantially all of its assets to any Person, or any
merger of any other Person into the Company in a single transaction or series of
related transactions, and, in the case of any such transaction or series of
related transactions, the outstanding Common Stock is changed or exchanged as a
result, unless the stockholders of the Company immediately before such
transaction own, directly or indirectly, immediately following such transaction,
at least a majority of the combined voting power of the outstanding voting
securities of the Person resulting from such transaction in substantially the
same proportion as their ownership of the Voting Stock immediately before such
transaction, or (iii) such time as the Continuing Directors do not constitute a
majority of the Board of Directors (or, if applicable, a successor corporation
to the Company); provided that a Change of Control shall not be deemed to have
occurred if either (x) the last sale price of the Common Stock for any five
trading days during the 10 trading days immediately preceding the Change of
Control is at least equal to 105% of the Conversion Price in effect on such day,
or (y) with respect to a merger or consolidation otherwise constituting a Change
of Control described in clause (ii) above, at least 90% of the consideration in
such transaction or transactions consists of common stock or securities
convertible into common stock that are, or upon issuance will be, traded on a
United States national securities exchange or approved for quotation on the
Nasdaq National Market.
"Continuing Director" means at any date a member of the Board of Directors
(i) who was a member of such board on the date of initial issuance of the Notes
or (ii) who was nominated or elected by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Board of Directors was recommended or endorsed by at least a
majority of the directors who were Continuing Directors at the time of such
nomination or election.
"Disqualified Capital Stock" means, with respect to the Company, Capital
Stock of the Company that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the happening
of an event or the passage of time would be, required to be redeemed or
repurchased (including at the option of the
28
<PAGE>
holder thereof) by the Company, in whole or in part, on or prior to the Stated
Maturity of the Notes, provided that only the portion of such Capital Stock
which is so convertible, exercisable, exchangeable or redeemable or subject to
repurchase prior to such Stated Maturity shall be deemed to be Disqualified
Capital Stock.
"Indebtedness" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of any such Person, (i) in
respect of borrowed money (whether or not the lender has recourse to all or any
portion of the assets of such person), (ii) evidenced by credit or loan
agreements, bonds, notes, debentures or similar instruments (including, without
limitation, notes or similar instruments given in connection with the
acquisition of any business, properties or assets of any kind), (iii) evidenced
by bankers' acceptances or similar instruments issued or accepted by banks, (iv)
for the payment of money relating to a Capitalized Lease Obligation or (v)
evidenced by a letter of credit or a reimbursement obligation of such Person
with respect to any letter of credit; (b) all obligations of such Person issued
or assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (c) all net obligations of such Person under Interest Swap and
Hedging Obligations; (d) all liabilities of others of the kind described in the
preceding clauses (a), (b) or (c) that such Person has guaranteed or that is
otherwise its legal liability, or which is secured by a lien on property of such
Person, and all obligations to purchase, redeem or acquire any Capital Stock;
and (e) any and all deferrals, renewals, extensions, modifications,
replacements, restatements, refinancings and refundings (whether direct or
indirect) of, or any indebtedness or obligation issued in exchange for, any
liability of the kind described in any of the preceding clauses (a), (b), (c) or
(d), or this clause (e), whether or not between or among the same parties.
"Interest Swap and Hedging Obligations" means the obligations of any Person
under any interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement or other interest rate hedge agreement, interest rate collar agreement
or other similar agreement or arrangement to which such Person is a party or
beneficiary.
"Junior Securities" means any Qualified Capital Stock and any Indebtedness
of the Company that is fully subordinated in right of payment to the Notes and
has no scheduled installment of principal due, by redemption, sinking fund
payment or otherwise, on or prior to the Stated Maturity of the Notes.
"Qualified Capital Stock" means any Capital Stock of the Company that is
not Disqualified Capital Stock.
"Senior Indebtedness" means all obligations of the Company to pay the
principal of, premium, if any, interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowable as a claim in any such
proceeding) and rent payable on or in connection with, and all fees, costs,
expenses and other amounts accrued or due on or in connection with, any
Indebtedness of the Company, whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed, guaranteed or in effect guaranteed by the
Company, unless the instrument creating or evidencing such Indebtedness provides
that such Indebtedness is not senior or superior in right of payment to the
Notes or is pari passu with, or subordinated to, the Notes; provided that in no
event shall Senior Indebtedness include (a) Indebtedness of the Company owed or
owing to any Subsidiary of the Company or any officer, director or employee of
the Company or any Subsidiary of the Company, (b) Indebtedness representing or
with respect to any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with the
obtaining of materials or services or (c) any liability for taxes owed or owing
by the Company or any Subsidiary of the Company.
"Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" of the Company within the meaning of Rule 1.02(w) of Regulation S-X
promulgated by the Commission as in effect as of the date of the Indenture.
"Stated Maturity" when used with respect to any Note, means September 15,
2004.
"Subsidiary" with respect to any Person, means (i) a corporation a majority
of whose Capital Stock with voting power normally entitled to vote in the
election of directors is at the time, directly or indirectly, owned by such
Person, by such Person and one or more Subsidiaries of such Person or by one or
more Subsidiaries of such Person, (ii) a partnership in which such Person or a
Subsidiary of such Person is, at the time, a general partner and owns alone or
together with one or more Subsidiaries of such Person a majority of the
partnership interests, or (iii) any other Person (other than a corporation) in
which such Person, one or more Subsidiaries of such Person or such Person and
one or more Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has at least a majority ownership interest.
