<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1997
REGISTRATION NUMBER 333-24141
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GULFMARK OFFSHORE, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 4499 76-0526032
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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5 POST OAK PARK, SUITE 1170
HOUSTON, TEXAS 77027
(713) 963-9522
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
FRANK R. PIERCE
GULFMARK OFFSHORE, INC.
5 POST OAK PARK, SUITE 1170
HOUSTON, TEXAS 77027
(713) 963-9522
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
W. GARNEY GRIGGS, ESQ.
GRIGGS & HARRISON, P.C.
1301 MCKINNEY, SUITE 3200
HOUSTON, TEXAS 77010-3033
(713) 651-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the Distribution described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
GULFMARK OFFSHORE, INC.
CROSS REFERENCE SHEET
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ITEM OF FORM S-4 LOCATION IN THE PROSPECTUS
---------------- --------------------------
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1. Forepart of Registration Statement and Outside Front Cover Page
of Prospectus.................................................... Cover of Registration Statement;
Cross Reference Sheet; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus.......... Inside Front Cover Page of
Prospectus; Available
Information; Table of
Contents; Incorporation of
Certain Documents by Reference
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information...................................................... Summary; Certain Considerations;
New GulfMark Risk Factors;
General Information about the
Meetings; Material Federal
Income Tax Considerations;
GulfMark Selected Consolidated
Financial Data; New GulfMark
Selected Financial Data; Pro
Forma Condensed Consolidated
Financial Statements; Notes to
Pro Forma Condensed Financial
Statements; Comparative Rights
of Stockholders of GulfMark
and New GulfMark; Price Range
of Common Stock and Dividend
Policy
4. Terms of the Transaction......................................... Background of the Transactions;
EVI's Reasons for the
Transactions; GulfMark's
Reasons for the Transactions;
Pre-Merger Transactions; The
Merger; Description of EVI and
New GulfMark Capital Stock;
Comparative Rights of
Stockholders of GulfMark and
New GulfMark; Material Federal
Income Tax Considerations
5. Pro Forma Financial Information.................................. Pro Forma Condensed Consolidated
Financial Statements; Notes to
Pro Forma Condensed
Consolidated Financial
Statements; Summary
6. Material Contracts with GulfMark Being Acquired.................. Not Applicable
7. Additional Information Required for Reoffering by Persons and
Parties Deemed to be Underwriters................................ Not Applicable
8. Interests of Named Experts and Counsel........................... Legal Matters; Experts
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities....................................... Not Applicable
10. Information with Respect to S-3 Registrants...................... Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
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ITEM OF FORM S-4 LOCATION IN THE PROSPECTUS
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11. Incorporation of Certain Information by Reference................ Incorporation of Certain
Documents by Reference
12. Information with Respect to S-2 or S-3 Registrants............... Not Applicable
13. Incorporation of Certain Information by Reference................ Not Applicable
14. Information with Respect to Registrants Other Than S-3 or S-2
Registrants...................................................... Description of New GulfMark --
GulfMark Marine Business;
Description of New GulfMark --
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations; New GulfMark
Selected Financial Data
15. Information with Respect to S-3 Companies........................ Not Applicable
16. Information with Respect to S-2 or S-3 Companies................. Not Applicable
17. Information with Respect to Companies Other Than S-3 or S-2
Companies........................................................ GulfMark Selected Consolidated
Financial Data; GulfMark
Retained Assets Selected
Financial Data; Management's
Discussion and Analysis of
Financial Condition and
Results of
Operations -- GulfMark; Price
Range of Common Stock and
Dividend Policy; Description
of GulfMark Retained Assets
18. Information if Proxies, Consents or Authorizations are to be
Solicited........................................................ Incorporation of Certain
Documents by Reference; General
Information About the
Meetings; Interests of Certain
Persons in the Transactions;
The Merger; Description of New
GulfMark -- Director
Compensation; Description of
New GulfMark -- Executive
Officers and Compensation;
Stock Ownership and Certain
Beneficial Owners
19. Information if Proxies, Consents or Authorizations are not to be
Solicited or in an Exchange Offer................................ Not Applicable
</TABLE>
<PAGE> 4
[GulfMark Logo]
GULFMARK INTERNATIONAL, INC.
5 POST OAK PARK, SUITE 1170
HOUSTON, TEXAS 77027-3414
March 31, 1997
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Special Meeting") of GulfMark International, Inc. ("GulfMark") to be held at
11:00 a.m., C.D.T., on Wednesday, April 30, 1997, at The Ritz-Carlton Hotel,
1919 Briar Oaks, Houston, Texas.
At the Special Meeting you will be asked to consider a proposal to approve
and adopt an Agreement and Plan of Distribution dated as of December 5, 1996
(the "Distribution Agreement"), by and among Energy Ventures, Inc. ("EVI"),
GulfMark and GulfMark Offshore, Inc., a wholly owned subsidiary of GulfMark
("New GulfMark"), pursuant to which GulfMark will, prior to the Merger, as
defined below, (i) contribute its offshore marine services business to New
GulfMark (the "Contribution") and (ii) then distribute all shares of the common
stock of New GulfMark pro rata to all holders of GulfMark common stock, $1.00
par value (the "Distribution"). You will also be asked to consider a proposal to
approve and adopt the Agreement and Plan of Merger dated December 5, 1996, as
amended (the "Merger Agreement"), among EVI, GulfMark Acquisition Co., a wholly
owned subsidiary of EVI ("Sub"), GulfMark and New GulfMark, providing for the
merger of Sub with and into GulfMark (the "Merger") pursuant to which each
outstanding share of GulfMark common stock will be converted into the right to
receive .6695 of one share of EVI common stock, $1.00 par value, subject to
adjustment under the Merger Agreement. Finally, you will be asked to consider
certain proposals amending GulfMark's stock option plans ("Stock Option
Amendments") to provide anti-dilution provisions allowing for an adjustment
mechanism to preserve the equivalent intrinsic value to the option holders upon
the consummation of the transactions contemplated by the Contribution, the
Distribution and the Merger.
A summary of the basic terms and conditions of the Contribution, the
Distribution, the Merger and the Stock Option Amendments, certain financial and
other information relating to GulfMark, New GulfMark and EVI and copies of the
Merger Agreement, the Distribution Agreement and the Stock Option Amendments are
set forth in the enclosed Joint Proxy Statement/Prospectus. Please review and
consider the enclosed materials carefully. In connection with the approval of
the foregoing proposals the Board of Directors received and took into account
the opinion of Jefferies & Company, Inc. ("Jefferies"), an investment banking
firm retained by GulfMark, that the Distribution of New GulfMark shares to
GulfMark stockholders and the common stock exchange ratio of one share of
GulfMark common stock to .6695 shares of EVI common stock was fair to the
stockholders of GulfMark from a financial point of view. A copy of the Jefferies
opinion is included in the accompanying Joint Proxy Statement/Prospectus.
The Board of Directors has approved the Contribution, the Distribution, the
Merger and the Stock Option Amendments. THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE FOR THEIR APPROVAL.
The Board of Directors appreciates and encourages stockholder participation
in GulfMark's affairs. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, IT
IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED. ACCORDINGLY, WE ASK THAT
YOU MARK, DATE, SIGN AND RETURN YOUR PROXY AT YOUR EARLIEST CONVENIENCE IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. If
you have multiple stockholder accounts and receive more than one set of these
materials, please be sure to vote each proxy and return it in the respective
postage-paid envelope provided.
Thank you for your continued interest and cooperation.
Very truly yours,
/s/ DAVID J. BUTTERS
David J. Butters
Chairman of the Board of Directors
<PAGE> 5
GULFMARK INTERNATIONAL, INC.
5 POST OAK PARK, SUITE 1170
HOUSTON, TEXAS 77027
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of GulfMark
International, Inc. ("GulfMark") will be held at The Ritz-Carlton Hotel, 1919
Briar Oaks, Houston, Texas, on Wednesday, April 30, 1997, at 11:00 a.m., C.D.T.,
for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Distribution dated as of December 5, 1996 (the
"Distribution Agreement"), by and among GulfMark, GulfMark Offshore, Inc.,
a wholly owned subsidiary of GulfMark ("New GulfMark"), and Energy
Ventures, Inc. ("EVI"), pursuant to which GulfMark will, prior to the
Merger, as defined below, (i) contribute its offshore marine services
business to New GulfMark (the "Contribution") and (ii) then distribute (the
"Distribution") all shares of the common stock, $.01 par value, of New
GulfMark ("New GulfMark Common Stock") pro rata to all holders of the
common stock, $1.00 par value, of GulfMark ("GulfMark Common Stock");
2. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger dated December 5, 1996, as amended (the
"Merger Agreement"), among EVI, GulfMark Acquisition Co., a wholly owned
subsidiary of EVI ("Sub"), GulfMark and New GulfMark, pursuant to which Sub
will merge with and into GulfMark (the "Merger") and each outstanding share
of GulfMark Common Stock will be converted into the right to receive .6695
of one share of EVI common stock, $1.00 par value, subject to adjustment
under the Merger Agreement;
3. To approve an amendment to the GulfMark International, Inc. Amended
and Restated 1993 Non-Employee Director Stock Option Plan to provide for
appropriate anti-dilution adjustments in connection with certain corporate
transactions;
4. To approve an amendment to the GulfMark International, Inc. 1987
Stock Option Plan, as amended, to provide for appropriate anti-dilution
adjustments in connection with certain corporate transactions and to
provide that the number of shares reserved for issuance thereunder is
subject to adjustment in accordance with amended anti-dilution provisions
and may serve to increase the number of shares for issuance thereunder
without stockholder approval; and
5. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
Each proposal will be voted upon separately by the stockholders of
GulfMark; however, GulfMark will not proceed with the Contribution, Distribution
and Merger described in this Joint Proxy Statement/Prospectus unless the
proposals set forth in paragraphs 1 and 2 above are both approved by the
stockholders of GulfMark.
<PAGE> 6
The Board of Directors has fixed the close of business on March 17, 1997,
as the record date for the determination of stockholders entitled to receive
notice of and to vote at the Special Meeting or any adjournment or postponement
thereof. Only stockholders of record at the close of business on such record
date are entitled to notice of and to vote at such meeting. A complete list of
such stockholders will be available for examination at the Special Meeting and
at GulfMark's offices at 5 Post Oak Park, Suite 1170, Houston, Texas, during
ordinary business hours, after April 20, 1997, for the examination of any such
stockholder for any purpose germane to the Special Meeting.
By Order of the Board of Directors,
/s/ FRANK R. PIERCE
Frank R. Pierce
Corporate Secretary
March 31, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING, AND IT IS
IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING, REGARDLESS OF THE
NUMBER OF SHARES YOU HOLD. PLEASE PROMPTLY COMPLETE, SIGN AND MAIL THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE WHETHER OR NOT YOU INTEND TO BE PRESENT AT
THE SPECIAL MEETING. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE AT THE
SPECIAL MEETING.
YOU SHOULD NOT RETURN ANY GULFMARK COMMON STOCK CERTIFICATES WITH THE
ENCLOSED PROXY. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES UNTIL YOU HAVE
RECEIVED A LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
<PAGE> 7
ENERGY VENTURES, INC. GULFMARK INTERNATIONAL, INC.
JOINT PROXY STATEMENT
SPECIAL MEETINGS OF STOCKHOLDERS TO BE HELD APRIL 30, 1997
---------------------
ENERGY VENTURES, INC.
(COMMON STOCK, $1.00 PAR VALUE)
PROSPECTUS
GULFMARK OFFSHORE, INC.
(COMMON STOCK, $.01 PAR VALUE)
PROSPECTUS
---------------------
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
Energy Ventures, Inc., a Delaware corporation ("EVI"), in connection with the
solicitation of proxies by its Board of Directors for use at the Special Meeting
of Stockholders of EVI (the "EVI Special Meeting") scheduled to be held on April
30, 1997, at 9:00 a.m., C.D.T., at The Ritz-Carlton Hotel, 1919 Briar Oaks,
Houston, Texas, and any adjournment or postponement thereof, and to stockholders
of GulfMark International, Inc., a Delaware corporation ("GulfMark"), in
connection with the solicitation of proxies by its Board of Directors for use at
the Special Meeting of Stockholders of GulfMark (the "GulfMark Special Meeting")
scheduled to be held on April 30, 1997, at 11:00 a.m., C.D.T., at The
Ritz-Carlton Hotel, 1919 Briar Oaks, Houston, Texas, and any adjournment or
postponement thereof. See "General Information about the Meetings".
At the EVI Special Meeting and the GulfMark Special Meeting, the holders of
the common stock, $1.00 par value, of EVI ("EVI Common Stock") and the holders
of the common stock, $1.00 par value, of GulfMark ("GulfMark Common Stock"),
respectively, will be asked to consider and vote on a proposal ("Merger
Proposal") to approve and adopt the Agreement and Plan of Merger dated December
5, 1996, as amended (the "Merger Agreement"), among EVI, GulfMark Acquisition
Co., a wholly owned Delaware subsidiary of EVI ("Sub"), GulfMark and GulfMark
Offshore, Inc., a wholly owned Delaware subsidiary of GulfMark ("New GulfMark"),
pursuant to which Sub will merge with and into GulfMark (the "Merger") and the
holders of the issued and outstanding shares of GulfMark Common Stock will be
entitled to receive .6695 of one share of EVI Common Stock for each share of
GulfMark Common Stock held by them as of the effective time of the Merger,
subject to adjustment under the Merger Agreement. See "The Merger".
At the GulfMark Special Meeting, holders of the GulfMark Common Stock also
will be asked to consider and vote on a proposal ("Contribution Proposal") to
approve the contribution of certain assets, principally the assets comprising
the GulfMark Marine Business (as hereinafter defined), not desired by EVI in the
Merger (the "Contribution") to New GulfMark, and the distribution (the
"Distribution") by GulfMark of all of the outstanding shares of New GulfMark's
common stock, $.01 par value ("New GulfMark Common Stock"), to the holders of
the GulfMark Common Stock on the basis of two shares of New GulfMark Common
Stock for each share of GulfMark Common Stock held by such stockholders. The
Contribution and the Distribution will be effected pursuant to the terms of an
Agreement and Plan of Distribution dated December 5, 1996 (the "Distribution
Agreement"), by and among GulfMark, New GulfMark and EVI. See "Pre-Merger
Transactions".
---------------------
All information in this Joint Proxy Statement/Prospectus relating to EVI
and Sub (other than tax consequences, which has been supplied by GulfMark) has
been supplied by EVI and all information relating to GulfMark and New GulfMark
has been supplied by GulfMark and New GulfMark.
---------------------
The Contribution, the Distribution and the Merger are being effected as a
means of allowing EVI to acquire GulfMark without acquiring GulfMark's offshore
marine services division and certain other related assets of GulfMark ("GulfMark
Marine Business") and allowing GulfMark to separate the GulfMark Marine Business
from GulfMark's other assets. As a result, the assets of GulfMark as of the
effective time of the Merger will consist of (i) 2,235,572 shares of EVI Common
Stock held by GulfMark, (ii) the assets of GulfMark's erosion control division
("Ercon") and (iii) certain miscellaneous corporate assets ((i)-(iii)
collectively, the "GulfMark Retained Assets"). See "Pre-Merger
Transactions -- Terms of the Contribution". New GulfMark will be required to
assume all of the liabilities and obligations of GulfMark with respect to the
transferred assets and certain historical liabilities of GulfMark and its
subsidiaries. See "Pre-Merger Transactions -- Terms of the Contribution". As a
condition to the Merger, GulfMark will be required to have completed the
Contribution and the Distribution. As a result of the Contribution and the
Distribution, as of the effective time of the Merger, the business and
operations of GulfMark will have effectively been separated, with EVI acquiring
the business and operations relating to the GulfMark Retained Assets and New
GulfMark acquiring the business and operations of the GulfMark Marine Business.
This Joint Proxy Statement/Prospectus, the attached Notices of the Special
Meetings of EVI and GulfMark and the enclosed forms of proxy are first being
mailed to stockholders of EVI and GulfMark on or about March 31, 1997.
<PAGE> 8
The obligations of EVI, Sub, GulfMark and New GulfMark to consummate the
Contribution, the Distribution and the Merger and the transactions contemplated
thereby are subject to the satisfaction or waiver of certain conditions. For a
description of such conditions, see "Pre-Merger Transactions -- Conditions to
the Distribution" and "The Merger -- Terms of the Merger -- Conditions to the
Merger".
A copy of the Merger Agreement and the Distribution Agreement are attached
as Appendices A and B, respectively. It is anticipated that the Contribution,
the Distribution and the Merger will be effected as soon as practicable
following the Special Meetings.
Holders of GulfMark Common Stock also will be asked to consider and vote
upon two proposals (the "Plan Amendment Proposals") to amend the Amended and
Restated 1993 Non-Employee Director Stock Option Plan (the "Director Plan") and
the 1987 Stock Option Plan, as amended (the "Employee Plan"), to provide for
appropriate anti-dilution adjustments in connection with certain corporate
transactions, such as the Distribution, and with respect only to the Employee
Plan, that the number of shares reserved for issuance thereunder is subject to
adjustment in accordance with the anti-dilution provisions and may serve to
increase the number of shares reserved for issuance thereunder without
stockholder approval. See "GulfMark Stock Option Plans and GulfMark Stock Option
Policy".
Each proposal, including the Plan Amendment Proposals, will be voted upon
separately by the stockholders of GulfMark; however, EVI and GulfMark will not
proceed with any of the transactions described in this Joint Proxy
Statement/Prospectus unless both the Contribution Proposal and the Merger
Proposal are approved by the holders of GulfMark Common Stock and the Merger
Proposal is approved by the holders of EVI Common Stock. The Contribution
Proposal, the Merger Proposal and the Plan Amendment Proposals are herein
collectively referred to as the "Proposals".
If the Contribution Proposal and the Merger Proposal are approved and the
other conditions to the consummation of the Contribution, the Distribution and
the Merger are satisfied or waived, the following additional actions will be
taken in connection therewith:
(i) GulfMark will elect, as the sole stockholder of New GulfMark prior
to the Distribution, the directors of New GulfMark, who are expected to be
the same as the current directors of GulfMark (see "Description of New
GulfMark -- Directors");
(ii) New GulfMark will assume and adopt GulfMark's Director Plan and
the Employee Plan (collectively referred to herein as the "GulfMark Stock
Option Plans") and all outstanding stock options granted thereunder, as
well as all outstanding stock options issued pursuant to GulfMark's 1988
Non-Employee Director Option Policy (the "GulfMark Stock Option Policy")
(see "GulfMark Stock Option Plans and GulfMark Stock Option Policy"); and
(iii) New GulfMark will assume the Assumed Liabilities, as defined
herein, which generally include all the debts, liabilities and other
obligations of GulfMark other than liabilities arising out of the GulfMark
Retained Assets after the effective date of the Merger. See "Pre-Merger
Transactions".
In addition, if all of the Proposals are approved, the exercise prices and
number of shares subject to GulfMark options being assumed by New GulfMark will
be adjusted to preserve the aggregate intrinsic value of each option. See
"GulfMark Stock Option Plans and GulfMark Stock Option Policy".
This Joint Proxy Statement/Prospectus constitutes the prospectus of EVI
pursuant to the Securities Act of 1933 (the "Securities Act") with respect to
the issuance of the shares of EVI Common Stock in connection with the Merger.
Application has been or will be made to list the shares of EVI Common Stock to
be issued in the Merger on the New York Stock Exchange (the "NYSE").
This Joint Proxy Statement/Prospectus also constitutes a prospectus of New
GulfMark with respect to the shares of New GulfMark Common Stock to be
distributed by GulfMark to its stockholders. New GulfMark will apply for
quotation of the New GulfMark Common Stock on the Nasdaq National Market System
under the symbol "GMRK". Prior to the Merger, there has been no public market
for the New GulfMark Common Stock.
On March 25, 1997, the closing prices of EVI Common Stock and GulfMark
Common Stock, as reported on the NYSE and the Nasdaq National Market System were
$58 5/8 and $67, respectively.
AN INVESTMENT IN EVI COMMON STOCK AND NEW GULFMARK COMMON STOCK AFTER THE MERGER
INVOLVES CERTAIN RISKS.
SEE "CERTAIN CONSIDERATIONS" ON PAGE 34 AND "NEW GULFMARK RISK FACTORS" ON PAGE
35.
---------------------
THE SHARES OF EVI COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER AND
THE SHARES OF NEW GULFMARK COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE
DISTRIBUTION HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS MARCH 31, 1997.
2
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TABLE OF CONTENTS
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AVAILABLE INFORMATION............................. 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE... 6
SUMMARY........................................... 8
The Companies................................... 8
The Special Meetings............................ 9
Pre-Merger Transactions......................... 10
The Merger...................................... 10
Material Federal Income Tax Considerations...... 13
Amendment of GulfMark Stock Option Plans........ 14
Comparative Rights of Stockholders of EVI and
GulfMark...................................... 14
Price Range of Common Stock and Dividend
Policy........................................ 14
Pro Forma Condensed Consolidated Financial
Data.......................................... 15
EVI Summary Historical Financial Data........... 16
GulfMark Summary Historical Financial Data...... 17
New GulfMark Summary Historical Financial
Data.......................................... 18
Comparative Per Share Information............... 19
GENERAL INFORMATION ABOUT THE MEETINGS............ 20
Date, Time and Place of Special Meetings........ 20
Record Date and Outstanding Shares.............. 20
Purposes of the Special Meetings................ 20
EVI........................................... 20
GulfMark...................................... 20
Vote Required................................... 20
EVI........................................... 20
GulfMark...................................... 21
Voting and Revocation of Proxies................ 21
Solicitation of Proxies......................... 21
No Dissenters' Rights........................... 22
Other Matters................................... 22
BACKGROUND OF THE TRANSACTIONS.................... 23
History......................................... 23
The EVI Special Committee....................... 24
The GulfMark Special Committee.................. 25
The Boards of Directors' Meetings............... 25
EVI'S REASONS FOR THE TRANSACTIONS................ 26
GULFMARK'S REASONS FOR THE TRANSACTIONS........... 27
OPINIONS OF FINANCIAL ADVISORS.................... 28
Prudential Securities Opinion................... 28
Comparable Company Analysis................... 29
Adjusted Market Value to Revenues............. 30
Adjusted Market Value to EBIT................. 30
Adjusted Market Value to EBIDTA............... 30
Adjusted Market Value to Earnings............. 30
Dilution/Accretion Analysis................... 30
Jefferies Opinion............................... 31
Discounted Cash Flow Analysis................. 32
Contribution Analysis......................... 32
Comparable Transactions Analysis.............. 33
CERTAIN CONSIDERATIONS............................ 34
Cautionary Statements........................... 34
Material Federal Income Tax Consequences........ 34
Absence of Trading Market; Market Prices........ 35
NEW GULFMARK RISK FACTORS......................... 35
Offshore Marine Services; Market Volatility..... 35
Reliance on Significant Customers............... 35
Environmental and Government Regulation......... 35
Operating Risks and Insurance................... 36
Reliance on Foreign Operations.................. 36
</TABLE>
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Currency Fluctuations........................... 36
Age of Fleet.................................... 37
Competition..................................... 37
High Leverage and Debt Service.................. 37
ORGANIZATION OF EVI, GULFMARK AND NEW GULFMARK
BEFORE AND AFTER THE TRANSACTIONS............... 38
PRE-MERGER TRANSACTIONS........................... 38
The Contribution and the Distribution........... 38
Terms of the Contribution....................... 39
Terms of the Distribution....................... 39
Conditions to the Distribution.................. 39
Indemnification................................. 39
Covenants of New GulfMark....................... 40
Tax Allocation Agreement........................ 40
Employee Benefits............................... 41
Federal Securities Law Consequences............. 41
No Dissenters' Rights........................... 41
Certain Definitions............................. 42
THE MERGER........................................ 43
Terms of the Merger............................. 43
General Description of the Merger............. 43
Effective Time of the Merger.................. 43
Manner and Basis of Converting Shares......... 43
GulfMark Employee Benefits.................... 44
Conditions to the Merger...................... 44
Representations and Warranties of the Parties
to the Merger Agreement..................... 45
Conduct of Business of GulfMark and EVI Prior
to Merger................................... 46
Management Following Merger................... 47
Termination or Amendment of Merger
Agreement................................... 47
Governmental and Regulatory Approvals........... 48
Accounting Treatment............................ 48
NYSE Listing of EVI Common Stock................ 48
Federal Securities Law Consequences............. 48
No Dissenters' Rights........................... 48
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS........ 49
Federal Income Tax Consequences of the
Transactions.................................. 49
Backup Withholding.............................. 51
INTERESTS OF CERTAIN PERSONS IN THE
TRANSACTIONS.................................... 52
GulfMark and Lehman Ownership................... 52
Indemnity....................................... 52
GULFMARK STOCK OPTION PLANS AND GULFMARK STOCK
OPTION POLICY................................... 53
Treatment of Outstanding Stock Options.......... 53
Plan Amendment Proposals........................ 53
Amended and Restated 1993 Non-Employee Director
Stock Option Plan........................... 54
Purpose....................................... 55
Administration................................ 55
Eligibility and Participation................. 55
Shares Subject to Options..................... 55
Grant of Options.............................. 56
Exercise of Options........................... 56
Rights of Optionees........................... 56
Changes in Capital Structure.................. 56
Amendment of the Director Plan................ 57
</TABLE>
3
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TABLE OF CONTENTS -- (CONTINUED)
<TABLE>
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Duration of the Director Plan; Registration of
Shares...................................... 58
Termination................................... 58
Federal Income Tax Consequences............... 59
Benefits...................................... 59
1987 Stock Option Plan.......................... 60
Purpose....................................... 61
Eligibility and Participation................. 61
Administration................................ 61
Grant of Options.............................. 61
Shares Subject to Options..................... 62
Option Terms.................................. 62
Duration of the Employee Plan; Registration of
Shares...................................... 62
Changes in Capital Structure.................. 62
Termination or Amendment of the Employee
Plan........................................ 63
Limitations................................... 64
Federal Income Tax Consequences............... 64
Benefits...................................... 65
1988 Non-Employee Director Option Policy...... 65
Eligibility and Participation............... 66
Option Terms................................ 66
Federal Income Tax Consequences............. 66
Benefits.................................... 67
EVI SELECTED CONSOLIDATED FINANCIAL DATA.......... 68
GULFMARK SELECTED CONSOLIDATED FINANCIAL DATA..... 69
NEW GULFMARK SELECTED FINANCIAL
DATA............................................ 70
GULFMARK RETAINED ASSETS SELECTED FINANCIAL
DATA............................................ 71
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS...................................... 72
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS............................ 75
DESCRIPTION OF EVI................................ 76
General......................................... 76
Recent Developments............................. 76
DESCRIPTION OF NEW GULFMARK....................... 77
GulfMark Marine Business........................ 77
General....................................... 77
Risk Factors.................................. 78
Vessels....................................... 78
Operations.................................... 79
North Sea..................................... 79
Southeast Asia................................ 79
Brazil........................................ 80
Other Considerations.......................... 80
Customers, Charter Terms and Competition...... 80
Environmental and Government Regulation....... 81
Operational Risks and Insurance............... 81
Seasonality of Business....................... 81
Employees..................................... 82
Properties.................................... 82
Legal Proceedings............................. 82
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 82
Liquidity and Capital Resources............... 82
Results of Operations......................... 83
Currency Fluctuations and Inflation........... 85
Accounting Pronouncements....................... 85
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Directors....................................... 86
Committees and Meetings of Directors............ 87
Compensation Committee Interlocks and Insider
Participation................................. 87
Director Compensation........................... 87
Executive Officers and Compensation............. 88
DESCRIPTION OF GULFMARK RETAINED ASSETS........... 91
DESCRIPTION OF EVI AND NEW GULFMARK CAPITAL
STOCK........................................... 91
EVI............................................. 91
New GulfMark.................................... 93
COMPARATIVE RIGHTS OF STOCKHOLDERS OF EVI AND
GULFMARK........................................ 94
Special Vote Required for Certain
Combinations.................................. 94
Vote Required for Corporate Transactions and
Other Matters................................. 94
Disposition of Assets........................... 94
Power to Amend By-laws.......................... 95
Quorum Requirements for Directors' Meetings..... 95
Removal of Directors............................ 95
Director Elections, Qualifications and Number... 95
COMPARATIVE RIGHTS OF STOCKHOLDERS OF GULFMARK AND
NEW GULFMARK.................................... 96
Special Vote Required for Certain
Combinations.................................. 96
Vote Required for Corporate Transactions and
Other Matters................................. 96
Disposition of Assets........................... 96
Power to Amend By-laws.......................... 97
Quorum Requirements for Directors' Meetings..... 97
Removal of Directors............................ 97
Director Elections, Qualifications and Number... 97
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY... 98
STOCK OWNERSHIP AND CERTAIN BENEFICIAL OWNERS..... 99
EVI............................................. 99
GulfMark and New GulfMark....................... 100
Security Ownership of Directors and Officers.... 101
RELATIONSHIPS WITH INDEPENDENT PUBLIC
ACCOUNTANTS..................................... 102
LEGAL MATTERS..................................... 102
EXPERTS........................................... 102
STOCKHOLDERS' PROPOSALS........................... 103
INDEX OF DEFINED TERMS............................ 104
INDEX TO FINANCIAL STATEMENTS..................... F-1
NEW GULFMARK CONSOLIDATED FINANCIAL STATEMENTS.... F-3
GULFMARK RETAINED ASSETS FINANCIAL STATEMENTS..... F-18
APPENDIX A: AGREEMENT AND PLAN OF MERGER
APPENDIX B: AGREEMENT AND PLAN OF DISTRIBUTION
APPENDIX C: PRUDENTIAL SECURITIES OPINION
APPENDIX D: JEFFERIES OPINION
APPENDIX E: AMENDMENT TO DIRECTOR PLAN
APPENDIX F: AMENDMENT TO EMPLOYEE PLAN
</TABLE>
4
<PAGE> 11
AVAILABLE INFORMATION
EVI and GulfMark are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by EVI and GulfMark with the Commission
can be inspected at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
Regional Offices of the Commission at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, New York,
New York 10048. Copies of such material can also 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. The Commission
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Such
reports, proxy and information statements and other information concerning EVI
can also be inspected and copied at the offices of the NYSE, 20 Broad Street,
New York, New York 10005, on which the EVI Common Stock is listed. Such reports,
proxy and information statements and other information concerning GulfMark and
New GulfMark can also be inspected and copied at the offices of The Nasdaq Stock
Market, 1735 K Street, N.W., Washington, D.C., on which the GulfMark Common
Stock is listed and the New GulfMark Common Stock will be listed.
Prior to the Merger, New GulfMark has not been subject to the reporting
requirements of the Exchange Act. New GulfMark intends to furnish its
stockholders with annual reports containing audited consolidated financial
statements reported on by independent public accountants following the end of
each fiscal year and such interim reports as it may determine to be necessary or
desirable.
EVI has filed with the Commission a registration statement on Form S-4
under the Securities Act with respect to the EVI Common Stock offered hereby
("Merger S-4"). New GulfMark has filed with the Commission a registration
statement on Form S-4 ("Distribution S-4") under the Securities Act with respect
to the New GulfMark Common Stock to be distributed in the Distribution. This
Joint Proxy Statement/Prospectus, which constitutes a part of such registration
statements, does not contain all of the information set forth in the Merger S-4
or the Distribution S-4, certain items of which are contained in exhibits to
such registration statements as permitted by the rules and regulations of the
Commission. For further information with respect to EVI and the EVI Common Stock
offered hereby, reference is made to the Merger S-4, including the exhibits
thereto; for further information with respect to the New GulfMark Common Stock
offered hereby, reference is made to the Distribution S-4, including the
exhibits thereto. Both the Merger S-4 and the Distribution S-4 may be inspected
without charge at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional Offices of
the Commission, and copies of which may be obtained from the Commission at
prescribed rates. Statements made in this Joint Proxy Statement/Prospectus
concerning the contents of any document referred to herein are not necessarily
complete. With respect to each such document filed with the Commission as an
exhibit to the registration statements, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. All information herein
with respect to EVI and its affiliates, including Sub (other than tax
consequences which have been supplied by GulfMark), has been furnished by EVI,
and all information herein with respect to GulfMark and its affiliates,
including New GulfMark, has been furnished by GulfMark.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SECURITIES, NOR DOES IT CONSTITUTE THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY
5
<PAGE> 12
PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION
IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/
PROSPECTUS NOR ANY DISTRIBUTION OF SHARES OF EVI COMMON STOCK OR NEW GULFMARK
COMMON STOCK MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF EVI, GULFMARK OR NEW
GULFMARK SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
UNTIL JUNE 29, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN NEW GULFMARK
COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A COPY OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by EVI with the Commission (File No. 0-7265)
are incorporated by reference into this Joint Proxy Statement/Prospectus:
(a) EVI's Annual Report on Form 10-K for the year ended December 31, 1996,
as amended by Amendment No. 1 to the Annual Report on Form 10-K on Form
10-K/A;
(b) EVI's Current Report on Form 8-K dated December 10, 1996, as amended by
Amendment No. 1 to the Current Report on Form 8-K on Form 8-K/A dated
January 23, 1997;
(c) EVI's Current Report on Form 8-K dated March 17, 1997.
(d) The description of EVI Common Stock contained in EVI's Registration
Statement on Form 8-A (filed May 19, 1994) and as amended by EVI's
Registration Statement on Form S-3 (Registration No. 333-12367),
including any amendment or report filed for the purpose of updating
such description.
The following document filed by GulfMark with the Commission (File No.
0-457) is incorporated by reference into this Joint Proxy Statement/Prospectus:
GulfMark's Annual Report on Form 10-K for the year ended December 31,
1996.
All documents filed by EVI and GulfMark pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Joint Proxy
Statement/Prospectus and prior to the date of the Special Meetings shall be
deemed to be incorporated herein by reference and shall be a part hereof from
the date of the filing of such document. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Joint Proxy Statement/Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes that statement. Any such statement so modified or
superseded shall not constitute a part of this Joint Proxy Statement/Prospectus,
except as so modified or superseded.
EVI undertakes to provide without charge to each person to whom a copy of
this Joint Proxy Statement/Prospectus has been delivered, upon the written or
oral request of any such person, a copy of any or all of the documents
incorporated by reference herein, other than the exhibits to such documents,
unless such exhibits are specifically incorporated by reference into the
information that this Joint Proxy Statement/ Prospectus incorporates. Written or
oral requests for such copies should be directed to EVI at 5 Post Oak Park,
Suite 1760, Houston, Texas 77027-3415, Attention: Secretary (Telephone number:
(713) 297-8400).
6
<PAGE> 13
Each of GulfMark and New GulfMark undertakes to provide without charge to
each person to whom a copy of this Joint Proxy Statement/Prospectus has been
delivered, upon the written or oral request of any such person, a copy of any or
all of the documents incorporated by reference herein, other than the exhibits
to such documents, unless such exhibits are specifically incorporated by
reference into the information that this Joint Proxy Statement/Prospectus
incorporates. Written or oral requests for such copies should be directed to
GulfMark at 5 Post Oak Park, Suite 1170, Houston, Texas 77027-3414, Attention:
Secretary (Telephone number: (713) 963-9522).
7
<PAGE> 14
SUMMARY
The following is a summary of certain information contained or incorporated
by reference in this Joint Proxy Statement/Prospectus. This summary is not
intended to be complete and is qualified in its entirety by reference to the
more detailed information and financial statements contained or incorporated by
reference in this Joint Proxy Statement/Prospectus and the appendices attached
hereto, all of which should be reviewed carefully. As used in this Joint Proxy
Statement/Prospectus, unless the context otherwise requires, the term "EVI"
means Energy Ventures, Inc. and its consolidated subsidiaries and the term
"GulfMark" means GulfMark International, Inc. and its consolidated subsidiaries.
Certain capitalized terms used in this summary are defined elsewhere in this
Joint Proxy Statement/Prospectus. For the convenience of the reader, an index of
defined terms used herein appears on page 104.
The Contribution Proposal and the Merger Proposal are being proposed as a
means of permitting EVI to acquire GulfMark, without the GulfMark Marine
Business, and permitting GulfMark to separate the GulfMark Marine Business from
the GulfMark Retained Assets. If the Contribution Proposal and the Merger
Proposal are approved and the other conditions to the consummation of the
Contribution, the Distribution and the Merger are satisfied, (i) GulfMark will
contribute to New GulfMark the GulfMark Marine Business and certain other
related assets, except the GulfMark Retained Assets, and New GulfMark will
assume and agree to hold GulfMark harmless from all of the liabilities and
obligations of GulfMark with respect to the transferred assets and certain
liabilities of GulfMark and its subsidiaries, (ii) the shares of New GulfMark
Common Stock will be distributed to the holders of GulfMark Common Stock and
(iii) the Merger will be consummated, pursuant to which GulfMark (then
consisting of only the GulfMark Retained Assets) will become a subsidiary of EVI
and each share of GulfMark Common Stock will be converted into .6695 of one
share of EVI Common Stock, subject to adjustment, pursuant to the Merger
Agreement. The Contribution, the Distribution, the Merger and the transactions
related thereto and described herein are hereinafter referred to as the
"Transactions".
THE COMPANIES
EVI and Sub. EVI is an international manufacturer and supplier of oilfield
equipment. EVI manufactures drill pipe, premium tubulars and a complete line of
artificial lift and production equipment used in the production of oil and
natural gas. See "Description of EVI".
EVI has achieved significant growth in recent years through a consistent
strategy of focused, synergistic acquisitions and internal development.
Acquisitions have sought to take advantage of the consolidating nature of the
industry and have concentrated on under-utilized fixed assets, proprietary
technology and name brand product lines. Internal development has focused on
product development, manufacturing enhancements and international expansion.
EVI's growth strategy has resulted in it becoming the leader in many of its
principal markets. EVI is currently the largest manufacturer and supplier of
drill pipe in the world, the largest manufacturer of premium tubulars in North
America and among the largest manufacturers of rod lift equipment in the world.
In November 1996, in connection with EVI's desire to concentrate its
efforts on the continued development of its oilfield equipment businesses, EVI
disposed of its Mallard Bay Drilling division ("Mallard Division") to Parker
Drilling Company, a Delaware corporation ("Parker"), for approximately $306
million cash and 3,056,600 shares of Parker's common stock. EVI intends to
deploy the net proceeds of the Mallard Division disposition to finance
acquisitions and the further development of its oilfield equipment business.
EVI was incorporated in 1972 as a Massachusetts corporation and was
reincorporated in Delaware in 1980. Sub is a wholly owned subsidiary of EVI that
was incorporated in Delaware in November 1996 for the purpose of effecting the
Merger. EVI's and Sub's corporate office is located at 5 Post Oak Park, Suite
1760, Houston, Texas 77027-3415, and their telephone number is (713) 297-8400.
GulfMark and New GulfMark. GulfMark currently provides and, after the
Transactions are consummated, New GulfMark will provide offshore marine services
to the energy industry with a fleet of 29 offshore supply vessels operating
primarily in the North Sea and Southeast Asia. GulfMark's supply vessels are
8
<PAGE> 15
chartered by major integrated oil companies and large independent oil and gas
operators as supply vessels to transport personnel, supplies and material and as
anchor handlers to move and position drilling structures in support of the
exploration and production of oil and gas in offshore waters around the world.
GulfMark's vessels consist principally of supply vessels with several having
anchor handling and towing capabilities. The fleet has grown from an original
eleven vessels acquired in late 1990 to its present level both through
opportunistic acquisitions and through strategic forward looking new
construction. This significant growth has been achieved in the context of a
long-term objective of profitability expanding operations, in the face of
sustainable demand by providing modern, task specific equipment targeted to meet
the needs of specific classes of customers likely to provide "term" employment
for such vessels. See "Description of New GulfMark". GulfMark's erosion control
division, Ercon, provides a variety of erosion control services and
installations. See "Description of GulfMark Retained Assets".
GulfMark was incorporated in 1953 as a Delaware corporation. New GulfMark
is a wholly owned subsidiary of GulfMark that was incorporated in Delaware in
December 1996 for the purposes of effecting the Transactions.
The principal executive offices of GulfMark and New GulfMark are located at
5 Post Oak Park Suite 1170, Houston, Texas 77027-3414, and their telephone
number is (713) 963-9522.