29
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material United States federal income
and estate tax considerations relating to the purchase, ownership and
disposition of the Notes and of Common Stock into which Notes may be converted,
but does not purport to be a complete analysis of all the potential tax
considerations relating thereto. This summary is based on the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the applicable Treasury
Regulations promulgated or proposed thereunder ("Treasury Regulations"),
judicial authority and current administrative rulings and practice, all of which
are subject to change, possibly on a retroactive basis. This summary deals only
with holders that will hold Notes and Common Stock into which Notes may be
converted as "capital assets" (within the meaning of Section 1221). This
summary does not purport to deal with all aspects of U.S. federal income
taxation that might be relevant to particular holders in light of their personal
investment circumstances or status, nor does it address tax considerations
applicable to investors that may be subject to special tax rules, such as
certain financial institutions, tax-exempt organizations, insurance companies,
dealers in securities or currencies, persons that will hold Notes as a position
in a hedging transaction, "straddle" or "conversion transaction" for tax
purposes, or persons that have a "functional currency" other than the U.S.
dollar. Moreover, the effect of any applicable state, local or foreign tax laws
is not discussed. The Company has not sought any ruling from the IRS with
respect to the statements made and the conclusions reached in the following
summary, and there can be no assurance that the IRS will not take adverse
positions on examination. THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION
ONLY. INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME AND
ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR
UNDER ANY APPLICABLE TAX TREATY.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means the beneficial owner
of a Note or Common Stock that for United States federal income tax purposes is
(i) a citizen or resident of the United States, (ii) treated as a domestic
corporation or domestic partnership, or (iii) an estate or trust that is subject
to United States federal income taxation on a net income basis in respect of the
Notes or Common Stock. A trust will be a "United States Holder" of a Note only
if the trust is subject to the supervision of a court within the United States
and the control of a United States fiduciary as described in Section 7701 (a)
(30) of the Code.
Payment of Interest
Interest on a Note generally will be included in the income of a United
States Holder as ordinary income at the time such interest is received or
accrued, in accordance with such Holder's method of accounting for United States
federal income tax purposes. The Notes will not have original issue discount.
Amortizable Bond Premium
If a United States Holder of a Note acquires the Note at a cost that is in
excess of the amount payable at maturity (after reducing such costs by an amount
equal to the value of the conversion option), the United States Holder may elect
under Section 171 of the Code to amortize the excess cost (as an offset to
interest income) on a constant interest rate basis over the term of such Note.
However, because the Notes may be redeemed at the option of the Company at a
price in excess of their principal amount, a United States holder may be
required to amortize any bond premium based on the earlier call date and the
call price payable at that time. If the United States Holder makes an election
to amortize bond premium, the tax basis of all such United States Holder's Notes
will be reduced by the allowable bond premium amortization. The amortization
election would apply to all debt instruments held or subsequently acquired by
the electing purchaser and cannot be revoked without permission from the IRS.
On conversion of a Note into shares of Common Stock, no additional amortization
of any bond premium would be allowed, and any remaining premium would be added
to the United States Holder's basis in the Common Stock received.
Market Discount
Investors acquiring Notes pursuant to this Prospectus should consider that
the resale of those Notes may be adversely affected by the market discount
provisions of Sections 1276 through 1278 of the Code. Except as described
below, gain recognized on the disposition of a Note that has accrued market
discount will be treated as ordinary income,
30
<PAGE>
and not capital gain, to the extent of the accrued market discount. "Market
discount" is defined generally as the excess, if any, of (i) the principal
amount of the Note over (ii) the tax basis of the Note in the hands of the
United States Holder immediately after its acquisition.
Under a de minimis exception, there is no market discount if the excess of
the principal amount of the obligation over the United States Holder's tax basis
in the obligation is less than 0.25% of the principal amount multiplied by the
number of complete years after the acquisition date to the obligation's date of
maturity. Unless the United States Holder elects to accrue market discount on a
constant yield basis, the accrued market discount generally would be the amount
calculated by multiplying the market discount by a fraction, the numerator of
which is the number of days the obligation has been held by the United States
Holder and the denominator of which is the number of days after the United
States Holder's acquisition of the obligation up to and including its maturity
date.
If a United States Holder of a Note acquired with market discount disposes
of such Note in any transaction other than a sale, exchange or involuntary
conversion, such United States Holder will be deemed to have realized an amount
equal to the fair market value of the Note and will be required to recognize as
ordinary income any accrued market discount. See the discussion below under
"--Sale, Exchange or Redemption of the Notes" for the tax consequences of a
sale or exchange. A partial principal payment (if any) on a Note will be
includable as ordinary income upon receipt to the extent of any accrued market
discount thereon. Although it is not free from doubt, any accrued market
discount not previously taken into income prior to a conversion of a Note into
shares of Common Stock should carry over to the Common Stock received on
conversion and be treated as ordinary income upon a subsequent disposition of
such Common Stock, to the extent of any gain recognized on such disposition. A
United States Holder of a Note acquired at a market discount also may be
required to defer the deduction of all or a portion of the interest on any
indebtedness incurred or maintained to purchase or carry the Note until the
maturity of the Note or the earlier disposition of the Note in a taxable
transaction.
A United States Holder of a Note acquired at a market discount may elect to
include the market discount in income as it accrues (on either a straight-line
basis or a constant yield basis). This election would apply to all market
discount obligations as acquired by the electing United States Holder on or
after the first day of the first year to which the election applies. The
election may be revoked only with the consent of the IRS. If a United States
Holder of a Note elects to include market discount in income currently, the
rules discussed above regarding (i) ordinary income recognition resulting from a
sale and certain other disposition transactions and (ii) deferral of interest
deductions would not apply.
Sale, Exchange or Redemption of the Notes
Upon the sale, exchange or redemption of a Note, subject to the market
discount rules discussed above, a United States Holder generally will recognize
capital gain or loss equal to the difference between (i) the amount of cash
proceeds and the fair market value of any property received on the sale,
exchange or redemption (except to the extent such amount is attributable to
accrued and unpaid interest not previously recognized by such Holder, which is
taxable as ordinary income) and (ii) such Holder's adjusted tax basis in the
Note. A United States Holder's adjusted tax basis in a Note generally will
equal the cost of the Note to such Holder, less any principal payments received
by such Holder and increased by any market discount previously included in
income by such Holder. Such capital gain or loss will be long-term capital gain
or loss if the United States Holder's holding period in the Note is more than 18
months at the time of sale, exchange or redemption. Gains from the sale or
exchange of assets held for more than one year, but not more than 18 months,
qualify for a tax rate that is less favorable than the long-term rate but more
favorable than the rate applicable to ordinary income.
Conversion of the Notes
A United States Holder generally will not recognize any income, gain or
loss upon conversion of a Note into Common Stock, except with respect to cash
received in lieu of a fractional share of Common Stock. Such Holder's tax basis
in the Common Stock received on conversion of a Note will be the same as such
Holder's adjusted tax basis in the Note at the time of conversion (reduced by
any basis allocable to a fractional share interest), and the holding period for
the Common Stock received on conversion will generally include the holding
period of the Note converted.
Cash received in lieu of a fractional share of Common Stock upon conversion
should be treated as a payment in exchange for the fractional share of Common
Stock. Accordingly, the receipt of cash in lieu of a fractional share of Common
Stock generally should result in capital gain or loss (measured by the
difference between the cash received for the fractional share and the United
States Holder's adjusted tax basis in the fractional share).
31
<PAGE>
Dividends on the Common Stock
The amount of any distribution by the Company in respect of the Common
Stock will be equal to the amount of cash and the fair market value, on the date
of distribution, of any property distributed. Generally, distributions will be
treated as a dividend, subject to tax as ordinary income, to the extent of the
Company's current or accumulated earnings and profits, then as a tax-free return
of capital to the extent of the Holder's tax basis in the Common Stock and
thereafter as gain from the sale or exchange of such stock.
In general, a dividend distribution to a corporate United States Holder
will qualify for the 70% dividends received deduction if the Holder owns less
than 20% of the voting power and value of the Company's stock (other than any
non-voting, non-convertible, non-participating preferred stock). A corporate
United States Holder that owns 20% or more of the voting power and value of the
Company's stock (other than any nonvoting, non-convertible, non-participating
preferred stock) generally will qualify for an 80% dividends received deduction.
The dividends received deduction is subject, however, to certain holding period,
taxable income and other limitations.
If at any time (i) the Company makes a distribution of cash or property to
its stockholders or purchases Common Stock and such distribution or purchase
would be taxable to such stockholders as a dividend for United States federal
income tax purposes (e.g., distributions of evidences of indebtedness or assets
of the Company, but generally not stock dividends or rights to subscribe for
Common Stock) and, pursuant to the antidilution provisions of the Indenture, the
conversion price of the Notes is decreased, or (ii) the conversion price of the
Notes is decreased at the discretion of the Company, such decrease in conversion
price may be deemed to be the payment of a taxable dividend to United States
Holders of Notes (pursuant to Section 305 of the Code) to the extent of the
Company's current or accumulated earnings and profits. Such Holders of Notes
could therefore have taxable income as a result of an event pursuant to which
they received no cash or property.
Sale of Common Stock
Upon the sale or exchange of Common Stock, a United States Holder generally
will recognize capital gain or loss equal to the difference between (i) the
amount of cash and the fair market value of any property received upon the sale
or exchange and (ii) such Holder's adjusted tax basis in the Common Stock. Such
capital gain or loss will be long-term if the United States Holder's holding
period in the Common Stock is more than eighteen months at the time of the sale
or exchange. A United States Holder's basis and holding period in Common Stock
received upon conversion of a Note are determined as discussed above under "--
Conversion of the Notes."