THE SPECIAL MEETINGS
Time, Date, Place and Purpose. The EVI Special Meeting will be held at 9:00
a.m., on Wednesday, April 30, 1997, at The Ritz-Carlton Hotel, 1919 Briar Oaks,
Houston, Texas, for the purpose of approving and adopting the Merger Proposal.
The GulfMark Special Meeting will be held at 11:00 a.m., on Wednesday, April 30,
1997, at The Ritz-Carlton Hotel, 1919 Briar Oaks, Houston, Texas, for the
purpose of approving and adopting the Contribution Proposal, the Merger Proposal
and the Plan Amendment Proposals. See "General Information about the Meetings".
Record Date and Vote Required. The Boards of Directors of EVI and GulfMark
have fixed the close of business on March 17, 1997, as the record date ("Record
Date") for the determination of stockholders entitled to notice of, and to vote
at, the Special Meetings and any adjournments thereof. Only holders of record of
EVI Common Stock and holders of record of GulfMark Common Stock at the close of
business on the Record Date are entitled to notice of, and to vote at, the EVI
Special Meeting and the GulfMark Special Meeting, respectively.
Under EVI's listing agreement with the NYSE, approval and adoption of the
Merger Proposal require the affirmative vote of the holders of a majority of the
shares of EVI Common Stock represented, in person or by proxy, and entitled to
vote at the EVI Special Meeting.
Under Delaware law, approval and adoption of the Merger Proposal and the
Contribution Proposal require the affirmative vote of the holders of a majority
of the shares of GulfMark Common Stock outstanding and entitled to vote thereon.
Adoption and approval of the Plan Amendment Proposals require the affirmative
vote of the holders of a majority of the shares of GulfMark Common Stock
represented, in person or by proxy, and entitled to vote at the GulfMark Special
Meeting. Each of the Proposals will be voted on separately by the stockholders
of GulfMark; however, GulfMark and EVI will not proceed with any of the
Transactions unless the Contribution Proposal and the Merger Proposal are
approved by the stockholders of GulfMark and the Merger Proposal is approved by
the stockholders of EVI. See "General Information about the Meetings -- Vote
Required".
At the close of business on the Record Date, there were 22,964,625 shares
of EVI Common Stock outstanding and entitled to vote at the EVI Special Meeting.
As of the Record Date, GulfMark and Lehman Brothers Holdings Inc. ("Lehman")
held 2,235,572 and 1,120,000 shares of EVI Common Stock, respectively,
representing an aggregate of approximately 14.6% of the outstanding shares of
EVI Common Stock. In addition, directors and officers of EVI and their
affiliates, excluding GulfMark and Lehman, held 2,007,553 shares of EVI Common
Stock, representing approximately 8.7% of the outstanding shares. Such persons
have indicated that they intend to vote their shares in favor of the approval of
the Merger Proposal.
9
<PAGE> 16
At the close of business on the Record Date, there were 3,339,952 shares of
GulfMark Common Stock outstanding and entitled to vote at the GulfMark Special
Meeting. At the close of business on the Record Date, Lehman held 1,048,913
shares of GulfMark Common Stock and the directors and officers of GulfMark and
their affiliates, other than Lehman, held 313,057 shares of GulfMark Common
Stock, representing approximately 31.4% and 9.4%, respectively, of the
outstanding shares. Such persons have indicated that they intend to vote their
shares in favor of the approval and adoption of the Proposals.
PRE-MERGER TRANSACTIONS
The Contribution. The Contribution includes a series of asset and stock
transfers and liability assumptions between and among GulfMark and New GulfMark
to be effected immediately prior to the Distribution. The purpose and effect of
such transfers and assumptions is to facilitate the Merger by separating the
GulfMark Marine Business from the GulfMark Retained Assets and to transfer the
assets and liabilities of GulfMark Marine Business to New GulfMark immediately
prior to the Distribution. As consideration for the Contribution, New GulfMark
will issue to GulfMark, in exchange for all the issued and outstanding shares of
stock of New GulfMark then held by GulfMark, the number of shares of New
GulfMark Common Stock equal to two times the number of shares of GulfMark Common
Stock outstanding as of the record date designated by or pursuant to the
authorization of the Board of Directors of GulfMark for the Distribution (the
"Distribution Record Date"). Accordingly, the GulfMark Retained Assets and the
GulfMark Retained Liabilities (as hereinafter defined) will constitute all of
the assets and liabilities of GulfMark at the effective time of the Merger. See
"Pre-Merger Transactions -- Terms of the Contribution".
The Distribution. Immediately after the Contribution and prior to the
Merger, GulfMark will distribute all the issued and outstanding shares of New
GulfMark Common Stock to the holders of GulfMark Common Stock as of the
Distribution Record Date on the basis of two shares of New GulfMark Common Stock
for each share of GulfMark Common Stock as provided in the Distribution
Agreement. See "Pre-Merger Transactions -- Terms of the Distribution".
Indemnification. Pursuant to the Distribution Agreement, New GulfMark is
obligated to indemnify GulfMark for various liabilities relating to the
historical operations of GulfMark and matters relating to the Transactions.
Among the matters for which New GulfMark is required to indemnify GulfMark and
EVI are (i) any taxes as a result of the Distribution, the Contribution or the
Merger subsequently determined to be a taxable transaction for foreign, federal,
state or local law purposes regardless of the theory or reason for the
Transactions being subject to tax and (ii) any liability relating to any claim
or damage by any stockholder of GulfMark or EVI with respect to the Merger, the
Contribution, the Distribution or the transactions relating thereto. This
indemnity includes claims and liabilities arising under the securities laws and
claims with respect to this Joint Proxy Statement/Prospectus. See "Pre-Merger
Transactions -- Indemnification".
THE MERGER
Terms of the Merger. At the Effective Time (as hereinafter defined), EVI
will acquire GulfMark through a merger of Sub with and into GulfMark. As of the
Effective Time, the only assets of GulfMark will consist of the GulfMark
Retained Assets and the only liabilities of GulfMark not assumed by New GulfMark
will consist of the GulfMark Retained Liabilities. Each outstanding share of
GulfMark Common Stock will be converted in the Merger into the right to receive
.6695 of one share of EVI Common Stock, subject to adjustment under the Merger
Agreement (the "Exchange Ratio"). After the Merger, GulfMark will be a wholly
owned subsidiary of EVI. Because the Exchange Ratio in the Merger is intended to
provide to the stockholders of GulfMark an aggregate number of shares
approximating the number of shares of EVI Common Stock held by GulfMark, the
number of shares of EVI Common Stock outstanding following the Merger is
expected to be approximately the same as before the Merger. See "The
Merger -- Terms of the Merger".
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<PAGE> 17
Recommendations of the Boards of Directors.
THE EVI BOARD OF DIRECTORS BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR
TO, AND IN THE INTERESTS OF, EVI AND THE HOLDERS OF EVI COMMON STOCK AND
UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF EVI COMMON STOCK APPROVE THE MERGER
PROPOSAL. See "Background of the Transactions" and "EVI's Reasons for the
Transactions".
THE GULFMARK BOARD OF DIRECTORS BELIEVES THAT THE TERMS OF THE PROPOSALS
ARE FAIR TO, AND IN THE INTERESTS OF, GULFMARK AND THE HOLDERS OF GULFMARK
COMMON STOCK AND UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF GULFMARK COMMON
STOCK APPROVE ALL OF THE PROPOSALS. See "Background of the Transactions" and
"GulfMark's Reasons for the Transactions".
Opinions of Financial Advisors. The EVI Board of Directors has received a
written opinion from Prudential Securities Incorporated ("Prudential
Securities") to the effect that the exchange ratio to be used in the Merger is
fair to the holders of EVI Common Stock from a financial point of view. The
GulfMark Board of Directors has received a written opinion from Jefferies &
Company, Inc. ("Jefferies") to the effect that the consideration to be received
by the holders of GulfMark Common Stock in the Merger and the Distribution is
fair from a financial point of view to such holders.
The stockholders of EVI and GulfMark are urged to read the full texts of
the opinions of Prudential Securities and Jefferies, respectively, for
descriptions of the procedures followed, assumptions made and matters considered
by Prudential Securities and Jefferies in connection with rendering such
opinions. See "Opinions of Financial Advisors -- Prudential Securities Opinion"
and "-- Jefferies Opinion". The full text of the Prudential Securities and
Jefferies opinions are attached to this Joint Proxy Statement/Prospectus as
Appendices C and D, respectively.
Governmental and Regulatory Approvals. Consummation of the Merger is
conditioned upon the expiration or termination of the waiting period applicable
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). It is expected that EVI, GulfMark and Lehman will file notification
reports under the HSR Act with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Department of Justice") at
approximately the time this Joint Proxy Statement/Prospectus is mailed. See "The
Merger -- Governmental and Regulatory Approvals". EVI and GulfMark are aware of
no other governmental or regulatory approvals required for the consummation of
the Merger, other than compliance with applicable securities laws of the various
states.
Effective Time of the Merger. The Merger will become effective at the
effective time set forth in the certified copy of the Certificate of Merger to
be issued by the Secretary of State of the State of Delaware with respect to the
Merger (the "Effective Time"). Assuming all conditions to the Merger contained
in the Merger Agreement are satisfied or waived prior thereto, it is anticipated
that the Effective Time will occur as soon as practicable following the EVI
Special Meeting and the GulfMark Special Meeting. See "The Merger -- Terms of
the Merger -- Effective Time of the Merger".
Delivery of Shares. If the Merger Proposal and the Contribution Proposal
are approved by the stockholders of GulfMark and the Merger Proposal is approved
by the stockholders of EVI, GulfMark will effect the Distribution by delivery of
certificates of New GulfMark Common Stock to American Stock Transfer & Trust
Company (the "Paying Agent") for delivery to the holders of record of GulfMark
Common Stock as of the Distribution Record Date, without any further action by
such holders. See "Pre-Merger Transactions -- Terms of the Distribution".
As soon as practicable after the Effective Time, American Stock Transfer &
Trust Company (the "Exchange Agent") will mail a letter of transmittal and other
information to each holder of record of GulfMark Common Stock immediately before
the Effective Time for use in exchanging certificates formerly representing
shares of GulfMark Common Stock for certificates representing shares of EVI
Common Stock and cash in lieu of any fractional shares. GULFMARK COMMON STOCK
CERTIFICATES SHOULD NOT BE SURRENDERED FOR EXCHANGE BY STOCKHOLDERS OF GULFMARK
PRIOR TO THE APPROVAL OF THE MERGER PROPOSAL AND THE RECEIPT OF A LETTER OF
TRANSMITTAL FROM THE EXCHANGE AGENT. See "The Merger -- Terms of the
Merger -- Manner and Basis of Converting Shares".
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<PAGE> 18
Assumption of GulfMark Stock Options. New GulfMark has agreed in the
Distribution Agreement that, as of the date the Distribution is effective, New
GulfMark will assume the GulfMark Stock Option Plans and all outstanding stock
options granted thereunder, as well as all outstanding stock options issued
pursuant to the GulfMark Stock Option Policy, and, pursuant to the equitable
adjustment provisions of the applicable plan or policy, each outstanding stock
option previously granted pursuant to any of the GulfMark Stock Option Plans or
the GulfMark Stock Option Policy to an employee, officer or director of GulfMark
who will, following the Distribution, become an employee, officer or director of
New GulfMark, will be converted into or exchanged for and represent an option to
acquire shares of New GulfMark Common Stock. The number of shares of New
GulfMark Common Stock subject to, and the exercise price of, each such New
GulfMark option will be adjusted in accordance with the requirements of Section
424 of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated thereunder, to reflect the Distribution so that (i) the
aggregate intrinsic value (difference between market value per share and
exercise price) of each option immediately after the Distribution is not greater
than the aggregate intrinsic value of such option immediately before the
Distribution, and (ii) the ratio of the exercise price per option to the market
value per share is not reduced. The vesting provisions and option period of the
New GulfMark options will remain unchanged from the GulfMark options so
replaced. See "Pre-Merger Transactions -- Employee Benefits" and "GulfMark Stock
Option Plans and GulfMark Stock Option Policy".
Other Conditions to the Merger. In addition to the approval and adoption of
the Merger Proposal by the requisite votes of EVI and GulfMark stockholders and
the receipt of regulatory approvals, the respective obligations of EVI and
GulfMark to effect the Merger are subject to the satisfaction or waiver, where
permissible, of certain other conditions, including (i) confirmation of the tax
opinions regarding the Distribution and the Merger, (ii) the receipt by each
party of various legal opinions, certificates and consents, (iii) the opinions
of the financial advisors shall not have been withdrawn, (iv) the Contribution
and the Distribution shall have occurred, (v) GulfMark shall have delivered to
EVI a pro forma balance sheet after giving effect to the Distribution reflecting
net working capital (as defined in the Merger Agreement) in an amount of not
less than $300,000, (vi) the accuracy as of the date of the Merger Agreement and
as of the date on which the closing of the transactions contemplated by the
Merger Agreement occurs (the "Closing Date") of the representations and
warranties of EVI, Sub and GulfMark and compliance in all material respects with
all agreements and covenants by each party to be performed on or before the
Closing Date and (vii) no material adverse change having occurred with respect
to GulfMark since the date of the Merger Agreement. There can be no assurance
that all of the conditions set forth in the Merger Agreement will be satisfied.
See "The Merger -- Terms of the Merger -- Conditions to the Merger".
Management After the Transactions. No changes in the management of EVI are
contemplated to be effected following the Merger. The management of New GulfMark
after the Transactions is expected to be substantially similar to the management
of GulfMark prior to the Transactions. See "The Merger -- Terms of the
Merger -- Management Following Merger", "Description of New
GulfMark -- Directors", "Description of New GulfMark -- Executive Officers and
Compensation".
Termination or Amendment of Merger Agreement. The Merger Agreement may be
terminated: (i) by mutual consent of EVI and GulfMark, (ii) by either party if
the stockholders of either GulfMark or EVI fail to approve the Merger Proposal
or the stockholders of GulfMark fail to approve the Contribution Proposal, (iii)
by either party if the Merger is not effected on or before May 31, 1997, (iv) by
either party if there has been a breach by the other party of any representation
or warranty or a failure by the other party to perform in any material respect
any of its covenants, agreements or obligations set forth in the Merger
Agreement, (v) by either party if a court of competent jurisdiction, or other
governmental body or regulatory authority shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise prohibiting
the Merger or (vi) by the affected party if in the exercise of its good faith
judgment as to its fiduciary duties to its stockholders imposed by law, as
advised by counsel, the Board of Directors of GulfMark or EVI determines that
such termination is appropriate in complying with its fiduciary obligations. EVI
and GulfMark may also terminate the Merger Agreement if the Board of Directors
of the other company withdraws, modifies or changes its recommendation with
respect to the Merger in a manner adverse to it or shall have resolved to do any
of the foregoing. The Merger Agreement may be amended or supplemented by an
instrument in writing
12
<PAGE> 19
signed on behalf of each party, provided that after the Merger Agreement has
been approved and adopted by the stockholders of EVI and GulfMark, it may be
amended only as may be permitted under applicable law. See "The Merger -- Terms
of the Merger -- Termination or Amendment of Merger Agreement".
Interests of Certain Persons. GulfMark currently owns 2,235,572 shares of
EVI Common Stock and Lehman currently owns 1,120,000 shares of EVI Common Stock,
which shares in aggregate represent approximately 14.6% of the total outstanding
shares of EVI Common Stock. In addition, Lehman currently owns 1,048,913 shares
of GulfMark Common Stock, representing approximately 31% of the total
outstanding shares of GulfMark Common Stock. Three representatives of Lehman,
David Butters, Eliot Fried and Robert Millard, are currently members of the
Board of Directors of EVI, with Mr. Butters also serving as the Chairman of the
Board of Directors of EVI. Messrs. Butters and Millard are also the Chairman of
the Board of Directors and a director of GulfMark, respectively. Messrs. Butters
and Millard also own 81,400 shares and 71,400 shares of GulfMark Common Stock,
respectively, and they hold options to purchase an aggregate of 30,000 shares of
GulfMark Common Stock, which options will be adjusted pursuant to the Plan
Amendment Proposals. See "Interests of Certain Persons in the Transactions".
Following the Transactions, Lehman will hold directly a total of 1,822,247
shares of EVI Common Stock or approximately 7.2% of the total outstanding shares
of EVI Common Stock after the Merger. Lehman will also hold 2,097,826 shares of
New GulfMark Common Stock, or approximately 31% of the outstanding shares of New
GulfMark Common Stock. Representatives of Lehman are expected to continue to
remain on the Board of Directors of EVI and New GulfMark following the
Distribution and the Merger. Such representatives, however, will not be
permitted to take any action as members of the Board of Directors of EVI in
respect of any matter relating to the Transactions, including any matter
relating to claims for indemnification or other disputes between EVI, GulfMark
or New GulfMark. See "Interests of Certain Persons in the Transactions".
Accounting Treatment. The Merger will be accounted for as a purchase under
generally accepted accounting principles. See "The Merger -- Accounting
Treatment".
No Dissenters' Rights. Delaware law does not provide holders of EVI Common
Stock or GulfMark Common Stock who object to the Merger and who vote against or
abstain from voting in favor of the Merger Proposal with any appraisal rights or
the right to receive cash for their shares of EVI Common Stock or GulfMark
Common Stock, and neither EVI nor GulfMark intends to make available any such
rights to its stockholders. See "The Merger -- No Dissenters' Rights". Delaware
law does not provide holders of GulfMark Common Stock who object to the
Contribution Proposal and who vote against or abstain from voting in favor of
the Contribution Proposal with any appraisal rights or the right to receive cash
for their shares of GulfMark Common Stock and GulfMark does not intend to make
available any such rights to its stockholders. See "Pre-Merger
Transactions -- No Dissenters' Rights".
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The Contribution and the Distribution are intended to qualify as
transactions described in Section 355 of the Code and as a "reorganization"
under Section 368(a)(1)(D) of the Code, and the Merger is intended to qualify as
a "reorganization" under Section 368(a)(1)(B) of the Code. Consummation of the
Contribution, the Distribution and the Merger is conditioned on the receipt of
opinions of Arthur Andersen LLP with respect to the Distribution and the Merger.
The Distribution opinion is required to state that (i) GulfMark, EVI and Sub
will recognize no gain or loss for Federal or state income tax purposes on the
Contribution or the Distribution, (ii) the holders of GulfMark Common Stock will
recognize no gain or loss, and will have no amounts includible in their income,
upon receipt of the Distribution, and (iii) New GulfMark will recognize no gain
or loss for Federal or state income tax purposes on receipt of the Contribution
in exchange for the New GulfMark Common Stock. The Merger opinion is required to
state that (i) the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a)(1)(B) of the Code, (ii) no
gain or loss for Federal or state income tax purposes will be recognized by EVI,
Sub or GulfMark as a result of the Merger, (iii) EVI and GulfMark are parties to
a reorganization within the meaning of Section 368(b) of the Code and (iv) no
gain or loss will be recognized by the stockholders of GulfMark upon the receipt
by them of shares of EVI Common Stock in exchange for their shares of GulfMark
Common
13
<PAGE> 20
Stock pursuant to the Merger, except with respect to cash received in lieu of
fractional shares of GulfMark Common Stock. The condition that the Distribution
and Contribution opinions be renewed at closing may be waived by EVI and
GulfMark. If the opinions are waived or if there are modifications to such
opinions which conclude that the Transactions are taxable in whole or in part to
the stockholders, EVI and GulfMark will provide additional disclosures to their
respective stockholders and will provide them with an opportunity to change
their vote on the Transactions. See "Material Federal Income Tax
Considerations".
AMENDMENT OF GULFMARK STOCK OPTION PLANS
The Plan Amendment Proposals, if adopted and approved by GulfMark
stockholders, would amend each of the GulfMark Stock Option Plans to provide
appropriate anti-dilution adjustments in connection with certain corporate
transactions, such as the Distribution, and would amend the Employee Plan to
provide that the number of shares reserved for issuance thereunder is subject to
adjustment in accordance with amended anti-dilution provisions and may serve to
increase the number of shares reserved for issuance thereunder without
stockholder approval. Copies of the proposed amendments to the Director Plan and
the Employee Plan are attached hereto as Appendices E and F, respectively. See
"GulfMark Stock Option Plans and GulfMark Stock Option Policy".
COMPARATIVE RIGHTS OF STOCKHOLDERS OF EVI AND GULFMARK
The rights of holders of GulfMark Common Stock are currently governed by
Delaware law, GulfMark's Certificate of Incorporation, as amended, and
GulfMark's By-laws, as amended and restated. Upon consummation of the
Distribution and the Merger, holders of GulfMark Common Stock will become
holders of New GulfMark Common Stock and EVI Common Stock, respectively, and
their rights as holders of New GulfMark Common Stock and EVI Common Stock will
continue to be governed by Delaware law, but also will be governed by New
GulfMark's Certificate of Incorporation and By-laws and EVI's Restated
Certificate of Incorporation and EVI's By-laws, respectively. See "Description
of EVI and New GulfMark Capital Stock", "Comparative Rights of Stockholders of
EVI and GulfMark" and "Comparative Rights of Stockholders of GulfMark and New
GulfMark".
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
EVI Common Stock is traded on the NYSE under the symbol "EVI", and GulfMark
Common Stock is traded on The Nasdaq Stock Market under the symbol "GMRK". The
following table sets forth the range of high and low sale prices for EVI Common
Stock and GulfMark Common Stock for the periods indicated, as reported on the
NYSE and The Nasdaq Stock Market, respectively.
<TABLE>
<CAPTION>
EVI GULFMARK
--------------------- ---------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
Twelve Months Ended December 31, 1995
Quarter ended March 31, 1995......................... $14 5/8 $11 7/8 $17 $14 3/4
Quarter ended June 30, 1995.......................... 20 5/8 13 1/4 19 1/4 15 1/2
Quarter ended September 30, 1995..................... 24 17 3/8 24 18
Quarter ended December 31, 1995...................... 25 1/4 18 3/8 27 21
Twelve Months Ended December 31, 1996
Quarter ended March 31, 1996......................... 28 7/8 22 1/4 30 1/4 24 3/4
Quarter ended June 30, 1996.......................... 35 25 3/4 37 29
Quarter ended September 30, 1996..................... 40 1/2 28 46 1/2 33
Quarter ended December 31, 1996...................... 51 1/2 39 64 44
Twelve Months Ended December 31, 1997
Quarter ended March 31, 1997 (through March 25,
1997)............................................. 63 3/4 47 3/4 67 56
</TABLE>
14
<PAGE> 21
EVI has not paid any dividends on the EVI Common Stock since 1984 and
currently anticipates that, for the foreseeable future, any earnings will be
retained for the development of EVI's business. GulfMark has not paid any
dividends on the GulfMark Common Stock since 1984. Following the consummation of
the Transactions, New GulfMark anticipates that, for the foreseeable future, any
earnings will be retained for the development of New GulfMark's business. See
"Price Range of Common Stock and Dividend Policy".
On December 4, 1996, the last trading day prior to the announcement by EVI
and GulfMark that they had reached an agreement concerning the Merger, the
closing sale prices of EVI Common Stock as reported by the NYSE and of GulfMark
Common Stock as reported by the Nasdaq National Market System were $48 3/4 and
$54 per share, respectively.
On March 25, 1997, the closing sale prices of EVI Common Stock as reported
by the NYSE and of GulfMark Common Stock as reported by the Nasdaq National
Market System were $58 5/8 and $67 per share, respectively.
Following the Merger, EVI Common Stock will continue to be traded on the
NYSE under the symbol "EVI", GulfMark Common Stock will cease to be traded and
there will be no further market for such stock and New GulfMark Common Stock
will be listed and begin trading on the Nasdaq National Market System under the
symbol "GMRK".
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following tables set forth certain summary pro forma condensed
consolidated financial data of EVI. The unaudited Condensed Consolidated
Statement of Income give effect to (i) the proposed Merger of GulfMark, (ii)
EVI's acquisition of Tubular Corporation of America ("TCA") on August 5, 1996
for 500,000 shares of EVI Common Stock, $14.35 million cash and a note for
$650,000, and (iii) EVI's public offering of 3.5 million shares of EVI Common
Stock on July 25, 1996, as if these transactions occurred on January 1, 1996.
The Unaudited Pro Forma Balance Sheet gives effect to the proposed Merger of
GulfMark as if this transaction had occurred on December 31, 1996. The unaudited
pro forma information set forth below is not necessarily indicative of the
results that actually would have been achieved had such transactions been
consummated as of the dates reflected, or that may be achieved in the future.
This information should be read in conjunction with EVI's Management's
Discussion and Analysis of Financial Condition and Results of Operations, EVI's
Selected Consolidated Financial Data, EVI's, TCA's and GulfMark's consolidated
financial statements and GulfMark Retained Assets' financial statements and
related notes thereto contained or incorporated by reference in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
(IN
THOUSANDS,
EXCEPT PER
SHARE DATA)
<S> <C>
OPERATING DATA:
Revenues.................................................. $513,274
Income from continuing operations......................... 27,180
Earnings per share from continuing operations............. 1.20
Weighted average shares outstanding....................... 22,637
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
BALANCE SHEET DATA:
Total assets.............................................. $855,319
Long-term debt............................................ 126,710
Stockholders' investment.................................. 454,084
</TABLE>
15
<PAGE> 22
EVI SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth certain summary historical condensed
consolidated financial data of EVI. This information should be read in
conjunction with EVI's Management's Discussion and Analysis of Financial
Condition and Results of Operations, the EVI Selected Consolidated Financial
Data, the Pro Forma Condensed Consolidated Financial Statements and related
notes thereto and the EVI Consolidated Financial Statements and related notes
thereto included or incorporated by reference in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.................................. $478,020 $271,675 $185,285 $171,638 $139,349
Cost of sales............................. 373,509 205,230 139,901 126,541 107,028
Selling, general and administrative
expenses............................... 58,224 48,480 41,746 38,339 32,377
-------- -------- -------- -------- --------
Operating income (loss)................... 46,287 17,965 3,638 6,758 (56)
Interest expense.......................... (16,454) (16,287) (13,537) (7,574) (5,258)
Other income, net......................... 1,713 684 412 1,482 631
Income tax provision (benefit)............ 7,041 (240) (3,795) 589 (835)
-------- -------- -------- -------- --------
Income (Loss) from continuing
operations............................. 24,505 2,602 (5,692) 77 (3,848)
======== ======== ======== ======== ========
Earnings (Loss) per share from continuing
operations............................. $ 1.20 $ 0.18 $ (0.45) $ 0.01 $ (0.32)
Weighted average shares outstanding....... 20,353 14,724 12,629 12,067 12,057
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.............................. $852,843 $453,125 $311,497 $251,377 $210,887
Long-term debt............................ 126,710 124,183 125,108 38,982 37,304
Stockholders' investment.................. 454,084 228,066 110,913 107,736 101,156
Cash dividends per share.................. -- -- -- -- --
</TABLE>
16
<PAGE> 23
GULFMARK SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth certain summary historical condensed
consolidated financial data of GulfMark. This information should be read in
conjunction with GulfMark Management's Discussion and Analysis of Financial
Condition and Results of Operations, GulfMark's Selected Consolidated Financial
Data, and GulfMark's Consolidated Financial Statements and related notes thereto
included or incorporated by reference in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA(1):
Revenues.................................... $41,743 $36,077 $34,448 $27,887 $22,955
Direct operating expenses................... 24,796 26,568 24,338 19,221 13,640
Selling, general and administrative
expenses................................. 6,908 6,059 5,885 4,690 4,813
------- ------- ------- ------- -------
Operating income............................ 10,039 3,450 4,225 3,976 4,502
Interest expense, net....................... (3,467) (2,613) (2,179) (2,047) (2,351)
Equity in earnings of EVI................... -- 761 1,012 1,333 155
Gain on sale of 300,000 EVI shares.......... 6,264 -- -- -- --
Other income (expense), net................. (86) 180 830 68 294
Income tax expenses......................... (4,311) (3,680)(2) (1,108) (686) (732)
Extraordinary item attributable to EVI (net
of tax).................................. -- -- (706) -- --
------- ------- ------- ------- -------
Net income (loss)........................... $ 8,439 $(1,902) $ 2,074 $ 2,644 $ 1,868
======= ======= ======= ======= =======
Earnings (loss) per share................... $ 2.53 $ (0.57) $ 0.62 $ 0.80 $ 0.56
Weighted average shares outstanding......... 3,338 3,322 3,320 3,312 3,310
Cash dividends per share.................... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Total assets................................. $189,686 $110,935 $88,676 $90,759 $77,983
Long term debt............................... 50,811 33,600 26,727 30,169 18,730
Stockholders' equity before adjustment....... 63,536 55,074 56,798 54,714 52,005
Cumulative translation adjustment(3)...... (1,520) (4,146) (3,773) (4,326) (3,699)
Adjustment for unrealized gain on EVI
investment(4)........................... 33,979 8,030 -- -- --
Stockholders' equity......................... 95,995 58,958 53,025 50,388 48,306
</TABLE>
- ---------------
(1) Upon consummation of the Transactions, for financial reporting purposes, New
GulfMark will reflect the operations of GulfMark Retained Assets as
discontinued operations.
(2) Includes a one time charge of $3,374,000 relating to additional deferred tax
provision associated with GulfMark's change in its method of accounting for
GulfMark's investment in EVI.
(3) Resulted primarily from translation of the Company's Sterling (U.K.)
invested assets and liabilities, which are substantially long-lived, at the
exchange rate in effect on the last day of the period.
(4) Resulted from the "Mark to Market" rules of SFAS 115 which first impacted
the Company in June, 1995.
17
<PAGE> 24
NEW GULFMARK SUMMARY HISTORICAL FINANCIAL DATA
The following sets forth summary selected consolidated financial data of
GulfMark's offshore marine services business that will be contributed to New
GulfMark. The summary financial data exclude financial information pertaining to
the GulfMark Retained Assets. The summary financial data is based on historical
financial information of New GulfMark, presented elsewhere herein. This
information should be read in conjunction with New GulfMark Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
New GulfMark Selected Consolidated Financial Data and the New GulfMark
Consolidated Financial Statements and related notes thereto included in this
Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA(1):
Revenues...................................... $ 34,749 $27,233 $27,692 $22,564 $18,115
Direct operating expenses..................... 20,874 20,605 19,988 15,649 10,350
Selling, general and administrative
expenses................................... 4,840 3,736 3,891 3,443 3,564
-------- ------- ------- ------- -------
Operating income.............................. 9,035 2,892 3,813 3,472 4,201
Interest expense, net......................... (3,467) (2,613) (2,179) (2,047) (2,351)
Other income (expense), net................... (86) 180 830 68 285
Income tax expenses........................... (1,839) (91) (981) (534) (601)
-------- ------- ------- ------- -------
Net income (loss)............................. $ 3,643 $ 368 $ 1,483 $ 959 $ 1,534
======== ======= ======= ======= =======
Pro forma per share data:
Earnings per share(2)...................... $ 1.09 $ 0.11 $ 0.45 $ 0.29 $ 0.46
Weighted average shares outstanding(2)..... 3,338 3,322 3,320 3,312 3,310
Earnings per share -- after giving effect
to the Distribution(3)................... $ 0.55 $ 0.06 $ 0.22 $ 0.14 $ 0.23
Weighted average shares
outstanding -- after giving effect to the
Distribution(3).......................... 6,676 6,644 6,640 6,624 6,620
Cash dividends per share...................... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Total assets.................................. $116,470 $74,904 $64,309 $67,158 $56,343
Long-term debt................................ 50,811 33,600 26,727 30,169 18,730
Stockholders' equity before adjustment........ 47,613 34,713 32,379 30,780 29,673
Cumulative translation adjustment(4).......... (434) (3,060) (2,866) (3,961) (3,533)
Stockholders' equity.......................... 47,179 31,653 29,513 26,819 26,140
</TABLE>
- ---------------
(1) Upon consummation of the Transactions, for financial reporting purposes, New
GulfMark will reflect the operations of GulfMark Retained Assets as
discontinued operations.
(2) Pro forma based on the historical weighted average shares of GulfMark and
the net income of New GulfMark.
(3) The Distribution calls for GulfMark stockholders to receive two shares of
New GulfMark for each share of GulfMark held.
(4) Resulted from translation of the Company's Sterling (U.K.) invested assets
and liabilities, which are substantially long-lived, at the exchange rate in
effect on the last day of the period.
18
<PAGE> 25
COMPARATIVE PER SHARE INFORMATION
The following table sets forth certain historical and pro forma earnings
per share and book value per share for the EVI Common Stock and the GulfMark
Common Stock. The table also reflects the equivalent per share earnings and book
value with respect to one share of GulfMark Common Stock on a pro forma basis
for the Merger after giving effect to various prior EVI transactions and the
Transactions. The GulfMark equivalent pro forma data does not give effect to the
earnings from continuing operations or book value attributable to the shares of
New GulfMark Common Stock issuable to the holders of the GulfMark Common Stock
in the Distribution. The information presented in the table should be read in
conjunction with the unaudited Pro Forma Condensed Consolidated Financial
Statements and the separate historical consolidated financial statements of EVI
and GulfMark and the related notes included or incorporated by reference in this
Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
------------------
<S> <C>
EARNINGS
EVI Historical Earnings Per Share from Continuing
Operations............................................. $1.20
GulfMark Historical Earnings Per Share.................... 2.53
EVI Pro Forma Earnings Per Share from Continuing
Operations for Transactions(1)......................... 1.20
GulfMark Equivalent Pro Forma Earnings Per Share from
Continuing Operations, Excluding Pro Forma Earnings
Attributable to New GulfMark Common Stock to be
Distributed(2)......................................... 0.80
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
BOOK VALUE
EVI Historical Book Value Per Share....................... $19.89
GulfMark Historical Book Value Per Share.................. 28.74
EVI Pro Forma Book Value Per Share for Transactions(1).... 19.89
GulfMark Equivalent Pro Forma Book Value Per Share,
excluding Pro Forma Book Value Attributable to New
GulfMark Common Stock to be Distributed(2)............. 13.32
</TABLE>
- ---------------
(1) Gives pro forma effect to (i) various acquisitions by EVI in 1996, (ii)
EVI's 1996 public offering of 3.5 million shares of EVI Common Stock in the
third quarter of 1996 and (iii) the Transactions.
(2) Represents the pro forma earnings per share and book value per share of
.6695 of one share of EVI Common Stock issuable in the Merger.
19
<PAGE> 26
GENERAL INFORMATION ABOUT THE MEETINGS
DATE, TIME AND PLACE OF SPECIAL MEETINGS
The EVI Special Meeting will be held at 9:00 a.m. on Wednesday, April 30,
1997, at The Ritz-Carlton Hotel, 1919 Briar Oaks, Houston, Texas. The GulfMark
Special Meeting will be held at 11:00 a.m., on Wednesday, April 30, 1997, at The
Ritz-Carlton Hotel, 1919 Briar Oaks, Houston, Texas.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of EVI Common Stock and holders of record of
GulfMark Common Stock at the close of business on March 17, 1997, are entitled
to notice of, and to vote at, the EVI Special Meeting and the GulfMark Special
Meeting, respectively.
At the close of business on the Record Date, there were 1,013 holders of
record of EVI Common Stock with 22,964,625 shares issued and outstanding and
1,497 holders of record of GulfMark Common Stock with 3,339,952 shares issued
and outstanding. Each share of EVI Common Stock and GulfMark Common Stock
entitles the holder thereof to one vote on each matter submitted for stockholder
approval.
PURPOSES OF THE SPECIAL MEETINGS
EVI. At the EVI Special Meeting, the holders of EVI Common Stock will be
asked to consider and vote upon the Merger Proposal and to transact such other
business as may properly come before the EVI Special Meeting.
GulfMark. At the GulfMark Special Meeting, GulfMark's stockholders will be
asked to consider and vote upon the Contribution Proposal, the Merger Proposal
and the Plan Amendment Proposals and to transact such other business as may
properly come before the Special Meeting.
Each Proposal will be voted upon separately by the stockholders of
GulfMark; however, GulfMark and EVI will not proceed with the Contribution,
Distribution or the Merger unless both the Contribution Proposal and the Merger
Proposal are approved by GulfMark's stockholders and the Merger Proposal is
approved by EVI's stockholders.
If the Proposals are approved and the other conditions to the consummation
of the Contribution, the Distribution and the Merger are satisfied or waived,
the following additional actions will be taken in connection therewith:
(i) GulfMark will elect, as the sole stockholder of New GulfMark prior
to the Distribution, the directors of New GulfMark, who are expected to be
the same as the current directors of GulfMark (see "Description of New
GulfMark -- Directors");
(ii) New GulfMark will assume and adopt the GulfMark Stock Option
Plans and all outstanding stock options granted thereunder, as well as all
outstanding stock options issued pursuant to the GulfMark Stock Option
Policy; (see "GulfMark Stock Option Plans and GulfMark Stock Option
Policy"); and
(iii) New GulfMark will assume the Assumed Liabilities, which
generally include all the debts, liabilities and other obligations of
GulfMark other than liabilities arising out of the GulfMark Retained Assets
after the Effective Time (see "Pre-Merger Transactions").
In addition, if all of the Proposals are approved, the exercise prices and
number of shares subject to GulfMark options being assumed by New GulfMark will
be adjusted to preserve the aggregate intrinsic value of each option. See
"GulfMark Stock Option Plan and GulfMark Stock Option Policy".
VOTE REQUIRED
EVI. EVI's By-laws provide that the presence at the EVI Special Meeting, in
person or by proxy, of the holders of a majority of the outstanding shares of
EVI Common Stock entitled to vote at the meeting will
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constitute a quorum for the transaction of business. Under EVI's listing
agreement with the NYSE, approval of the Merger Proposal requires the
affirmative vote of the holders of a majority of the shares of EVI Common Stock
present, in person or by proxy, and entitled to vote at the EVI Special Meeting.
At the close of business on the Record Date, there were 22,964,625 shares
of EVI Common Stock outstanding and entitled to vote at the EVI Special Meeting.
As of the Record Date, GulfMark and Lehman held 2,235,572 and 1,120,000 shares
of EVI Common Stock, respectively, representing an aggregate of approximately
14.6% of the outstanding shares. In addition, directors and officers of EVI and
their affiliates, excluding GulfMark and Lehman, held 2,002,553 shares of EVI
Common Stock, representing approximately 8.7% of the outstanding shares. Such
persons have indicated that they intend to vote their shares in favor of the
approval and adoption of the Merger Proposal.
GulfMark. GulfMark's By-laws provide that the presence at the GulfMark
Special Meeting, in person or by proxy, of the holders of a majority of the
GulfMark Common Stock issued and outstanding and entitled to vote at the meeting
will constitute a quorum for the transaction of business. Under Delaware law,
approval of the Merger Proposal and the Contribution Proposal require the
affirmative vote of the holders of a majority of the shares of GulfMark Common
Stock outstanding on the Record Date, or 1,669,977 shares. Adoption and approval
of the Plan Amendment Proposals will require the affirmative vote of a majority
of the shares of GulfMark Common Stock represented, in person or by proxy, and
entitled to vote at the GulfMark Special Meeting.
At the close of business on the Record Date, there were 3,339,952 shares of
GulfMark Common Stock outstanding and entitled to vote at the GulfMark Special
Meeting. At the close of business on the Record Date, Lehman held 1,048,913
shares of GulfMark Common Stock and the directors and officers of GulfMark and
their affiliates other than Lehman held 313,057 shares of GulfMark Common Stock,
representing approximately 31% and 10%, respectively, of the outstanding shares.
Such persons have indicated that they intend to vote their shares in favor of
the approval and adoption of the Proposals.
VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the EVI
Special Meeting and the GulfMark Special Meeting, as applicable, in accordance
with the instructions contained therein. If a holder of EVI Common Stock or a
holder of GulfMark Common Stock executes and returns a proxy and does not
specify otherwise, the shares represented by such proxy will be voted "FOR"
approval and adoption of the Merger Proposal in accordance with the
recommendation of the EVI Board of Directors and the GulfMark Board of
Directors, respectively, and, in the case of GulfMark, "FOR" approval and
adoption of the Contribution Proposal and the Plan Amendment Proposals in
accordance with the recommendation of the GulfMark Board of Directors. Checking
the abstention box on the proxy card or failing to return the proxy card has the
same effect as voting against the Proposals. A stockholder of EVI or stockholder
of GulfMark who has executed and returned a proxy may revoke it at any time
before it is voted at the respective Special Meeting by executing and returning
a proxy bearing a later date, by filing written notice of such revocation with
the Secretary of EVI or GulfMark, as appropriate, stating that the proxy is
revoked or by attending the Special Meeting and voting in person.