Information Reporting and Backup Withholding Tax
In general, certain information is required to be reported by the payor to
the IRS with respect to payments of principal, premium, if any, and interest on
a Note (including the payment of liquidated damages under the Registration
Rights Agreement), payments of dividends on Common Stock, payments of the
proceeds of the sale of a Note and payments of the proceeds of the sale of
Common Stock to certain noncorporate United States Holders. The payor will be
required to withhold backup withholding tax at the rate of 31% if (a) the payee
fails to furnish a taxpayer identification number ("TIN") to the payor or
establish an exemption from backup withholding, (b) the IRS notifies the payor
that the TIN furnished by the payee is incorrect, (c) there has been a notified
payee under reporting with respect to interest, dividends or original issue
discount described in Section 3406(c) of the Code or (d) there has been a
failure of the payee to certify under the penalty of perjury that the payee is
not subject to backup withholding under the Code. Any amounts withheld under the
backup withholding rules from a payment to a United States Holder will be
allowed as a credit against such Holder's United States federal income tax and
may entitle the Holder to a refund, provided that the required information is
furnished to the IRS.
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means any beneficial
owner of a Note or Common Stock that is not a United States Holder.
Payment of Interest
Generally, interest income of a Non-United States Holder that is not
effectively connected with a United States trade or business will be subject to
a withholding tax at a 30% rate (or, if applicable, a lower treaty rate).
However, interest paid on a Note by the Company or any Paying Agent to a Non-
United States Holder will qualify for the
32
<PAGE>
"portfolio interest exemption" and therefore, subject to the discussion of
backup withholding below, will not be subject to United States federal income
tax or withholding tax, provided that such interest income is not effectively
connected with a United States trade or business of the Non-United States Holder
and provided that the Non-United States Holder (i) does not actually or
constructively own (pursuant to the conversion feature of the Notes or
otherwise) 10% or more of the combined voting power of all classes of stock of
the Company entitled to vote, (ii) is not a controlled foreign corporation
related to the Company actually or constructively through stock ownership, (iii)
is not a bank which acquired the Notes in consideration for an extension of
credit made pursuant to a loan agreement entered into in the ordinary course of
business and (iv) either (a) provides a Form W-8 (or a suitable substitute form)
signed under penalties of perjury that includes its name and address and
certifies as to its non-United States status in compliance with applicable law
and regulations, or (b) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business holds the Note and provides a statement to the Company or
its agent under penalties of perjury in which it certifies that such a Form W-8
(or a suitable substitute) has been received by it from the Non-United States
Holder or qualifying intermediary and furnishes the Company or its agent with a
copy thereof.
Proposed Treasury Regulations would provide alternative methods for
satisfying the certification requirement described in clause (iv) above. The
proposed Treasury Regulations also would require, in the case of Notes held by a
foreign partnership, that (i) the certification described in clause (iv) above
be provided by the partners rather than by the foreign partnership and (h) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. The proposed Treasury Regulations are proposed to be effective
for payments made after December 31, 1997. There can be no assurance that the
proposed Treasury Regulations will be adopted or as to the provisions that they
will include if and when adopted in temporary or final form.
Except to the extent that an applicable treaty otherwise provides, a Non-
United States Holder generally will be taxed in the same manner as a United
States Holder with respect to interest if the interest income is effectively
connected with a United States trade or business of the Non-United States
Holder. Effectively connected interest received by a corporate Non-United
States Holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or, if applicable, a lower treaty rate).
Even though such effectively connected interest is subject to income tax, and
may be subject to the branch profits tax, it is not subject to withholding tax
if the Holder delivers a properly executed IRS Form 4224 to the payor.
Sale, Exchange or Redemption of the Notes
A Non-United States Holder of a Note will generally not be subject to
United States federal income tax or withholding tax on any gain realized on the
sale, exchange or redemption of the Note (including the receipt of cash in lieu
of fractional shares upon conversion of a Note into Common Stock but not
including any amount representing interest or accrued market discount) unless
(1) the gain is effectively connected with a United States trade or business of
the Non-United States Holder, (2) in the case of a Non-United States Holder who
is an individual, such Holder is present in the United States for a period or
periods aggregating 183 days or more during the taxable year of the disposition
and certain other requirements are met, or (3) the Holder is subject to tax
pursuant to the provisions of the Code applicable to certain United States
expatriates.
Conversion of the Notes
In general, no United States federal income tax or withholding tax will be
imposed upon the conversion of a Note into Common Stock by a Non-United States
Holder except with respect to the receipt of cash in lieu of fractional shares
by Non-United States Holders upon conversion of a Note where any of the
conditions described above under "Non-United States Holders--Sale, Exchange or
Redemption of the Notes" is satisfied.
Sale or Exchange of Common Stock
Subject to the discussion below under "FIRPTA Treatment of Non-United
States Holders," a Non-United States Holder generally will not be subject to
United States federal income tax or withholding tax on the sale or exchange of
Common Stock unless any of the conditions described above under "Non-United
States Holders--Sale, Exchange or Redemption of the Notes" is satisfied.
33
<PAGE>
FIRPTA Treatment of Non-United States Holders
Under the Foreign Investment in Real Property Tax Act of 1980, as amended
("FIRPTA"), foreign persons generally are subject to United States federal
income tax on capital gain realized on the disposition of any interest (other
than solely as a creditor) in a corporation that is a United States real
property holding corporation (a "USRPHC"). For this purpose, a foreign person
is defined as any holder who is a foreign corporation (other than certain
foreign corporations that elect to be treated as domestic corporations), a non-
resident alien individual, a non-resident fiduciary of a foreign estate or
trust, or a foreign partnership. Under FIRPTA, a corporation is a USRPHC if the
fair market value of the United States real property interests held by the
corporation is 50% or more of the aggregate fair market value of certain assets
of the corporation.
The Company does not currently believe that it is a USRPHC. Thus, a
foreign person that holds shares of the Common Stock of the Company generally
will not be subject to the U.S. federal income tax on a sale or other
disposition of the shares of Common Stock. Even if a corporation meets the test
for a USRPHC, a foreign person would generally not be subject to tax, or
withholding in respect to such tax, on gain from a sale or other disposition of
such corporation's stock solely by reason of the corporation's USRPHC status if
the stock is regularly traded on an established securities market ("regularly
traded") during the calendar year in which such sale or disposition occurs,
provided that such holder does not own, actually or constructively, stock with a
fair market value in excess of 5 percent of the fair market value of all such
stock outstanding at any time during the shorter of the five-year period
preceding such disposition or the holder's holding period. The Company believes
that the Common Stock will be treated as regularly traded.
Dividends
Distributions by the Company with respect to the Common Stock that are
treated as dividends paid (or deemed paid), as described above under "United
States Holders--Dividends on the Common Stock" to a Non-United States Holder
(excluding dividends that are effectively connected with the conduct of a trade
or business in the United States by such Holder and are taxable as described
below) will be subject to United States federal withholding tax at a 30% rate
(or lower rate provided under any applicable income tax treaty). Except to the
extent that an applicable tax treaty otherwise provides, a Non-United States
Holder will be taxed in the same manner as a United States Holder on dividends
paid (or deemed paid) that are effectively connected with the conduct of a trade
or business in the United States by the Non-United States Holder. If such Non-
United States Holder is a foreign corporation, it may also be subject to a
United States branch profits tax on such effectively connected income at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
Even though such effectively connected dividends are subject to income tax, and
may be subject to the branch profits tax, they will not be subject to U.S.
withholding tax if the holder delivers IRS Form 4224 to the payor.
Under current United States Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and, under the current interpretation of the
Treasury Regulations, for purposes of determining the applicability of a tax
treaty rate. Under Treasury Regulations that are proposed to be effective for
distributions after 1997, however, a non-U.S. holder of Common Stock who wishes
to claim the benefit of an applicable treaty rate would be required to satisfy
applicable certification and other requirements. In addition, under the
proposed Treasury Regulations, in the case of common stock held by a foreign
partnership, the certification requirement would generally be applied to the
partners of the partnership and the partnership would be required to provide
certain information, including a United States taxpayer identification number.
The proposed Treasury Regulations also provide look-through rules for tiered
partnerships. It is not certain whether, or in what form, the proposed Treasury
Regulations will be adopted as final regulations.
Death of a Non-United States Holder
A Note held by an individual who is a Non-United States Holder at the time
of his or her death will not be includable in the decedent's gross estate for
United States estate tax purposes, provided that such Holder or beneficial owner
did not at the time of death actually or constructively own 10% or more of the
combined voting power of all classes of stock of the Company entitled to vote,
and provided that, at the time of death, payments with respect to such Notes
would not have been effectively connected with the conduct by such Non-United
States Holder of a trade or business within the United States.
34
<PAGE>
Common Stock actually or beneficially held (other than through a foreign
corporation) by a Non-United States Holder at the time of his or her death (or
previously transferred subject to certain retained rights or powers) will be
subject to United States federal estate tax unless otherwise provided by an
applicable estate tax treaty.
Information Reporting and Backup Withholding Tax
United States information reporting requirements and backup withholding tax
will not apply to payments on a Note to a Non-United States Holder if the
statement described in "Non-United States Holders--Payment of Interest" is duly
provided by such holder, provided that the payor does not have actual knowledge
that the holder is a United States person.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a Note or any payment of the
proceeds of the sale of Common Stock effected outside the United States by a
foreign office of a "broker" (as defined in applicable Treasury Regulations),
unless such broker is (i) a United States person, (ii) a foreign person that
derives 50% of more of its gross foreign income for certain periods from
activities that are effectively connected with the conduct of a trade or
business in the United States or (iii) a controlled foreign corporation for
United States federal income tax purposes. Payment of the proceeds of any such
sale effected outside the United States by a foreign office of any broker that
is described in (i), (ii) or (iii) of the preceding sentence will not be subject
to backup withholding tax, but will be subject to information reporting
requirements unless such broker has documentary evidence in its records that the
beneficial owner is a Non-United States Holder and certain other conditions are
met, or the beneficial owner otherwise establishes an exemption. Payment of the
proceeds of any such sale to or through the United States office of a broker is
subject to information reporting and backup withholding requirements, unless the
beneficial owner of the Note provides the statement described in "Non-United
States Holders--Payment of Interest" or otherwise establishes an exemption.
If paid to an address outside the United States, dividends on Common Stock
held by a Non-United States Holder will generally not be subject to the
information reporting and backup withholding requirements described in this
section, provided that the payor does not have actual knowledge that the holder
is a United States person. However, under the proposed Treasury Regulations,
dividend payments will be subject to information reporting and backup
withholding unless applicable certification requirements are satisfied. See the
discussion above with respect to rules applicable to foreign partnerships under
the proposed Treasury Regulations.