Under applicable stock exchange rules, brokers will not be permitted to
submit proxies authorizing a vote on the Proposals in the absence of specific
instructions from beneficial owners. An abstention will have the effect of a
vote against the Merger Proposal, the Contribution Proposal and the Plan
Amendment Proposals. A broker non-vote will have the effect of a vote against
the Merger Proposal and the Contribution Proposal and have no effect on the Plan
Amendment Proposals. Under Delaware law, both abstentions and broker non-votes
contained on a returned proxy card will be considered present for purposes of
determining the existence of a quorum at the EVI Special Meeting or the GulfMark
Special Meeting.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers and employees
of each of EVI and GulfMark may solicit proxies from their respective
stockholders by personal interview, telephone, facsimile or otherwise.
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EVI and GulfMark will each bear the costs of the solicitation of proxies from
their respective stockholders. Arrangements also will be made with brokerage
firms and other custodians, nominees and fiduciaries who hold the voting
securities of record for the forwarding of solicitation materials to the
beneficial owners thereof. EVI and GulfMark will reimburse such brokers,
custodians, nominees and fiduciaries for the reasonable out-of-pocket expenses
incurred by them in connection therewith.
NO DISSENTERS' RIGHTS
Delaware law does not require that holders of EVI Common Stock or GulfMark
Common Stock who object to the Merger Proposal or the Contribution Proposal, if
a GulfMark stockholder, and who vote against or abstain from voting in favor of
the Merger Proposal or the Contribution Proposal, if a GulfMark stockholder, be
afforded any appraisal rights or the right to receive cash for their shares of
EVI Common Stock or GulfMark Common Stock, and neither EVI nor GulfMark intends
to make available such rights to their stockholders.
OTHER MATTERS
As of the date of this Joint Proxy Statement/Prospectus, the EVI Board of
Directors and the GulfMark Board of Directors do not know of any business to be
presented at their respective Special Meetings other than as set forth in the
notices accompanying this Joint Proxy Statement/Prospectus. If any other matters
should properly come before the respective Special Meetings, including a
proposal to adjourn such Special Meetings, it is intended that the shares
represented by proxies will be voted with respect to such matters in accordance
with the judgment of the persons voting such proxies.
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BACKGROUND OF THE TRANSACTIONS
HISTORY
EVI and GulfMark have from time to time over the years discussed the
desirability of effecting a combination between the two companies in light of
GulfMark's sizeable stock ownership interest in EVI and the overlapping share
ownership of Lehman between the two companies. These discussions, however, never
progressed to the level of an agreement either because of valuation differences
as was the case in 1990 and 1991 or other business reasons in recent years. As a
result, EVI and GulfMark have each embarked on differing long-term operational
strategies, with EVI's focus being on the development of an international
oilfield equipment and service company and GulfMark's focus being on the
development of an international offshore marine services business. To date, both
of these strategies have been successful, with EVI's revenues and operating
income (loss) from continuing operations having increased from $139 million and
($3.8) million, respectively, for the year ended December 31, 1992, to $478
million and $24.5 million, respectively, for the year ended December 31, 1996.
GulfMark has similarly experienced growth in its offshore marine services
business with the revenues and operating income from continuing operations
attributable to this business having increased from $13.5 million and $2.8
million, respectively, in 1991 to $41.7 million and $10.0 million, respectively,
for the year ended December 31, 1996.
GulfMark has from time to time considered various alternatives in order to
raise capital for its offshore marine operations. These alternatives included a
sale of the EVI Common Stock held by GulfMark, an equity offering by GulfMark
and an initial public offering through a controlled subsidiary holding its
offshore marine operations. Ultimately these alternatives were abandoned in
favor of a complete separation of its offshore marine services business from
Ercon and the EVI Common Stock holdings. The Board of Directors of GulfMark
believed that the market pricing for GulfMark Common Stock was not fully
reflecting the value of the EVI Common Stock held by GulfMark and any
alternative would continue to reflect discount of GulfMark Common Stock. Another
alternative, the sale of all of the EVI Common Stock holdings, was not seriously
considered because it was not as economically attractive to GulfMark and its
stockholders as the Transactions due to the taxability of such a sale. A
complete separation of GulfMark's offshore marine services business was not
originally considered because GulfMark had not conducted its offshore marine
services business for a period of five years until November 1995. Prior to such
time a separation was not considered to be possible on a tax-free basis. In
early 1996, having conducted its offshore marine services business for over five
years, GulfMark commenced a detailed review of the feasibility of such a
separation. Following this review, the Board of Directors of GulfMark concluded
that it would be desirable for its offshore marine services operations to be
separate from its other operations. The separation of such businesses was
considered desirable by GulfMark for various reasons, including (i) the
differing nature of the businesses, (ii) GulfMark's belief that the combination
of the businesses, in particular its large ownership of EVI Common Stock, has
resulted in the public market having difficulties in valuing the stock of
GulfMark, (iii) GulfMark's desire to focus its business and operations in its
rapidly growing international offshore marine services business, (iv) GulfMark's
belief that the division of the business will enhance and facilitate its ability
to access capital to further develop its growth plans, (v) the illiquidity of
GulfMark's shares of EVI Common Stock and the market discount on GulfMark's
shares due to such illiquidity and the tax impact of a sale of the shares and
(vi) the absence by GulfMark of any United States operations other than its
erosion control business.
In light of the foregoing, in August 1996, David Butters and Robert Millard
on behalf of GulfMark approached Bernard Duroc-Danner, President and Chief
Executive Officer of EVI, to discuss EVI's interest in acquiring GulfMark
without its offshore marine services business. Following these initial
conversations, on September 10, 1996, Mr. Duroc-Danner and Mr. Butters discussed
the general terms on which a transaction between EVI and GulfMark might be
effected. This meeting was followed by a meeting held on September 12, 1996,
among the representatives of EVI and GulfMark. The representatives of EVI
consisted of Mr. Duroc-Danner, James G. Kiley, EVI's Vice President and Chief
Financial Officer, and representatives of Fulbright & Jaworski L.L.P., EVI's
outside counsel. GulfMark was represented by Mr. Butters, Frank R. Pierce,
GulfMark's Executive Vice President and Chief Financial Officer, representatives
of Griggs & Harrison, P.C., GulfMark's outside counsel, and representatives of
Arthur Andersen LLP, GulfMark's outside
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tax advisors. At this meeting, the participants, discussed the possibility of
such a transaction and the form in which such a transaction could be effected.
Following this meeting, representatives of Fulbright & Jaworski L.L.P. had
various conversations and discussions with representatives of Griggs & Harrison,
P.C. with respect to the possible structure of a transaction if the transaction
were to be effected.
Upon the completion of the discussions in September 1996, management of EVI
determined that an acquisition by EVI of GulfMark without GulfMark's offshore
marine services business would be desirable to EVI if the acquisition could be
effected on a tax-free basis and on appropriate financial terms. Following this
expression of interest, David Butters on behalf of GulfMark proposed a
transaction in which EVI would acquire GulfMark in a tax-free merger in which a
number of shares of EVI Common Stock approximating the number of shares of EVI
Common Stock held by GulfMark would be issued to the GulfMark stockholders.
Under GulfMark's proposal, GulfMark would also distribute in a tax-free spinoff
to its stockholders prior to the Merger GulfMark's offshore marine services
division and all other assets of GulfMark other than its erosion control
business, its shares of EVI Common Stock and $300,000 in net working capital.
Under this proposal, the remaining assets of GulfMark at the time of the merger
would have consisted only of the shares of EVI Common Stock held by GulfMark,
its erosion control business and cash and other assets sufficient to allow
GulfMark to have a $300,000 positive working capital balance. With full market
value given to all of GulfMark's holdings of EVI Common Stock instead of the
discounted value placed on such shares by the market due to the illiquidity of
such shares and the taxes that would be required to be paid on a taxable sale by
GulfMark of such shares, and the ability to effect the Transactions on a
tax-free basis, GulfMark believed EVI's consideration was fair to GulfMark's
stockholders.
THE EVI SPECIAL COMMITTEE
Following the receipt of the proposal by GulfMark, Mr. Duroc-Danner advised
the outside members of the Board of Directors of EVI who were unaffiliated with
Lehman of GulfMark's proposal and management's interest in pursuing the
transaction if the transaction could be properly structured. The GulfMark
proposal was formally presented to the Board of Directors of EVI by Messrs.
Duroc-Danner and Butters at a meeting of the Board of Directors held on October
17, 1996. Because of Lehman's 31% ownership interest in GulfMark and its three
representatives on the Board of Directors of EVI, two of whom are also members
of the Board of Directors of GulfMark, the Board of Directors of EVI appointed a
special committee of the Board of Directors consisting of Sheldon Gordon,
Sheldon Lubar and Robert Rayne (the "EVI Special Committee") to review the
Transactions. The EVI Special Committee then engaged Prudential Securities to
advise it in its review of the Transactions and to render a fairness opinion to
the EVI Board of Directors as to the fairness of the consideration to be issued
in the Merger.
Following the establishment of the EVI Special Committee, representatives
of EVI and the EVI Special Committee met with representatives of GulfMark to
negotiate the terms and conditions of an acquisition by EVI of GulfMark
excluding GulfMark's offshore marine services business. On November 6, 1996, the
EVI Special Committee met with representatives of Fulbright & Jaworski L.L.P.
and Prudential Securities to review the structure of the transaction. Following
this meeting, the EVI Special Committee requested additional information from
GulfMark and that the net working capital of GulfMark following the transaction
be increased to an amount greater than $300,000. The EVI Special Committee also
requested a complete indemnity from New GulfMark for prior unaccrued or
unassumed liabilities of GulfMark and any tax liabilities in the event the
Merger, the Contribution and the Distribution were determined to be taxable and
a security interest in the stock of a subsidiary that would hold the stock of
New GulfMark's operating subsidiaries. Such indemnification obligations were
generally not quantifiable. However, although EVI and GulfMark have received an
opinion that the Transactions would be tax-free under the Code as more fully
described under "Material Federal Income Tax Considerations", the potential tax
liability to GulfMark in the event the Transactions were determined to be
taxable was estimated to be between $18 million and $25 million. The members of
the EVI Special Committee then met with Mr. Butters on November 13, 1996, to
negotiate these issues. Additional negotiations between Mr. Gordon, on behalf of
the EVI Special Committee, and Mr. Butters, on behalf of GulfMark, occurred
through November 25, 1996, at which time the economic terms of the transaction
to be presented to the respective Boards were finalized. Negotiations between
counsel for EVI and GulfMark were ongoing during this time period.
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As a result of the November 1996 meetings, GulfMark agreed to increase the
net working capital of GulfMark following the transaction by excluding the value
of the inventory of GulfMark's erosion control business from the $300,000 net
working capital amount. GulfMark, however, would not agree to the granting by
New GulfMark of a security interest to secure its indemnification obligations
and, in lieu thereof, agreed that any successor to New GulfMark or its
subsidiaries would be required to assume the indemnification obligations under
the Distribution Agreement. GulfMark also agreed that New GulfMark's
indemnification obligations would be absolute without any restrictions and that
GulfMark would retain GulfMark's approximate 33% interest in American
Independent Oil Company, a privately held company. The net effect of these
modifications was to increase the value of the transaction to EVI in an amount
between $200,000 to $500,000. The increased valuation reflected EVI's estimate
of the average book value of Ercon's inventory and the estimated liquidation
value of GulfMark's interest in American Independent Oil Company based on
information provided to EVI by GulfMark.
THE GULFMARK SPECIAL COMMITTEE
The GulfMark Proposal was presented by Mr. Butters to the Board of
Directors of GulfMark at a meeting of the Board of Directors held on October 24,
1996. Because of Lehman's 31% ownership interest in GulfMark and its two
representatives on the Board of Directors of GulfMark, which representatives are
also on the Board of Directors of EVI, the Board of Directors of GulfMark
appointed a special committee of the Board of Directors consisting of Norman G.
Cohen, Marshall A. Crowe and Louis S. Gimbel, 3rd (the "GulfMark Special
Committee") to review the proposed Transactions. The GulfMark Special Committee
then engaged Jefferies to advise it in its review of the Transactions and to
render a fairness opinion to the GulfMark Board of Directors as to the fairness
of the consideration to be issued in the Transactions.
After the formation of the GulfMark Special Committee, representatives of
GulfMark met with representatives of EVI to negotiate the terms and conditions
of an acquisition by EVI of GulfMark to be preceded by the distribution to
GulfMark's stockholders of its offshore marine services business. On November 7,
1996, the GulfMark Special Committee met with its advisors to review the legal,
tax and financial structure of the transaction. Following this meeting, the
GulfMark Special Committee requested that EVI's request that New GulfMark's
indemnity obligations be secured by GulfMark's stock in its offshore
subsidiaries be eliminated. EVI agreed to remove the security condition subject
to GulfMark's agreement to the increase in the required working capital
obligation, the addition of a requirement that any successors to New GulfMark
assume the indemnity obligations of New GulfMark and the inclusion of an
absolute indemnity obligation on behalf of New GulfMark. Representatives of the
EVI Special Committee continued meeting with representatives of GulfMark to
negotiate certain other issues relating to working capital requirements
addressed above. Following the negotiations, GulfMark agreed to exclude the
value of inventory from the required net working capital to be maintained and
EVI agreed that New GulfMark's indemnity obligations to EVI remain unsecured
obligations of New GulfMark.
THE BOARDS OF DIRECTORS' MEETINGS
On December 4, 1996, the EVI Special Committee met to review the final
terms of the proposed Merger. At this meeting, Prudential Securities delivered
to the EVI Special Committee its oral opinion that the consideration to be
received by EVI in the Merger was fair to the stockholders from a financial
point of view. Following that meeting, the Board of Directors of EVI, after
receiving the recommendation of the EVI Special Committee, approved the Merger,
with David Butters, Eliot Fried and Robert Millard, all of whom are affiliated
with Lehman and GulfMark, abstaining from the vote. See "Interests of Certain
Persons in the Transactions".
On December 5, 1996, the GulfMark Special Committee met to review the final
terms of the proposed Contribution, Distribution and Merger. At this meeting,
Jefferies delivered to the GulfMark Special Committee its oral opinion that the
consideration to be received by the stockholders of GulfMark in the Merger and
the Distribution was fair from a financial point of view. Following that
meeting, the Board of Directors of GulfMark, after receiving the recommendation
of the GulfMark Special Committee, approved the Contribution, the Distribution
and the Merger, with David Butters and Robert Millard, both of whom are
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affiliated with Lehman, GulfMark and EVI, abstaining from the vote. See
"Interests of Certain Persons in the Transactions".
EVI'S REASONS FOR THE TRANSACTIONS
The Board of Directors of EVI, with Messrs. Butters, Fried and Millard
abstaining, has approved the Merger Proposal and recommends that the
stockholders of EVI approve the Merger Proposal. The EVI Board of Directors
believes that the Merger is in the interest of EVI and its stockholders for the
following reasons. First, the Merger is expected to enhance the liquidity of the
EVI Common Stock by placing the EVI Common Stock currently held by GulfMark
directly in the hands of the GulfMark stockholders. Second, the Merger is
expected to reduce the market overhang created by GulfMark's current ownership
of EVI Common Stock. Third, the Merger will permit EVI to acquire GulfMark's
erosion control business on terms that are financially attractive to EVI. No
other tax-free transaction would allow EVI to accomplish the foregoing
objectives.
With respect to the acquisition of GulfMark's erosion control business, the
EVI Special Committee and the EVI Board of Directors noted that while no
appraisal had been made on that business, GulfMark had valued the business at
between $8 million and $10 million and a comparable company analysis conducted
by Prudential Securities reflected a valuation of the business at between $3.6
million and $11.5 million, with an average mean and median value of $7.5
million. See "Opinions of Financial Advisors -- Prudential Securities Opinion".
Finally, the EVI Special Committee and the Board of Directors of EVI noted that
under the terms of the Merger the number of shares of EVI Common Stock to be
issued to the GulfMark stockholders would approximate the number of shares of
EVI Common Stock held by GulfMark. As a result, from the perspective of EVI, the
benefits to be realized by EVI from the Merger could be expected to be obtained
without any significant actual cost to EVI.
With respect to the improved liquidity and elimination of the GulfMark
overhang, the EVI Special Committee and EVI Board of Directors noted that the
broader issuance of the shares of EVI Common Stock held by GulfMark could be
expected to improve the trading float of the EVI Common Stock, which in turn
could be expected to benefit EVI in effecting future financings and
acquisitions.
The EVI Special Committee and the EVI Board of Directors also considered a
number of other factors in approving the Merger. Principal among these
additional factors was the fact that under the terms of the Merger Agreement and
the Distribution Agreement, New GulfMark is required to indemnify EVI and
GulfMark for all liabilities relating to GulfMark's prior offshore marine
services business and all historical contingent liabilities relating to the
other businesses of GulfMark and its subsidiaries. The EVI Board of Directors
also placed considerable weight on the opinion of Arthur Andersen LLP to the
effect that the Transactions would all be tax-free to EVI and GulfMark and on
the fact that, under the terms of the Distribution Agreement, New GulfMark will
be fully responsible for and indemnify GulfMark and EVI against any and all tax
liabilities that may arise in connection with the Transactions. Finally, the EVI
Special Committee and the EVI Board of Directors considered the opinion of
Prudential Securities that the consideration to be paid by EVI in the Merger was
fair to EVI from a financial point of view.
Although no specific weight was given to any one of the above described
reasons or factors by the EVI Board in approving the Merger, the ability of EVI
to realize the potential benefits of the Merger without any significant cost to
EVI other than transactional cost and with a complete indemnity from New
GulfMark for prior liabilities of GulfMark and its subsidiaries was considered
to be the most important factor by both the EVI Special Committee and the EVI
Board of Directors. The foregoing factors were all the material factors
considered by EVI's Board of Directors.
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GULFMARK'S REASONS FOR THE TRANSACTIONS
The Board of Directors of GulfMark, with Messrs. Butters and Millard
abstaining, has approved the Contribution, the Distribution and the Merger, as
well as the Plan Amendments and recommends that the stockholders of GulfMark
approve the Proposals. The GulfMark Board of Directors believes that the
Contribution, the Distribution and the Merger are in the interest of GulfMark
and its stockholders for the following reasons. First, it is GulfMark's belief
that the separation of GulfMark's businesses through the Distribution will
enhance and facilitate its ability to access capital to further develop its
growth plans. GulfMark believes that the GulfMark Marine Business as a
"stand-alone" entity should be more favorably received by the investment
community and would be expected to have a greater ability to access the capital
markets than as a controlled subsidiary of GulfMark holding EVI Common Stock.
Second, GulfMark believes that its shares of EVI Common Stock have been
discounted in the price of GulfMark Common Stock due to their illiquidity and
the tax impact of any sale of such shares; however, through the tax-free Merger,
the EVI Common Stock currently held by GulfMark will be placed directly in the
hands of the GulfMark stockholders which, when combined with the tax-free
distribution of New GulfMark Common Stock accomplished through the Distribution,
will result in the stockholders of GulfMark obtaining the highest value
reasonably obtainable for the collective GulfMark businesses. Third, after the
Contribution and Distribution, New GulfMark will be able to focus on the rapidly
growing international offshore marine services sector, a vastly different
business and strategic focus from the domestic erosion control business to be
acquired by EVI in the Merger.
The Special Committee and the GulfMark Board of Directors balanced the
value of Ercon against the inherent risks associated with the erosion control
business, the significant management support required to operate Ercon, the
desirability of conducting solely the GulfMark Marine Business, the undiscounted
value offered by EVI for the EVI Common Stock held by GulfMark and the tax-free
aspects of the Transactions. The Special Committee and the GulfMark Board of
Directors then determined that the combined value of the foregoing factors to
GulfMark taken as a whole out-weighed the value of Ercon to GulfMark and
justified the consideration received from EVI. The GulfMark Special Committee
and GulfMark Board of Directors also considered a number of other factors in
approving the Contribution, the Distribution and the Merger. The GulfMark Board
of Directors also placed considerable weight on the opinion of Arthur Andersen
LLP to the effect that the Contribution, the Distribution and the Merger would
be tax-free to EVI, GulfMark and New GulfMark. Finally, the GulfMark Special
Committee and the GulfMark Board of Directors considered the opinion of
Jefferies that the consideration to be paid to GulfMark's stockholders in the
Distribution and the consideration to be paid to GulfMark's stockholders by EVI
in the Merger was fair to GulfMark's stockholders from a financial point of
view.
Although no specific weight was given to any one of the above described
reasons or factors by the GulfMark Board in approving the Contribution, the
Distribution and the Merger, the ability of GulfMark to enhance and facilitate
its ability to access capital to further develop its growth plans was considered
to be the most important factor by both the GulfMark Special Committee and the
GulfMark Board of Directors. New GulfMark intends to undertake an offering of
New GulfMark Common Stock within one year. It is anticipated that such an
offering would seek to raise at least $20 million in net proceeds through the
issuance of up to 950,000 shares of New GulfMark Common Stock. The net proceeds
of such an offering would be used to expand New GulfMark's offshore marine
fleet, to retire indebtedness, and for general corporate purposes. Although
there can be no assurance that such an offering will be successful or as to the
timing of such an offering, New GulfMark intends to pursue such an offering
unless New GulfMark's Board of Directors determines that based on unforeseen
circumstances such an offering would not yield to New GulfMark at least $20
million from the issuance of approximately 950,000 shares of New GulfMark Common
Stock. The foregoing discussion enumerates all of the material factors
considered by GulfMark's Board of Directors in connection with its approval of
the Transactions.
The GulfMark Board of Directors has also approved the Plan Amendment
Proposals to continue to provide incentives to the GulfMark directors and
management who will be continuing in New GulfMark by giving such directors and
management a proprietary interest in the success of New GulfMark. The Plan
Amendments when combined with the Plan Assumptions will keep directors and
management in the same economic position with respect to their stock options as
they were in prior to the Distribution and Merger.
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OPINIONS OF FINANCIAL ADVISORS
PRUDENTIAL SECURITIES OPINION
In its role as financial advisor to EVI, Prudential Securities was
requested by the EVI Board of Directors to render an opinion as to the fairness
of the Exchange Ratio, from a financial point of view, to EVI's stockholders in
connection with the acquisition of GulfMark pursuant to the Merger Agreement. No
limitations were imposed upon Prudential Securities by the Special Committee or
the EVI Board of Directors with respect to the review undertaken or the
procedures followed in rendering its opinion. Prudential Securities delivered
its oral opinion to the EVI Board on December 4, 1996, which opinion was
confirmed in a written opinion dated March 21, 1997 (the "Prudential Securities
Opinion"), to the effect that as of that date, based on the assumptions,
qualifications and limitations contained therein, the Exchange Ratio was fair,
from a financial point of view, to the EVI stockholders.
THE FULL TEXT OF THE PRUDENTIAL SECURITIES OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, THE MATTERS CONSIDERED AND THE LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS SET FORTH AS APPENDIX C TO THIS JOINT PROXY STATEMENT/PROSPECTUS
AND IS INCORPORATED HEREIN BY REFERENCE AND SHOULD BE READ IN ITS ENTIRETY IN
CONNECTION WITH THIS JOINT PROXY STATEMENT/PROSPECTUS. THE PRUDENTIAL SECURITIES
OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO AND DOES NOT
ADDRESS ANY OTHER TERMS OF THE MERGER OR THE EVI BOARD'S UNDERLYING BUSINESS
DECISION TO EFFECT THE MERGER. THE PRUDENTIAL SECURITIES OPINION WAS DELIVERED
FOR THE INFORMATION OF EVI'S BOARD AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY STOCKHOLDER OF EVI AS TO HOW SUCH STOCKHOLDER SHOULD VOTE SUCH STOCKHOLDER'S
SHARES AT THE EVI SPECIAL MEETING. THE SUMMARY OF THE PRUDENTIAL SECURITIES
OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE PRUDENTIAL SECURITIES OPINION
ATTACHED AS APPENDIX C.
In conducting its analysis and arriving at the opinion, Prudential
Securities reviewed such information and considered such financial data and
other factors as Prudential Securities deemed relevant under the circumstances,
including among others, the following: (i) the terms and conditions of the
Merger Agreement and the Distribution Agreement and the financial terms of the
transaction as set forth therein; (ii) historical business and financial
information relating to EVI and GulfMark, including certain public filings of
each of EVI and GulfMark; (iii) certain internal historical and projected
financial data provided by GulfMark relating to the businesses of GulfMark and
Ercon; (iv) publicly available financial, operating and stock market data for
companies engaged in businesses Prudential Securities deemed comparable to Ercon
or otherwise relevant to the inquiry; (v) the pro forma combined financial
impact of the Merger on EVI; (vi) the opinion of Arthur Andersen LLP relating to
the tax-free nature of the Distribution and the Merger; and (vii) such other
factors as Prudential Securities deemed relevant to its opinion. Prudential
Securities also met with senior officers of EVI and GulfMark and conducted
discussions concerning the prospects for their respective businesses and such
other matters as Prudential Securities believed relevant.
The foregoing factors represent all of the material factors considered by
Prudential Securities. The Prudential Securities Opinion was necessarily based
upon information available to it and on economic, financial, market and other
conditions as they existed and could be evaluated on the date of the opinion.
Although subsequent developments may affect its opinion, Prudential Securities
does not have any obligation to update, revise or reaffirm the Prudential
Securities Opinion. In connection with its review and analysis Prudential
Securities relied, without independent verification, upon the accuracy and
completeness of all financial data and other information that was provided by
EVI and GulfMark, or that was publicly available. With respect to financial
forecasts furnished by GulfMark, Prudential Securities assumed that the
projections reflect the best currently available estimates and judgments of
GulfMark's and Ercon's management as to the expected future financial
performance of GulfMark and Ercon. Prudential Securities did not undertake any
independent analysis to verify the reasonableness of the assumptions underlying
these projections. Prudential Securities neither made nor obtained any
independent appraisals of the assets or liabilities of GulfMark or Ercon.
Prudential Securities did not express any opinion with respect to legal or tax
matters relating to the Merger, the Contribution or the Distribution. In
preparing its opinion, Prudential Securities assumed that the Transactions would
not subject EVI, Sub, GulfMark or New GulfMark to any federal income taxes,
Texas franchise taxes or Louisiana income and franchise taxes based on the
opinion of Arthur Andersen LLP
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described in this Joint Proxy Statement/Prospectus. Prudential Securities also
assumed that such taxes are the only relevant taxes for purposes of its opinion.
See "Material Federal Income Tax Considerations". Such opinion should be
carefully reviewed. Prudential Securities also noted that under the Distribution
Agreement, New GulfMark will be obligated to indemnify EVI and GulfMark for
various liabilities, including any tax liabilities in the event the Transactions
were to result in any tax to EVI, Sub or GulfMark.
In formulating its opinion, Prudential Securities performed a variety of
financial analyses, including those summarized below. The summary set forth
below does not purport to be a complete description of the analyses performed.
The preparation of a fairness opinion is a complex process that involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances.
Accordingly, such an opinion is not necessarily susceptible to partial analysis
or summary description. Prudential Securities believes that its analysis must be
considered as a whole and that selecting portions thereof or portions of the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying the opinion.
Prudential Securities made numerous assumptions with respect to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of EVI, GulfMark and Ercon.
Any estimates contained in Prudential Securities' analyses are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses. Additionally, estimates
of the values of businesses and securities do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may be
sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty. Subject to the foregoing, the following is a brief
summary of the material financial analyses performed by Prudential Securities in
connection with the rendering of its opinion as to the fairness of the Exchange
Ratio, from a financial point of view, to the stockholders of EVI.
The terms of the Merger Agreement provide that EVI will issue to the
stockholders of GulfMark a number of shares of EVI Common Stock approximating
the number of shares of EVI Common Stock currently held by GulfMark. Prudential
Securities did not engage in a valuation of the shares of EVI Common Stock to be
issued in the Merger or to be received by EVI through its acquisition of
GulfMark in the Merger in that such shares were viewed by Prudential Securities
to essentially have an equivalent value. Prudential Securities, therefore,
focused its analysis of fairness on (i) an analysis of the estimated value of
Ercon and (ii) the earnings per share impact of the transaction to EVI.
Prudential Securities' analysis as to the value of Ercon was primarily utilized
as a means of providing the Board of Directors of EVI with a range of potential
values of Ercon that could be used by the Board of Directors of EVI to assess
the desirability of an acquisition of Ercon against the cost of Ercon to EVI in
the form of transaction costs and contingent liability risks. The earnings per
share analysis was made to ascertain whether the acquisition of GulfMark would
be accretive or dilutive to the earnings of EVI.
Comparable Company Analysis.
Prudential Securities conducted a comparable company analysis to establish
implied ranges of value for Ercon. Although Ercon is not a stand-alone public
entity, Prudential Securities selected publicly traded companies whose lines of
business and operations made them, in Prudential Securities' judgment, as nearly
comparable to Ercon as practicable. An analysis of comparable companies is not
purely mathematical; rather it involves complex considerations and judgments
concerning similarities and differences in financial, operational and other
characteristics of potentially comparable companies. For purposes of this
analysis, Prudential Securities treated the following companies as comparable to
Ercon: Cerbco, Inc., Insituform East, Inc., Insituform Technologies, Inc. and
Utilx Corporation (collectively the "Ercon Comparables"). This analysis was
believed by Prudential Securities to be a reasonable method of valuation in
light of the absence of market data regarding similar private companies. The
public company analysis also reflects market valuations of similar businesses
based on recognized financial ratios.
Using publicly available financial data, Prudential Securities determined
the relationship for the Ercon Comparables between their adjusted market value
("AMV") (defined as market value of common equity plus total debt and redeemable
preferred stock) and their latest twelve months ("LTM") revenues, LTM earnings
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before interest and taxes ("EBIT") and LTM earnings before interest, taxes,
depreciation and amortization ("EBITDA") and the relationship between their
stock price per share and their LTM earnings per share ("EPS").
Adjusted Market Value to Revenues. The Ercon Comparables were found to have
high, low, mean and median AMV to LTM revenues ratios of 0.9x, 0.5x, 0.6x and
0.5x, respectively. Applying such multiples to 1996 revenues for Ercon, this
analysis resulted in an implied high, low, mean and median equity valuation for
Ercon of $6.1 million, $3.6 million, $4.4 million and $3.6 million,
respectively.
Adjusted Market Value to EBIT. The high, low, mean and median AMV to LTM
EBIT ratios for the Ercon Comparables were 14.1x, 9.9x, 12.0x and 12.0x,
respectively. Applying such multiples to 1996 EBIT for Ercon, this analysis
resulted in an implied high and low equity valuation of $16.6 million and $11.7
million with a mean and median of $14.1 million and $14.1 million, respectively.
Adjusted Market Value to EBITDA. The high, low, mean and median AMV to LTM
EBITDA ratios for the Ercon Comparables were 7.1x, 5.0x, 6.0x and 5.9x,
respectively. Utilizing these ratios and Ercon's 1996 EBITDA resulted in an
implied equity valuation ranging from $6.5 million to $9.1 million with mean and
median implied equity valuations of $7.7 million and $7.6 million, respectively.
Adjusted Market Value to Earnings. The Ercon Comparables were found to have
a share price to LTM EPS ratio of 7.6x. Applying this multiple to Ercon's 1996
net income resulted in an implied equity valuation of $5.8 million.
Utilizing the means of each high, low, mean and median implied valuations
resulted in average high, low, mean, and median implied Ercon equity valuations
of $9.4 million, $6.9 million, $8.0 million, and $7.8 million, respectively.
Dilution/Accretion Analysis.
Prudential Securities also analyzed the pro forma effect of the Merger on
EVI's historical and projected EPS. An analysis of the historical results of EVI
and Ercon indicated that the Merger results in an increase in EVI's pro forma
combined 1996 EPS. An analysis of the anticipated future results of EVI and
Ercon based on publicly available estimates of EVI's 1997 EPS and estimates
provided by GulfMark of Ercon's 1997 estimated pre-tax income indicated that the
Merger also results in an increase in EVI's pro forma combined estimated 1997
EPS.
The EVI Special Committee selected Prudential Securities as financial
advisor to EVI because it is an internationally recognized investment banking
firm that is regularly engaged in the evaluation of businesses and their
securities in connection with mergers and acquisitions and is familiar with EVI
and the oil field service industry. Pursuant to the terms of an engagement
letter dated October 30, 1996, between EVI and Prudential Securities, Prudential
Securities received a retainer fee of $50,000 and is due an additional fee of
$100,000 for delivery of the Prudential Securities Opinion. Pursuant to the
engagement letter, upon the closing date, Prudential Securities will receive
additional cash compensation of $100,000. In addition, EVI has agreed to
reimburse Prudential Securities for all out-of-pocket and incidental expenses,
including all reasonable fees and disbursements of Prudential Securities' legal
counsel, incurred in connection with the services provided by Prudential
Securities and to indemnify and hold Prudential Securities and certain related
parties harmless to the full extent lawful from and against certain liabilities,
including certain liabilities under the federal securities laws or otherwise
relating to or arising out of its engagement. The terms of the fee arrangement
with Prudential Securities, which Prudential Securities and EVI believe are
customary in transactions of this nature, were negotiated at arm's length
between EVI and Prudential Securities, and the EVI Special Committee and the EVI
Board of Directors were aware of such arrangement, including the fact that a
portion of Prudential Securities' fee is contingent upon the consummation of the
Merger.
In the past, Prudential Securities has provided financing services for EVI
and received customary compensation for such services. In addition, Prudential
Securities makes a market in EVI Common Stock and, in the ordinary course of
business, may actively trade the securities of EVI and GulfMark for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities. Prudential Securities also
provides equity research coverage for EVI.
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JEFFERIES OPINION
In its role as financial advisor to GulfMark, Jefferies was requested by
the GulfMark Board of Directors to render an opinion as to the fairness, from a
financial point of view, of the consideration to be received by the holders of
GulfMark Common Stock in connection with the Transactions. No limitations were
imposed upon Jefferies by the GulfMark Board of Directors or the GulfMark
Special Committee with respect to the review undertaken or the procedures
followed in rendering its opinion. Jefferies was engaged solely to render a
fairness opinion and was not engaged to seek an alternative transaction to the
Transactions. Jefferies delivered its oral opinion to the GulfMark Board of
Directors on December 5, 1996, which opinion was confirmed in a written opinion
dated March 20, 1997 (the "Jefferies Opinion"), to the effect that as of that
date, based on the assumptions and qualifications contained therein, the
Transactions were fair, from a financial point of view, to the GulfMark
stockholders.
THE FULL TEXT OF THE JEFFERIES OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, THE MATTERS CONSIDERED AND THE LIMITATIONS ON THE REVIEW UNDERTAKEN, IS
SET FORTH AS APPENDIX D TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE AND SHOULD BE READ IN ITS ENTIRETY IN
CONNECTION WITH THIS JOINT PROXY STATEMENT/PROSPECTUS. THE JEFFERIES OPINION IS
DIRECTED ONLY TO THE FAIRNESS OF THE TRANSACTIONS AND DOES NOT ADDRESS ANY OTHER
TERMS OF THE CONTRIBUTION, THE DISTRIBUTION OR THE MERGER OR THE GULFMARK BOARD
OF DIRECTOR'S UNDERLYING BUSINESS DECISION TO EFFECT THE TRANSACTIONS. THE
JEFFERIES OPINION WAS DELIVERED FOR THE INFORMATION OF GULFMARK'S BOARD OF
DIRECTORS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF
GULFMARK AS TO HOW SUCH STOCKHOLDER SHOULD VOTE SUCH STOCKHOLDER'S SHARES AT THE
GULFMARK SPECIAL MEETING. THE SUMMARY OF THE JEFFERIES OPINION SET FORTH IN THIS
JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF THE JEFFERIES OPINION ATTACHED AS APPENDIX D.
In conducting its analysis and arriving at the opinion, Jefferies reviewed
such information and considered such financial data and other factors as
Jefferies deemed relevant under the circumstances, including among others, the
following: (i) the terms and conditions of a draft of the Merger Agreement and
the Distribution Agreement and the financial terms of the transaction as set
forth therein; (ii) historical and current financial condition and results of
operations of GulfMark and EVI, including certain public filings of each of
GulfMark and EVI; (iii) certain non-public financial and non-financial
information prepared by GulfMark; (iv) published information regarding the
financial performance and operating characteristics of a selected group of
companies engaged in businesses Jefferies deemed comparable to GulfMark and
Ercon or otherwise relevant to the inquiry; (v) business prospects of GulfMark
with its current asset base and after giving effect to the impact of the
Transactions; (vi) the historical and current market price for GulfMark Common
Stock; (vii) publicly available information, including research reports on
companies Jefferies considered relevant to its inquiry; (viii) recent
transactions in the oil service industry; (ix) the value of certain intangible
benefits that may accrue to GulfMark as a result of the Transactions; (x) drafts
of opinions of Arthur Andersen LLP dated December 2, 1996 relating to the
tax-free nature of the Distribution and the Merger; and (xi) such other factors
as Jefferies deemed relevant to its opinion. Jefferies also met with senior
officers of GulfMark and conducted discussions concerning the prospects for
their respective businesses and such other matters as Jefferies believed
relevant.
The foregoing factors represent the material factors considered by
Jefferies. The Jefferies Opinion was necessarily based upon information
available to it and on economic, financial, market and other conditions as they
existed and could be evaluated on the date of the opinion. Existing conditions
are subject to rapid and unpredictable changes and any such changes could impact
the Jefferies Opinion. Although subsequent developments may affect its opinion,
Jefferies does not have any obligation to update, revise or reaffirm the
Jefferies Opinion. In connection with its review and analysis Jefferies relied,
without independent verification, upon the accuracy and completeness of all
financial data and other information that was provided by GulfMark and EVI, or
that was publicly available. With respect to financial forecasts furnished by
GulfMark, Jefferies assumed that the projections reflect the best currently
available estimates and judgments of GulfMark's management as to the expected
future financial performance of GulfMark. Jefferies did not undertake any
independent analysis to verify the reasonableness of the assumptions underlying
these projections. Jefferies neither made nor obtained any independent
appraisals of the assets or liabilities of GulfMark. Jefferies did not express
any opinion with respect to legal or tax matters relating to the
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Transactions. In preparing its opinion, Jefferies relied upon the opinion of
Arthur Andersen LLP described in this Joint Proxy Statement/Prospectus that the
Transactions would not subject GulfMark, New GulfMark, Sub or EVI to any federal
or state income taxes.
In formulating its opinion, Jefferies performed a variety of financial
analyses, including those summarized below. The summary set forth below does not
purport to be a complete description of the analyses performed. The preparation
of a fairness opinion is a complex process that involves various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances. Accordingly, such
an opinion is not necessarily susceptible to partial analysis or summary
description. Jefferies believes that its analysis must be considered as a whole
and that selecting portions thereof or portions of the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying the opinion. Jefferies made numerous
assumptions with respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of GulfMark and EVI. Any estimates contained in Jefferies' analyses are
not necessarily indicative of actual values or actual future results, which may
be significantly more or less favorable than suggested by such analyses.
Additionally, estimates of the values of businesses and securities do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. Subject to the foregoing, the
following is a brief summary of the material financial analyses performed by
Jefferies in connection with the rendering of its opinion as to the fairness of
the Transactions, from a financial point of view, to the stockholders of
GulfMark.
The terms of the Distribution Agreement provide that GulfMark will
contribute all of the assets of GulfMark used in connection with the GulfMark
Marine Business, as well as certain other corporate assets of GulfMark, to New
GulfMark (excluding the GulfMark Retained Assets) in exchange for all of the
issued and outstanding common stock of New GulfMark and that GulfMark will
distribute to its stockholders all of such shares. The terms of the Merger
Agreement provide that each outstanding share of GulfMark Common Stock will be
converted in the Merger into the right to receive .6695 of one share of EVI
Common Stock. Accordingly, Jefferies focused its analysis on the estimated
equity values of GulfMark, New GulfMark and Ercon in relation to the current
GulfMark stock price per share. Jefferies used three valuation methodologies to
estimate the value New GulfMark stockholders will receive as a result of the
Transactions.
Discounted Cash Flow Analysis. Jefferies conducted a discounted cash flow
analysis of New GulfMark for the fiscal years ended 1997 through 2001 to
estimate the present value of the stand-alone unlevered free cash flows that New
GulfMark is expected to generate if New GulfMark performs in accordance with
scenarios based upon certain financial forecasts. The discounted cash flow
analysis for New GulfMark was based upon certain discussions with management of
GulfMark, as well as upon certain financial forecasts prepared by management of
GulfMark. Free cash flows of New GulfMark were calculated as EBITDA minus
working capital minus maintenance capital expenditure minus cash tax expense.
Jefferies calculated terminal values for New GulfMark by applying a terminal
free cash flow multiple of 15.6x based on multiples for recent Oil Service
Business Comparable Transactions (as defined below) to the free cash flow in
fiscal 2001 representing estimated long-term free cash flow multiples. The
unlevered free cash flow streams and terminal values were then discounted to the
present. Jefferies calculated a discount rate of 17% for New GulfMark based on
the weighted average cost of capital method; however, in order to be more
conservative, Jefferies used a discount rate of 20%. Using the financial
information and forecasts provided by management of GulfMark, Jefferies derived
an implied equity value for New GulfMark of $131.4 million and a per share value
of $39.33.
Contribution Analysis. Jefferies also conducted a contribution analysis to
generate an implied equity value for New GulfMark. Jefferies used a GulfMark
market capitalization of $180.4 million and a total enterprise value of $219.9
million based on a GulfMark price per share of $54.00 at the time. In
conjunction therewith Jefferies analyzed the EBITDA, earnings and cash flow of
EVI compared to GulfMark. Assuming that New GulfMark traded at the same
multiples as EVI, Jefferies estimated New GulfMark's implied equity value to be
$115.6 million or $34.61 per share.
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Comparable Transactions Analysis. Using publicly available information,
Jefferies performed an analysis of selected recent transactions (collectively,
the "Oil Service Business Comparable Transactions") involving certain drilling
and offshore service companies. Jefferies compared certain financial and market
statistics, including multiples of target free cash flow and EBITDA for the Oil
Service Business Comparable Transactions. The Oil Service Business Comparable
Transactions comparison included the following transactions (acquiree/acquiror):
Chiles Offshore Corporation/Noble Drilling Corporation, Sundowner Offshore
Services, Inc./Nabors Industries, Inc., Wilrig AS/Transocean ASA, Sonat Offshore
Drilling, Inc./Falcon Drilling Company, Inc., Enterra Corporation/Weatherford
International, Inc., Drexel Oilfield Services/ Tuboscope Vetco International
Corporation, Wedco Technology, Inc./ICO, Inc., Arethusa (Off-Shore)
Limited/Diamond Offshore Drilling, Inc., EnServ/Precision Drilling, Veritas
Energy Services Inc./Digicon, Inc., Dual Drilling Company/ENSCO International,
Inc., Neddrill Holding B.V./Noble Drilling Corporation, Campbell Wells
Ltd./Newpark Resources, Inc., Hornbeck Offshore Services, Inc./Tidewater, Inc.,
Transocean ASA/Sonat Offshore Drilling, Inc., Landmark Graphics
Corp./Halliburton Company, Bettis Corporation/Daniel Industries, Inc. and
Mallard Bay Drilling, Inc./Parker Drilling Company.
Jefferies considered three factors in its analysis of comparable
transactions: enterprise acquisition value, target EBITDA, and the EBITDA
multiple. Using the financial information and forecasts provided by management
of GulfMark, Jefferies applied these factors to New GulfMark, which resulted in
a New GulfMark enterprise value. Jefferies derived an average implied enterprise
value for New GulfMark of $153.2 million which, after subtracting debt and
adding cash, equaled an estimated equity value of New GulfMark of $113.6
million. Based on 3.34 million shares of GulfMark Common Stock outstanding, the
comparable transactions analysis indicated an implied equity value of New
GulfMark of $34.02 per share. This analysis also yielded an average free cash
flow multiple of 15.6x which Jefferies used in its discounted cash flow analysis
as the terminal value multiple.
In a summary valuation analysis, Jefferies considered the results of the
discounted cash flow analysis, contribution analysis and comparable transactions
analysis and determined that the average total estimated equity value to holders
of GulfMark Common Stock of New GulfMark Common Stock together with the value of
.6695 of one share of EVI Common Stock (based on EVI's market value per share of
$45.63 on November 14, 1996) and the estimated equity value of Ercon will be
$68.68 per share. Jefferies estimated an equity value of Ercon of $2.13 per
share of GulfMark Common Stock based on earnings, cash flow and EBITDA multiples
for oil service companies with market capitalizations of less than $100 million
and applied a 25% discount from these multiples due to the illiquid nature of an
investment in Ercon. Based on the November 14, 1996 market price of GulfMark
Common Stock of $54.00 per share, GulfMark's Common Stock traded at
approximately 78.7% of the estimated equity value of New GulfMark Common Stock,
plus the value of EVI's Common Stock held by GulfMark and the estimated value of
Ercon.
The GulfMark Board of Directors selected Jefferies as financial advisor to
GulfMark because it is a nationally recognized investment banking firm that is
regularly engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions and is familiar with GulfMark and EVI
and the oil field service industry. Pursuant to the terms of an engagement
letter dated October 17, 1996, between GulfMark and Jefferies and the Jefferies
Opinion, Jefferies will receive a cash fee of $150,000, contingent upon the
completion of the Transactions and payable upon delivery of its opinion. In
addition, GulfMark has agreed to reimburse Jefferies for all reasonable fees,
disbursements and out-of-pocket expenses, including all reasonable fees and
disbursements of Jefferies' legal counsel, incurred in connection with the
services provided by Jefferies and to indemnify and hold Jefferies and certain
related parties harmless to the full extent lawful from and against certain
liabilities, including certain liabilities under the federal securities laws or
otherwise relating to or arising out of its engagement, provided that GulfMark
shall not be liable with respect to any liability arising out of the wilful
misconduct or gross negligence of Jefferies or another indemnified related
party. The terms of the fee arrangement with Jefferies, which Jefferies and
GulfMark believe are customary in transactions of this nature, were negotiated
at arm's length between GulfMark and Jefferies, and the GulfMark Special
Committee and the GulfMark Board of Directors were aware of such arrangement,
including the fact that Jefferies' fee is contingent upon the consummation of
the Transactions.
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Jefferies has not rendered any investment banking or financial advisory
services to GulfMark prior to rendering its opinion. In the past, Jefferies has
rendered investment banking services to EVI for which it received customary
compensation. In addition, Jefferies, in the ordinary course of business, may
actively trade the securities of EVI and GulfMark for its own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.
CERTAIN CONSIDERATIONS
An investment in the EVI Common Stock and New GulfMark Common Stock offered
hereby involves a high degree of risk. The following factors should be carefully
considered, together with the information contained or incorporated by reference
in this Joint Proxy Statement/Prospectus, in evaluating an investment in the EVI
Common Stock and New GulfMark Common Stock offered hereby.
CAUTIONARY STATEMENTS
This Joint Proxy Statement/Prospectus contains statements relating to
future results of EVI, GulfMark and New GulfMark (including certain projections
and business trends) that are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. Actual results may differ
materially from those projected as a result of certain risks and uncertainties,
including but not limited to (i) changes in the oil and gas industry and
domestic and international drilling activity, (ii) changes in domestic and
international economic conditions, (iii) technological advances involving EVI's
products, (iv) the ability of EVI to integrate its recent acquisitions and
effect anticipated cost savings, (v) the timing and application by EVI of the
net proceeds from the recent disposition of its contract drilling division, (vi)
environmental regulations and remediation expenditures, (vii) legal proceedings,
(viii) employee and labor relations, (ix) domestic and international trade
restrictions and tariffs, (x) EVI's and GulfMark's successful execution of
internal operating plans, (xi) regulatory uncertainties, (xii) performance
issues with key suppliers and subcontractors, (xiii) international currency
fluctuations, (xiv) vessel seizures with respect to GulfMark and (xv) world-wide
political stability, as well as other risks and uncertainties, including but not
limited to those detailed from time to time in the filings of EVI, GulfMark or
New GulfMark with the Commission. The "safe harbor" for forward-looking
statements provided by the Private Securities Litigation Reform Act of 1995 will
not be available to New GulfMark with respect to the offering of New GulfMark
Common Stock made hereby. For additional information regarding risks and
uncertainties relating to EVI and GulfMark, see EVI's and GulfMark's respective
Annual Reports on Form 10-K for the year ended December 31, 1996, that are
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference".
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Transactions is conditioned on the receipt of opinions
of Arthur Andersen LLP that (i) the Contribution and the Distribution qualify as
transactions described in Section 355 of the Code and as a "reorganization"
under Section 368(a)(1)(D) of the Code and (ii) the Merger qualifies as a
"reorganization" under Section 368(a)(1)(B) of the Code. The opinion of Arthur
Andersen LLP is not binding on the Internal Revenue Service ("IRS") or the
courts. See "Material Federal Income Tax Considerations". If the Contribution
and the Distribution or the Merger fail to qualify under those sections of the
Code, GulfMark would recognize gain equal to the excess of the fair market value
of the New GulfMark Common Stock distributed to its stockholders over GulfMark's
basis in the New GulfMark Common Stock, and each GulfMark stockholder who
received shares of New GulfMark Common Stock would be generally treated as if
such stockholder had received a taxable distribution in an amount equal to the
fair market value of New GulfMark Common Stock received. If the Merger fails to
qualify as a "reorganization", each GulfMark stockholder who receives shares of
EVI Common Stock would recognize gain or loss equal to the difference between
the fair market value of the EVI Common Stock received and such stockholder's
basis in the shares of GulfMark Common Stock surrendered in exchange therefor.
Under the terms of the Distribution Agreement, New GulfMark will be required to
indemnify EVI and GulfMark for adverse tax consequences to EVI or GulfMark
arising out of the Contribution, the Distribution or the Merger. See "Pre-Merger
Transactions -- Indemnification" and "The Merger -- Terms of the
Merger -- Conditions to the Merger".
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ABSENCE OF TRADING MARKET; MARKET PRICES
Prior to the consummation of the Transactions, there will not have been any
trading market for the New GulfMark Common Stock and there can be no assurance
as to the prices at which trading in the New GulfMark Common Stock will occur
after the completion of the Transactions. Until the New GulfMark Common Stock is
fully distributed and an orderly market develops, the trading price may be
volatile. Prices for shares of New GulfMark Common Stock will be determined in
the marketplace and may be influenced by many factors, including the operating
performance of New GulfMark, the depth and liquidity of the market for New
GulfMark Common Stock, investor perception of New GulfMark and general economic
and market conditions. New GulfMark will make application for listing of the New
GulfMark Common Stock on The Nasdaq Stock Market.
NEW GULFMARK RISK FACTORS
The following are the key factors that have a direct bearing on New
GulfMark's future results and financial condition. See also "Certain
Considerations" for a description of certain risks applicable to the
Transactions.
OFFSHORE MARINE SERVICES; MARKET VOLATILITY
New GulfMark's offshore vessel operations are dependent on activity in the
offshore oil and gas exploration and production industry. The level of
exploration and development of offshore areas is affected by both short-term and
long-term trends in oil and gas prices which, in turn, are related to the demand
for petroleum products and the current availability of oil and gas resources.
The level of offshore activity also is related to local policies that influence
drilling activities. In recent years, oil and gas prices and, therefore, the
level of offshore exploration and drilling activity have been volatile. A
significant or prolonged decline in future oil and gas prices likely would
result in reduced exploration and development of offshore areas and a decline in
the demand for offshore marine services. Such reduced activity could have a
material adverse effect on New GulfMark's financial condition and results of
operations.
Charter rates for New GulfMark's vessels also are dependent on the supply
of offshore support vessels. Excess vessel capacity in the industry can result
from refurbishment of "mothballed" vessels, conversion of vessels formerly
dedicated to services other than offshore marine support and construction of new
vessels. The addition of new capacity to the worldwide offshore marine fleet
would increase competition in those markets where New GulfMark presently
operates which, in turn, could have a material adverse effect on New GulfMark's
financial condition and results of operations.
RELIANCE ON SIGNIFICANT CUSTOMERS
New GulfMark offers offshore marine services primarily to the major
integrated oil companies and large independent oil and gas exploration and
production companies. The percentage of revenues attributable to an individual
customer varies from time to time, depending on the level of oil and gas
exploration undertaken by a particular customer, the suitability of New
GulfMark's vessels for the customer's projects and other factors, many of which
are beyond New GulfMark's control. For the year ended December 31, 1996,
approximately 14% and 16% of New GulfMark's marine operating revenues were
received from Shell UK Exploration & Production and Aberdeen Services Company
(North Sea), respectively. See "Description of New GulfMark -- Customers,
Charter Terms and Competition."
ENVIRONMENTAL AND GOVERNMENT REGULATION
New GulfMark's offshore marine operations are materially affected by
government regulation in the form of international conventions, federal and
state laws and regulations in jurisdictions where New GulfMark's vessels operate
and/or are registered. These regulations govern oil spills and other matters of
environmental protection, worker health and safety, and the manning,
construction and operation of vessels.
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New GulfMark believes that it presently is in material compliance with the
environmental laws and regulations to which New GulfMark's operations are
subject. New GulfMark is not a party to any pending proceeding and is unaware of
any threatened litigation or other judicial, administrative or arbitrable
environmental proceedings which, if adversely determined, would have a material
adverse effect on the financial condition or results of operations of New
GulfMark. However, the risks of incurring substantial compliance costs and
liabilities and penalties for non-compliance are inherent in offshore marine
service operations. There can be no assurance that significant costs,
liabilities and penalties will not be incurred by or imposed on New GulfMark in
the future.
OPERATING RISKS AND INSURANCE
The operation of offshore support vessels is subject to various risks,
including catastrophic marine disaster, adverse weather conditions, mechanical
failure, collision, oil and hazardous substance spills and errors of navigation
by vessel pilots, all of which represent a threat to the safety of personnel and
to New GulfMark's vessels, cargo, equipment under tow and other property, as
well as the environment. The occurrence of the foregoing events could result in
revenue and casualty loss, increased costs and significant liability by New
GulfMark to third parties. New GulfMark maintains insurance coverage against
these risks which it considers adequate and it has not in the past experienced a
loss in excess of policy limits. There can be no assurance, however, that New
GulfMark's existing insurance coverage can be renewed at commercially reasonable
rates or that such coverage will be adequate to cover future claims that may
arise.
RELIANCE ON FOREIGN OPERATIONS
For the year ended December 31, 1996, 100% of New GulfMark's offshore
marine revenues were derived from foreign operations. New GulfMark's foreign
offshore marine operations are subject to various risks inherent in conducting
business in foreign nations. These risks include, among others, political
instability, potential vessel seizure, nationalization of assets, currency
restrictions and exchange rate fluctuations, import-export quotas and other
forms of public and governmental regulation, all of which are beyond the control
of New GulfMark. Although, historically, New GulfMark's operations have not been
affected materially by such conditions or events, it is not possible to predict
whether any such conditions or events might develop in the future. The
occurrence of any one or more of such conditions or events could have a material
adverse effect on New GulfMark's financial condition and results of operations.
CURRENCY FLUCTUATIONS
Due to its foreign operations, New GulfMark is exposed to currency
fluctuations and exchange rate risks. To minimize the financial impact of these
risks, New GulfMark attempts to match the currency of the vessel debt and
operating costs with the currency of the Charter revenue. For financial
statement reporting purposes, these accounts are translated into U.S. dollars at
the weighted average exchange rates during the relevant period.
New GulfMark will from time to time hedge certain transactions that are not
in the functional currency of New GulfMark or its operating subsidiaries.
Subsequent to year end, New GulfMark entered into a contract to hedge
approximately $13.9 million of its Norwegian Kroner commitment on a new vessel
construction contract against unfavorable fluctuations in the Sterling to Kroner
exchange rates. Because New GulfMark conducts substantially all its operations
in foreign currencies, to the extent the value of the U.S. dollar decreases in
relation to the value of applicable foreign currencies, such decrease
potentially could adversely affect New GulfMark's operating revenues in foreign
jurisdictions. To date, currency fluctuations have not had a material impact on
New GulfMark's financial condition or results of operations. See "Description of
New GulfMark -- Management's Discussion and Analysis of Financial Condition and
Results of Operations".
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AGE OF FLEET
As of February 26, 1997, the average age of New GulfMark's owned offshore
marine service fleet was approximately 13 years. New GulfMark believes that
after an offshore supply vessel has been in service for approximately 25 years,
the amount of expenditures (which typically increase with vessel age) necessary
to satisfy required marine certification standards may not be economically
justifiable. If New GulfMark is unable to replace its vessels at the end of
their useful economic lives, the costs of new building could materially increase
New GulfMark's capital expenditures. There can be no assurance that New GulfMark
will be able to maintain its fleet by extending the economic life of existing
vessels or acquiring new or used vessels, or that New GulfMark's financial
resources will be sufficient to enable it to make capital expenditures for such
purposes.
COMPETITION
New GulfMark operates in a highly competitive industry. In addition to
price, service and reputation, the principal competitive factors for offshore
supply fleets include the existence of national flag preference, operating
conditions and intended use (all of which determine the suitability of vessel
types), complexity of maintaining logistical support and the cost of
transferring equipment from one market to another. See "Description of New
GulfMark -- The GulfMark Marine Business, -- Management's Discussion and
Analysis of Financial Condition and Results of Operations".
HIGH LEVERAGE AND DEBT SERVICE
New GulfMark will have substantial indebtedness upon consummation of the
Transactions. New GulfMark's total outstanding indebtedness would have been
$63.2 million as of January 31, 1997. In addition, New GulfMark has future
payment requirements for a vessel currently under construction. New GulfMark's
leverage poses certain risks for New GulfMark, including the risks that New
GulfMark may not generate sufficient cash flow to service its indebtedness; that
New GulfMark will be unable to renegotiate the terms of its indebtedness; that
it may be unable to obtain additional financing in the future; that, to the
extent it is significantly more leveraged that its competitors, it may be placed
at a competitive disadvantage; and that New GulfMark's capacity to respond to
market conditions and other factors may be adversely affected. New GulfMark's
ability to service its debt will depend on its future performance, which will be
subject to prevailing economic and competitive conditions and other specific
factors discussed herein, as well as developments in capital markets generally.
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ORGANIZATION OF EVI, GULFMARK AND NEW GULFMARK
BEFORE AND AFTER THE TRANSACTIONS
The following table sets forth the stock ownership and organizational
structure of EVI, GulfMark and New GulfMark before and after the Transactions:
[BEFORE AND AFTER TRANSACTIONS CHARTS]
PRE-MERGER TRANSACTIONS
The detailed terms and conditions to the consummation of the Contribution
and the Distribution are contained in the Distribution Agreement, which is
attached as Appendix B to this Joint Proxy Statement/ Prospectus and
incorporated herein by reference. The following discussion sets forth a
description of the material terms and conditions of the Distribution Agreement.
THE DESCRIPTION IN THIS JOINT PROXY STATEMENT/ PROSPECTUS OF THE TERMS AND
CONDITIONS TO THE CONSUMMATION OF THE CONTRIBUTION AND THE DISTRIBUTION IS
QUALIFIED BY, AND MADE SUBJECT TO, THE MORE COMPLETE INFORMATION SET FORTH IN
THE DISTRIBUTION AGREEMENT.
THE CONTRIBUTION AND THE DISTRIBUTION
New GulfMark was recently organized for the purpose of effecting the
Transactions. Prior to the Contribution and the Distribution, New GulfMark will
own no material assets and will not conduct any business activities other than
in connection with the Transactions. Consummation of the Contribution and the
Distribution is a condition to the Merger. Neither EVI nor GulfMark will proceed
with any of the Transactions described herein unless the Contribution Proposal
is approved by GulfMark's stockholders.
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TERMS OF THE CONTRIBUTION
The Distribution Agreement provides that, effective as of the time and date
immediately prior to the Distribution when the Contribution is effective (the
"Contribution Date"), GulfMark will contribute to New GulfMark all of GulfMark's
right, title and interest in and to all of the assets of GulfMark other than (i)
all properties and assets of Ercon, (ii) the EVI Common Stock owned by GulfMark,
(iii) the stock of American Independent Oil Company owned by GulfMark and (iv)
the original tax, accounting and other corporate records of GulfMark. As
consideration for the Contribution, New GulfMark will assume the Assumed
Liabilities and issue to GulfMark that number of shares of New GulfMark Common
Stock equal to two times the number of shares of GulfMark Common Stock
outstanding on the Record Date. Following the Contribution and as of the time of
the Merger, the liabilities of GulfMark will consist of the GulfMark Retained
Liabilities. For a description of the general character and location of property
to be transferred by GulfMark to New GulfMark, see "Description of New
GulfMark".
TERMS OF THE DISTRIBUTION
The Distribution Agreement provides that, immediately prior to the
Effective Time, the Distribution shall be effected by the distribution to each
holder of record of GulfMark Common Stock, as of the Distribution Record Date,
of certificates representing two shares of New GulfMark Common Stock for each
share of GulfMark Common Stock held by such holder, without any action required
by such holders. The certificates representing the shares of New GulfMark Common
Stock will be distributed by the Paying Agent. It is currently anticipated that
the Distribution will be effected as of the close of business on the first
business day prior to the Effective Time.
CONDITIONS TO THE DISTRIBUTION
The Distribution Agreement provides that the obligations of GulfMark to
consummate the Distribution are subject to the fulfillment of each of the
following conditions: (i) all of the transactions described in the Distribution
Agreement that are associated with the Contribution shall have been consummated;
(ii) the recapitalization of New GulfMark in accordance with the Distribution
Agreement shall have been consummated; (iii) each condition to the closing of
the Merger Agreement set forth therein, other than conditions as to the
consummation of the Contribution and the Distribution, shall have been fulfilled
or waived by the party for whose benefit such condition exists; and (iv) the
Board of Directors of GulfMark shall be reasonably satisfied that, after giving
effect to the Contribution, (a) GulfMark will not be insolvent and will not have
unreasonably small capital with which to engage in its businesses and (b) the
GulfMark surplus would be sufficient to permit, without violation of Section 170
of the General Corporation Law of the State of Delaware, the Distribution.
INDEMNIFICATION
New GulfMark agreed under the Distribution Agreement, to indemnify, defend
and hold GulfMark, EVI and their respective officers, directors, employees,
agents and assigns harmless from and against any and all liabilities or
environmental liabilities (including, without limitation, reasonable fees and
expenses of attorneys, accountants, consultants and experts) that such parties
incur, are subject to a claim for, or are subject to, that are based upon,
arising out of, relating to or otherwise in respect of: (i) any breach of any
covenant or agreement of New GulfMark contained in the Distribution Agreement or
any other agreement contemplated thereby; (ii) the acts or omissions of GulfMark
or any of its current or past subsidiaries or affiliated companies, including
Ercon (a "GulfMark Company") on or before the Effective Time; (iii) the acts or
omissions of any GulfMark Company (other than Ercon), New GulfMark or any of New
GulfMark's affiliates or the conduct of any business by them on or after the
Effective Time; (iv) the Assumed Liabilities; (v) the assets being contributed
to New GulfMark, regardless of GulfMark's or any GulfMark Company's prior use of
any such asset; (vi) the conveyance, assignment, sale, lease or making available
of such assets; (vii) the conveyance, assignment, sale, merger or contribution
of the stock or share capital or assets of Ercon to GulfMark; (viii) any taxes
as a result of the Distribution, the Contribution or the Merger subsequently
being determined to be a taxable transaction for foreign, Federal, state or
local law purposes regardless of the theory
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or reason for the transactions being subject to tax; (ix) any and all amounts
for which GulfMark or EVI may be liable on account of any claims, administrative
charges, self-insured retentions, deductibles, retrospective premiums or
fronting provisions in insurance policies, including as the result of any
uninsured period, insolvent insurance carriers or exhausted policies, arising
from claims by GulfMark's or any GulfMark Company's affiliates, or the employees
of any of the foregoing, or claims by insurance carriers of GulfMark or any
GulfMark Company for indemnity arising from or out of claims by or against
GulfMark or any GulfMark Company for acts or omissions of GulfMark or any
GulfMark Company, or related to any current or past business of GulfMark or any
GulfMark Company or any product or service provided by GulfMark or any GulfMark
Company in whole or part prior to the Effective Time; (x) any liability under
the Consolidated Omnibus Budget Reconciliation Act of 1986 with respect to any
employees of GulfMark or any GulfMark Company who become employees of New
GulfMark after the Distribution; (xi) any settlements or judgments in any
litigation commenced by one or more insurance carriers against GulfMark or EVI
on account of claims by New GulfMark or any GulfMark Company or employees of New
GulfMark or any GulfMark Company; (xii) any and all liabilities incurred by
GulfMark or EVI pursuant to its obligations hereunder in seeking to obtain or
obtaining any consent or approval to assign, transfer or lease any interest in
any asset or instrument, contract, lease, permit or benefit arising thereunder
or resulting therefrom; (xiii) any liability relating to the failure to comply
with any bulk sales or transfer laws in connection herewith or with any of the
other agreements contemplated hereby; (xiv) the on-site or off-site handling,
storage, treatment or disposal of any Waste Materials (as hereinafter defined)
generated by GulfMark or any GulfMark Company on or prior to the Effective Time
or any GulfMark Company (other than Ercon) at any time; (xv) any and all
Environmental Conditions (as hereinafter defined) on or prior to the Effective
Time, known or unknown, existing on, at or underlying any of the properties
owned, leased or operated by GulfMark or Ercon on or after the Effective Time;
(xvi) any and all Environmental Conditions, known or unknown, existing on, at or
underlying any of the properties currently or previously owned or operated by
GulfMark or any GulfMark Company other than the properties owned, leased or
operated by GulfMark or Ercon after the Effective Time; (xvii) any acts or
omissions on or prior to the Effective Time of GulfMark or any GulfMark Company
relating to the ownership or operation of the business of GulfMark or any
GulfMark Company or the properties currently or previously owned or operated by
GulfMark or any GulfMark Company; (xviii) any liability relating to any claim or
demand by any stockholder of GulfMark or EVI with respect to the Merger, the
Contribution, the Distribution or the transactions relating thereto; and (xix)
any liability relating to the GulfMark 401(k) Plan and the other employee
benefit or welfare plans of GulfMark or any GulfMark Company arising out of
circumstances occurring on or prior to the Effective Time.
COVENANTS OF NEW GULFMARK
New GulfMark agreed in the Distribution Agreement to offer employment or
continued employment from the date the Contribution is effective to all
employees of GulfMark, except those employed by Ercon, on terms that are
substantially the same as the terms on which they were employed by GulfMark
immediately prior to the Contribution Date.
New GulfMark also agreed in the Distribution Agreement that it will not,
and will cause its subsidiaries to not, merge, convert into another entity,
engage in a share exchange for a majority of its shares, liquidate or transfer,
assign or otherwise convey or allocate, directly or indirectly, in one or more
transactions, whether or not related, a majority of New GulfMark's assets
(determined in good faith by a board resolution prior to the transaction on a
fair value and consolidated basis) to any person unless the acquiring person (i)
expressly assumes the obligations of New GulfMark under the Distribution
Agreement, (ii) executes and delivers to GulfMark and EVI an agreement agreeing
to be bound by each and every provision of the Distribution Agreement as if it
were New GulfMark and (iii) has a net worth on a pro forma basis after giving
effect to the acquisition or business combination equal to or greater than that
of New GulfMark (on a consolidated basis).
TAX ALLOCATION AGREEMENT
GulfMark, New GulfMark and EVI agreed in the Distribution Agreement to
enter into a Tax Allocation Agreement prior to the Distribution acceptable in
all respects to EVI and New GulfMark, which will set forth
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each party's rights and obligations with respect to payments and refunds, if
any, of taxes for periods before and after the Effective Time and related
matters such as the filing of tax returns and the conduct of audits and other
tax proceedings.
EMPLOYEE BENEFITS
New GulfMark agreed in the Distribution Agreement to establish a defined
benefit contribution plan (the "New GulfMark 401(k) Plan") that is to be
qualified under Section 401(a) of the Code and effective as of the date the
Distribution is effective. GulfMark has agreed in the Distribution Agreement to
cause the account balance attributable to each individual who will cease to be
an employee of GulfMark following the date the Distribution is effective to be
distributed directly to such individual or, upon the request of any such
individual, to be transferred to another qualified rollover investment
(including the New GulfMark 401(k) Plan if such individual is eligible to
participate therein) specified in such request to the extent that such transfer
or distribution is permitted by law.
New GulfMark also agreed in the Distribution Agreement that, effective as
of the date the Distribution is effective, New GulfMark would establish such
employee health, life and disability insurance plans and other employee welfare
or fringe benefit arrangements which are comparable in the aggregate to the
health, life and disability insurance plans and other employee welfare or fringe
benefit arrangements which had been maintained by GulfMark for its employees and
the employees of GulfMark's subsidiaries prior to the date the Distribution is
effective.
In addition, New GulfMark agreed in the Distribution Agreement that, as of
the date the Distribution is effective, New GulfMark would assume the GulfMark
Stock Option Plans and all outstanding options granted thereunder, as well as
all outstanding options issued pursuant to the GulfMark Stock Option Policy,
and, pursuant to the equitable adjustment provisions of the applicable plan or
policy, each outstanding stock option previously granted pursuant to any of the
GulfMark Stock Option Plans or the GulfMark Stock Option Policy to an employee,
officer or director of GulfMark who will, following the Distribution, become an
employee, officer or director of New GulfMark, will be converted into or
exchanged for and represent an option to acquire shares of New GulfMark Common
Stock. The number of shares of New GulfMark Common Stock subject to, and the
exercise price of, each such New GulfMark option will be adjusted in accordance
with the requirements of Section 424 of the Code, and the regulations
promulgated thereunder, to reflect the Distribution so that (i) the aggregate
intrinsic value (difference between market value per share and exercise price)
of each option immediately after the Distribution is not greater than the
aggregate intrinsic value of such option immediately before the Distribution,
and (ii) the ratio of the exercise price per option to the market value per
share is not reduced. The vesting provisions and option period of the New
GulfMark options will remain unchanged from the GulfMark options so replaced.
See "GulfMark Stock Option Plans and GulfMark Stock Option Policy".
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of New GulfMark Common Stock distributed by GulfMark in
connection with the Distribution will be freely transferable, except that any
share of New GulfMark Common Stock received by persons who are deemed to be
"affiliates" (as that term is defined under the Securities Act) of New GulfMark
may be resold by them only in transactions registered under the Securities Act,
permitted by the resale provisions of Rule 144 promulgated under the Securities
Act or otherwise permitted under the Securities Act. Persons who may be deemed
to be affiliates of New GulfMark generally include individuals or entities that
control, are controlled by, or are in common control with such party, and may
include certain officers and directors of such party, as well as principal
stockholders of such party.
NO DISSENTERS' RIGHTS
Delaware law does not require that the holders of GulfMark Common Stock who
object to the Contribution Proposal and who vote against or abstain from voting
in favor of the Merger Proposal be afforded
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any appraisal rights or the right to receive cash for their shares of GulfMark
Common Stock, and GulfMark does not intend to make available such rights to its
stockholders.
CERTAIN DEFINITIONS
For purposes of the Distribution Agreement, the following terms have the
following meanings:
"Assumed Liabilities" means any and all liabilities and environmental
liabilities other than the GulfMark Retained Liabilities and to which GulfMark
or any of the assets being contributed to New GulfMark may now or at any time in
the future become subject (whether directly or indirectly, including by reason
of GulfMark or any GulfMark Company, excluding Ercon, owning, controlling or
operating any business or assets of any person (including any current or past
affiliate)), resulting from, arising out of or relating to (i) any GulfMark
Company, (ii) any taxes to which GulfMark or any GulfMark Company may be
obligated for periods ending on or before the Effective Time, (iii) any
obligation, matter, fact, circumstance or action or omission by any person in
any way relating to or arising from the business, operations or assets of
GulfMark or Ercon that existed on or prior to the Effective Time, (iv) any
product or service provided by GulfMark or any GulfMark Company prior to the
Effective Time, (v) the Merger, the Contribution, the Distribution or any of the
other transactions contemplated hereby, (vi) previously conducted operations of
GulfMark or any GulfMark Company or (vii) the assets being contributed to New
GulfMark.
"Environmental Conditions" means any pollution, contamination, degradation,
damage or injury caused by, related to, arising from or in connection with the
generation, handling, use, treatment, storage, transportation, disposal,
discharge, release or emission of any Waste Materials (as hereinafter defined).
"Environmental Laws" means all laws, rules, regulations, statutes,
ordinances, decrees or orders of any governmental entity now or at any time in
the future in effect relating to (i) the control of any potential pollutant or
protection of the air, water or land, (ii) solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or transportation and (iii)
exposure to hazardous, toxic or other substances alleged to be harmful. The term
"Environmental Laws" includes, without limitation, (1) the terms and conditions
of any license, permit, approval or other authorization by any governmental
entity and (2) judicial, administrative or other regulatory decrees, judgments
and orders of any governmental entity. The term "Environmental Laws" includes,
but is not limited to the following statutes and the regulations promulgated
thereunder: the Clean Air Act, 42 U.S.C. sec. 7401 et seq., the Clean Water Act,
33 U.S.C. sec. 1251 et seq., the Resource Conservation Recovery Act, 42 U.S.C.
sec. 6901 et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C.
sec. 11011 et seq., the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et
seq., the Water Pollution Control Act, 33 U.S.C. sec. 1251, et seq., the Safe
Drinking Water Act, 42 U.S.C. sec. 300f et seq., the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. sec. 9601, et seq., and any
state, county or local regulations similar thereto.
"GulfMark Retained Liabilities" means, and are limited solely to, (i)
accounts payable relating to the business of Ercon that are reflected on the
balance sheet of GulfMark at the Effective Time, (ii) accounts payable reflected
on the balance sheet of GulfMark at the Effective Time and agreed to by EVI and
(iii) the obligations of GulfMark and Ercon that arise after the Effective Time
(other than obligations relating to matters existing or occurring on or prior to
the Effective Time and indemnification, warranty and product liability, wrongful
death or property claims associated with actions or omissions prior to the
Effective Time or any business conducted prior to the Effective Time) including
those obligations set forth under the express terms of the contracts of GulfMark
relating to the operations of Ercon.
"Waste Materials" means any (i) toxic or hazardous materials or substances,
(ii) solid wastes, including asbestos, polychlorinated biphenyls, mercury,
buried contaminants, chemicals, flammable or explosive materials, (iii)
radioactive materials, (iv) petroleum wastes and spills or releases of petroleum
products and (v) any other chemical, pollutant, contaminant, substance or waste
that is regulated by any governmental entity under any Environmental Law.
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THE MERGER
The following description does not purport to be complete and is qualified
in its entirety by reference to the Merger Agreement, a copy of which is
attached as Appendix A to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference.
TERMS OF THE MERGER
The detailed terms and conditions to the consummation of the Merger are
contained in the Merger Agreement, which is attached as Appendix A to this Joint
Proxy Statement/Prospectus and incorporated herein by reference. The following
discussion sets forth a description of certain material terms and conditions of
the Merger Agreement. THE DESCRIPTION IN THIS JOINT PROXY STATEMENT/PROSPECTUS
OF THE TERMS AND CONDITIONS TO THE CONSUMMATION OF THE MERGER IS QUALIFIED BY,
AND MADE SUBJECT TO, THE MORE COMPLETE INFORMATION SET FORTH IN THE MERGER
AGREEMENT.
General Description of the Merger. The Merger Agreement provides that, at
the Effective Time, Sub will merge with and into GulfMark, with GulfMark
becoming the surviving corporation. Pursuant to the Merger, each outstanding
share of GulfMark Common Stock will be converted into the right to receive .6695
of one share of EVI Common Stock, subject to adjustment in the event any new
shares of GulfMark Common Stock are issued prior to the Effective Time. As of
the Record Date, there were 22,964,625 shares of EVI Common Stock outstanding,
including the 2,235,572 shares of EVI Common Stock held by GulfMark. Based upon
the number of shares of GulfMark Common Stock outstanding as of the Record Date,
and after giving effect to the conversion of the 2,235,572 shares of EVI Common
Stock held by GulfMark into treasury shares, the number of shares of EVI Common
Stock outstanding after the Merger will be approximately the same as prior to
the Merger.
Effective Time of the Merger. Under the terms of the Merger Agreement, the
Merger will become effective when the Certificate of Merger is duly filed with
the Delaware Secretary of State or at such later time (not to exceed 90 days
from the date the Certificate of Merger is filed) as is specified in the
Certificate of Merger pursuant to mutual agreement of EVI and GulfMark. It is
anticipated that, if the Merger Proposal is approved at the EVI Special Meeting
and the GulfMark Special Meeting and all other conditions to the Merger have
been satisfied or waived, the Effective Time will occur as soon as practicable
thereafter.
Manner and Basis of Converting Shares. The Merger Agreement provides that,
at the Effective Time, each share of GulfMark Common Stock issued and
outstanding immediately prior to the Effective Time not owned directly or
indirectly by GulfMark shall be converted into the right to receive .6695 of one
share of EVI Common Stock, subject to adjustment in the event any new shares of
GulfMark Common Stock are issued prior to the Effective Time.
As soon as practicable following the Effective Time, EVI will cause the
Exchange Agent to mail to each record holder of GulfMark Common Stock
immediately prior to the Effective Time a letter of transmittal and other
information advising such holder of the consummation of the Merger and for use
in exchanging GulfMark Common Stock certificates for EVI Common Stock
certificates and cash in lieu of fractional shares. Letters of transmittal also
will be available following the Effective Time at the offices of the Exchange
Agent. SHARE CERTIFICATES SHOULD NOT BE SURRENDERED FOR EXCHANGE BY STOCKHOLDERS
OF GULFMARK PRIOR TO APPROVAL OF THE MERGER AND THE RECEIPT OF A LETTER OF
TRANSMITTAL.
No fraction of a share of EVI Common Stock will be issued in the Merger.
Each stockholder of GulfMark otherwise entitled to a fraction of a share will,
upon surrender of GulfMark Common Stock certificates held by such holder, be
paid an amount in cash equal to the value of such fraction of a share based upon
an average of the daily closing price of EVI Common Stock on the NYSE for the
ten trading days prior to the Effective Time. No interest will be paid on such
amount and all shares of GulfMark Common Stock held by a record holder shall be
aggregated for purposes of computing the number of shares of EVI Common Stock to
be issued in the Merger.
Until such time as a holder of GulfMark Common Stock surrenders such
stockholder's outstanding stock certificate to the Exchange Agent, together with
an appropriately completed and executed letter of transmittal,
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such stockholder will have no rights as a stockholder of EVI. Such certificate
shall represent only the right to receive upon surrender thereof the number of
shares of EVI Common Stock and cash, if any, in lieu of fractional shares of EVI
Common Stock, into which the shares of GulfMark Common Stock theretofore
represented by such certificate shall be converted pursuant to the Merger
Agreement. Unless and until such outstanding certificates are surrendered, no
dividends or other distributions payable to the holders of EVI Common Stock, as
of any time on or after the Effective Time, will be paid to the holders of such
outstanding certificates. Upon surrender of the certificate previously
representing GulfMark Common Stock, the holder thereof will receive certificates
representing the number of shares of EVI Common Stock to which such stockholder
is entitled, cash in lieu of a fraction of a share and the amount of any
dividends or other distributions, if any, payable to holders of EVI Common Stock
on or after the Effective Time with respect to such shares, without interest
thereon.
GulfMark Employee Benefits. Pursuant to the Merger Agreement, GulfMark has
agreed to take action prior to the Merger and the Distribution to cause all
outstanding options (the "GulfMark Stock Options") to purchase GulfMark Common
Stock under the GulfMark Stock Option Plans and the GulfMark Stock Option Policy
to be converted into options of New GulfMark and to cause the GulfMark Stock
Option Plans to be transferred to and assumed by New GulfMark, such that all
obligations of GulfMark thereunder shall be terminated and neither GulfMark nor
EVI shall have any obligations under the GulfMark Stock Option Plans and the
GulfMark Stock Option Policy. In addition, EVI has agreed to cause the GulfMark
401(k) plan to be merged into an EVI plan qualified under Section 401(a) and
501(a) of the Code, subject to the receipt of a favorable Internal Revenue
Service determination letter with respect to the GulfMark 401(k) plan and
resolution of any outstanding issues with respect thereto.