THE COMPANY
Under Section 279 of the Code, interest paid or incurred by a corporation
with respect to certain convertible, subordinated indebtedness that is utilized
to provide consideration for the acquisition of stock in another corporation (or
a substantial portion of the assets of another corporation) is not deductible
for federal income tax purposes to the extent interest on such "corporate
acquisition indebtedness" as defined in Section 279 exceeds $5 million per year,
reduced by the interest paid on certain other indebtedness that does not
constitute "corporate acquisition indebtedness" for purposes of Section 279, but
is used to fund corporate acquisitions. The Notes may constitute "corporate
acquisition indebtedness" for purposes of Section 279 of the Code, which could
result in all or a portion of the interest payments under the Notes not being
deductible for federal income tax purposes. Although there can be no assurance,
the Company does not anticipate that any significant portion of the interest
deductions with respect to the Notes will be disallowed pursuant to Section 279.
35
<PAGE>
PLAN OF DISTRIBUTION
The Notes were issued to the Selling Securityholders in connection with an
underwritten private placement and are convertible into Common Stock as
described in "Description of Notes -- Conversion Rights." The Company entered
into the Registration Rights Agreement with the Initial Purchasers for the
benefit of holders of the Notes to register their Notes and such Shares under
the Securities Act under certain circumstances and at certain times. The
Registration Rights Agreement provides for cross-indemnification of the Selling
Securityholders and the Company for losses, claims, damages, liabilities and
expenses arising, under certain circumstances, out of the registration of the
Notes and such Shares.
The Notes and such Shares may be sold from time to time by the Selling
Securityholders. The Selling Securityholders may from time to time sell all or
a portion of the Notes and such Shares in transactions on the American Stock
Exchange, in negotiated transactions, or a combination of such methods of sale,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Notes and such Shares may
be sold directly or through underwriters or broker-dealers. If the Notes or
Shares sold through underwriters or broker-dealers, the Selling Securityholders
may pay underwriting discounts or brokerage commissions and charges. The
methods by which the Notes and such Shares may be sold include (i) a block trade
in which the broker or dealer so engaged will attempt to sell the securities as
agent but may position and resell a portion of the block as principal to
facilitate the transaction, (ii) purchases by a broker or dealer as principal
and resale by such broker or dealer for its own account pursuant to this
Prospectus, (iii) exchange distributions and/or secondary distributions in
accordance with the rules of the American Stock Exchange, (iv) ordinary
brokerage transactions and transactions in which the broker solicits purchasers,
and (v) privately negotiated transactions.
Pursuant to the provisions of the Registration Rights Agreement, the
Company will pay the costs and expenses incident to its registration and
qualification of the Notes and Shares offered hereby, including registration and
filing fees. In addition, the Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities arising under
the Securities Act.
The Selling Securityholders and any underwriter or broker-dealer
participating in the distribution of the Notes and Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profits,
discounts, commissions or concessions paid or allowed to any such underwriter or
broker-dealer may be deemed to be underwriting discounts and commissions under
the Securities Act. The Selling Securityholders may indemnify any broker-dealer
that participates in transactions involving the sale of Notes and Shares against
certain liabilities, including liabilities under the Securities Act.
In addition, any securities covered by this Prospectus that qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this Prospectus. There can be no
assurance that any Selling Securityholder will sell any or all of the Notes or
Shares described herein, and any Selling Securityholder may transfer, devise or
gift such securities by other means not described herein.
LEGAL MATTERS
Certain legal matters with respect to the Notes and Shares have been passed
upon by Baker & Botts, L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements of Halter Marine Group, Inc.
appearing in Halter Marine Group, Inc.'s Annual Report on Form 10-K for the year
ended March 31, 1997, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of Texas Drydock, Inc. and
subsidiary as of September 30, 1995 and 1996, and for each of the years then
ended, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
36
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE
SPECIFICALLY OFFERED HEREBY OR OF ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
----------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information ........................ 1
Incorporation of Documents by Reference....... 2
The Company................................... 3
Risk Factors.................................. 4
Ratio of Earnings to Fixed Charges............ 10
Use of Proceeds............................... 10
Selling Securityholders....................... 11
Description of Notes.......................... 18
Certain United States Federal
Income Tax Consequences................... 30
Plan of Distribution.......................... 36
Legal Matters................................. 36
Experts....................................... 36
</TABLE>
HALTER MARINE GROUP, INC.
$185,000,000
4 1/2% CONVERTIBLE SUBORDINATED NOTES
DUE 2004
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
---------------------------
PROSPECTUS
---------------------------
December 29, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All of the expenses in connection with the distribution of the Notes
and Shares are set forth below and will be borne by the Registrant.
<TABLE>
<CAPTION>
<S> <C>
Registration Fee........................................................... $56,061
American Stock Exchange Listing Fee........................................ 17,500
*Legal Fees and Expenses.................................................... 15,000
*Accounting Fees and Expenses............................................... 9,000
*Total.................................................................. $97,561
=======
</TABLE>
- ------------
*Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware General Corporation Law
Section 145 (a) of the DGCL provides that a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a
director, officer, employee or agent of a corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 145(d) of the DGCL provides that any indemnification under
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b) of Section 145. Such determination shall be
made (1) by the board of directors by a majority vote of directors who were not
parties to such action, suit or proceeding, even though less than a quorum, or
(2) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the stockholders.