Conditions to the Merger. EVI's and GulfMark's obligations to effect the
Merger are subject to the fulfillment of, at or prior to the Closing Date, the
following conditions: (i) Ercon shall have been merged into GulfMark; (ii) the
Merger Proposal (and the Contribution Proposal in the case of GulfMark) shall
have been approved and adopted by the requisite vote of the stockholders of
GulfMark and EVI, as may be required by law, by the rules of the NYSE and The
Nasdaq Stock Market and by any applicable provisions of their respective
charters or bylaws; (iii) the waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated; (iv) no order shall have been entered and remain in
effect in any action or proceeding before any foreign, federal or state court or
governmental agency or other foreign, federal or state regulatory or
administrative agency or commission that would prevent or make illegal the
consummation of the Contribution, the Distribution or the Merger; (v) the
registration statements of which this Joint Proxy Statement/Prospectus forms a
part shall be effective on the Closing Date, and all post-effective amendments
filed shall have been declared effective or shall have been withdrawn and no
stop-order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the parties, threatened by the Commission; (vi) there shall have been obtained
any and all material permits, approvals and consents of securities or blue sky
commissions of any jurisdiction, and of any other governmental body or agency,
that reasonably may be deemed necessary so that the consummation of the Merger
and the transactions contemplated thereby will be in compliance with applicable
laws, the failure to comply with which would have (a) a material adverse effect
on the financial condition of GulfMark or Ercon after giving effect to the
Distribution or prevent or adversely affect the ability of GulfMark or New
GulfMark to perform and comply with their respective obligations under the
Merger Agreement, the Distribution Agreement or any other agreement to be
executed and delivered in connection with the transactions contemplated thereby
(collectively, a "GulfMark MAE") or (b) a material adverse effect on the
financial condition of EVI and its subsidiaries, taken as a whole (an "EVI
MAE"); (vii) the shares of EVI Common Stock issuable upon consummation of the
Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance; and (viii) all approvals and consents of third persons (a)
the granting of which is necessary for the consummation of the Transactions
contemplated in connection therewith and (b) the non-receipt of which would have
a GulfMark MAE or an EVI MAE, shall have been obtained.
EVI's obligation to effect the Merger is, at the option of EVI, also
subject to the fulfillment at or prior to the Closing Date of the following
conditions: (i) the representations and warranties of GulfMark contained in
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the Merger Agreement shall be accurate as of the date of the Merger Agreement
and (except to the extent such representations and warranties speak specifically
as of an earlier date) as of the Closing Date as though such representations and
warranties had been made at and as of that time, all of the terms, covenants and
conditions of the Merger Agreement to be complied with and performed by GulfMark
on or before the Closing Date shall have been duly complied with and performed
in all material respects, and a certificate to the foregoing effect dated the
Closing Date and signed by the executive vice president of GulfMark shall have
been delivered to EVI; (ii) there shall not have occurred or exist any fact or
condition that would reasonably result in a GulfMark MAE or would constitute a
material fixed or contingent liability to GulfMark, and EVI shall have received
a certificate signed by the executive vice president of GulfMark dated the
Closing Date to such effect; (iii) the Prudential Securities Opinion shall not
have been withdrawn; (iv) GulfMark shall have received, and furnished written
copies to EVI of, the GulfMark affiliates' agreements required by the Merger
Agreement; (v) EVI shall have received from Griggs & Harrison, P.C., counsel to
GulfMark, an opinion dated the Closing Date covering customary matters relating
to the Merger Agreement, the Distribution Agreement and the Transactions; (vi)
EVI shall have received a written opinion from Arthur Andersen LLP, in form and
substance satisfactory to EVI, dated as of the date that this Joint Proxy
Statement/Prospectus is first mailed to the stockholders of GulfMark and EVI, to
the effect that (a) the Merger will be treated for U.S. federal income tax
purposes as a reorganization within the meaning of Section 368(a)(1)(B) of the
Code, (b) the Contribution and the Distribution will not result in any gain or
loss to GulfMark under the Code, (c) EVI, Sub and GulfMark will not recognize
any gain or loss for Federal or state income tax purposes as a result of the
Merger, the Contribution or the Distribution, (d) EVI, Sub and GulfMark are each
parties to a reorganization within the meaning of Section 368(b) of the Code and
(e) GulfMark and New GulfMark will not recognize any gain or loss for Federal or
state income tax purposes as a result of the Contribution or the Distribution,
and such opinion shall be confirmed at the closing; (vii) the conveyances and
assumptions under the Distribution Agreement shall have occurred; (viii) the
Distribution shall have occurred; and (ix) GulfMark shall have delivered to EVI
a pro forma balance sheet after giving effect to the Distribution reflecting net
working capital (as defined in the Merger Agreement) in an amount of not less
than $300,000.
GulfMark's obligations to effect the Merger is, at the option of GulfMark,
also subject to the fulfillment at or prior to the Closing Date of the following
conditions: (i) the representations and warranties of EVI and Sub contained in
the Merger Agreement shall be accurate as of the date of the Merger Agreement
and (except to the extent such representations and warranties speak specifically
as of an earlier date) as of the Closing Date as though such representations and
warranties had been made at and as of that time, all the terms, covenants and
conditions of the Merger Agreement to be complied with and performed by EVI on
or before the Closing Date shall have been duly complied with and performed in
all material respects, and a certificate to the foregoing effect dated the
Closing Date and signed by the chief executive officer of EVI shall have been
delivered to GulfMark; (ii) the Jefferies Opinion shall not have been withdrawn;
(iii) GulfMark shall have received from Fulbright & Jaworski L.L.P., counsel to
EVI, an opinion dated the Closing Date covering customary matters relating to
the Merger Agreement and the Merger; (iv) GulfMark shall have received, a
written opinion from Arthur Andersen LLP, in form and substance satisfactory to
GulfMark, dated as of the date that the Joint Proxy Statement/Prospectus is
first mailed to stockholders of GulfMark and EVI to the effect that (a) the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a)(1)(B) of the Code, (b) the Contribution and
the Distribution will not result in any gain or loss to GulfMark under the Code,
(c) EVI, Sub and GulfMark will not recognize any gain or loss for Federal or
state income tax purposes as a result of the Transactions, (d) EVI and GulfMark
are each parties to a reorganization within the meaning of Section 368(b) of the
Code and (e) GulfMark and New GulfMark will not recognize any gain or loss for
Federal or state income tax purposes as a result of the Contribution or the
Distribution, and such opinion shall be confirmed at the Closing; (v) the
Contribution shall have occurred; and (vi) the Distribution shall have occurred.
Representations and Warranties of the Parties to the Merger Agreement. EVI,
Sub, GulfMark and New GulfMark have made various representations and warranties
in the Merger Agreement relating to, among other things, their respective
businesses and financial conditions, the accuracy of their various filings with
the Commission and their financial statements contained therein, the status of
various employee benefit plans and environmental matters, the satisfaction of
certain legal requirements for the Merger and the existence of
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certain litigation. The representations and warranties of each of the parties to
the Merger Agreement other than New GulfMark will expire upon consummation of
the Merger. The representations and warranties of New GulfMark will survive the
Merger Agreement without limitation.
Conduct of Business of GulfMark and EVI Prior to Merger. Under the Merger
Agreement, GulfMark is prohibited from taking various actions prior to the
Merger without the prior consent of EVI. In this regard, GulfMark has agreed
that, unless otherwise expressly contemplated by the Merger Agreement or the
Distribution Agreement, (i) its business, including that of Ercon, and its
subsidiaries would be conducted only in, and it and its subsidiaries would not
take any action except in, the ordinary course of business and consistent with
past practice; (ii) it would not directly or indirectly do any of the following:
(a) issue, sell, pledge, dispose of or encumber any capital stock of GulfMark
except upon the exercise of GulfMark Stock Options; (b) split, combine, or
reclassify any outstanding capital stock, or declare, set aside, or pay any
dividend payable in cash, stock, property, or otherwise with respect to its
capital stock outstanding at any time; (c) redeem, purchase or acquire or offer
to acquire any of its capital stock; (d) acquire, agree to acquire or make any
offer to acquire for cash or other consideration, any equity interest in or
assets of any corporation, partnership, joint venture, or other entity in an
amount greater than $500,000; or (e) enter into any contract, agreement,
commitment, or arrangement with respect to any of the matters set forth in this
clause (ii); (iii) it would not transfer, dispose or otherwise convey any of the
shares of EVI Common Stock held by it or grant or permit there to exist any lien
or other encumbrance on such shares; (iv) subject to certain procedures relating
to approvals of new contracts, it would not enter into any contract regarding
the business of Ercon having a term greater than 120 days or involving an amount
in excess of $50,000 or commit to do the same; (v) it would not become bound by
any agreement or obligation in an amount in excess of $500,000 in the aggregate
for all such agreements and obligations unless by the terms of such agreement or
obligation such agreement or obligation will be assumed by New GulfMark as of
the Distribution and GulfMark will have no further obligations with respect
thereto; (vi) it would not pledge or encumber any of the assets to be held by it
following the Distribution; (vii) it would not enter into any employment or
consulting contracts; (viii) it would not enter into any contract or agreement
that if effective on the date of the Merger Agreement would be required to be
identified to EVI under the terms of the Merger Agreement; (ix) it would not
sell, lease, mortgage, pledge, grant a lien or other encumbrance on or otherwise
encumber or otherwise dispose of any of its or Ercon's properties or assets,
except sales of inventory in the ordinary course of business consistent with
past practice; (x) neither it nor Ercon would directly or indirectly incur any
indebtedness for borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other rights to acquire
any debt securities of GulfMark or Ercon, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice, which obligations in respect of GulfMark and Ercon would be released
in connection with the Distribution, or make or permit to remain outstanding any
loans, advances or capital contributions to, or investments in, any other
person, other than to GulfMark or any direct or indirect wholly owned subsidiary
of GulfMark; (xi) it would not make any election relating to taxes; (xii)
neither it nor Ercon would change any accounting principle used by it or
applicable to Ercon; (xiii) it would use its reasonable efforts (a) to preserve
intact the business organization of GulfMark and Ercon, (b) to maintain in
effect any material authorizations or similar rights of GulfMark or Ercon, (c)
to preserve the goodwill of those having material business relationships with
it, (d) to maintain and keep each of GulfMark's and Ercon's properties in the
same repair and condition as presently exists, except for deterioration due to
ordinary wear and tear and damage due to casualty, and (e) to maintain in full
force and effect insurance comparable in amount and scope of coverage to that
currently maintained by it and Ercon; (xiv) it would, and would cause its
subsidiaries to, perform their respective obligations under any contracts and
agreements to which it is a party or to which any of its assets is subject,
except to the extent such failure to perform would not have a GulfMark MAE, and
except for such obligations as GulfMark in good faith may dispute; (xv) it would
cause there to exist immediately prior to the Effective Time net working capital
(as defined in the Merger Agreement) of not less than $300,000; (xvi) neither it
nor Ercon would settle or compromise any litigation other than settlements or
compromises (a) of litigation where the amount paid in settlement or compromise
does not exceed $500,000, or if greater, the amount of the reserve therefor is
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reflected in the most recent GulfMark documents filed with the Commission and
the terms of the settlement would not otherwise have a GulfMark MAE, or (b) in
consultation and cooperation with EVI, and, with respect to any such settlement,
with the prior written consent of EVI; (xvii) it would cause the Contribution
and the Distribution to be effected prior to the Merger; and (xviii) it would
not authorize any of, or commit or agree to take any of, or permit any of its
subsidiaries to take any of, the foregoing actions to the extent prohibited by
the foregoing and would not, and would not permit any of its subsidiaries to,
take any action that would, or that reasonably could be expected to, result in
any of the representations and warranties set forth in the Merger Agreement
becoming untrue or any of the conditions to the Merger set forth above not being
satisfied.
Pursuant to the Merger Agreement, EVI agreed that, from the date of the
Merger Agreement until the Effective Time, unless GulfMark otherwise agrees in
writing or as otherwise expressly contemplated by the Merger Agreement, it would
not take any action that would, or that reasonably could be expected to, result
in any of the representations and warranties set forth in the Merger Agreement
becoming untrue or any of the conditions to the Merger set forth above not
applicable to it being satisfied.
Management Following Merger. No changes in the directors or officers of EVI
will be effected as a result of the Merger. As of the Effective Time, the
directors and officers of Sub will become the directors and officers of
GulfMark.
Termination or Amendment of Merger Agreement. The Merger Agreement provides
that it may be terminated and the Merger and the other transactions contemplated
therein may be abandoned at any time prior to the Effective Time, whether prior
to or after approval by the stockholders of EVI or the stockholders of GulfMark
by mutual written consent of EVI and GulfMark.
EVI or GulfMark may also terminate the Merger Agreement if: (i) the Merger
has not been consummated on or before May 31, 1997 (provided that the right to
terminate the Merger Agreement under this provision is not available to any
party whose breach of any representation or warranty or failure to fulfill any
covenant or agreement under the Merger Agreement is the cause of or resulted in
the failure of the Merger to occur on or before such date); (ii) any court of
competent jurisdiction, or some other governmental body or regulatory authority
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger; (iii) the
stockholders of GulfMark do not approve the Contribution Proposal, or the Merger
Proposal at the GulfMark Special Meeting or at any adjournment thereof; (iv) the
stockholders of EVI do not approve the Merger Proposal at the EVI Special
Meeting or any adjournment thereof; or (v) in the exercise of its good faith
judgment as to its fiduciary duties to its stockholders imposed by law, as
advised by outside counsel, the Board of Directors of GulfMark or EVI determines
that such termination is appropriate in complying with its fiduciary
obligations.
GulfMark may terminate the Merger Agreement if: (i) EVI fails to comply in
any material respect with any of the covenants or agreements contained in the
Merger Agreement to be complied with or performed by EVI or Sub at or prior to
such date of termination (provided such breach is not cured within 30 days
following receipt by EVI of written notice from GulfMark of such breach and is
existing at the time of termination of the Merger Agreement); (ii) any
representation or warranty of EVI contained in the Merger Agreement shall not
have been true in all respects when made (provided such breach has not been
cured within 30 days following receipt by EVI of written notice from GulfMark of
such breach and is existing at the time of termination of the Merger Agreement)
or on and as of the Effective Time as if made on and as of the Effective Time
(except to the extent it relates to a particular date), except for such failures
to be so true and correct which would not, individually or in the aggregate,
reasonably be expected to have an EVI MAE, assuming the effectiveness of the
Merger; or (iii) the Board of Directors of EVI withdraws, modifies or changes
its recommendation of the Merger Proposal in a manner adverse to GulfMark or
shall have resolved to do any of the foregoing.
EVI may terminate the Merger Agreement if: (i) GulfMark fails to comply in
any material respect with any of the covenants or agreements contained in the
Merger Agreement to be complied with or performed by it at or prior to such date
of termination (provided such breach is not cured within 30 days following
receipt by GulfMark of written notice from EVI of such breach and is existing at
the time of termination of the Merger
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Agreement; (ii) any representation or warranty of GulfMark contained in the
Merger Agreement shall not have been true in all respects when made (provided
such breach has not been cured within 30 days following receipt by GulfMark of
written notice from EVI of such breach and is existing at the time of
termination of the Merger Agreement) or on and as of the Effective Time as if
made on and as of the Effective Time (except to the extent it relates to a
particular date), except for such failures to be so true and correct which would
not, individually or in the aggregate, reasonably be expected to have a GulfMark
MAE, assuming the effectiveness of the Merger or (iii) the Board of Directors of
GulfMark withdraws, modifies or changes its recommendation of the Merger
Proposal in a manner adverse to EVI or shall have resolved to do any of the
foregoing.
GOVERNMENTAL AND REGULATORY APPROVALS
Under the provisions of the HSR Act, the Merger may not be consummated
until such time as the specified waiting period requirements of the HSR Act have
been satisfied. It is expected that EVI, GulfMark and Lehman will file
notification reports, together with requests for early termination of the
waiting period, with the Department of Justice and the FTC at approximately the
time this Joint Proxy Statement/Prospectus is mailed. At any time before or
after the Effective Time, the Department of Justice, the FTC or a private person
or entity could seek under the antitrust laws, among other things, to enjoin the
Merger or to cause EVI to divest itself, in whole or in part, of GulfMark or of
other businesses conducted by EVI. Although neither EVI nor GulfMark knows of
any reason that a challenge to the Merger would be made under the antitrust
laws, there can be no assurance that a challenge to the Merger will not be made.
EVI and GulfMark are aware of no other governmental or regulatory approvals
required for consummation of the Merger, other than compliance with applicable
securities laws of the various states.
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase under generally accepted
accounting principles.
NYSE LISTING OF EVI COMMON STOCK
Pursuant to the Merger Agreement, EVI is required to use its best efforts
to obtain listing on the NYSE of the shares of EVI Common Stock to be issued in
connection with the Merger. An application for a listing of such shares on the
NYSE, subject to the approval of the Merger by the stockholders of EVI, is
expected to be filed and approved prior to the closing of the Merger. Approval
of the listing on the NYSE of the shares of EVI Common Stock to be issued in the
Merger is a condition to the respective obligations of EVI, GulfMark and Sub to
consummate the Merger.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of EVI Common Stock issued in connection with the Merger will be
freely transferable, except that any share of EVI Common Stock received by
persons who are deemed to be "affiliates" (as that term is defined under the
Securities Act) of GulfMark prior to the Merger may be resold by them only in
transactions registered under the Securities Act, permitted by the resale
provisions of Rule 145 promulgated under the Securities Act (or Rule 144 if such
persons are or become affiliates of EVI) or otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of EVI generally
include individuals or entities that control, are controlled by, or are in
common control with such party, and may include certain officers and directors
of such party, as well as principal stockholders of such party.
NO DISSENTERS' RIGHTS
Delaware law does not require that holders of EVI Common Stock or GulfMark
Common Stock who object to the Merger Proposal, and who vote against or abstain
from voting in favor of the Merger Proposal be afforded any appraisal rights or
the right to receive cash for their shares of EVI Common Stock or GulfMark
Common Stock, and neither EVI nor GulfMark intends to make available such rights
to their stockholders.
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MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the material United States Federal income tax
consequences of the Transactions is based in part on an opinion of Arthur
Andersen LLP dated March 20, 1997, a copy of which has been filed as an exhibit
to the registration statements to which this Joint Proxy Statement/Prospectus
forms a part, and on the Code, Treasury regulations promulgated thereunder, and
judicial and administrative interpretations thereof, all as in effect on the
date hereof. No rulings have been requested from the IRS with respect to these
matters. Additionally, the opinion of Arthur Andersen LLP is based on various
representations and assumptions described therein, including representations by
EVI and GulfMark regarding the reasons for the Transactions described in "EVI's
Reasons for the Transactions" and "GulfMark's Reasons for the Transactions," and
is not binding on the IRS or the courts. The conclusions set forth in the
discussion may change as a result of changes in applicable laws or
interpretations thereof occurring after the date hereof. The discussion does not
address the effects of any state, local or foreign tax laws on the Transactions.
The opinion of Arthur Andersen LLP is also required to be delivered to EVI
and GulfMark as a condition to the closing of the Merger. This condition may be
waived by EVI and GulfMark as to the opinion to be received by it. Except for
modifications to the opinions which would not change the conclusions of the
opinions described below or which EVI and GulfMark do not believe will
materially change the substance of such opinions, no waiver of the required
opinions of Arthur Andersen LLP will be effected by EVI or GulfMark without
disclosure to their respective stockholders of such waiver, including the risks
thereof, and providing stockholders with an opportunity to change their vote on
the Transactions.
The tax treatment of a stockholder may vary depending upon his or her
particular situation, and certain stockholders that have a special status
(including individuals who hold restricted GulfMark Common Stock, individuals
who acquired GulfMark Common Stock as a result of the exercise of an employee
stock option, pursuant to an employee stock purchase plan or otherwise as
compensation, insurance companies, tax-exempt organizations, financial
institutions or broker-dealers, persons who do not hold GulfMark Common Stock as
capital assets and persons who are neither citizens nor residents of the United
States, or who are foreign corporations, foreign partnerships or foreign estates
or trusts not subject to United States Federal income tax on income regardless
of source) may be subject to special rules not discussed below.
President Clinton's budget recommendations announced in early 1997 called
for the enactment of a new legislative provision that, if enacted in its
proposed form with an effective date applicable to stock distributions made on
or prior to the date of the Distribution, would require GulfMark, for Federal
income tax purposes, to recognize gain equal to the excess of the value of the
New GulfMark Common Stock distributed to GulfMark's stockholders in the
Distribution over GulfMark's basis in the New GulfMark Common Stock received in
the Contribution. As proposed, the provision would be effective for stock
distributions made after the date of first action by a Congressional tax-writing
committee. To date, there has been no such committee action on the
recommendation.
EACH STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE TRANSACTIONS DESCRIBED HEREIN,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND OF CHANGES IN APPLICABLE TAX LAWS.
FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTIONS
In the opinion of Arthur Andersen LLP:
(i) The Contribution and the Distribution will qualify as transactions
described in Section 355 of the Code and as a "reorganization" within the
meaning of Section 368(a)(1)(D) of the Code, and the Merger will qualify as a
"reorganization" under Section 368(a)(1)(B) of the Code.
(ii) No gain or loss will be recognized by GulfMark or New GulfMark as a
result of the Contribution and the Distribution.
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(iii) No gain or loss will be recognized by (and no amount will be included
in the income of) GulfMark's stockholders as a result of their receipt of the
New GulfMark Common Stock in the Distribution.
(iv) The tax basis of the New GulfMark Common Stock and GulfMark Common
Stock, as the case may be, in the hands of each holder of GulfMark Common Stock
immediately after the Distribution will be the same as the tax basis of the
GulfMark Common Stock held by such holder immediately before the Distribution,
allocated in proportion to the relative fair market values of the New GulfMark
Common Stock and GulfMark Common Stock held immediately after the Distribution.
(v) The holding period of the New GulfMark Common Stock received by a
holder of GulfMark Common Stock in the Distribution will include the period
during which such holder held his or her GulfMark Common Stock, provided that
the GulfMark Common Stock was held as a capital asset at the time of the
Distribution.
Additionally, as a result of the Merger, in the opinion of Arthur Andersen
LLP:
(i) Except for any cash received in lieu of fractional shares, a holder of
GulfMark Common Stock will not recognize any income, gain or loss as a result of
the receipt of EVI Common Stock in the Merger.
(ii) A holder's tax basis in his or her shares of EVI Common Stock received
in the Merger, including any fractional share interest for which cash is
received, will equal such holder's basis in his or her GulfMark Common Stock
surrendered in exchange therefor (as determined immediately following the
Merger).
(iii) A holder's holding period for his or her shares of EVI Common Stock
received in the Merger, including any fractional share interest for which cash
is received, will include the period for which the shares of GulfMark Common
Stock were held, provided such shares were held as capital assets at the time of
the Merger.
In the opinion of Arthur Andersen LLP, a holder of GulfMark Common Stock
who receives cash in lieu of fractional shares will recognize gain or loss equal
to the difference between the amount of such cash and the tax basis allocated to
such stockholder's fractional shares of GulfMark Common Stock. Such gain or loss
will constitute long-term capital gain or loss, if, at the Effective Time, such
stockholder has held such GulfMark Common Stock for more than one year.
Arthur Andersen LLP has advised that if the Contribution and the
Distribution do not qualify as transactions pursuant to Section 355 of the Code
and as a "reorganization" under Section 368(a)(1)(D) of the Code, GulfMark would
be required to recognize gain equal to the excess of the fair market value of
the New GulfMark Common Stock distributed to its stockholders over GulfMark's
basis in the New GulfMark Common Stock. New GulfMark has agreed to indemnify
GulfMark and EVI for any tax liability resulting from any such gain required to
be recognized by GulfMark. In addition, based on the advise of Arthur Andersen
LLP, if the Merger, the Contribution and the Distribution fail to qualify under
the aforementioned sections of the Code, each GulfMark stockholder who receives
shares of New GulfMark Common Stock in the Distribution would be generally
treated as if such stockholder had received a taxable distribution in an amount
equal to the fair market value of New GulfMark Common Stock received. Further,
based on the advise of Arthur Andersen LLP, if the Merger fails to qualify as a
"reorganization" under Section 368(a)(1)(B) of the Code, each GulfMark
stockholder who receives shares of EVI Common Stock in the Merger would be
required to recognize gain or loss equal to the difference between the fair
market value of the EVI Common Stock received and such stockholder's basis in
the shares of GulfMark Common Stock surrendered in exchange therefor.
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BACKUP WITHHOLDING
Under the backup withholding rules, a holder of New GulfMark Common Stock
and EVI Common Stock may be subject to backup withholding at the rate of 31%
with respect to dividends and proceeds of redemption, unless such holder (a) is
a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (b) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. Any amount withheld under these rules will be credited
against the holder's Federal income tax liability. New GulfMark or EVI may
require holders of New GulfMark Common Stock or EVI Common Stock to establish an
exemption from backup withholding or to make arrangements satisfactory to New
GulfMark or EVI with respect to the payment of backup withholding. A holder who
does not provide New GulfMark or EVI with his or her current taxpayer
identification number may be subject to penalties imposed by the IRS.
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INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
GULFMARK AND LEHMAN OWNERSHIP
GulfMark currently owns 2,235,572 shares of EVI Common Stock and Lehman
currently owns 1,120,000 shares of EVI Common Stock, which in aggregate
represent approximately 14.6% of the total outstanding shares of EVI Common
Stock. In addition, Lehman currently owns 1,048,913 shares of GulfMark Common
Stock, representing approximately 31% of the total outstanding shares of
GulfMark Common Stock. Three representatives of Lehman, David Butters, Chairman
of the Board of Directors of EVI, Robert Millard and Eliot Fried, are currently
members of the Board of Directors of EVI. Messrs. Butters and Millard are also
the Chairman of the Board of Directors and a director of GulfMark, respectively.
Messrs. Butters and Millard also hold 71,400 and 81,400 shares of GulfMark
Common Stock, respectively, and options to purchase an aggregate of 15,000
shares of GulfMark Common Stock each, which options will be adjusted pursuant to
the Plan Amendment Proposals. For a description of the treatment of GulfMark
Stock Options outstanding under the GulfMark Stock Option Plans, see "GulfMark
Stock Option Plans and GulfMark Stock Option Policy".
Lehman has from time to time provided financial advisory services to EVI,
including advisory services relating to EVI's disposition of its Mallard
Division, for which it has received usual and customary compensation.
Following the Transactions, Lehman will hold directly a total of 1,822,247
shares of EVI Common Stock or approximately 7.2% of the total outstanding shares
of EVI Common Stock after the Merger. Lehman will also hold 2,097,826 shares of
New GulfMark Common Stock, or approximately 31% of the outstanding shares of New
GulfMark Common Stock. Representatives of Lehman are expected to continue to
remain on the Board of Directors of EVI and New GulfMark following the Merger.
Such representatives, however, will not be permitted to take any action as
members of the Board of Directors of EVI or New GulfMark in respect of any
matter relating to the Transactions, including any matter relating to claims for
indemnification or other disputes between EVI, GulfMark or New GulfMark.
INDEMNITY
Pursuant to the Distribution Agreement, New GulfMark is obligated to
indemnify GulfMark for various liabilities relating to the historical operations
of GulfMark and matters relating to the Transactions. Among the matters for
which New GulfMark is required to indemnify GulfMark and EVI are (i) any taxes
as a result of the Distribution, the Contribution or the Merger subsequently
being determined to be a taxable transaction for foreign, federal, state or
local law purposes regardless of the theory or reason for the Transactions being
subject to tax and (ii) any liability relating to any claim or damage by any
stockholder of GulfMark or EVI with respect to the Merger, the Contribution, the
Distribution or the transactions relating thereto. This indemnity includes
claims and liabilities arising under the securities laws and claims with respect
to this Joint Proxy Statement/Prospectus.
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GULFMARK STOCK OPTION PLANS AND
GULFMARK STOCK OPTION POLICY
In December 1996, the Board of Directors of GulfMark approved an amendment
to the Director Plan, subject to approval of GulfMark stockholders, to replace
the anti-dilution provisions set forth therein with anti-dilution provisions
allowing for equitable adjustments in connection with certain corporate
transactions. A complete copy of the proposed amendment to the Director Plan is
attached hereto as Appendix E.
In December 1996, the Board of Directors of GulfMark also approved an
amendment to the Employee Plan, subject to approval of GulfMark stockholders, to
provide that the number of shares reserved for issuance pursuant to the Employee
Plan is subject to adjustment in accordance with the anti-dilution provisions of
the Employee Plan, and to replace the anti-dilution provisions set forth therein
with anti-dilution provisions allowing for equitable adjustments in connection
with certain corporate transactions. A complete copy of the proposed amendment
to the Employee Plan is attached hereto as Appendix F.
TREATMENT OF OUTSTANDING STOCK OPTIONS
The Distribution Agreement requires New GulfMark to assume each of the
GulfMark Stock Option Plans and all outstanding stock options granted
thereunder, as well as all outstanding stock options issued under the GulfMark
Stock Option Policy, and provides that, pursuant to the equitable adjustment
provisions of the applicable plan or policy, each outstanding stock option
previously granted pursuant to any of the GulfMark Stock Option Plans or the
GulfMark Stock Option Policy to an employee, officer or director of GulfMark who
will, following the Distribution, become an employee, officer or director of New
GulfMark, will be converted into or exchanged for and represent an option to
acquire shares of New GulfMark Common Stock.
All of the employees, officers and directors of GulfMark who currently hold
options granted pursuant to any of the GulfMark Stock Option Plans or the
GulfMark Stock Option Policy will, following the Distribution, become employees,
officers or directors, as the case may be, of New GulfMark. Therefore, all
outstanding options granted pursuant to any of the GulfMark Stock Option Plans
or the GulfMark Stock Option Policy will be converted into or exchanged for and
represent options to acquire shares of New GulfMark Common Stock as of the date
the Distribution becomes effective. From and after the date the Distribution
becomes effective, no options to purchase GulfMark Common Stock will be
outstanding and GulfMark will have no further obligations pursuant to any of the
GulfMark Stock Option Plans or the GulfMark Stock Option Policy.
The number of shares of New GulfMark Common Stock subject to, and the
exercise price of, each such New GulfMark option will be adjusted in accordance
with the requirements of Section 424 of the Code and the regulations promulgated
thereunder to reflect the Distribution so that (i) the aggregate intrinsic value
(difference between market value per share and exercise price) of each option
immediately after the Distribution is not greater than the aggregate intrinsic
value of such option immediately before the Distribution and (ii) the ratio of
the exercise price per option to the market value per share is not reduced.
PLAN AMENDMENT PROPOSALS
The Plan Amendment Proposals, if adopted and approved by GulfMark
stockholders, would amend each of the GulfMark Stock Option Plans to provide
appropriate anti-dilution adjustments in connection with certain corporate
transactions, such as the Distribution, and would amend the Employee Plan to
provide that the number of shares reserved for issuance thereunder is subject to
adjustment in accordance with the amended anti-dilution provisions and may serve
to increase the number of shares reserved for issuance thereunder without
stockholder approval.
The proposed amendment to each of the GulfMark Stock Option Plans to
provide appropriate anti-dilution adjustment provisions in connection with
certain corporate transactions is required to effect the adjustment in the
number of shares subject to, and the exercise price of, options currently
outstanding under the GulfMark Stock Option Plans. To effect the adjustment
required by Section 424 of the Code and the
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regulations promulgated thereunder, as set forth in the Distribution Agreement,
(i) the number of shares of New GulfMark Common Stock covered by each New
GulfMark option shall be the number of shares covered by the GulfMark Option
being replaced thereby, multiplied by a fraction equal to the ratio of the pre-
Distribution market price per share of GulfMark Common Stock to the
post-Distribution market price per share of New GulfMark Common Stock, and (ii)
the exercise price per share of each New GulfMark option shall be the exercise
price per share of the GulfMark Option being replaced thereby, multiplied by a
fraction equal to the ratio of the post-Distribution market price per share of
the New GulfMark Common Stock to the pre-Distribution market price per share of
GulfMark Common Stock. For purposes of the foregoing adjustment, the
pre-Distribution market price per share of GulfMark Common Stock shall be the
closing price of GulfMark Common Stock on the last day on which GulfMark Common
Stock is traded on the Nasdaq National Market System, and the post-Distribution
market price per share of New GulfMark Common Stock shall be the closing price
of New GulfMark Common Stock on the first day on which New GulfMark Common Stock
is traded on the Nasdaq National Market System following the Distribution Date.
Pursuant to the proposed equitable anti-dilution adjustment provisions, the
actual adjustment resulting from the Distribution will have the effect of
increasing the number of shares and decreasing the option exercise price of each
outstanding option issued pursuant to the GulfMark Stock Option Plans and the
GulfMark Stock Option Policy in accordance with the requirements of Section 424
of the Code and the regulations promulgated thereunder, as required by the
Distribution Agreement, to preserve the aggregate intrinsic value of each option
and the ratio of the exercise price to the market value per share. The actual
adjustment pursuant to the proposed equitable anti-dilution adjustment
provisions will also have the effect of increasing the aggregate number of
shares reserved for issuance pursuant to the GulfMark Stock Option Plans to
accommodate (i) an increase in the number of shares subject to outstanding
options per the adjustment described above, and (ii) an increase in the number
of shares available for future awards in connection with an adjustment to
reflect the Distribution, namely a distribution to holders of GulfMark Common
Stock of two shares of New GulfMark Common Stock for each share of GulfMark
Common Stock. Finally, with respect only to the Director Plan, the actual
adjustment pursuant to the proposed equitable anti-dilution adjustment
provisions will have the effect of doubling the number of shares covered by the
automatic grant provisions of the Director Plan from and after the Distribution
Record Date to reflect the Distribution of two shares of New GulfMark Common
Stock for each share of GulfMark Common Stock.
AMENDED AND RESTATED 1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Director Plan was adopted by the Board of Directors of GulfMark on
December 8, 1993 and approved by GulfMark stockholders on May 18, 1994. A total
of 50,000 shares of GulfMark Common Stock were initially reserved for issuance
thereunder. On March 18, 1996, the Board of Directors of GulfMark amended the
Director Plan to, among other things, increase the number of shares reserved for
issuance thereunder to an aggregate of 200,000 shares, and such amendment was
approved by GulfMark stockholders on May 8, 1996.
As of the date the Distribution becomes effective, New GulfMark will assume
the Director Plan, and pursuant to the equitable adjustment provisions of the
Director Plan, each outstanding stock option previously granted pursuant to the
Director Plan will be converted into or exchanged for and represent an option to
acquire shares of New GulfMark Common Stock. The number of shares of New
GulfMark Common Stock subject to, and the exercise price of, each such New
GulfMark option will be adjusted to reflect the Distribution in accordance with
the requirements of Section 424 of the Code and the regulations promulgated
thereunder to preserve the aggregate intrinsic value of each option and the
ratio of the exercise price to market value per share. In addition, the number
of shares of New GulfMark Common Stock available for future awards pursuant to
the Director Plan will be increased to reflect the Distribution. Finally, the
number of shares covered by the automatic grant provisions of the Director Plan
from and after the Distribution Date will be doubled to reflect the Distribution
of two shares of New GulfMark Common Stock for each share of GulfMark Common
Stock.
Set forth below is a summary of the material provisions of the Director
Plan. This summary does not purport to be a complete statement of the provisions
of the Director Plan and is qualified in its entirety by
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reference to the Director Plan. In the event of a discrepancy between this
summary and the Director Plan, the terms of the Director Plan will control.
Purpose. The Director Plan was adopted for the benefit of directors who at
the time of their service are not employees of GulfMark or any of its
subsidiaries and was intended to advance the interests of GulfMark by providing
non-employee directors with additional incentive to serve GulfMark by increasing
their proprietary interest in the success of GulfMark. Upon assumption of the
Director Plan by New GulfMark pursuant to the Distribution Agreement, the
Director Plan will be for the benefit of directors who at the time of their
service are not employees of New GulfMark or any of its subsidiaries and will be
intended to advance the interests of New GulfMark by providing non-employee
directors with additional incentive to serve New GulfMark by increasing their
proprietary interest in the success of New GulfMark.
Administration. The Director Plan is administered by the compensation
committee of the Board of Directors of GulfMark, the members of which are
Messrs. Butters, Cohen and Millard. The selection of non-employee directors to
whom options are to be granted, the number of shares subject to any option, the
exercise price of any option and the term of any option are as provided in the
Director Plan, and the committee administering the Director Plan has no
discretion as to such matters. Upon assumption of the Director Plan by New
GulfMark pursuant to the Distribution Agreement, the Director Plan will be
administered by the compensation committee of the Board of Directors of New
GulfMark, the members of which will be Messrs. Butters, Cohen and Millard.
Eligibility and Participation. The Director Plan provides for the grant of
an option to purchase 5,000 shares of GulfMark Common Stock to each non-employee
director on December 8, 1993, on March 18, 1996 and thereafter on the date of
reelection as a director at the annual stockholders meetings in 1999, 2002 and
2005. Any new non-employee directors will receive a grant of an option to
purchase 5,000 shares of GulfMark Common Stock on the date of his or her first
election as a director, and thereafter on the date of reelection as a director
at the annual stockholders meetings in 1999, 2002 and 2005. At the current time,
five GulfMark directors are eligible to participate in the Director Plan. Upon
assumption of the Director Plan by New GulfMark pursuant to the Distribution
Agreement, the Director Plan will provide for the grant of an option to purchase
10,000 shares of New GulfMark Common Stock to each non-employee director on the
date of reelection as a director at the New GulfMark annual stockholders
meetings in 1999, 2002 and 2005, and any new non-employee directors of New
GulfMark will receive a grant of an option to purchase 10,000 shares of New
GulfMark Common Stock on the date of his or her first election as a director,
and thereafter on the date of reelection as a director at the New GulfMark
annual stockholders meetings in 1999, 2002 and 2005. Immediately following
assumption of the Director Plan by New GulfMark pursuant to the Distribution
Agreement, five New GulfMark directors will be eligible to participate in the
Director Plan. No options to purchase New GulfMark Common Stock have been or
will be granted upon the election of the initial directors of New GulfMark.
Options granted pursuant to the Director Plan are exercisable at a purchase
price per share equal to the fair market value of the stock underlying such
option as of the date of grant. Fair market value of a share of stock as of any
particular date shall mean the average of the high and low sales price of a
share of such stock on that date as reported on the Nasdaq National Market
System or the closing price of a share of such stock on any national securities
exchange, if such stock is then listed on a national securities exchange,
provided that if no such prices are so reported on that date or if, in the
discretion of the administering committee, another means of determining the fair
market value of a share of stock at such date shall be necessary or advisable,
the administrative committee may provide for another means for determining such
fair market value.
Shares Subject to Options. An aggregate of 200,000 shares of GulfMark
Common Stock, subject to adjustment for changes in capitalization, are
authorized for issuance upon exercise of options granted pursuant to the
Director Plan. Such shares may be treasury shares or authorized but unissued
shares. The number of shares reserved for issuance pursuant to the Director Plan
is subject to the anti-dilution provisions, as amended, of the Director Plan.
The proposed amendment to the Director Plan broadens the situations in which
adjustments for changes in capitalization may be made, and expands the board's
discretion as to the types of adjustments warranted with respect to the
aggregate number of shares reserved for issuance
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thereunder. The proposed equitable anti-dilution adjustment provisions will have
the effect of increasing the aggregate number of shares of GulfMark Common Stock
(or of New GulfMark Common Stock following assumption of the Director Plan by
New GulfMark pursuant to the Distribution Agreement) authorized for issuance
upon exercise of options granted pursuant to the Director Plan to accommodate
(i) an increase in the number of shares subject to outstanding options to
preserve the aggregate intrinsic value of each option and the ratio of the
exercise price to the market value per share and (ii) an increase in the number
of shares available for future awards to reflect the two-for-one nature of the
Distribution. Any shares of GulfMark Common Stock issued upon the exercise,
prior to the date the Distribution becomes effective, of GulfMark options
granted pursuant to the Director Plan will count against the aggregate number of
shares of New GulfMark Common Stock authorized for issuance pursuant to the
Director Plan.
Grant of Options. Each option granted under the Director Plan is required
to be embodied in a written option agreement, which is subject to the terms and
conditions of the Director Plan and which contains such other provisions as the
administrative committee of the Director Plan consistent with the Director Plan
in its discretion deems advisable. Each option granted under the Director Plan
is exercisable for a term of ten years from the date of grant, subject to
earlier termination as set forth below under the heading "Termination".
Exercise of Options. Options granted pursuant to the Director Plan are not
exercisable for a period of one year from the date of grant. Options are
exercised by the delivery to GulfMark of a written notice stating (i) that such
optionee wishes to exercise such option on the date such notice is delivered,
(ii) the number of shares of stock with respect to which the option is to be
exercised, (iii) the address to which the certificate representing such shares
of stock should be mailed and (iv) the social security number of such optionee.
Such written notice must be accompanied by payment in the form of a cashier's
check of (i) the option price of such shares of stock and (ii) the amount of
money necessary to satisfy any resulting withholding tax liability. Subject to
certain limitations in the Director Plan, payment may be made in shares of
GulfMark Common Stock owned by the optionee. The Director Plan does not provide
for the simultaneous, successive stock payment procedure, which is commonly
referred to as "pyramiding". Upon assumption of the Director Plan by New
GulfMark following the Distribution, payment of the exercise price may be made
in shares of New GulfMark Common Stock owned by the optionee, subject to certain
limitations.
Rights of Optionees. No optionee has rights as a stockholder with respect
to the shares covered by his or her option until the date of issuance of a stock
certificate for such shares.
Changes in Capital Structure. The existence of outstanding options under
the Director Plan does not affect in any way the right or power of GulfMark or
its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in GulfMark's capital structure or its
business, or any merger or consolidation of GulfMark, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the
GulfMark Common Stock or the rights thereof, or the dissolution or liquidation
of GulfMark, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise. Upon assumption of the Director Plan by New GulfMark
pursuant to the Distribution Agreement, the existence of outstanding options
under the Director Plan will not affect in any way the right or power of New
GulfMark or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in New GulfMark's capital
structure or its business, or any merger or consolidation of New GulfMark, or
any issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the New GulfMark Common Stock or the rights thereof, or the
dissolution or liquidation of New GulfMark, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
Except as expressly provided in the Director Plan, the issue by GulfMark of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of GulfMark convertible into such shares or
other securities, will not affect, and no adjustment by reason thereof will be
required to be made with respect to, the number or price of shares of GulfMark
Common Stock then subject to outstanding options under the Director Plan. Upon
assumption of the Director Plan by New GulfMark pursuant to the Distribution
Agreement, except as expressly provided in the Director
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Plan, the issue by New GulfMark of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
New GulfMark convertible into such shares or other securities, will not affect,
and no adjustment by reason thereof will be required to be made with respect to,
the number or price of shares of New GulfMark Common Stock then subject to
outstanding options under the Director Plan.
The Director Plan currently provides that the number, class and per share
exercise price of shares of stock subject to outstanding options will be subject
to adjustment under the Director Plan if GulfMark effects certain changes in its
capital structure. The Director Plan contains specific provisions with respect
to such adjustments in the event of (i) a subdivision or consolidation of shares
or other capital adjustment of, or the payment of a dividend in capital stock or
other equity securities of GulfMark on, the GulfMark Common Stock, or other
increases or reductions in the number of shares of GulfMark Common Stock without
receipt of consideration therefor, or the reclassification of GulfMark Common
Stock, in whole or in part, into other equity securities of GulfMark, (ii) a
distribution by GulfMark to all holders of shares of GulfMark Common Stock of
evidences of indebtedness or cash or other assets (other than ordinary cash
dividends), (iii) a tender offer by GulfMark for, or the grant by GulfMark to
all holders of shares of GulfMark Common Stock of the right to require GulfMark
to acquire from such stockholders shares of, GulfMark Common Stock at a price in
excess of the current market price, or the grant by GulfMark to all holders of
shares of GulfMark Common Stock of the right to acquire shares of GulfMark
Common Stock for less than the current market price, and (iv) the merger of one
or more corporations into GulfMark, the merger of GulfMark into one or more
corporations, the consolidation of GulfMark and one or more corporations, or any
other corporate transaction described in Section 424(a) of the Code.
The proposed amendment to the Director Plan would replace the specific
provisions for adjustment set forth with respect to each of the events described
above with a general statement providing that in the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, or extraordinary dividend or divestiture (including a spin-off), or
any other change in corporate structure or shares, then adjustments, determined
by the board of directors in its discretion to be appropriate, shall be made as
to the number and kind of securities reserved under and subject to the automatic
grant provisions of the Director Plan and, in order to prevent dilution or
enlargement of rights of participants, as to the number, kind and where
applicable, the option exercise price, of securities subject to outstanding
awards or securities subject to options issued in replacement of outstanding
awards. The proposed amendment broadens the situations in which adjustments for
changes in capital structure may be made and expands the board's discretion as
to the types of adjustments warranted, thereby allowing greater flexibility to
satisfy tax and equitable considerations associated with adjustments.
The proposed amendment to the anti-dilution adjustment provisions of the
Director Plan pertaining to certain corporate transactions is required in order
to effect the adjustment in the number of shares subject to, and the exercise
price of, options currently outstanding under the Director Plan. Pursuant to the
proposed amendment to the anti-dilution adjustment provisions of the Director
Plan, the number of shares of New GulfMark Common Stock subject to, and the
exercise price of, each such New GulfMark option will be adjusted in accordance
with the requirements of Section 424 of the Code and the regulations promulgated
thereunder to reflect the Distribution so that (i) the aggregate intrinsic value
(difference between market value per share and exercise price) of each option
immediately after the Distribution is not greater than the aggregate intrinsic
value of such option immediately before the Distribution and (ii) the ratio of
the exercise price per option to the market value per share is not reduced.
Amendment of the Director Plan. The Board of Directors may modify, revise
or terminate the Director Plan at any time and from time to time; provided,
however, that without the further approval of the holders of at least a majority
of the outstanding shares of voting stock, or if the provisions of the
Certificate of Incorporation or By-Laws or if applicable state law prescribes a
greater degree of stockholder approval for this action, without the degree of
stockholder approval thus required, the Board of Directors may not (i) change
the aggregate number of shares that may be issued under options pursuant to the
Director Plan, (ii) reduce the option price permitted for the options, (iii)
extend the term during which an option may be exercised or
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the termination date of the Director Plan or (iv) materially increase any other
benefits accruing to directors under the Director Plan or materially modify the
requirements as to eligibility for participation in the Director Plan unless, in
each such case, the Board of Directors shall have obtained an opinion of legal
counsel to the effect that stockholder approval of the amendment is not required
(a) by law, (b) by the applicable rules and regulations of, or any agreement
with, the National Association of Securities Dealers, Inc. if the GulfMark
Common Stock (or following assumption of the Director Plan by New GulfMark, the
New GulfMark Common Stock) is not then listed on any national securities
exchange or if the GulfMark Common Stock (or following assumption of the
Director Plan by New GulfMark, the New GulfMark Common Stock) is so listed, the
rules and regulations, or any agreement with, such securities exchange, and (c)
in order to make available to the optionee with respect to any option granted
under the Director Plan, the benefits of Rule 16b-3 of the Rules and Regulations
under the Exchange Act, or any similar or successor rule. In addition, the terms
of the Director Plan relating to the number of shares of stock that may be
subject to an option, the times at which options may be granted and the means by
which the option price for options granted is to be determined may not be
amended more than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act or the rules thereunder.
Duration of the Director Plan; Registration of Shares. No options will be
granted pursuant to the Director Plan after December 8, 2005. It is the
intention of New GulfMark to register under the Securities Act the shares of New
GulfMark Common Stock covered by the Director Plan, as assumed by New GulfMark,
as soon as practicable after consummation of the Transactions.
Termination. Except as may be otherwise expressly provided in the Director
Plan, each option, to the extent it shall not previously have been exercised,
shall terminate on the earlier of the following:
(i) On the last day of the three month period commencing on the date
on which the optionee ceases to be a member of GulfMark's Board of
Directors, for any reason other than the death, disability or retirement of
the optionee, during which period the optionee will be entitled to exercise
all options fully vested on the date on which the optionee ceased to be a
member of GulfMark's Board of Directors;
(ii) On the last day of the one year period commencing on the date on
which the optionee ceases to be a member of GulfMark's Board of Directors
because of permanent disability, during which period the optionee will be
entitled to exercise all options fully vested on the date on which the
optionee ceased to be a member of GulfMark's Board of Directors because of
such disability;
(iii) On the last day of the one year period commencing on the date of
the optionee's death while serving as a member of GulfMark's Board of
Directors, during which period the executor or administrator of the
optionee's estate or the person or persons to whom the optionee's option
shall have been transferred by will or the laws of descent and distribution
will be entitled to exercise all options in respect of the number of shares
that the optionee would have been entitled to purchase had the optionee
exercised such options on the date of his or her death;
(iv) On the last day of the one year period commencing on the date on
which the optionee who has completed at least five years of service as a
GulfMark director retires from the Board of Directors of GulfMark, during
which period the optionee, or the executor or administrator of the
optionee's estate or the person or persons to whom such option shall have
been transferred by will or the laws of descent or distribution in the
event of the optionee's death within such one year period, as the case may
be, shall be entitled to exercise all options in respect of the number of
shares that the optionee would have been entitled to purchase had the
optionee exercised such options on the date of such retirement; and
(v) Ten years after the date of grant of such option.
Currently outstanding options granted by GulfMark pursuant to the Director
Plan will be assumed by New GulfMark and, therefore, will not terminate upon the
subsequent resignation of GulfMark directors, all of whom will be elected as
directors of New GulfMark.
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Upon assumption of the Director Plan by New GulfMark pursuant to the
Distribution Agreement, except as may be otherwise expressly provided in the
Director Plan, each option, to the extent it shall not previously have been
exercised, shall terminate on the earlier of the following:
(i) On the last day of the three month period commencing on the date
on which the optionee ceases to be a member of New GulfMark's Board of
Directors, for any reason other than the death, disability or retirement of
the optionee, during which period the optionee will be entitled to exercise
all options fully vested on the date on which the optionee ceased to be a
member of New GulfMark's Board of Directors;
(ii) On the last day of the one year period commencing on the date on
which the optionee ceases to be a member of New GulfMark's Board of
Directors because of permanent disability, during which period the optionee
will be entitled to exercise all options fully vested on the date on which
the optionee ceased to be a member of New GulfMark's Board of Directors
because of such disability;
(iii) On the last day of the one year period commencing on the date of
the optionee's death while serving as a member of New GulfMark's Board of
Directors, during which period the executor or administrator of the
optionee's estate or the person or persons to whom the optionee's option
shall have been transferred by will or the laws of descent and distribution
will be entitled to exercise all options in respect of the number of shares
that the optionee would have been entitled to purchase had the optionee
exercised such options on the date of his or her death;
(iv) On the last day of the one year period commencing on the date on
which the optionee who has completed at least five years of service as a
director of New GulfMark (with service as a director of GulfMark prior to
the Distribution qualifying as service as a director of New GulfMark)
retires from the Board of Directors of New GulfMark, during which period
the optionee, or the executor or administrator of the optionee's estate or
the person or persons to whom such option shall have been transferred by
will or the laws of descent or distribution in the event of the optionee's
death within such one year period, as the case may be, shall be entitled to
exercise all options in respect of the number of shares that the optionee
would have been entitled to purchase had the optionee exercised such
options on the date of such retirement; and
(v) Ten years after the date of grant of such option.
Federal Income Tax Consequences. The optionee is not taxed upon receipt of
an option. When the option is exercised, the optionee will be taxed at ordinary
income rates on the difference between the option price and the fair market
value on the date of exercise. GulfMark receives a deduction for compensation
expense for this amount, and following assumption of the Director Plan by New
GulfMark pursuant to the Distribution Agreement, New GulfMark will receive a
deduction for compensation expense for this amount. There is a withholding
requirement on the date of exercise. At the option of GulfMark, or following
assumption of the Director Plan by New GulfMark pursuant to the Distribution
Agreement, at the option of New GulfMark, shares issued upon exercise of options
may be withheld to satisfy withholding tax liability of the optionee.
Benefits. On December 8, 1993, each non-employee director of GulfMark was
granted an option to purchase 5,000 shares of GulfMark Common Stock at an
exercise price of $14.75 per share. Such options will expire on December 8,
2003. On March 18, 1996, each non-employee director of GulfMark was granted an
option to purchase 5,000 shares of GulfMark Common Stock at an exercise price of
$26.375 per share. Such options will expire on March 18, 2006.
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The number of options to be granted in the future pursuant to the Director
Plan to the Directors of GulfMark or, following assumption of the Director Plan
by New GulfMark, to the directors of New GulfMark, cannot be determined,
inasmuch as such number depends on the continuing service of such individual as
a director of New GulfMark. Information regarding the options granted to date
pursuant to the Director Plan is as follows:
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS
NAME GRANTED TO DATE
---- ---------------
<S> <C>
Bruce A. Streeter, President and Chief Operating
Officer(1)................................................ --
Frank R. Pierce, Executive Vice President, Treasurer and
Secretary................................................. --
John E. Leech, Vice President(2)............................ --
David J. Butters, Director.................................. 10,000
Norman G. Cohen, Director................................... 10,000
Marshall A. Crowe, Director................................. 10,000
Louis S. Gimbel, 3rd, Director.............................. 10,000
Robert B. Millard, Director................................. 10,000
All Executive Officers (as a group)......................... --
All Non-Executive Directors (as a group).................... 50,000
All Non-Executive Employees (as a group).................... --
</TABLE>
- ---------------
(1) Mr. Streeter is currently the president of GulfMark's Marine Division. He
was elected president and chief operating officer of New GulfMark in January
1997. It is expected that Mr. Streeter will be elected as a director of New
GulfMark.
(2) Mr. Leech is a non-executive officer of GulfMark but was elected as a vice
president of New GulfMark in January 1997 and will be named as an executive
officer of New GulfMark.
As of the date the Distribution becomes effective, New GulfMark will assume
the Director Plan, and pursuant to the equitable adjustment provisions of the
Director Plan, each outstanding stock option previously granted pursuant to the
Director Plan will be converted into or exchanged for and represent an option to
acquire shares of New GulfMark Common Stock. The number of shares of New
GulfMark Common Stock subject to, and the exercise price of, each such New
GulfMark option will be adjusted to reflect the Distribution in accordance with
the requirements of Section 424 of the Code and the regulations promulgated
thereunder in order to preserve the aggregate intrinsic value of each option and
the ratio of the exercise price to market value per share.
1987 STOCK OPTION PLAN
The Employee Plan was adopted by the Board of Directors of GulfMark on May
20, 1987, and approved by GulfMark stockholders on May 18, 1988. A total of
200,000 shares of GulfMark Common Stock was initially reserved for issuance
thereunder. The Employee Plan will expire for future grant purposes on May 20,
1997.
As of the date the Distribution becomes effective, New GulfMark will assume
the Employee Plan, and pursuant to the equitable adjustment provisions of the
Employee Plan, each outstanding stock option previously granted pursuant to the
Employee Plan will be converted into or exchanged for and represent an option to
acquire shares of New GulfMark Common Stock. The number of shares of New
GulfMark Common Stock subject to, and the exercise price of, each such New
GulfMark option will be adjusted to reflect the Distribution in accordance with
the requirements of Section 424 of the Code and the regulations promulgated
thereunder to preserve the aggregate intrinsic value of each option and the
ratio of the exercise price to market value per share. In addition, the number
of shares of New GulfMark Common Stock available for future awards pursuant to
the Employee Plan will be increased to reflect the Distribution.
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<PAGE> 67
Set forth below is a summary of the material provisions of the Employee
Plan. This summary does not purport to be a complete statement of the provisions
of the Employee Plan and is qualified in its entirety by reference to the
Employee Plan. In the event of a discrepancy between this summary and the
Employee Plan, the terms of the Employee Plan will control.
Purpose. The purpose of the Employee Plan was to provide a means whereby
certain employees of GulfMark and its subsidiaries may develop a sense of
proprietorship and personal involvement in the development and financial success
of GulfMark. Upon assumption of the Employee Plan by New GulfMark pursuant to
the Distribution Agreement, the Employee Plan will provide a means whereby
certain employees of New GulfMark and its subsidiaries may develop a sense of
proprietorship and personal involvement in the development and financial success
of New GulfMark.
Eligibility and Participation. Options to purchase shares of GulfMark
Common Stock granted pursuant to the Employee Plan may be either incentive stock
options within the meaning of Section 422(b) of the Code ("Incentive Stock
Options"), or options which do not constitute Incentive Stock Options
("Nonqualified Stock Options"). Options may be granted only to individuals who
are key employees (including officers and directors who are also key employees)
of GulfMark or its subsidiaries. At the current time, approximately six
employees of GulfMark are eligible to participate in the Employee Plan. Options
may be granted to the same individual on more than one occasion. The aggregate
fair market value of Incentive Stock Options exercisable for the first time by
an individual in any one calendar year (including any other incentive stock
option plans of GulfMark) shall not exceed $100,000. No Incentive Stock Option
shall be granted to an employee owning GulfMark Common Stock with aggregate
voting power of more than 10% unless the option is granted at 110% of the fair
market value of the GulfMark Common Stock and such option is not exercisable
after five years from the date of grant.
Upon assumption of the Employee Plan by New GulfMark pursuant to the
Distribution Agreement, options to purchase shares of New GulfMark Common Stock
granted pursuant to the Employee Plan may be either Incentive Stock Options or
Nonqualified Stock Options. Options may be granted only to individuals who are
key employees (including officers and directors who are also key employees) of
New GulfMark or its subsidiaries. Upon assumption of the Employee Plan by New
GulfMark, approximately six employees of New GulfMark will be eligible to
participate in the Employee Plan. Options may be granted to the same individual
on more than one occasion. The aggregate fair market value of Incentive Stock
Options exercisable for the first time by an individual in any one calendar year
(including any other incentive stock option plans of New GulfMark) shall not
exceed $100,000. No Incentive Stock Option shall be granted to an employee
owning New GulfMark Common Stock with aggregate voting power of more than 10%
unless the option is granted at 110% of the fair market value of the New
GulfMark Common Stock and such option is not exercisable after five years from
the date of grant.
Administration. The Employee Plan is administered by a committee appointed
by the Board of Directors. The Employee Plan contains appropriate provisions to
assure that the committee satisfies the disinterested administration provisions
of Section 16(b) of the Exchange Act and the rules promulgated thereunder. The
committee has sole authority to select employees who are to be granted options
and the number of shares to be issued under each option. The committee is
authorized to interpret the Employee Plan and may adopt such rules and
regulations as it may deem advisable to carry out the Employee Plan. All
decisions made by the committee in selecting employees for option grants and the
number of shares issued under each option shall be final. Upon assumption of the
Employee Plan by New GulfMark pursuant to the Distribution Agreement, the
Employee Plan will be administered by the compensation committee of the Board of
Directors of New GulfMark, the members of which will be Messrs. Butters, Cohen
and Millard.
Grant of Options. Each option granted pursuant to the Employee Plan is
required to be evidenced by an option agreement containing terms and conditions
as may be approved by the committee. The terms and conditions of the respective
option agreements need not be identical. Option agreements may provide the right
to surrender the option in exchange for payment in cash or stock of an amount
equal to the excess of the fair market value of the shares subject to the option
over the option exercise price upon approval by the committee
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<PAGE> 68
in its sole discretion. Each option shall not be transferable other than by will
or by the laws of descent and distribution. The option rights shall be
exercisable only by the optionee during his lifetime.
Shares Subject to Options. An aggregate of 200,000 shares of GulfMark
Common Stock, subject to adjustment for certain changes in capitalization, are
authorized for issuance (or have been issued) upon exercise of options granted
pursuant to the Employee Plan. The proposed amendment to the Employee Plan
provides that the number of shares reserved for issuance pursuant to the
Employee Plan is subject to adjustment in accordance with the anti-dilution
provisions, as amended, of the Employee Plan. The proposed amendment to the
Employee Plan broadens the situations in which adjustments for changes in
capitalization may be made, and expands the board's discretion as to the types
of adjustments warranted, with respect to the aggregate number of shares
reserved for issuance thereunder. The equitable anti-dilution adjustment
provisions will have the effect of increasing the aggregate number of shares of
GulfMark Common Stock (or of New GulfMark Common Stock following assumption of
the Employee Plan by New GulfMark pursuant to the Distribution Agreement)
authorized for issuance upon exercise of options granted pursuant to the
Employee Plan to accommodate (i) an increase in the number of shares subject to
outstanding options to preserve the aggregate intrinsic value of each option and
the ratio of the exercise price to the market value per share, and (ii) an
increase in the number of shares available for future awards to reflect the
two-for-one nature of the Distribution. Any shares of GulfMark Common Stock
issued upon the exercise, prior to the date the Distribution becomes effective,
of GulfMark options granted pursuant to the Employee Plan will count against the
aggregate number of shares of New GulfMark Common Stock authorized for issuance
pursuant to the Employee Plan.
Any shares which remain unissued and are not subject to outstanding options
at the termination of the Employee Plan shall cease to be subject to the
Employee Plan. Separate stock certificates shall be issued for those shares
acquired pursuant to the exercise of Incentive Stock Options or Nonqualified
Stock Options.
Option Terms. The exercise price of each option shall be determined by the
committee, but the exercise price per share shall be not less than the greater
of (i) 50% of the fair market value of a share of such stock at the time the
option is granted and (ii) the par value of the stock, and the exercise price of
each Incentive Stock Option shall be not less than the fair market value of the
stock subject to the option at the time the option is granted.
Duration of the Employee Plan; Registration of Shares. No options will be
granted pursuant to the Employee Plan after May 20, 1997. It is the intention of
New GulfMark to register under the Securities Act the shares of New GulfMark
Common Stock covered by the Employee Plan, as assumed by New GulfMark, as soon
as practicable after consummation of the Transactions.
Changes in Capital Structure. The existence of the Employee Plan and
options granted thereunder shall not affect in any way the right or power of the
board or the stockholders of GulfMark to make or authorize any corporate act or
proceeding. Upon assumption of the Employee Plan by New GulfMark pursuant to the
Distribution Agreement, the existence of the Employee Plan and options granted
thereunder shall not affect in any way the right or power of the board or the
stockholders of New GulfMark to make or authorize any corporate act or
proceeding.
The Employee Plan currently provides that if GulfMark shall effect a stock
split or reverse stock split or issue a stock dividend, the number of options
outstanding and the exercise price per share shall be proportionately adjusted.
The Employee Plan also provides that if GulfMark recapitalizes or otherwise
changes its capital structure, an optionee shall thereafter be entitled to
purchase, upon exercise of an option theretofore granted, the number and class
of securities to which the optionee would have been entitled pursuant to the
terms of such recapitalization if, immediately prior to such recapitalization,
the optionee had been the holder of such number of shares of GulfMark Common
Stock as to which such option was then exercisable.
The proposed amendment to the Employee Plan would replace the specific
provisions for adjustment set forth with respect to each of the events described
above with a general statement providing that in the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock
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<PAGE> 69
split, combination of shares, rights offering, or extraordinary dividend or
divestiture (including a spin-off) or any other change in corporate structure or
shares, then adjustments, determined by the board of directors in its discretion
to be appropriate, shall be made as to the number and kind of securities subject
to and reserved under the Employee Plan and, in order to prevent dilution or
enlargement of rights of participants, as to the number, kind and where
applicable, the option exercise price, of securities subject to outstanding
awards or securities subject to options issued in replacement of outstanding
awards. The proposed amendment broadens the situations in which adjustments for
changes in capital structure may be made, and expands the board's discretion as
to the types of adjustments warranted, thereby allowing greater flexibility to
satisfy tax and equitable considerations associated with adjustments.
The proposed amendment to the anti-dilution adjustment provisions of the
Employee Plan pertaining to certain corporate transactions is required in order
to effect the adjustment in the number of shares subject to, and the exercise
price of, options currently outstanding under the Employee Plan. Pursuant to the
proposed amendment to the anti-dilution adjustment provisions of the Employee
Plan, the number of shares of New GulfMark Common Stock subject to, and the
exercise price of, each such New GulfMark option will be adjusted in accordance
with the requirements of Section 424 of the Code and the regulations promulgated
thereunder to reflect the Distribution so that (i) the aggregate intrinsic value
(difference between market value per share and exercise price) of each option
immediately after the Distribution is not greater than the aggregate intrinsic
value of such option immediately before the Distribution and (ii) the ratio of
the exercise price per option to the market value per share is not reduced.
The Employee Plan further provides that in the event that GulfMark shall
not be the surviving corporation in any merger or consolidation, or GulfMark
shall sell substantially all of its assets, or more than 50% of the outstanding
shares of stock shall change ownership as the result of a concerted action, or
an attempt is made to effect such a change of ownership, or GulfMark is to be
dissolved or liquidated, then the committee at its discretion may accelerate the
terms of the outstanding options to be exercised, provide for the purchase of
the outstanding options for an amount of cash equal to the excess of the fair
market value of the shares subject to the options over the exercise price and/or
cause the outstanding options to be assumed or new options substituted by the
surviving corporation. The committee will not be taking any action to accelerate
the vesting schedule of outstanding options in connection with the Distribution,
inasmuch as the Distribution Agreement provides that all outstanding stock
options granted by GulfMark pursuant to the Employee Plan will be assumed by New
GulfMark.
Upon assumption of the Employee Plan by New GulfMark pursuant to the
Distribution Agreement, the Employee Plan will provide that in the event that
New GulfMark shall not be the surviving corporation in any merger or
consolidation, or New GulfMark shall sell substantially all of its assets, or
more than 50% of the outstanding shares of stock shall change ownership as the
result of a concerted action, or an attempt is made to effect such a change of
ownership, or New GulfMark is to be dissolved or liquidated, then the committee
at its discretion may accelerate the terms of the outstanding options to be
exercised, provide for the purchase of the outstanding options for an amount of
cash equal to the excess of the fair market value of the shares subject to the
options over the exercise price and/or cause the outstanding options to be
assumed or new options substituted by the surviving corporation.
Termination or Amendment of the Employee Plan. The board may terminate the
Employee Plan at any time with respect to shares for which options have not been
granted. The board may alter or amend the Employee Plan provided that no change
in any option granted would impair the rights of the optionee without the
consent of the optionee. Further, the board may not make any alteration or
amendment which would materially increase the benefits to participants, increase
the aggregate number of shares which may be issued (other than to reflect a
stock dividend or stock split), change the class of employees eligible to
receive options or extend the term of the Employee Plan, without the approval of
the stockholders of GulfMark, or following assumption of the Employee Plan by
New GulfMark pursuant to the Distribution Agreement, without the approval of the
stockholders of New GulfMark. The proposed amendment to the Employee Plan will
broaden the circumstances in which the aggregate number of shares may be
increased without stockholder approval, from current provisions allowing such
increase without stockholder approval to reflect a stock dividend or stock
split, to new provisions allowing an increase deemed appropriate by the board,
in its discretion, to reflect
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<PAGE> 70
a reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, extraordinary dividend or divestiture (including a spin-off), or any
other change in corporate structure or shares.
Limitations. GulfMark's obligation to deliver shares of GulfMark Common
Stock pursuant to the Employee Plan is subject to all applicable laws, rules and
regulations and to all approvals by any governmental agencies or national
securities exchanges on which GulfMark Common Stock is traded. Upon assumption
of the Employee Plan by New GulfMark pursuant to the Distribution Agreement, New
GulfMark's obligation to deliver shares of New GulfMark Common Stock pursuant to
the Employee Plan is subject to all applicable laws, rules and regulations and
to all approvals by any governmental agencies or national securities exchanges
on which New GulfMark Common Stock is traded.
Federal Income Tax Consequences. The following summary is a description of
the Federal income tax consequences to the recipient and GulfMark (or New
GulfMark following its assumption of the Employee Plan pursuant to the
Distribution Agreement) of the issuance and exercise of stock options granted
pursuant to the Employee Plan. The summary is not intended to be exhaustive and
does not attempt to be a comprehensive description of all possible tax effects.
The grant of an Incentive Stock Option will not be treated as taxable
income to the optionee for federal tax purposes, and will not result in a
deduction for GulfMark (or New GulfMark following its assumption of the Employee
Plan) for tax purposes. On exercise of an Incentive Stock Option, the optionee
will not recognize any taxable income, and GulfMark (or New GulfMark following
its assumption of the Employee Plan) will not be entitled to a deduction for tax
purposes, although exercise of an Incentive Stock Option may give rise to
liability under the alternative minimum tax provisions of the Code. Upon the
sale or exchange of the shares at least two years after the grant date of the
option and one year after the exercise date, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares, over (ii)
the exercise price paid for such shares. If these holding periods are not
satisfied, the optionee will recognize ordinary income, and GulfMark (or New
GulfMark following its assumption of the Employee Plan) will be entitled to a
deduction for tax purposes, in an amount equal to the difference between the
exercise price and the lower of the fair market value of the shares on the date
the option was exercised or the sale price of such shares. A different rule for
measuring ordinary income upon such a premature disposition may apply if the
optionee is also an officer, director or 10% shareholder of GulfMark (or New
GulfMark following its assumption of the Employee Plan). Any gain recognized by
the optionee on such a premature disposition of the shares in excess of the
amount treated as ordinary income will be characterized as capital gain.
No income is realized by the optionee at the time a Nonqualified Stock
Option is granted. Upon exercise, the amount by which the fair market value of
the purchased shares on the exercise date exceeds the option price will
generally be taxable to the optionee as ordinary income and deductible by
GulfMark (or New GulfMark following its assumption of the Employee Plan) for tax
purposes. Upon disposition of the shares, appreciation or depreciation after the
exercise date is treated as a short-term or long-term capital gain or loss to
the optionee and will not result in any deduction by GulfMark (or New GulfMark
following its assumption of the Employee Plan).
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<PAGE> 71
Benefits. The number of options to be granted in the future pursuant to the
Employee Plan to employees of GulfMark, or following assumption of the Employee
Plan by New GulfMark, to the employees of New GulfMark, cannot be determined.
Information regarding the options granted to date pursuant to the Employee Plan,
excluding options which have terminated following a termination of employment,
is as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
NAME GRANTED TO DATE
---- -----------------
<S> <C>
Bruce A. Streeter, President and Chief Operating
Officer(1)................................................ 13,000
Frank R. Pierce, Executive Vice President, Treasurer and
Secretary................................................. 24,000
John E. Leech, Vice President(2)............................ 9,000
David J. Butters, Director.................................. --
Norman G. Cohen, Director................................... --
Marshall A. Crowe, Director................................. --
Louis S. Gimbel, 3rd, Director.............................. --
Robert B. Millard, Director................................. --
All Executive Officers (as a group)......................... 48,000
All Non-Executive Directors (as a group).................... --
All Non-Executive Employees (as a group).................... 1,000
</TABLE>
- ---------------
(1) Mr. Streeter is currently the president of GulfMark's Marine Division. He
was elected president and chief operating officer of New GulfMark in January
1997. It is expected that Mr. Streeter will be elected as a director of New
GulfMark.
(2) Mr. Leech is a non-executive officer of GulfMark but was elected as a vice
president of New GulfMark in January 1997 and will be named as an executive
officer of New GulfMark.
As of the date the Distribution becomes effective, New GulfMark will assume
the Employee Plan, and pursuant to the equitable adjustment provisions of the
Employee Plan, each outstanding stock option previously granted pursuant to the
Employee Plan will be converted into or exchanged for and represent an option to
acquire shares of New GulfMark Common Stock. The number of shares of New
GulfMark Common Stock subject to, and the exercise price of, each such New
GulfMark option will be adjusted to reflect the Distribution in accordance with
the requirements of Section 424 of the Code and the regulations promulgated
thereunder to preserve the aggregate intrinsic value of each option and the
ratio of the exercise price to market value per share.
1988 NON-EMPLOYEE DIRECTOR OPTION POLICY
On July 27, 1988, the Board of Directors of GulfMark approved a resolution
adopting the GulfMark Stock Option Policy, a policy of granting options to
acquire shares of GulfMark Common Stock to all non-employee directors of
GulfMark. The GulfMark Stock Option Policy was approved by GulfMark stockholders
on May 15, 1990. Options to purchase an aggregate of 25,000 shares of GulfMark
Common Stock were issued pursuant to the GulfMark Stock Option Policy, options
for 22,500 shares of which remain outstanding. Effective as of May 18, 1994, the
GulfMark Stock Option Policy was terminated for future grant purposes.
As of the date the Distribution becomes effective, New GulfMark will assume
the outstanding options granted pursuant to the GulfMark Stock Option Policy,
and each outstanding stock option previously granted pursuant to the GulfMark
Stock Option Policy will be converted into or exchanged for and represent an
option to acquire shares of New GulfMark Common Stock. The number of shares of
New GulfMark Common Stock subject to, and the exercise price of, each such New
GulfMark option will be adjusted to reflect the Distribution in accordance with
the requirements of Section 424 of the Code and the regulations promulgated
thereunder to preserve the aggregate intrinsic value of each option and the
ratio of the exercise price to market value per share.
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<PAGE> 72
Set forth below is a summary of the material provisions of the GulfMark
Stock Option Policy.
Eligibility and Participation. Pursuant to the GulfMark Stock Option
Policy, each non-employee director of GulfMark received options to acquire an
aggregate of 5,000 shares of GulfMark Common Stock as follows: an option to
purchase 2,500 shares of GulfMark Common Stock was granted on the first day of
August of the first year in which the individual qualified as a non-employee
director; and an option to purchase an additional 2,500 shares was granted on
the first anniversary of the initial grant if the individual continued to
qualify as a non-employee director at such time.
Option Terms. Each option granted pursuant to the GulfMark Stock Option
Policy is exercisable at any time before the expiration of ten years from the
date of grant and terminates upon the expiration of specific limited periods
after the optionee ceases to be a director of GulfMark. Currently outstanding
options granted by GulfMark pursuant to the GulfMark Stock Option Policy will be
assumed by New GulfMark and, therefore, will not terminate upon the subsequent
resignation of GulfMark directors, all of whom will be elected as directors of
New GulfMark. The exercise price for the options is the market price of the
shares of GulfMark Common Stock subject to the options on the date of grant of
the options. Upon assumption by New GulfMark of the outstanding options granted
pursuant to the GulfMark Stock Option Policy pursuant to the Distribution
Agreement, each outstanding option granted pursuant to the GulfMark Stock Option
Policy will continue to be exercisable at any time before the expiration of ten
years from the original date of grant and will terminate upon the expiration of
specific limited periods after the optionee ceases to be a director of New
GulfMark.
Federal Income Tax Consequences. The following summarizes the applicable
provisions of the Code and the income tax regulations promulgated thereunder
with respect to the issuance and exercise of options granted pursuant to the
GulfMark Stock Option Policy. Any person relying on such information should
consult his tax advisor regarding his particular situation. No federal income
tax is imposed on the optionee upon the grant of an option pursuant to the
GulfMark Stock Option Policy. Generally, upon the exercise of an option, the
optionee will be treated as receiving compensation taxable as ordinary income in
the year of exercise, in an amount equal to the excess of the fair market value
of the shares at the time of exercise over the exercise price for such shares.
Upon a subsequent disposition of the shares received upon exercise of an option,
any difference between the fair market value of the shares at the time of
exercise and the amount realized on the disposition would be treated as
long-term or short-term capital gain or loss, depending on the holding period of
the shares. Upon an optionee's exercise of an option, GulfMark (or New GulfMark
following its assumption of options granted pursuant to the GulfMark Stock
Option Policy) may claim a deduction for compensation paid at the same time and
in the same amount as income is recognized by the optionee.
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<PAGE> 73
Benefits. Pursuant to the GulfMark Stock Option Policy, options to purchase
2,500 shares of GulfMark Common Stock were granted to each of Messrs. Cohen,
Crowe and Gimbel on August 1, 1988 at an exercise price of $6.75 per share, and
again on August 1, 1989 at an exercise price of $10.50 per share. Options to
purchase 2,500 shares of GulfMark Common Stock were granted to each of Messrs.
Butters and Millard on August 1, 1990 at an exercise price of $17.75 per share,
and again on August 1, 1991 at an exercise price of $15.25 per share. No
additional options may be awarded pursuant to the GulfMark Stock Option Policy.
Information regarding the options granted to date pursuant to the GulfMark Stock
Option Policy is as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
NAME GRANTED TO DATE
---- -----------------
<S> <C>
Bruce A. Streeter, President and Chief Operating
Officer(1)................................................ --
Frank R. Pierce, Executive Vice President, Treasurer and
Secretary................................................. --
John E. Leech, Vice President(2)............................ --
David J. Butters, Director.................................. 5,000
Norman G. Cohen, Director................................... 5,000
Marshall A. Crowe, Director................................. 5,000
Louis S. Gimbel, 3rd, Director.............................. 5,000
Robert B. Millard, Director................................. 5,000
All Executive Officers (as a group)......................... --
All Non-Executive Directors (as a group).................... 25,000
All Non-Executive Employees (as a group).................... --
</TABLE>
- ---------------
(1) Mr. Streeter is currently the president of GulfMark's Marine Division. He
was elected president and chief operating officer of New GulfMark in
January 1997. It is expected that Mr. Streeter will be elected as a
director of New GulfMark.
(2) Mr. Leech is a non-executive officer of GulfMark but was elected as a vice
president of New GulfMark in January 1997 and will be named as an executive
officer of New GulfMark.
As of the date the Distribution becomes effective, New GulfMark will assume
all outstanding options granted pursuant to the GulfMark Stock Option Policy,
and each outstanding stock option previously granted pursuant to the GulfMark
Stock Option Policy will be converted into or exchanged for and represent an
option to acquire shares of New GulfMark Common Stock. The number of shares of
New GulfMark Common Stock subject to, and the exercise price of, each such New
GulfMark option will be adjusted to reflect the Distribution in accordance with
the requirements of Section 424 of the Code and the regulations promulgated
thereunder to preserve the aggregate intrinsic value of each option and the
ratio of the exercise price to market value per share. As of the date the
Distribution becomes effective, neither GulfMark, EVI nor New GulfMark shall
have any further obligations under the GulfMark Stock Option Policy.
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<PAGE> 74
EVI SELECTED CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial information for
each of the five years ended December 31, 1996, are derived from EVI's
Consolidated Financial Statements. The selected financial data set forth in the
table below should be read in conjunction with the EVI Consolidated Financial
Statements, including the notes thereto, incorporated by reference in this Joint
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues........................................ $478,020 $271,675 $185,285 $171,638 $139,349
Cost of sales................................... 373,509 205,230 139,901 126,541 107,028
Selling, general and administrative expenses.... 58,224 48,480 41,746 38,339 32,377
-------- -------- -------- -------- --------
Operating income (loss)......................... 46,287 17,965 3,638 6,758 (56)
Interest expense................................ (16,454) (16,287) (13,537) (7,574) (5,258)
Other income, net............................... 1,713 684 412 1,482 631
Income tax provisions (benefit)................. 7,041 (240) (3,795) 589 (835)
-------- -------- -------- -------- --------
Income (Loss) from continuing operations........ 24,505 2,602 (5,692) 77 (3,848)
======== ======== ======== ======== ========
Earnings (Loss) per share from continuing
operations.................................... $ 1.20 $ 0.18 $ (0.45) $ 0.01 $ (0.32)
Weighted average shares outstanding............. 20,353 14,724 12,629 12,067 12,057
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.................................... $852,843 $453,125 $311,497 $251,377 $210,887
Long-term debt.................................. 126,710 124,183 125,108 38,982 37,304
Stockholders' investment........................ 454,084 228,066 110,913 107,736 101,156
Cash dividends per share........................ -- -- -- -- --
</TABLE>
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GULFMARK SELECTED CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial information for
each of the five years ended December 31, 1996, are derived from, and should be
read in conjunction with, GulfMark's Consolidated Financial Statements,
including the notes thereto, incorporated by reference in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA(1):
Revenues.................................... $41,743 $36,077 $34,448 $27,887 $22,955
Direct operating expenses................... 24,796 26,568 24,338 19,221 13,640
Selling, general and administrative
expenses................................. 6,908 6,059 5,885 4,690 4,813
------- ------- ------- ------- -------
Operating income............................ 10,039 3,450 4,225 3,976 4,502
Interest expense, net....................... (3,467) (2,613) (2,179) (2,047) (2,351)
Equity in earnings of EVI................... -- 761 1,012 1,333 155
Gain on sale of 300,000 EVI shares.......... 6,264 -- -- -- --
Other income (expense), net................. (86) 180 830 68 294
Income tax expenses......................... (4,311) (3,680)(2) (1,108) (686) (732)
Extraordinary item attributable to EVI (net
of tax).................................. -- -- (706) -- --
------- ------- ------- ------- -------
Net income (loss)........................... $ 8,439 $(1,902) $ 2,074 $ 2,644 $ 1,868
======= ======= ======= ======= =======
Earnings (loss) per share................... $ 2.53 $ (0.57) $ 0.62 $ 0.80 $ 0.56
Weighted average shares outstanding......... 3,338 3,322 3,320 3,312 3,310
Cash dividends per share.................... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Total assets................................. $189,686 $110,935 $88,676 $90,759 $77,983
Long term debt............................... 50,811 33,600 26,727 30,169 18,730
Stockholders' equity before adjustment....... 63,536 55,074 56,798 54,714 52,005
Cumulative translation adjustment(3)...... (1,520) (4,146) (3,773) (4,326) (3,699)
Adjustment for unrealized gain on EVI
investment(4)........................... 33,979 8,030 -- -- --
Stockholders' equity......................... 95,995 58,958 53,025 50,388 48,306
</TABLE>
- ---------------
(1) Upon consummation of the Transactions, for financial reporting purposes, New
GulfMark will reflect the operations of GulfMark Retained Assets as
discontinued operations.