II-1
<PAGE>
Section 145(e) of the DGCL provides that expenses (including
attorneys' fees) incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in Section 145.
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
Section 102(b)(7) of the Delaware General Corporation Law provides,
generally, that the certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision may not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
section 174 of Title 8 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit. No
such provision may eliminate or limit the liability of a director for any act or
omission occurring prior to the date when such provision became effective.
Certificate of Incorporation
The Certificate of Incorporation of the Company provides that a
director of the Company will not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except, if required by the DGCL as amended from time to time, for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, which concerns unlawful payments of dividends, stock purchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. Neither the amendment nor repeal of such provision
will eliminate or reduce the effect of such provision in respect of any matter
occurring, or any cause of action, suit or claim that, but for such provision,
would accrue or arise, prior to such amendment or repeal.
While the Certificate provides directors with protection from awards
for monetary damages for breaches of their duty of care, it does not eliminate
such duty. Accordingly, the Certificate will have no effect on the availability
of equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care.
The Certificate provides that each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person, or a person of whom such person is the legal
representative, is or was or has agreed to become a director or officer of the
Company or is or was serving or has agreed to serve at the request of the
Company as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving or having agreed to serve as a director,
officer, employee or agent, will be indemnified and held harmless by the Company
to the fullest extent authorized by the DGCL, as the same exists or may
thereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment), against all expense, liability and loss (including attorneys'
fees, judgments, fines, amounts paid or to be paid in settlement and excise
taxes or penalties arising under ERISA) reasonably incurred or suffered by such
person in connection therewith. Such right to indemnification includes the
right to have the Company pay the expenses incurred in defending any such
proceeding in advance of its final disposition, subject to the provisions of the
DGCL. Such rights are not exclusive of any other right which any person may
have or thereafter acquire under any statute, provision of the Certificate,
Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
No repeal or modification of such provision will in any way diminish or
adversely affect the rights of any director, officer, employee or agent of the
Company thereunder in respect of any occurrence or matter arising prior to any
such repeal or modification. The Certificate also specifically authorizes the
Company to maintain insurance and to grant similar indemnification rights to
employees or agents of the Company.
Bylaws
The Bylaws of the Company provide that each person who was or is made
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person, or a person of whom such person is the
legal representative, is or was or has agreed to become a director or officer of
the Company or is or was serving or has agreed to serve at the request of the
Company
II-2
<PAGE>
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceedings is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving or having agreed to serve as a director,
officer, employee or agent shall be indemnified and held harmless by the Company
to the fullest extent authorized by the DGCL, as the same exists or may
thereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment), against all expense, liability or loss (including attorneys'
fees, judgments, fines, amounts paid or to be paid in settlement and excise
taxes or penalties arising under ERISA) reasonably incurred or suffered by such
person in connection therewith, and such indemnification shall continue as to a
person who has ceased to serve in the capacity which initially entitled such
person to indemnity thereunder and shall inure to the benefit of such person's
heirs, executors and administrators. Such right to indemnification includes the
right to have the Company pay the expenses incurred in defending any such
proceeding in advance of its final disposition, subject to the provisions of the
DGCL. Such rights are not exclusive of any other right which any person may have
or thereafter acquire under any statute, provision of the Certificate, Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise. No
repeal or modification of such provision will in any way diminish or adversely
affect the rights of any director, officer, employee or agent of the Company
thereunder in respect of any occurrence or matter arising prior to any such
repeal or modification. The Bylaws also specifically authorize the Company to
maintain insurance to protect itself and any director, officer, employee or
agent of the Company.
Indemnification Agreements
The Company has entered into Indemnification Agreements pursuant to
which it will indemnify certain of its directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
incurred as a result of the fact that any director or officer, in his capacity
as such, is made or threatened to be made a party to any suit or proceeding.
Such persons will be indemnified to the fullest extent now or hereafter
permitted by the DGCL. The Indemnification Agreements also provide for the
advancement of certain expenses to such directors and officers in connection
with any such suit or proceeding.
ITEM 16. EXHIBITS
3.1+ Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1
to the Company's Registration Statement on Form S-1 (Reg. No. 333-
6967)).
3.2+ Amended and Restated Bylaws (filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Reg. No. 333-6967)).
4.1* Indenture dated September 15, 1997 between the Company and United
States Trust Company of Texas, N.A., as Trustee for the Company's 4 1/2%
Convertible Subordinated Notes due 2004.
4.2* Registration Rights Agreement dated September 15, 1997, among the Company
and Donaldson, Lufkin & Jenrette Securities Corporation and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
4.3+ Form of Certificate representing shares of Common Stock (filed as Exhibit
4.1 to the Company's Registration Statement on Form S-1 (Reg. No. 333-
6967)).
4.4+ Rights Agreement dated September 23, 1996, between the Company and The
Bank of New York, as Rights Agent (filed as Exhibit 4.4 to the Company's
Registration Statement on Form S-3 (Reg. No. 333-39379)).
5.1* Opinion of Baker & Botts, L.L.P.
12.1 Statement regarding Computation of Ratios.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG Peat Marwick LLP.
24.1* Power of Attorney (included on signature pages to the Registration
Statement).