(2) Includes a one time charge of $3,374,000 relating to additional deferred tax
provision associated with GulfMark's change in its method of accounting for
GulfMark's investment in EVI.
(3) Resulted primarily from translation of the Company's Sterling (U.K.)
invested assets and liabilities, which are substantially long-lived, at the
exchange rate in effect on the last day of the period.
(4) Resulted from the "Mark to Market" rules of SFAS 115 which first impacted
the Company in June, 1995.
69
<PAGE> 76
NEW GULFMARK SELECTED FINANCIAL DATA
The following selected historical consolidated financial information of
GulfMark's Offshore Marine Services business that will be contributed to New
GulfMark for each of the five years ended December 31, 1996, has been derived
from the New GulfMark Consolidated Financial Statements included elsewhere
herein. The consolidated financial information for 1992 is unaudited and, in the
opinion of New GulfMark's management, includes all adjustments that are of a
normal recurring nature and necessary for a fair presentation. The selected
financial data set forth in the table below should be read in conjunction with
New GulfMark's Consolidated Financial Statements, including the notes thereto,
contained in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA(1):
Revenues................................... $34,749 $27,233 $27,692 $22,564 $18,115
Direct operating expenses.................. 20,874 20,605 19,988 15,649 10,350
Selling, general and administrative
expenses................................ 4,840 3,736 3,891 3,443 3,564
------- ------- ------- ------- -------
Operating income........................... 9,035 2,892 3,813 3,472 4,201
Interest expense, net...................... (3,467) (2,613) (2,179) (2,047) (2,351)
Other income (expense), net................ (86) 180 830 68 285
Income tax expenses........................ (1,839) (91) (981) (534) (601)
------- ------- ------- ------- -------
Net income................................. $ 3,643 $ 368 $ 1,483 $ 959 $ 1,534
======= ======= ======= ======= =======
Pro forma per share data:
Earnings per share(2)................... $ 1.09 $ 0.11 $ 0.45 $ 0.29 $ 0.46
Weighted average shares
outstanding(2)........................ 3,338 3,322 3,320 3,312 3,310
Earnings per share -- after giving
effect to the Distribution(3)......... $ 0.55 $ 0.06 $ 0.22 $ 0.14 $ 0.23
Weighted average shares
outstanding -- after giving effect to
the Distribution(3)................... 6,676 6,644 6,640 6,624 6,620
Cash dividends per share................... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Total assets.............................. $116,470 $74,904 $64,309 $67,158 $56,343
Long-term debt............................ 50,811 33,600 26,727 30,169 18,730
Stockholders' equity before adjustment.... 47,613 34,713 32,379 30,780 29,673
Cumulative translation adjustment(4)...... (434) (3,060) (2,866) (3,961) (3,533)
Stockholders' equity...................... 47,179 31,653 29,513 26,819 26,140
</TABLE>
- ---------------
(1) Upon consummation of the Transactions, for financial reporting purposes, New
GulfMark will reflect the operations of GulfMark Retained Assets as
discontinued operations.
(2) Pro forma based on the historical weighted average shares of GulfMark and
the net income of New GulfMark.
(3) The Distribution calls for GulfMark shareholders to receive two shares of
New GulfMark for each share of GulfMark held.
(4) Resulted from translation of the Company's Sterling (U.K.) invested assets
and liabilities, which are substantially long-lived, at the exchange rate in
effect on the last day of the period.
70
<PAGE> 77
GULFMARK RETAINED ASSETS SELECTED FINANCIAL DATA
The following selected historical financial information of the GulfMark
Retained Assets for each of the five years ended December 31, 1996 are derived
from the GulfMark Retained Assets Financial Statements included elsewhere
herein. The financial information for 1992 is unaudited and, in the opinion of
GulfMark's management, includes all adjustments that are of a normal recurring
nature and necessary for a fair presentation. The selected financial data set
forth in the table below should be read in conjunction with the GulfMark
Retained Assets Financial Statements, including the notes thereto, contained in
this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................................. $ 6,994 $ 8,844 $ 6,756 $ 5,323 $ 4,840
Direct operating expenses................ 3,922 5,963 4,350 3,572 3,290
Selling, general and administrative
expenses.............................. 2,068 2,323 1,994 1,247 1,249
------- ------- ------- ------- -------
Operating income......................... 1,004 558 412 504 301
Equity in earnings of EVI................ -- 761 1,012 1,333 155
Gain on sale of 300,000 EVI shares....... 6,264 -- -- -- --
Income tax expenses...................... (2,472) (3,589)(1) (127) (152) (122)
Extraordinary item attributable to EVI
(net of tax).......................... -- -- (706) -- --
------- ------- ------- ------- -------
Net income (loss)........................ $ 4,796 $(2,270) $ 591 $ 1,685 $ 334
======= ======= ======= ======= =======
Pro forma per share data:
Earnings per share(2)................. $ 1.44 $ (0.68) $ 0.18 $ 0.51 $ 0.10
Weighted average shares
outstanding(2)...................... 3,338 3,322 3,320 3,312 3,310
Cash dividends per share................. -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................. $73,216 $36,031 $25,141 $23,601 $21,640
Long-term debt........................... -- -- -- -- --
Advances and equity before adjustment.... 15,923 20,361 24,419 23,934 22,332
Cumulative translation adjustment(3)..... (1,086) (1,086) (907) (365) (166)
Adjustment for unrealized gain on EVI
investment(4)......................... 33,979 8,030 -- -- --
Advances and equity...................... 48,816 27,305 23,512 23,569 22,166
</TABLE>
- ---------------
(1) Includes a one time charge of $3,374,000 relating to additional deferred tax
provision associated with GulfMark Retained Assets' change in its method of
accounting for GulfMark Retained Assets' investment in EVI.
(2) Pro forma based on the historical weighted average shares of GulfMark and
the net income (loss) of GulfMark Retained Assets.
(3) GulfMark Retained Assets recorded its portion of EVI's cumulative
translation adjustment during the periods in which GulfMark Retained Assets
accounted for its investment in EVI on the equity method.
(4) Resulted from the "Mark to Market" rules of SFAS 115 which first impacted
the Company in June, 1995.
71
<PAGE> 78
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth certain summary pro forma condensed
consolidated financial data of EVI. The unaudited Condensed Consolidated
Statement of Income gives effect to (i) the proposed Merger of GulfMark, (ii)
EVI's acquisition of TCA on August 5, 1996 for 500,000 shares of EVI Common
Stock, $14.35 million cash and a note for $650,000 and (iii) EVI's public
offering of 3.5 million shares of EVI Common Stock on July 25, 1996, as if these
transactions occurred on January 1, 1996. The Unaudited Pro Forma Balance Sheet
gives effect to the proposed Merger of GulfMark as if this transaction had
occurred on December 31, 1996. The unaudited pro forma information set forth
below is not necessarily indicative of the results that actually would have been
achieved had such transactions been consummated as of the dates reflected, or
that may be achieved in the future. This information should be read in
conjunction with EVI's Management's Discussion and Analysis of Financial
Condition and Results of Operations, EVI's Selected Consolidated Financial Data,
EVI's, TCA's and GulfMark's consolidated financial statements and GulfMark
Retained Assets' financial statements and related notes thereto contained or
incorporated by reference in this Joint Proxy Statement/Prospectus.
72
<PAGE> 79
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
EVI ---------------------------- EVI
HISTORICAL GULFMARK NEW GULFMARK GULFMARK PRO FORMA
CONSOLIDATED HISTORICAL DISTRIBUTION(A) MERGER POST MERGER
------------ ---------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents....................... $223,966 $ 17,590 $ (17,234) $ 300 $ 224,622
Accounts Receivable, Net........................ 119,152 9,796 (8,939) -- 120,009
Inventories..................................... 157,631 385 (228) -- 157,788
Prepaid Expenses and Other...................... 57,932 571 (447) -- 58,056
-------- -------- ---------- -------- ---------
Total Current Assets..................... 558,681 28,342 (26,848) 300 560,475
-------- -------- ---------- -------- ---------
Property, Plant and Equipment, Net.............. 172,724 87,665 (87,405) -- 172,984
Goodwill, Net................................... 102,474 -- -- -- 102,474
Investment in EVI............................... -- 71,040 -- (71,040)(b) --
Other Assets.................................... 18,964 2,639 (2,217) -- 19,386
-------- -------- ---------- -------- ---------
$852,843 $189,686 $ (116,470) $(70,740) $ 855,319
======== ======== ========== ======== =========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Short-Term Borrowings, Primarily Under Revolving
Lines of Credit............................... $ 4,451 $ -- $ -- $ -- $ 4,451
Current Maturities of Long-Term Debt............ 3,622 9,341 (9,341) -- 3,622
Accounts Payable................................ 80,783 2,345 (1,931) -- 81,197
Other Accrued Liabilities....................... 144,270 2,968 (1,628) 800(c) 146,410
-------- -------- ---------- -------- ---------
Total Current Liabilities................ 233,126 14,654 (12,900) 800 235,680
-------- -------- ---------- -------- ---------
Long-Term Debt.................................. 126,710 50,811 (50,811) -- 126,710
Deferred Income Taxes, Net and Other............ 38,923 27,725 (5,079) (22,724)(d) 38,845
Minority Interests.............................. -- 501 (501) -- --
Stockholders' Investment:
Common Stock.................................... 22,965 3,340 (3,340) 2,236(b) 25,201
Capital in Excess of Par........................ 281,686 23,520 (34,236) 106,748(b) 377,718
Retained Earnings............................... 158,333 36,676 (10,037) (15,923)(e) 169,049
Cumulative Foreign Currency Translation
Adjustment.................................... (8,712) (1,520) 434 1,086(e) (8,712)
Unrealized Gain on Marketable Securities........ 2,381 33,979 -- (33,979)(d) 2,381
Treasury Stock, at Cost......................... (2,569) -- -- (108,984)(b) (111,553)
-------- -------- ---------- -------- ---------
Total Stockholders'
Investment............................. 454,084 95,995 (47,179) (48,816) 454,084
-------- -------- ---------- -------- ---------
$852,843 $189,686 $ (116,470) $(70,740) $ 855,319
======== ======== ========== ======== =========
</TABLE>
73
<PAGE> 80
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TCA
HISTORICAL
FOR THE
SIX
MONTHS PRO FORMA
EVI ENDED ADJUSTMENTS EVI
HISTORICAL JUNE 30, ----------- PRO FORMA GULFMARK
CONSOLIDATED 1996 TCA PRE MERGER HISTORICAL
------------ ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................................. $478,020 $28,260 $ -- $506,280 $41,743
-------- ------- ------ -------- -------
Costs and expenses:
Cost of sales....................................... 373,509 24,381 579(g) 398,469 24,796
Selling, general and administrative attributable to
segments.......................................... 51,885 1,006 197(h) 53,088 6,908
Corporate general and administrative................ 6,339 -- -- 6,339 --
-------- ------- ------ -------- -------
431,733 25,387 776 457,896 31,704
-------- ------- ------ -------- -------
Operating income..................................... 46,287 2,873 (776) 48,384 10,039
-------- ------- ------ -------- -------
Other income (expense):
Interest expense.................................... (16,454) (602) 602(i) (16,454) (3,936)
Interest income..................................... 2,163 -- -- 2,163 469
Other income (expense), net......................... (450) (742) 875(j) (317) 6,178
-------- ------- ------ -------- -------
(14,741) (1,344) 1,477 (14,608) 2,711
-------- ------- ------ -------- -------
Income (loss) before income taxes.................... 31,546 1,529 701 33,776 12,750
(Provision) benefit for income taxes................. (7,041) (34) (245)(l) (7,320) (4,311)
-------- ------- ------ -------- -------
Income (loss) from continuing operations............. $ 24,505 $ 1,495 $ 456 $ 26,456 $ 8,439
======== ======= ====== ======== =======
Earnings per share from continuing operations........ $ 1.20 $ 1.17
======== ========
Weighted average shares outstanding.................. 20,353 22,637
======== ========
<CAPTION>
PRO FORMA ADJUSTMENTS EVI
-------------------------- PRO
FORMA
NEW GULFMARK GULFMARK POST
DISTRIBUTION(F) MERGER MERGER
--------------- -------- --------
<S> <C> <C> <C>
Revenues............................................. $(34,749) $ -- $513,274
-------- ------- --------
Costs and expenses:
Cost of sales....................................... (20,874) -- 402,391
Selling, general and administrative attributable to
segments.......................................... (4,840) -- 55,156
Corporate general and administrative................ -- -- 6,339
-------- ------- --------
(25,714) -- 463,886
-------- ------- --------
Operating income..................................... (9,035) -- 49,388
-------- ------- --------
Other income (expense):
Interest expense.................................... 3,936 -- (16,454)
Interest income..................................... (469) -- 2,163
Other income (expense), net......................... 86 (6,264)(k) (317)
-------- ------- --------
3,553 (6,264) (14,608)
-------- ------- --------
Income (loss) before income taxes.................... (5,482) (6,264) 34,780
(Provision) benefit for income taxes................. 1,839 2,192(l) (7,600)
-------- ------- --------
Income (loss) from continuing operations............. $ (3,643) $(4,072) $ 27,180
======== ======= ========
Earnings per share from continuing operations........ $ 1.20
========
Weighted average shares outstanding.................. 22,637(m)
========
</TABLE>
74
<PAGE> 81
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA ADJUSTMENTS
The adjustments to the accompanying unaudited pro forma condensed
consolidated balance sheet as of December 31, 1996, are described below:
(a) To reduce GulfMark historical balances related to the distribution of
all the shares of New GulfMark, which will be a new publicly traded
company, to GulfMark stockholders in a tax-free spin-off. The GulfMark
stockholders will receive two shares of New GulfMark for each share of
GulfMark held. As part of the Distribution, New GulfMark will acquire
all of the assets of GulfMark used in connection with the GulfMark
Marine Business and certain liabilities associated with such assets.
Following the spin-off, the assets of GulfMark will consist of the
GulfMark Retained Assets, which includes Ercon, approximately 2.2
million shares of EVI Common Stock and certain miscellaneous assets.
(b) To reflect the issuance of 2,235,572 shares of EVI Common Stock in the
Merger at a price of $48.75 per share, the market price of the EVI
Common Stock on December 5, 1996, and the acquisition of 2,235,572
shares of EVI Common Stock held by GulfMark as a result of the Merger.
The shares of EVI Common Stock held by GulfMark have been classified
as treasury shares.
(c) To record the estimated cost of the Merger.
(d) To eliminate GulfMark's historical unrealized gain on its investments
in EVI and certain deferred taxes.
(e) To eliminate GulfMark Retained Assets' historical retained earnings
and cumulative foreign currency translation adjustment.
The adjustments to the accompanying unaudited pro forma condensed
consolidated statement of income for the year ended December 31, 1996, are
described below:
(f) To eliminate the operating results attributable to the GulfMark Marine
Business.
(g) To adjust the historical amounts of TCA, acquired by the Company on
August 5, 1996, for an increase in depreciation expense associated
with the assets of TCA, which was acquired on August 5, 1996, as a
result of the $11.6 million fair value increase of property, plant and
equipment through the purchase price allocation. Such increase in
property, plant, and equipment is being depreciated over an average
life of ten years.
(h) To record amortization expense relating to the estimated $15.8 million
of excess of cost over fair value of net tangible assets acquired in
connection with the acquisition of TCA. Such excess of cost over fair
value of net tangible assets acquired is being amortized over 40
years.
(i) To reduce TCA's interest expense to reflect EVI's retirement of TCA's
$7.7 million debt outstanding at the date of acquisition. EVI funded
such retirement with a portion of the net proceeds from the 1996
equity offering.
(j) To eliminate certain expenses incurred by TCA relating to EVI's
acquisition of TCA. Such expenses relate to amounts paid to an
investment banking firm which represented TCA in EVI's acquisition of
TCA.
(k) To eliminate the $6,264,000 gain recorded by GulfMark with respect to
the sale by GulfMark of 300,000 shares of EVI Common Stock in July
1996. The net proceeds from this sale will not be received by EVI nor
included in the GulfMark Retained Assets.
(l) To record the income tax provision related to the pro forma
adjustments at statutory rate.
(m) The EVI historical shares outstanding, post-merger pro forma shares
outstanding and weighted average post-merger pro forma shares
outstanding were 22,828,921, 22,828,921 and 22,637,275, respectively.
75
<PAGE> 82
DESCRIPTION OF EVI
GENERAL
EVI is an international manufacturer and supplier of oilfield equipment.
EVI manufactures drill pipe, premium tubulars and a complete line of artificial
lift and production equipment used in the production of oil and natural gas.
EVI has achieved significant growth in recent years through a consistent
strategy of focused, synergistic acquisitions and internal development.
Acquisitions have sought to take advantage of the consolidating nature of the
industry and have concentrated on under utilized fixed assets, proprietary
technology and name brand product lines. Internal development has focused on
product development, manufacturing enhancements and international expansion.
EVI's growth strategy has resulted in it becoming the leader in many of its
principal markets. EVI is currently the largest manufacturer and supplier of
drill pipe in the world, the largest manufacturer of premium tubulars in North
America and among the largest manufacturers of rod lift equipment in the world.
EVI was incorporated in 1972 as a Massachusetts corporation and was
reincorporated in Delaware in 1980. EVI's corporate office is located at 5 Post
Oak Park, Suite 1760, Houston, Texas 77027-3415, and its telephone number is
(713) 297-8400.
RECENT DEVELOPMENTS
Mallard Disposition. In November 1996, in connection with EVI's desire to
concentrate its efforts on the continued development of its oilfield equipment
businesses, EVI disposed of its Mallard Division for approximately $306 million
before taxes and 3,056,600 shares of Parker Common Stock. EVI intends to deploy
the net proceeds of the Mallard Division disposition to finance acquisitions and
the further development of its oilfield equipment business.
Arrow Acquisition. On December 10, 1996, EVI acquired the operating assets
of Arrow Completion Systems, Inc., a Texas corporation ("Arrow"), from
Weatherford Enterra, Inc., a Delaware corporation, pursuant to an Asset Purchase
Agreement dated as of October 18, 1996 (the "Arrow Agreement"). Under the terms
of the Arrow Agreement, EVI paid consideration of approximately $21.3 million
cash and assumed certain liabilities of Arrow.
Arrow is a manufacturer and distributor of downhole packers and oil
recovery and completion service tools. EVI is in the process of integrating the
operations of Arrow with those of EVI Oil Tools and intends to offer Arrow's
product line and services in conjunction with EVI's own line of oilfield
equipment, tools and services.
TA Industries Acquisition. On February 21, 1997, EVI entered into an Stock
Purchase Agreement (the "TAI Agreement") with Seigo Arai and Kanematsu USA Inc.,
a New York corporation, providing for the acquisition by EVI of all of the
capital stock of TA Industries, Inc., a Delaware corporation ("TA Industries"),
in exchange for approximately $64 million in cash and assumed debt.
TA Industries designs, manufactures and markets worldwide a complete line
of tubular couplings and accessories under the brand names Texas Arai and
Tube-Alloy. EVI intends to integrate TA Industries with EVI's drilling tools and
premium tubulars division, thus creating an integrated supplier of premium
tubular products and services.
The acquisition of TA Industries is subject to various conditions,
including the receipt of all required regulatory approvals and the expiration of
all waiting periods. Although there can be no assurance that the TAI Agreement
will close, EVI anticipates that the acquisition will be consummated shortly
after the receipt of such regulatory approvals.
76
<PAGE> 83
DESCRIPTION OF NEW GULFMARK
The operations of New GulfMark will be concentrated in the offshore marine
industry. The GulfMark Marine Business operates twenty-nine offshore support
vessels primarily in the North Sea and Southeast Asia with one vessel operating
worldwide. The offshore support vessels operated in the GulfMark Marine Business
provide transportation of materials, supplies and personnel to and from offshore
drilling platforms and rigs, production platforms and other installations. Some
of the vessels also perform anchor handling and towing services. In addition to
the vessels, the assets of the GulfMark Marine Business include various support
facilities, spare parts inventory, as well as customer and vessel management
contracts.
New GulfMark was organized in 1996 as a Delaware corporation. Its principal
executive offices are located at 5 Post Oak Park, Suite 1170, Houston, Texas
77027, and its telephone number is (713) 963-9522.
GULFMARK MARINE BUSINESS
General. Upon consummation of the Transactions, New GulfMark will operate
twenty-nine offshore support vessels, principally in two major offshore
exploration and production areas of the world: the North Sea and Southeast Asia.
The GulfMark Marine Business does not currently operate any vessels in offshore
U.S. waters. Offshore support vessels are contracted by major integrated oil
companies and large independent oil and gas operators to transport personnel,
supplies and material, as well as to move and position drilling structures in
support of the exploration and production of oil and gas in offshore waters.
Offshore support vessels generally fall into seven functional categories:
(i) supply vessels, (ii) anchor handling, towing and supply vessels, (iii)
construction support vessels, (iv) standby rescue vessels, (v) crewboats, (vi)
specialty vessels and (vii) utility vessels. It is not unusual for a vessel to
function in more than one of these categories.
- Supply vessels (150' to 200') are used to transport supplies such as
fuel, water, drilling fluids, equipment and provisions. Large platform
supply vessels (200' to 275'), because of their large, clear after deck
and below deck capacities, are well suited for large concentrated
offshore production centers.
- Anchor handling, towing and supply vessels (150' to 250') are used to
set anchors for the rigs and to tow mobile drilling rigs and equipment
from one location to another. In addition, these vessels typically can be
used as supply vessels when they are not performing anchor handling and
towing services.
- Construction support vessels can be vessels used in the actual
construction effort such as pipe laying barges or they can be specially
designed vessels, such as pipe carriers, used to transport the large
cargos of material and supplies required to support construction and
installation of offshore platforms and pipelines.
- Standby rescue vessels perform a safety patrol function for an area and
are equipped to provide emergency rescue and first aid in the event of
accidents.
- Crewboats are smaller vessels (75' to 120') used to transport personnel
and a limited amount of supplies to platforms and rigs.
- Specialty vessels perform diving and seismic support, as well as other
functions such as well stimulation, oil recovery and oil pollution
control.
- Utility vessels (90' to 150') provide limited crew transportation, some
transportation of oilfield support equipment and in some locations
standby functions.
The vessels operated in the fleet are capable of transporting supplies and
personnel to offshore drilling platforms and rigs, production platforms and
other installations. Twelve of the owned vessels are used primarily for carriage
of cargo, of these twelve, seven vessels are capable of supporting offshore
construction in the North Sea, as well as large capacity platform supply duties.
The other eight owned vessels perform anchor handling and towing services for
moving rigs and platforms between locations. One vessel, the Searunner, is
smaller in length and is used primarily to transport crews to and from offshore
facilities.
77
<PAGE> 84
Risk Factors. Among the key factors that may have a direct bearing on New
GulfMark's results and financial condition are: (i) competitive practices in the
offshore support and marine transportation industry in which New GulfMark
competes, (ii) fluctuations in oil and gas prices, (iii) environmental
liabilities to which New GulfMark may become subject, (iv) the future laws and
governmental regulations affecting the offshore support and marine
transportation industry in general and New GulfMark's operations in particular,
(vi) employee and labor relations, (vii) risks relating to the availability of
capital, (viii) risks relating to New GulfMark's leverage position and potential
inability to service its debt and (ix) risks related to New GulfMark's reliance
on significant customers. See "New GulfMark Risk Factors".
Vessels. The New GulfMark fleet includes twenty-nine vessels, twenty-one of
which are owned, two bareboat chartered and six managed. The following table
summarizes information on each vessel as of February 26, 1997:
<TABLE>
<CAPTION>
YEAR LENGTH
NAME LOCATION CLASSIFICATION BUILT (IN FEET) BHP(3) DWT(4)
---- -------- -------------- ----- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
OWNED:
Highland Rover(5) North Sea Pipe carrier/platform supply 1998(5) 236 5,450 3,700
Highland Drummer(1) North Sea Pipe carrier/platform supply 1997 221 5,450 2,800
Highland Piper(1) North Sea Pipe carrier/platform supply 1996 221 5,450 2,800
Highland Pride(1) North Sea Pipe carrier/platform supply 1992 265 6,600 4,000
Highland Star(1) North Sea Pipe carrier/platform supply 1991 265 6,600 4,000
Highland Fortress(1) North Sea Pipe carrier/platform supply 1982 255 6,120 3,200
Highland Warrior(1) North Sea Pipe carrier/platform supply 1981 265 5,300 3,890
Highland Champion(1) North Sea Pipe carrier/platform supply 1979 265 4,800 3,320
Highland Legend(1) North Sea Supply 1986 194 3,590 1,442
Highland Sprite(1) North Sea Supply 1986 194 3,590 1,442
Sem Courageous(1) Southeast Asia Anchor handling, towing, supply 1981 191 4,000 1,220
Sem Valiant(1) Southeast Asia Anchor handling, towing, supply 1981 191 4,000 1,220
Seawhip(1) Southeast Asia Anchor handling, towing, supply 1983 192 3,900 1,200
Seawitch(1) Southeast Asia Anchor handling, towing, supply 1983 192 3,900 1,200
Sea Explorer(1) Southeast Asia Anchor handling, towing, supply 1981 192 5,750 1,420
Sea Diligent(1) Southeast Asia Anchor handling, towing, supply 1981 192 4,610 1,219
Sea Endeavor(1) Southeast Asia Anchor handling, towing, supply 1981 191 4,000 1,000
Sea Conquest(1) Southeast Asia Anchor handling, towing, supply 1977 185 3,850 1,142
Sea Searcher(1) Southeast Asia Anchor handling, towing, supply 1976 185 3,850 1,215
Sea Eagle(1) Southeast Asia Anchor handling, towing, supply 1976 185 3,850 1,215
Searunner Southeast Asia Crewboat 1982 120 2,720 126
Seapower(1) Brazil Bulk, supply 1974 222 7,040 1,205
BAREBOAT CHARTERED:
SeaMark South Carolina(2) Southeast Asia Anchor handling, towing, supply 1983 180 3,000 1,200
SeaMark Mississippi(2) Southeast Asia Supply 1982 180 2,250 1,200
MANAGED:
Sea Truck North Sea Pipe carrier/platform supply 1979 266 4,600 2,477
North Prince North Sea Supply 1978 259 6,000 2,717
Clwyd Supporter North Sea Towing, standby, oil recovery 1984 266 10,700 1,400
Sefton Supporter North Sea Standby, oil pollution control 1971 250 1,620 1,233
Portosalvo North Sea Anchor handling, towing, 1982 227 12,750 2,085
Safe Truck North Sea Pipe carrier/platform supply 1996 221 5,450 2,800
</TABLE>
- ---------------
(1) These vessels are mortgaged under certain debt agreements.
(2) The SeaMark South Carolina and SeaMark Mississippi are bareboat chartered
through August, 1998 to SeaMark Ltd., a Panamanian corporation owned 51% by
Gulf Offshore Marine International, Inc., a wholly owned subsidiary of
GulfMark and 49% by the vessel owners.
(3) Break horsepower.
(4) Dead weight tons.
(5) This modified and extended UT755 design vessel is under contract to be
delivered in early 1998, and will be mortgaged under certain debt
agreements.
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Operations. The offshore marine services industry is directly impacted by
the level of activity in international, offshore oil and gas exploration,
development and production which in turn is impacted by changes in oil and gas
prices. Oil and gas prices are affected by a host of geopolitical and economic
forces including the fundamental principles of supply and demand. Declines in
oil and gas prices in the early 1980s and concerns relating to the stability of
prices that followed resulted in a significant reduction in exploration and
development activity worldwide. This decline in activity coupled with the
overbuilding of new vessels in the early 1980s resulted in an oversupply of
offshore support vessels. While there is some vessel interchangeability between
geographic regions, there are also barriers such as mobilization costs and
vessel suitability that restrict migration of excess capacity. This is most
notably the case in the North Sea where vessel design requirements dictated by
the harsh operating environment restrict migration of vessels into that market
and, to a lesser degree, high operating costs restrict migration out of the
market. The effect of these restrictions on vessel migration is to segment
various regions into separate markets. These markets for offshore marine
services were impacted differently by the above described forces because of each
area's unique blend of political, operating and economic factors.
North Sea. The operating environment in the North Sea area is such that
exploration and development projects tend to be fewer in number but larger in
scope and therefore require longer planning horizons. Consequently, demand for
support vessels in this market is generally easier to forecast and less
susceptible to abrupt swings. This market requires vessels that are generally
larger and more sophisticated technically. Such equipment constraints require
larger capital commitments that restrict the number of participants to entities
that are larger and better capitalized.
Vessel demand began to decline late in 1991 and continued to remain low as
oil companies reduced exploration activity in reaction to lower world oil prices
and changes in certain United Kingdom tax incentives. In addition, construction
seasons during this period were unusually short and this further contributed to
the softening market. Anticipated improvements in demand in 1994 were delayed
when oil prices declined to their lowest level since the end of the Iraqi war.
The decline in prices related to a number of factors, including a continued
sluggish world economy, an inability of the Organization of Petroleum Exporting
Countries ("OPEC") to reach an agreement on production levels and prices and
uncertainty surrounding the resumption of Iraqi oil exports. Oil prices
recovered during 1995; however, the recovery was tenuous because of continued
uncertainty about exports of Iraqi oil, including the effect on price levels of
a limited and/or temporary resumption of such oil exports. Nevertheless,
exploration activity strengthened with particular emphasis in the West of
Shetlands. A number of long-term drilling contracts were signed during 1995
increasing the demand for vessels in 1996, and the expectation is for sharply
increased activity in 1997. In addition, long-term construction projects already
underway indicate the market for construction support vessels will be strong in
1997 and further indicates that consistent demand will continue to be strong
through 1999 and potentially 2000.
Countering the effect of expected improvements in demand from increased
exploration and construction activity is the increase in new vessel buildings.
New construction has been limited in recent years. 1995 saw the first
significant new vessel construction activity since the orders placed in 1990 and
1991. In 1996, orders for a number of anchor handlers and over a dozen platform
supply vessels were placed. A large number of the vessels are being built
against or have been awarded long-term contracts, and the market appears capable
of absorbing the number of vessels currently on order.
Upon consummation of the Transactions, the New GulfMark North Sea fleet
will include nine owned vessels and six managed vessels. These vessels are
supported by onshore bases in Aberdeen and Liverpool. The North Sea fleet will
account for 80% of New GulfMark's vessel assets measured by net book value.
Southeast Asia. The fleet's Southeast Asia activity principally consists of
offshore work in Indonesia, Malaysia and Thailand, but vessels have also worked
in China, India, Vietnam, Cambodia and the Philippines. Historically, the type
of vessels required to service this market were similar in design to those
operating in the U.S. Gulf of Mexico. In this regard, past practice has been for
U.S. operators to retire vessels out of the Gulf of Mexico to work out their
remaining useful lives in this market. In recent years, there has been pressure
(most notably from Malaysia) to upgrade offshore support vessel capabilities by
establishing limits on the age
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of vessels working in their waters and by encouraging construction of new
vessels designed particularly to operate in this market.
The Southeast Asia market differs country by country, but generally the
competitive environment is characterized by a large number of small companies in
contrast to many of the other major offshore exploration and production areas of
the world where a few large operators dominate the market. Affiliations and
joint ventures with local companies are necessary to maintain a viable marketing
presence. Vessels in this market are smaller than in other areas. Yet, the
varying weather conditions, annual monsoons and long distances between supply
centers have allowed for a variety of vessel designs to compete in this market,
each suited for a particular set of operating parameters. For certain
situations, contracts in this market require very specialized vessels, and
building specific vessels to contract is more common than in other markets. As a
result, the competitive pressures from having a large number of smaller
operators are lessened because vessels are not as easily interchangeable between
different locations.
Indonesia is the only significant member of OPEC in the region. Exploration
activity in Indonesia has historically focused on oil exploration. Vessel demand
in this country softened in 1992 as exploration activities were reduced while
some of the major oil companies renegotiated their production royalty and tax
structures. This reversed somewhat in 1993 and 1994 as some agreements were
reached. However, in 1995 the oil companies pressed for further modifications to
their production royalty and tax structures and reduced exploration budgets
resulting in lower than expected activity in 1995, and only marginal improvement
in 1996.
The rapid economic growth for many countries in the Pacific Rim has
resulted in increased demand for energy and a related increase in oil and gas
exploration. Decisions by local governments to implement policies that will
reduce dependence on energy supplies from the Middle East have stimulated
additional interest in exploration in the region to avoid dependence on the
traditional OPEC sources. Virtually every country in the region has known or
potential reserves. However, exploration activity suffered during 1993 and 1994
when oil prices dipped and has been slow to recover. Budgets appear to be higher
for 1997, but there has been a reduction in available drilling rigs as demand
has accelerated faster in other areas of the world.
Brazil. In May 1995, the Seapower returned to Brazil to begin working under
a two year contract (which has now been extended through May 1999) with
Petrobras. Brazil has traditionally been a high risk area due to its highly
inflationary economy, changing political environment and harsh working
environment. The country's offshore industry requires a large number of highly
sophisticated vessels, and it is a large user of North Sea class vessels.
Other Considerations. Historically, the expenditures necessary to maintain
a vessel to satisfy international certification standards for vessels
approaching twenty years of age have made it generally prohibitively expensive
to continue to operate those vessels beyond that age. However, survey results on
post-1985 built vessels now suggest that improvements in coating systems and
materials lead to longer expected useful lives for these vessels. Depressed
conditions in the offshore marine services industry in the mid to late 1980s and
early 1990s limited the construction of new vessels, and as a result the normal
replacement of older vessels has been substantially curtailed since 1983. The
average age of the GulfMark Marine Business fleet is approximately 13 years.
This fact, coupled with the low level of new vessel construction will give New
GulfMark an advantageous marketing position with respect to certain of its
competitors.
Industry conditions, the availability of capital and other factors will
play a part in determining whether New GulfMark will be able to maintain its
fleet through extending the economic life of existing vessels or acquiring new
or used vessels. If New GulfMark is unable to replace the vessels at the end of
their economic useful lives, it could have an adverse effect on profitability.
Customers, Charter Terms and Competition. The fleet's principal customers
are major integrated oil companies and large independent oil and gas exploration
and production companies working in international markets, as well as foreign
government owned or controlled organizations. During 1996, as a result of
multiple contracts in the ordinary course of business two customers accounted
for 10% or more of total consolidated revenues: Aberdeen Services Company (North
Sea) Ltd. at 16% and Shell UK Exploration & Production Ltd. at 14%. The
contracts with these customers were industry standard time charters with a
wholly owned
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U.K. subsidiary of New GulfMark, Gulf Offshore N.S., Ltd. The contracts involved
various of New GulfMark's vessels for periods ranging from just a few days or
months to, in one case, one year. The charters are generally not cancelable
except for unsatisfactory performance by the vessel. The loss of a major
customer could have a material adverse effect on New GulfMark's financial
condition and results of operations until a replacement is obtained. As of
February 26, 1997, ten of the fleet's owned and bareboat chartered vessels are
on term charters with initial charter periods of one year or longer. Six are on
charters of less than one year but over 30 days and seven of the vessels are on
spot contracts (less than 30 days). Seven vessels are currently available for
charter.
Offshore supply vessel companies compete principally on the basis of
suitability of equipment, price and service. Also in certain foreign countries,
preferences are given to vessels owned by national companies. The GulfMark
Marine Business has mitigated some of the impact of such preferences through
affiliations and joint ventures with local companies.
The fleet competes with approximately 20 similar companies in the North Sea
market and numerous small and large competitors in the Southeast Asia market.
Many of the competitors have greater financial resources than New GulfMark will
have.
Environmental and Government Regulation. All of the fleet's vessels are
subject to various international conventions including certain safety
environmental and construction standards. In addition, the countries under which
the vessels are flagged require certain periodic inspections and drydock
examinations. Generally surveys and inspections are performed by internationally
recognized classification societies. Most of the owned vessels are flagged
either in Panama, the United Kingdom or Malaysia. Among the more significant of
the conventions applicable to the fleet are: (i) the International Convention
for the Prevention of Pollution of the Sea, 1973, 1979 Protocol, (ii) the
International Convention on the Safety of Life at Sea, 1974, 1978 and 1981/1983
Protocol, and (iii) the International Convention on Standards of Training,
Certification and Watchkeeping for Seafarers, 1978. These regulations govern oil
spills and other matters of environmental protection, worker health and safety,
and the manning, construction and operation of vessels. New GulfMark believes
that it presently is in material compliance with the environmental laws and
regulations to which its operations are subject. Neither GulfMark nor New
GulfMark is a party to any pending proceeding or is aware of any threatened
litigation or other judicial, administrative or arbitrable environmental
proceeding which, if adversely determined, would have a material adverse effect
on the financial condition or results of operations of New GulfMark. However,
the risks of incurring substantial compliance costs and liabilities and
penalties for non-compliance are inherent in offshore marine service operations.
There can be no assurance that significant costs, liabilities, and penalties
will not be incurred by or imposed on New GulfMark in the future.
Operational Risks and Insurance. The operation of offshore support vessels
is subject to various risks, such as catastrophic marine disaster, adverse
weather conditions, mechanical failure, collision and errors in navigation, all
of which represent a threat to the safety of personnel and vessels under tow and
other property, as well as the environment. All of the operations are in foreign
waters and as such are subject to the usual risks inherent in doing business in
foreign countries. Such risks include political changes, possible vessel
seizure, company nationalization or other governmental actions, currency
restrictions and revaluations and import/export restrictions, all of which are
beyond the control of New GulfMark. Any of these events could result in revenue
and casualty loss, increased costs and significant liability to third parties.
The GulfMark Marine Business maintains various types of insurance that
management considers to be adequate based on industry standards and the value of
the fleet, including hull and machinery insurance for the vessels, protection
and indemnity insurance against liabilities to employees and third parties for
injury, damage or pollution and other customary insurance. There can be no
assurance, however, that such insurance coverage would be adequate to cover
losses that New GulfMark may incur or that adequate insurance rates that New
GulfMark considers commercially reasonable will continue to be available.
Seasonality of Business. The operations of the fleet are subject to
seasonal factors. Operations in the North Sea are generally at their highest
level during the months from April to August and at their lowest levels during
the winter months. Vessels operating in Southeast Asia are generally at their
highest utilization rates during the months of May to August and at their lowest
utilization rates during the monsoon season at
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the end of the year. In addition, operations may be affected by unusually long
or short construction seasons due to, among other things, abnormal weather
conditions.
Employees. At December 31, 1996, the GulfMark Marine Business had 539
employees located in the United States, the United Kingdom and Southeast Asia.
Through its contract with a crewing agency, it participates in collective
bargaining arrangements with approximately 352 employees working on its North
Sea vessels under agreements covering one to two year periods. The operation has
no other collective bargaining agreements. Relations with the employees are
considered satisfactory. To date operations of the Gulfmark Marine Business have
never been interrupted by strikes or work stoppages.
Properties. The principal executive offices for New GulfMark will be
located in Houston, Texas, while operations will be headquartered in Lafayette,
Louisiana. For local support, it will also have offices and warehouse facilities
in the United Kingdom and Singapore. Each of these facilities is under lease.
New GulfMark's operations generally do not require highly specialized
facilities, and suitable facilities are generally available on a lease basis as
required.
Legal Proceedings. Various legal proceedings and claims that arise in the
ordinary course of business may be instituted or asserted against GulfMark and
New GulfMark relating to the offshore marine services operations. Although the
outcome of litigation cannot be predicted with certainty, management believes,
based on discussions with its legal counsel and in consideration of reserves
recorded, that the outcome of these legal actions will not have a material
adverse effect upon the consolidated financial position and results of
operations of New GulfMark.