II-3
<PAGE>
25.1* Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of United States Trust Company of Texas, N.A.
99.1* Purchase Agreement dated September 9, 1997, among the Company and
Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
- --------------------
* Previously filed.
+ Incorporated herein by reference to the indicated filing.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of the prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Gulfport, State of Mississippi, on the 29th day of
December, 1997.
HALTER MARINE GROUP, INC.
By: /S/ Rick S. Rees
-----------------------------
Rick S. Rees
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
- --------- -------- ----
*
- --------------------- Chairman, President and December 29, 1997
John Dane III Chief Executive Officer
and Director (Principal
Executive Officer)
*
- --------------------- Senior Vice President December 29, 1997
Keith L. Voigts (Principal Accounting Officer)
/s/ Rick S. Rees
- --------------------- Executive Vice President, December 29, 1997
Rick S. Rees Chief Financial Officer
and Director (Principal
Financial Officer)
*
- --------------------- Director December 29, 1997
Kenneth W. Lewis
*
- --------------------- Director December 29, 1997
Daniel J. Mortimer
- --------------------- Director
Angus R. Cooper, II
- --------------------- Director
Burt H. Keenan
- --------------------- Director
Barry J. Galt
*By: /s/ Rick S. Rees
----------------------------
Rick S. Rees
Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
3.1+ Amended and Restated Certificate of Incorporation (filed as Exhibit
3.1 to the Company's Registration Statement on Form S-1 (Reg. No. 333-
6967)).
3.2+ Amended and Restated Bylaws (filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Reg. No. 333-6967)).
4.1* Indenture dated September 15, 1997 between the Company and United
States Trust Company of Texas, N.A., as Trustee for the Company's 4
1/2% Convertible Subordinated Notes due 2004.
4.2* Registration Rights Agreement dated September 15, 1997, among the
Company and Donaldson, Lufkin & Jenrette Securities Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
4.3+ Form of Certificate representing shares of Common Stock (filed as
Exhibit 4.1 to the Company's Registration Statement on Form S-1 (Reg.
No. 333-6967)).
4.4+ Rights Agreement dated September 23, 1996, between the Company and The
Bank of New York, as Rights Agent (filed as Exhibit 4.4 to the
Company's Registration Statement on Form S-3 (Reg. No. 333-39379)).
5.1* Opinion of Baker & Botts, L.L.P.
12.1 Statement regarding Computation of Ratios.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of KPMG Peat Marwick LLP.
24.1* Power of Attorney (included on signature pages to the Registration
Statement).
25.1* Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of United States Trust Company of Texas, N.A.
99.1* Purchase Agreement dated September 9, 1997, among the Company and
Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
- --------------------
* Previously filed.
+ Incorporated herein by reference to the indicated filing.
<PAGE>
EXHIBIT 12.1
STATEMENT OF COMPUTATION OF RATIOS
HALTER MARINE GROUP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------- -------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1996 1997 1997 1996 1997 1997
------ ------ ------ ------ ------ --------- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income before income taxes 30,290 31,734 25,878 20,567 27,003 21,501 7,213 18,899 17,261
Add Fixed charges 1,937 1,902 3,844 3,268 3,283 9,407 1,700 3,228 4,866
--------------------------------------------------- ------------------------
Earnings as adjusted 32,227 33,636 29,722 23,835 30,286 30,908 8,913 22,117 22,127
Fixed charges
Interest expense 1,937 1,902 3,844 3,268 3,232 8,485 1,700 3,150 4,430
Amortization of debt
expense 51 922 78 436
--------------------------------------------------- ------------------------
Total fixed charges 1,937 1,902 3,844 3,268 3,283 9,407 1,700 3,228 4,866
Ratio of earnings to fixed
charges 16.6 17.7 7.7 7.3 9.2 3.3 5.2 6.9 4.5
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-38491) and
related Prospectus of Halter Marine Group, Inc. for the registration of
$185,000,000 4 1/2% Convertible Subordinated Notes due 2004 and 5,873,016 shares
of common stock issuable upon conversion thereof and to the incorporation by
reference therein of our report dated May 8, 1997 (except Note 15, as to which
the date is May 16, 1997), with respect to the consolidated financial statements
of Halter Marine Group, Inc. included in its Annual Report (Form 10-K) for the
year ended March 31, 1997, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
New Orleans, Louisiana
December 24, 1997
<PAGE>
EXHIBIT 23.2
The Board of Directors
Halter Marine Group, Inc.
We consent to the reference to our firm under the heading "Experts" and to the
incorporation by reference in Amendment No. 1 to the registration statement on
Form S-3 of Halter Marine Group, Inc. for the registration of $185,000,000 of 4
1/2% Convertible Subordinated Notes due 2004 and 5,873,016 shares of its common
stock of our report dated November 22, 1996, except as to Note 9, which is as of
May 16, 1997, with respect to the consolidated balance sheets of Texas Drydock,
Inc. and subsidiary as of September 30, 1995 and 1996, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the years in the two-year period then ended, which report appears in the
Form 8-K/A of Halter Marine Group, Inc. dated October 21, 1997.
/s/ KPMG Peat Marwick LLP
New Orleans, Louisiana
December 24, 1997