Pursuant to the terms of the Distribution Agreement and the Merger
Agreement, if the Transactions are consummated, New GulfMark will assume
responsibility for all past and future claims and litigation against GulfMark
stemming from the offshore marine services operations and all past claims and
litigation in respect of the Retained Assets.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of New GulfMark assumes the
stockholders of GulfMark have approved the Proposals and the Transactions have
been consummated. This information should be read in conjunction with New
GulfMark's Consolidated Financial Statements and related notes thereto included
in this Joint Proxy Statement/Prospectus. See also "New GulfMark Selected
Financial Data".
Liquidity and Capital Resources. At December 31, 1996, New GulfMark had
$17.2 million in cash and cash equivalents as compared to $5.1 million at
December 31, 1995. Investing and financing activities provided $2.6 million in
cash and cash equivalents in the twelve month period ended December 31, 1996,
and $8.5 million of cash and cash equivalents was generated by operations. This
compared to $3.7 million used for investing and financing activities and $6.4
million generated by operations for the same period in 1995.
New GulfMark contracted with a shipyard in Norway for the construction of
two UT 755 design vessels for deployment in the North Sea. Delivery of the first
vessel, the Highland Piper, was made March 15, 1996. The second vessel named the
Highland Drummer was delivered January 3, 1997. New GulfMark made the final
payment on the Highland Piper and interim construction payments on the Highland
Drummer totalling $11,508,000 during 1996 and a final payment on the Highland
Drummer of $12,850,000 in 1997. Funding of $7,254,000 in 1997 was provided by
additional borrowings under existing credit facilities.
On August 2, 1996, New GulfMark purchased six offshore supply vessels from
Maritime (Pte) Limited which operated in Southeast Asia. Funding for this
acquisition was provided through a new $7,000,000 facility with a bank and a
drawdown available under existing facilities. The new facility requires ten
semi-annual payments beginning in 1997.
New GulfMark has entered into a contract with a shipyard to construct an
enhanced UT 755 design, supply vessel at a price of approximately $18 million
denominated in Norwegian Kroner. The new ship will be a modified version of New
GulfMark's recently delivered Highland Piper (March 1996) and Highland Drummer
(January 1997). This vessel, scheduled for delivery in the first quarter of
1998, will be available to
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participate in the growing demand for deep water, remotely operated vehicle
(ROV) support, standard supply duties and specialized services in the North Sea.
New GulfMark is required to make interim construction payments of $.9 million in
1996 and $2.7 million in 1997. Final payment is due upon delivery of the vessel.
New GulfMark anticipates financing the cost of the vessel through additional
borrowings and existing funds. Subsequent to year end, the Company entered into
a contract to hedge approximately $13.9 million of the Norwegian Kroner
commitment against unfavorable fluctuations in the Sterling to Kroner exchange
rates. Upon delivery, any gain or loss will be included in the cost of the
vessel.
During the year ended December 31, 1996, expenditures for scheduled
drydockings of vessels were $1,230,000 and $57,000 for vessel upgrades and
modifications. New GulfMark estimates that capital and maintenance expenditures,
excluding any expenditures to build or acquire additional vessels, will be
approximately $2.8 million for 1997, of which $2.2 million is related to
scheduled drydockings.
At January 31, 1997, New GulfMark had outstanding debt of $63.2 million
borrowed under various facilities. These facilities are secured by preferred
ship mortgages on nineteen of New GulfMark's vessels and assignments of such
vessels' earnings. Interest on the borrowings accrues at rates between LIBOR
plus 1 1/4% and LIBOR plus 2 1/4% per annum. Scheduled debt repayments are
expected to total $9.3 million for 1997. The loan facility agreements place
certain restrictions on the ability of the subsidiaries subject to these
agreements to pay dividends. As of January 31, 1997, New GulfMark could borrow
up to $2.0 million under its short-term credit facility.
Substantially all of New GulfMark's tax provision is for deferred taxes.
The net operating loss available in the United Kingdom is primarily the result
of accelerated depreciation allowances under United Kingdom tax law.
New GulfMark intends to undertake an offering of New GulfMark Common Stock
within one year. It is anticipated that such an offering would seek to raise at
least $20 million in net proceeds through the issuance of up to 950,000 shares
of New GulfMark Common Stock. The net proceeds of such an offering would be used
to expand New GulfMark's offshore marine fleet, retire indebtedness and for
general corporate purposes. Although there can be no assurance that such an
offering will be successful or as to the timing of such an offering, New
GulfMark intends to pursue such an offering unless New GulfMark's Board of
Directors determines that based on unforeseen circumstances such an offering
would not yield to New GulfMark at least $20 million from the issuance of
approximately 950,000 shares of New GulfMark Common Stock.
New GulfMark believes that current reserves of cash and short-term
investments, cash flows from operations and access to various credit
arrangements will provide sufficient resources to finance internal operating
requirements. New GulfMark will, however, actively seek further investment
opportunities. Such investments may require the expenditure of significant
resources, either in cash, notes, stock or a combination thereof.
Results of Operations. The demand and pricing for the services of New
GulfMark is substantially dependent on worldwide levels of exploration and
production of oil and gas. Exploration and development activity is in turn
largely dependent upon prevailing oil and natural gas prices. Prices for oil and
natural gas have historically been extremely volatile and have reacted to actual
and perceived changes in demand and supply of oil and natural gas, domestic and
worldwide economic conditions and political instabilities in the oil producing
countries.
During 1994, world oil prices declined to their lowest level since the end
of the Iraqi war. The decline in prices related to a number of factors,
including a continued sluggish world economy, an inability of OPEC to reach an
agreement on production levels and prices and uncertainty surrounding the
resumption of Iraqi oil exports. This decline in oil prices affected the demand
for offshore marine services, including those provided by New GulfMark. Oil
prices recovered somewhat and stabilized in 1995 and natural gas prices in the
United States improved during the course of 1995. However, gas prices in the
United Kingdom dropped significantly and led to reduced activity in the Southern
sector of the North Sea. In 1996, several factors, including exceptionally cold
weather in a wide area encompassing North America, Europe and Asia; continued
strong economic growth, particularly in the Pacific Rim countries and low
beginning inventories converged to
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produce dramatically stronger oil prices which have driven a now sixteen month
long surge in offshore drilling and production activity. The surge has been
particularly evident in the U.S. Gulf of Mexico as well as in the North Sea. The
southeast Asia region has been less impacted because of an exodus of quality
drilling units from this area early in the surge. Results for 1997 will continue
to be affected by price levels for oil and natural gas and other influences on
exploration and development, in particular in the North Sea and Southeast Asia.
Year Ended December 31, 1996 compared to Year Ended December 31, 1995.
Revenues and operating income for the twelve months ended December 31, 1996
were $34,749,000 and $9,035,000 compared to $27,233,000 and $2,892,000,
respectively for the comparable period in 1995. Improvements in revenue are
primarily attributable to the addition of two vessels to the North Sea Fleet:
the newly constructed Highland Piper (delivered in March 1996) and the Highland
Warrior (previously under bareboat charter and purchased in December 1995).
Results were also favorably impacted by an upturn in the North Sea spot market
day rates late in the period as well as the August 1996 acquisition of six
offshore supply vessels in Southeast Asia. Operating income benefitted from
reduced depreciation resulting from New GulfMark's change (effective January 1,
1996) in its estimate of vessel useful lives from 20 years to 25 years. Revenues
and average number of owned vessels by region and segment compared as follows
(in thousands):
<TABLE>
<CAPTION>
FAR BRAZIL
EUROPE EAST AND OTHER TOTAL
---------------- ------ --------- -------
(PRIMARILY U.K.)
<S> <C> <C> <C> <C>
1996:
Revenues................................. $25,552 $7,732 $1,465 $34,749
Average* number of owned vessels......... 8 9 1 18
1995:
Revenues................................. $20,176 $6,142 $ 915 $27,233
Average* number of owned vessels......... 6 5 1 12
</TABLE>
- ---------------
* Adjusted for part year availability.
In addition to the variable expenses associated with the operation of the
New GulfMark fleet, New GulfMark also incurs fixed charges to depreciate its
vessels and amortize certain other assets, including deferred drydocking costs.
Depreciation and amortization for 1996 was $5,013,000, compared to $5,472,000
for 1995. This decrease is due to the change in estimated useful lives and was
partially offset by the addition of new vessels.
Year Ended December 31, 1995 compared to Year Ended December 31, 1994.
Revenues decreased slightly from $27,692,000 in 1994 to $27,233,000 in 1995
while operating income declined from $3,813,000 in 1994 to $2,892,000 in 1995 as
earnings in the Southeast Asia region decreased between 1994 and 1995. Revenues
and average number of owned vessels by region compared as follows (in
thousands):
<TABLE>
<CAPTION>
FAR BRAZIL
EUROPE EAST AND OTHER TOTAL
---------------- ------ --------- -------
(PRIMARILY U.K.)
<S> <C> <C> <C> <C>
1995:
Revenues................................. $20,176 $6,142 $ 915 $27,233
Average* number of owned vessels......... 6 5 1 12
1994:
Revenues................................. $18,685 $8,178 $ 829 $27,692
Average* number of owned vessels......... 6 6 1 13
</TABLE>
- ---------------
* Adjusted for partial year availability.
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Revenues and operating income for the North Sea region improved somewhat
due to a combination of improved dayrates and utilization rates. The decline in
revenues and earnings for Southeast Asia is due primarily to lower utilization
rates as well as the lack of earnings from the Seawind which was sold in late
1994.
Interest expense increased from $2,408,000 in 1994 to $2,801,000 in 1995 as
the result of higher overall interest rates and the writeoff of certain loan
costs on debt which was refinanced through a new facility with a different bank.
Other income in 1994 included a gain of $842,000 from the sale of the Highland
Sentinel.
In addition to variable expenses associated with the operation of New
GulfMark's fleet, New GulfMark will also incur fixed charges to depreciate its
vessels and amortize certain other assets, including deferred drydocking costs.
Depreciation and amortization for 1995 was $5,472,000, representing an increase
of $407,000 from 1994. This increase was due to increased drydocking
amortization expense.
New GulfMark's effective tax rate decreased to 19.8% in 1995 as compared to
39.8% in 1994. This decrease was primarily due to a decrease in foreign losses
for which no corresponding tax benefit was available.
Currency Fluctuations and Inflation. A significant portion of the
operations of New GulfMark are overseas, therefore it is potentially exposed to
currency fluctuations and exchange rate risks. Charters for vessels in the North
Sea fleet are primarily denominated in British Pounds Sterling ("Sterling") and
substantially all the operating costs are in Sterling. North Sea operations
generated $25.6 million in revenues, $9.8 million in operating income and $9.9
million of cash flows from operations for the year ended December 31, 1996. In
1996 the Sterling/Dollar exchange rate ranged from a high of L = U.S.$1.71 to a
low of L = U.S.$1.49 for an average of L = U.S.$1.56 for the year. As of
February 26, 1997, the Sterling/Dollar exchange rate was L = U.S.$1.63. New
GulfMark hedged the effect on cash flows of these fluctuations in the
Sterling/Dollar exchange rates through Sterling denominated borrowings that
account for 81% or $48.7 million of total debt and represented $4.4 million or
all of the debt repayments made in 1996.
Reflected in the accompanying balance sheet for December 31, 1996, is a
($434,000) cumulative translation adjustment primarily relating to the lower
Sterling exchange rate as of December 31, 1996 in comparison to the exchange
rate when New GulfMark invested capital in its United Kingdom subsidiaries.
Changes in the cumulative translation adjustment are non-cash items that are
primarily attributable to investments in vessels and are partially offset by the
Sterling denominated debt in the North Sea.
Several of New GulfMark's Southeast Asia charters were denominated in
Malaysian ringgits as were a portion of the operating costs. Cash flows for this
currency were approximately $1.6 million. Malaysian currency rates have been
relatively stable in recent years, with the exchange rate for ringgits to U.S.
dollars averaging M$ = U.S.$0.40 during 1996 and the high and low during the
year ranging within 3% of this average. Therefore, GulfMark does not currently
hedge this currency. Where currency risks are high, as in Brazil, New GulfMark
accepts only a small percentage of charter hire in local currency and the
remainder is paid in U.S. dollars.
To date, general inflationary trends have not had a material effect on the
operating revenues or expenses of New GulfMark.
ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", which was effective for New GulfMark on January 1,
1996. The statement sets forth guidelines regarding when to recognize an
impairment of long-lived assets, including goodwill, and how to measure such
impairment. Adoption of SFAS No. 121 did not have any effect on New GulfMark's
consolidated financial statements.
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DIRECTORS
The Board of Directors of New GulfMark following the Transactions is
expected to be identical to the Board of Directors of GulfMark prior to the
Transactions with the addition of one new director, Bruce A. Streeter. It is
expected that GulfMark, as the sole stockholder of New GulfMark prior to the
Transactions, will elect each of the following GulfMark directors and Mr.
Streeter, to serve as directors of New GulfMark and such persons will cease to
be directors of GulfMark upon consummation of the Merger. It is anticipated that
the directors will serve on the same committees as they served on GulfMark's
Board of Directors. Unless otherwise indicated, (i) the business address for
each person listed below is GulfMark International, Inc., 5 Post Oak Park, Suite
1170, Houston, Texas 77027-3414, and (ii) each individual listed below is a
citizen of the United States. The directors will serve until the 1997 Annual
Meeting of New GulfMark and until their respective successors are elected and
qualified.
<TABLE>
<CAPTION>
YEAR FIRST
BECAME DIRECTOR
NAME AGE (OF GULFMARK)
---- --- ---------------
<S> <C> <C>
David J. Butters...................................... 56 1989
Norman G. Cohen....................................... 74 1972
Marshall A. Crowe..................................... 75 1978
Louis S. Gimbel, 3rd.................................. 67 1970
Robert B. Millard..................................... 46 1989
Bruce A. Streeter..................................... 48 N/A
</TABLE>
David J. Butters is Chairman of the Board and is a member of the Executive,
Audit and Compensation Committees. He is a Managing Director of Lehman Brothers,
an investment banking firm and division of Lehman Brothers, Inc. ("Lehman
Brothers"), which is a subsidiary of Lehman, where he has been employed for more
than the past five years. Mr. Butters is currently Chairman of the Board of EVI,
a director of Anangel-American Shipholdings, Ltd., and a member of the Board of
Advisors of Energy International, N.V.
Norman G. Cohen is Chairman of the Audit and Compensation Committees. He
has served as President of Norman G. Cohen, Inc., consultants and mortgage
lenders, for more than five years and is a director of Brewster Wallcovering
Co., Randolf, Massachusetts. Mr. Cohen is a partner in Orie Co., a private
investment company, and former Chairman of the National Parks and Conservation
Association.
Marshall A. Crowe serves as a member of the Audit Committee. Since January
1978, Mr. Crowe has served as President of M. A. Crowe Consultants, Inc.,
providing consulting services in the energy and financial fields. For four years
prior thereto, he was Chairman of the National Energy Board of Canada and was
previously Chairman of the Board of Canada Development Corporation, which was
engaged in the business of making equity investments in Canadian enterprises.
Mr. Crowe is also of counsel at Johnston & Buchan, barristers and solicitors,
Ottawa, Canada. Mr. Crowe is a Canadian citizen.
Louis S. Gimbel, 3rd is a member of the Executive Committee. He is
President, Chief Executive Officer and a Director of S. S. Steiner, Inc. and
President and Chairman of the Board of Hops Extract Corporation and Co-Manager
of Stadelman Fruit LLC. He has been employed by S. S. Steiner, Inc. for more
than the past five years. S. S. Steiner, Inc. is engaged in the farming,
trading, processing, importing and exporting of hops and other specialty crops.
Robert B. Millard is a member of the Executive and Compensation Committees.
He is a Managing Director of Lehman Brothers, where he has been employed for
more than the past five years. Mr. Millard also serves as a director of EVI.
Bruce A. Streeter is expected to be elected as a new director of New
GulfMark. Mr. Streeter was elected President and Chief Operating Officer of New
GulfMark in January 1997. Mr. Streeter was elected President of GulfMark's
Marine Division in November 1990 and has continued in that capacity up to the
present. Prior to November 1990, he was with Offshore Logistics, Inc. for a
period of twelve years serving in a number of capacities including General
Manager Marine Division.
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<PAGE> 93
COMMITTEES AND MEETINGS OF DIRECTORS
The Standing Committees of the Board of Directors of New GulfMark will be
identical to the Standing Committees of the Board of Directors of GulfMark and
will include an Executive Committee, an Audit Committee and a Compensation
Committee. The function of each of these three committees is described and the
members of each are listed below. During the year ended December 31, 1996, the
Board of Directors of GulfMark met five times, the Audit Committee met two
times, and the Compensation Committee met twice. During 1996, each director
attended 100% of the combined GulfMark Board of Directors meetings and meetings
of committees of the Board on which he served except Mr. Gimbel who attended 80%
of such meetings.
Messrs. Butters, Cohen and Crowe are the current members of the Audit
Committee. The Audit Committee makes recommendations to the Board concerning the
selection and discharge of GulfMark's independent auditors, reviews professional
services performed by the auditors, the plan and results of their audit
engagement and the fees charged for audit and non-audit services by the auditors
and evaluates GulfMark's system of internal accounting controls.
Messrs. Butters, Cohen and Millard are the current members of the
Compensation Committee, the principal function of which is to recommend to the
Board of Directors the salaries to be paid to the officers of GulfMark and
administer compensation and benefit plans of GulfMark.
Messrs. Butters, Gimbel and Millard are the current members of the
Executive Committee, which acts on behalf of the Board between regularly
scheduled meetings of the Board of Directors.
GulfMark has no standing Nominating Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of GulfMark is or was an officer or
employee of GulfMark or had any relationship requiring disclosure under
applicable rules, except that Mr. Butters has a retainer arrangement with
GulfMark, pursuant to which Mr. Butters receives a retainer of $6,250 per month
for serving as Chairman of the Board of GulfMark. In 1996, Mr. Butters received
$90,500 in director fees and retainers from GulfMark.
DIRECTOR COMPENSATION
Each non-employee director of New GulfMark is paid $1,000 for each meeting
of the Board of Directors and $500 for each Committee meeting of the Board of
Directors he attends. In addition, a $2,000 retainer is paid to each
non-employee director of New GulfMark for each quarter of the year in which such
director serves as a director. GulfMark has a retainer arrangement with Mr.
Butters pursuant to which he receives a retainer of $6,250 per month for serving
as Chairman of the Board. Each of these director compensation arrangements will
be assumed by New GulfMark following the Distribution. Total compensation paid
in 1996 to the non-employee directors, including director fees and retainers,
was $90,500 for Mr. Butters, $16,000 for Mr. Cohen, $15,000 for Mr. Crowe,
$12,500 for Mr. Gimbel and $13,000 for Mr. Millard. In addition, GulfMark
furnishes Messrs. Cohen, Crowe and Gimbel with a $250,000 life insurance policy.
Premiums paid during 1996 for such policies were $12,757 for Mr. Cohen, $15,428
for Mr. Crowe and $6,805 for Mr. Gimbel.
The Board of Directors of GulfMark maintains the Director Plan. New
GulfMark has agreed to assume the Director Plan as of the date the Distribution
becomes effective. If the Plan Amendment Proposals are adopted, the number of
shares subject to, and the option exercise price of each outstanding option
issued pursuant to the Director Plan will be adjusted to preserve the aggregate
intrinsic value of each option and the ratio of the exercise price to the market
value per share. See "GulfMark Stock Option Plans and GulfMark Stock Option
Policy -- Amended and Restated 1993 Non-Employee Director Stock Option Plan".
On December 8, 1993, each of New GulfMark's current directors received
options to purchase 5,000 shares of GulfMark Common Stock under GulfMark's
Director Plan having an exercise price of $14.75 per share. On March 18, 1996,
each of New GulfMark's current directors received options to purchase
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5,000 shares of GulfMark Common Stock having an exercise price of $26.375 per
share. Pursuant to the Director Plan, each non-employee director will receive
options to purchase 10,000 shares of New GulfMark Common Stock at an exercise
price equal to the fair market value of such shares of New GulfMark Common Stock
on the date of grant, upon his re-election as a director at the New GulfMark
Annual Stockholders meetings in 1999, 2002 and 2005.
In 1988, GulfMark adopted the GulfMark Stock Option Policy, under which
each non-employee director of GulfMark as of the time of such adoption and each
future non-employee director of GulfMark was granted options to purchase an
aggregate of 5,000 shares of Common Stock. Each of GulfMark's current directors
has received options under this arrangement, with the options granted to Messrs.
Crowe, Cohen and Gimbel having an average exercise price of $8.63 per share and
the options granted to Messrs. Butters and Millard having an average exercise
price of $16.50 per share. New GulfMark has agreed to assume the outstanding
stock options issued pursuant to this policy. See "GulfMark Stock Option Plans
and GulfMark Stock Option Policy -- 1988 Non-Employee Director Option Policy".
EXECUTIVE OFFICERS AND COMPENSATION
The executive officers of New GulfMark following the Transactions will be
substantially similar to the executive officers of GulfMark. It is expected that
prior to the Merger each of the GulfMark Executive Officers listed below will be
elected to the position in New GulfMark set forth opposite his name below and at
the Effective Time, each such person will cease to be an officer of GulfMark.
Executive officers of New GulfMark will serve until they resign or are removed,
or are otherwise disqualified to serve, or until their successors are elected
and qualified. The following are executive officers and key employees of
GulfMark, who serve at the discretion of the Board of Directors. Mr. Streeter,
previously President over GulfMark's primary operating segment, the Gulf
Offshore Marine Division, will serve as President of New GulfMark. Mr. Leech was
not formerly an executive officer of GulfMark but will serve as a Vice President
of New GulfMark.
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
Bruce A. Streeter.......... President and Chief Operating Officer 48
Frank R. Pierce............ Executive Vice President, Secretary and Treasurer 47
John E. Leech.............. Vice President 44
Kevin D. Mitchell.......... Controller and Assistant Secretary 28
</TABLE>
Bruce A. Streeter was elected President of GulfMark's Marine Division in
November 1990 and has continued in that capacity up to the present. Prior to
November 1990 he was with Offshore Logistics, Inc. for a period of twelve years
serving in a number of capacities including General Manager Marine Division. Mr.
Streeter was elected President and Chief Operating Officer of New GulfMark in
January 1997.
Frank R. Pierce was elected Executive Vice President, Secretary and
Treasurer of GulfMark in December 1990 and has been employed with GulfMark since
July 1987 serving as its Vice President, Finance. In addition, he served as
Director and Vice President, Finance of Energy Ventures, Inc. until 1990. Prior
to July 1987, he was with Daniel Industries, Inc., a supplier of fluid
measurement products and systems to energy companies, for nine years, where he
served as Controller. Mr. Pierce was elected Executive Vice President, Secretary
and Treasurer of New GulfMark in January 1997.
John E. Leech was elected Vice President of New GulfMark in January 1997.
Prior to that, he served as Vice President of GulfMark's Marine Division from
its formation in November 1990. Prior to November, 1990, Mr. Leech was with
Offshore Logistics, Inc. for a period of fifteen years serving in a number of
capabilities including Manager Domestic Operations and International Operations
Manager.
Kevin D. Mitchell was elected Controller and Assistant Secretary of
GulfMark in September 1996. Prior to that, he served as controller for one year
with E-Stamp Corporation, a start-up software company, having previously
completed six years with Arthur Andersen LLP, a major public accounting firm.
Mr. Mitchell was elected Controller and Assistant Secretary of New GulfMark in
January 1997.
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The aggregate compensation paid by GulfMark for services rendered during
the last three years in all capacities to the highest paid executive officers
whose total annual salary and bonus exceeded $100,000 during the year ended
December 31, 1996 was as follows:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ------------
AWARDS
------------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION
------------------ ---- -------- ------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Bruce A. Streeter 1996 $175,000 $75,000 $ -- 8,000 $2,848(2)
President, Gulf Offshore 1995 140,000 70,000 -- -- 2,765
Marine Division(3) 1994 135,000 50,000 -- -- 2,708
Frank R. Pierce 1996 135,000 25,000 -- 2,000 1,755(2)
Executive Vice President, 1995 130,000 15,000 -- -- 1,706
Secretary, and 1994 125,000 8,000 -- -- 1,663
Treasurer
John E. Leech(4) 1996 120,000 50,000 -- 4,000 $2,623(2)
Vice President 1995 110,000 45,000 -- -- 2,550
1994 105,000 35,000 -- -- 2,525
</TABLE>
- ---------------
(1) Other annual compensation excludes perquisites and other benefits because
the aggregate amount of such compensation was less than 10% of the combined
total for salary and bonus.
(2) Includes matching contributions made by GulfMark pursuant to its 401(k)
savings plan of $1,900, $1,755 and $1,875 for Messrs. Streeter, Pierce and
Leech, respectively, and premiums associated with a $500,000 split-dollar
life insurance policy of $948 and $748 for Messrs. Streeter and Leech,
respectively.
(3) Mr. Streeter is currently the president of GulfMark's Marine Division. He
was elected president and chief operating officer of New GulfMark in January
1997. It is expected that Mr. Streeter will be elected as a director of New
GulfMark.
(4) Mr. Leech is a non-executive officer of GulfMark but was elected as a vice
president of New GulfMark in January 1997 and will be named as an executive
officer of New GulfMark.
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GulfMark entered into an employment contract with Mr. Streeter on January
1, 1994, which provided for a salary of at least $135,000 per year until
December 31, 1996. The contract further provided that in the event employment
was terminated, Mr. Streeter would have continued to receive the base salary and
other benefits until December 31, 1996, except in the event of resignation by
Mr. Streeter, termination due to Mr. Streeter's death or total and permanent
disability or termination by GulfMark for "cause", as defined in the employment
contract. This employment contract has now expired, but it is likely New
GulfMark will enter into a similar arrangement with Mr. Streeter. Mr. Leech also
had an employment contract with GulfMark which expired December 31, 1996. The
contract provided for an annual salary of at least $105,000. It is anticipated
that New GulfMark will also enter into a similar contract with Mr. Leech.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
- ----------------------------------------------------------------------------------------------- ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS/SARS(1) EMPLOYEES OR BASE EXPIRATION ---------------------
NAME GRANTED(#) IN FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
---- --------------- -------------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bruce A. Streeter................ 8,000 47.1% $26.375 03-18-06 $132,697 $336,280
Frank R. Pierce.................. 2,000 11.8% 26.375 03-18-06 33,174 84,070
John E. Leech(2)................. 2,000 11.8% 26.375 03-18-06 33,174 84,070
John E. Leech(2)................. 2,000 11.8% 39.00 09-05-06 49,054 124,312
</TABLE>
- ---------------
(1) One-third of the options granted became exercisable at each of one year, two
years and three years, respectively, from the date of grant.
(2) Mr. Leech is a non-executive officer of GulfMark but was elected as a vice
president of New GulfMark in January 1997 and will be named as an executive
officer of New GulfMark.
The following table presents the total number of options to purchase
GulfMark Common Stock held by the named executive officers of GulfMark at
December 31, 1996:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED FISCAL YEAR END FISCAL YEAR END
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE(2)
---- -------- ----------- --------------- -----------------
<S> <C> <C> <C> <C>
Bruce A. Streeter.....................,,,,,,,,,, -- $ -- 5000/8000 $215,000/$253,000
Frank R. Pierce................................. 900 46,350 9100/2000 $437,200/$ 63,250
John E. Leech(3)......................,,,,,,,,,, -- -- 5000/4000 $215,000/$101,250
</TABLE>
- ---------------
(1) Value based on difference in market value on date of exercise and exercise
price.
(2) Value based on difference in market value of GulfMark Common Stock on
December 31, 1996 and exercise price. The actual value, if any, of the
unexercised options will be dependent upon the market price of the Common
Stock at the time of exercise.
(3) Mr. Leech is a non-executive officer of GulfMark but was elected as a vice
president of New GulfMark in January 1997 and will be named as an executive
officer of New GulfMark.
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DESCRIPTION OF GULFMARK RETAINED ASSETS
The GulfMark Retained Assets consist of (i) 2,235,572 shares of EVI Common
Stock, (ii) Ercon, (iii) a 33% minority interest in American Independent Oil
Company (having a book value of approximately $109,000 and (iv) the original
tax, accounting and other corporate records of GulfMark.
Ercon offers a variety of turnkey erosion control services and
installations including, problem analysis, field surveys, engineering design,
permit acquisition, material procurement and installation. Site specific systems
are designed to protect property such as pipelines, railroads, buildings,
highways, marinas, beaches and fiber optic cable systems. Each project is
reviewed to determine the most cost-effective and technically acceptable
technique for the particular job based on engineering analysis, research and
prior experience. Projects typically take three weeks to three months to
complete and are secured generally through fixed price bids.
A significant portion of Ercon's work is related to protection of waterway
crossings for pipeline transmission firms, railroads, utilities, state highway
departments and major oil companies. When soil erosion causes pipeline exposure
on a creek crossing or riverbed, relocating or lowering the pipeline can be very
costly, and may provide only a temporary solution to a potentially dangerous
problem. Ercon's proprietary erosion control techniques offer long-term
protection at substantial cost-savings by eliminating pipe relocation.
Additionally, there is no downtime or production loss as Ercon's systems allow
the line to remain in operation throughout the installation process. A similar
cost-benefit relationship applies to highway and railroad bridges.
Ercon seeks to design new products and techniques to address site-specific
problems for erosion control. Several patents have been granted covering methods
and systems including a "variable permeability" palisade system to control water
velocity adjacent to eroding river banks.
Ercon's business is moderately seasonal since many of its products and
systems are installed under field conditions, and projects can be impacted by
inclement weather.
DESCRIPTION OF EVI AND NEW GULFMARK CAPITAL STOCK
EVI
EVI's authorized capital stock consists of 40,000,000 shares of Common
Stock, par value $1.00 per share, and 3,000,000 shares of Preferred Stock, par
value $1.00 per share ("EVI Preferred Stock"). At March 17, 1997, 22,964,625
shares of EVI Common Stock were outstanding. In addition, at March 17, 1997,
there were 1,525,268 shares of EVI Common Stock reserved for issuance pursuant
to EVI's 1981 Employee Stock Option Plan, 1992 Employee Stock Option Plan,
Amended and Restated Non-Employee Director Stock Option Plan and restricted
stock plan for foreign key employees, of which 900,268 shares of EVI Common
Stock were reserved for issuance upon exercise of outstanding options. At March
17, 1997, there were no shares of EVI Preferred Stock issued or outstanding. The
holders of shares of EVI Common Stock are not liable to further calls or
assessments by EVI. The description below is a summary of and is qualified in
its entirety by the provisions of EVI's Restated Certificate of Incorporation as
currently in effect.
Subject to the rights of the holders of any outstanding shares of EVI
Preferred Stock and those rights provided by law, (i) dividends may be declared
and paid or set apart for payment upon the EVI Common Stock out of any assets or
funds of EVI legally available for the payment of dividends and may be payable
in cash, stock or otherwise, (ii) the holders of EVI stock have the exclusive
right to vote for the election of directors and, except as provided below, on
all other matters requiring stockholder action generally, with each share being
entitled to one vote and (iii) upon the voluntary or involuntary liquidation,
dissolution or winding up of EVI, the net assets of EVI will be distributed pro
rata to the holders of the EVI Common Stock in accordance with their respective
rights and interests to the exclusion of the holders of any outstanding shares
of EVI Preferred Stock.
Although the holders of the EVI Common Stock are generally entitled to vote
for the approval of amendments to EVI's Restated Certificate of Incorporation,
the voting rights of the holders of the EVI
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Common Stock are limited with respect to certain amendments to EVI's Restated
Certificate of Incorporation that affect only the holders of the EVI Preferred
Stock. Specifically, subject to the rights of any outstanding shares of any
series of EVI Preferred Stock, EVI's Restated Certificate of Incorporation
provides that it may be amended from time to time in any manner that would
solely modify or change the relative powers, preferences and rights and the
qualifications or restrictions of any issued shares of any series of EVI
Preferred Stock then outstanding with the only required vote or consent for
approval of such amendment being the affirmative vote or consent of the holders
of a majority of the outstanding shares of the series of EVI Preferred Stock so
affected, provided that the powers, preferences and rights and the
qualifications and limitations or restrictions of such series after giving
effect to such amendment are no greater than the powers, preferences and rights
and qualifications and limitations or restrictions permitted to be fixed and
determined by the Board of Directors with respect to the establishment of any
new series of shares of EVI Preferred Stock pursuant to the authority vested in
the Board of Directors as to such matters.
Holders of the EVI Common Stock do not have any cumulative voting,
redemptive or conversion rights and have no preemptive rights to subscribe for,
purchase or receive any class of shares or securities of EVI. Holders of the EVI
Common Stock have no fixed dividend rights. Dividends may be declared by the
Board of Directors at its discretion depending on various factors, although no
dividends are anticipated for the foreseeable future. EVI is currently subject
to certain prohibitions on the declaration and payment of cash dividends on the
EVI Common Stock under the terms of the EVI Senior Notes and EVI's existing
credit facilities. Under the most restrictive of these credit facilities, EVI is
limited in the amount of dividends, distributions and other restricted payments
that it may make to $133 million as of December 31, 1996. See "Price Range of
Common Stock and Dividend Policy".
The EVI Preferred Stock may be issued from time to time in one or more
series, with each such series having such powers, preferences and rights and
qualifications and limitations or restrictions as may be fixed by EVI's Board of
Directors pursuant to the resolution or resolutions providing for the issuance
of such series.
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by EVI of stock or any transaction from which
the director derived an improper personal benefit. EVI's Restated Certificate of
Incorporation provides that EVI's directors are not liable to EVI or its
stockholders for monetary damages for breach of their fiduciary duty, subject to
the above described exceptions specified by Delaware law.
As a Delaware corporation, EVI is subject to Section 203 of the Delaware
General Corporation Law (the "DGCL"). In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years following
the date such person became an interested stockholder unless (i) before such
person became an interested stockholder, the board of directors of the
corporation approved the transaction in which the interested stockholder became
an interested stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with the
rights to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer); or (iii) following the transaction
in which such person became an interested stockholder, the business combination
is approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is
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approved or not opposed by a majority of the directors who were directors prior
to any person becoming an interested stockholder during the previous three years
or were recommended for election or elected to succeed such directors by a
majority of such directors. EVI has approved the acquisition by GulfMark and
Lehman of the shares of EVI Common Stock owned by them under Section 203 and
GulfMark and Lehman are therefore not subject to the restrictions under Section
203.
The Registrar and Transfer Agent for the EVI Common Stock is American Stock
Transfer and Trust Company, New York, New York.
NEW GULFMARK
New GulfMark's authorized capital stock consists of (i) 17,000,000 shares
of New GulfMark Common Stock, par value $.01 per share, and (ii) 2,000,000
shares of Preferred Stock, with no par value ("New GulfMark Preferred Stock"),
of which a number of shares of New GulfMark Common Stock will be issued in the
Distribution equal to two times the number of shares of GulfMark Common Stock
outstanding on the Distribution Record Date. In addition, on the Distribution
Record Date, there will be shares of New GulfMark Common Stock reserved for
issuance pursuant to the Director Plan, the Employee Plan and the GulfMark Stock
Option Policy. At the Distribution Record Date, there will be no shares of New
GulfMark Preferred Stock issued or outstanding. The holders of shares of New
GulfMark Common Stock will not be liable to further calls or assessments by New
GulfMark. The description below is a summary of and is qualified in its entirety
by the provisions of New GulfMark's Certificate of Incorporation as currently in
effect.
Subject to the rights of the holders of any outstanding shares of New
GulfMark Preferred Stock and those rights provided by law, (i) dividends may be
declared and paid or set apart for payment upon the New GulfMark Common Stock
out of any assets or funds of New GulfMark legally available for the payment of
dividends and may be payable in cash, stock or otherwise, (ii) the holders of
New GulfMark Common Stock have the exclusive right to vote for the election of
directors and, except as provided below, on all other matters requiring
stockholder action generally, with each share being entitled to one vote and
(iii) upon the voluntary or involuntary liquidation, dissolution or winding up
of New GulfMark, the net assets of New GulfMark will be distributed pro rata to
the holders of the New GulfMark Common Stock in accordance with their respective
rights and interests to the exclusion of the holders of any outstanding shares
of New GulfMark Preferred Stock.
Holders of the New GulfMark Common Stock do not have any cumulative voting,
redemptive or conversion rights and have no preemptive rights to subscribe for,
purchase or receive any class of shares or securities of New GulfMark. Holders
of the New GulfMark Common Stock have no fixed dividend rights. Dividends may be
declared by the Board of Directors at its discretion depending on various
factors, although no dividends are anticipated for the foreseeable future. It is
possible that New GulfMark may be subject to certain prohibitions on the
declaration and payment of cash dividends on the New GulfMark Common Stock under
the terms of New GulfMark's credit facilities. The existing credit facilities of
GulfMark, however, only restrict payment of dividends to GulfMark from certain
operating subsidiaries. See "Price Range of Common Stock and Dividend Policy".
The New GulfMark Preferred Stock may be issued from time to time in one or
more series, with each such series having such powers, preferences and rights
and qualifications and limitations or restrictions as may be fixed by New
GulfMark's Board of Directors pursuant to the resolution or resolutions
providing for the issuance of such series.
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action, had no
reasonable cause to believe their conduct was unlawful. New GulfMark's
Certificate of Incorporation provides that New GulfMark's directors are not
personally liable to New GulfMark or its stockholders for monetary damages for
breach of their fiduciary duty to the full extent permitted by Delaware law.
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As a Delaware corporation, New GulfMark is subject to Section 203 of the
DGCL. New GulfMark intends to approve Lehman's acquisition of New GulfMark
Common Stock received in the Distribution.
The Registrar and Transfer Agent for the New GulfMark Common Stock is
American Stock Transfer and Trust Company, New York, New York.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF EVI AND GULFMARK
The rights of holders of GulfMark Common Stock are currently governed by
Delaware law, GulfMark's Certificate of Incorporation, as amended, and
GulfMark's By-laws, as amended. Upon consummation of the Merger, holders of
GulfMark Common Stock will become holders of EVI Common Stock, and their rights
as holders of EVI Common Stock will be governed by Delaware law and EVI's
Restated Certificate of Incorporation and By-laws. Set forth below is an
explanation of material differences between the rights of holders of GulfMark
Common Stock and rights of holders of EVI Common Stock.
SPECIAL VOTE REQUIRED FOR CERTAIN COMBINATIONS
Section 203 of the DGCL applies to EVI and GulfMark. Although EVI is
subject to Section 203, the Merger with GulfMark is not prohibited by Section
203 because the Board of Directors of EVI previously approved the transactions
in which each of GulfMark and Lehman became an "interested stockholder" of EVI
Common Stock.
VOTE REQUIRED FOR CORPORATE TRANSACTIONS AND OTHER MATTERS
Under the DGCL, an amendment to a corporation's certificate of
incorporation requires the affirmative vote of the holders of a majority of the
outstanding stock of the corporation entitled to vote thereon and a majority of
the outstanding stock of each class entitled to vote thereon as a class unless
the corporation's certificate of incorporation provides for a higher percentage.
The DGCL also provides that the holders of a majority of the outstanding stock
of the corporation entitled to vote thereon may approve an agreement of merger
or consolidation or the dissolution of a corporation.
Article Twelfth of GulfMark's Certificate of Incorporation states that the
Certificate of Incorporation may be amended as prescribed by statute. Under the
DGCL, such amendment requires the affirmative vote of the holders of a majority
of the outstanding GulfMark Common Stock. Article Fourth of GulfMark's
Certificate of Incorporation requires the consent of holders of 2/3 of the
number of shares of outstanding preferred stock voting separately as a class if
such amendment adversely affects the rights and preferences of such preferred
stock. Under the DGCL, the affirmative vote of a majority of the outstanding
GulfMark Common Stock is required to approve an agreement of merger,
consolidation or dissolution of GulfMark. In addition, Article Fourth of
GulfMark's Certificate of Incorporation requires the consent of holders of a
majority of the number of shares of outstanding preferred stock voting
separately as a class to effect a merger, consolidation or dissolution of
GulfMark.
Article 8 of EVI's Restated Certificate of Incorporation provides that the
Restated Certificate of Incorporation may be amended, altered, changed or
repealed as prescribed by statute. Under the DGCL, such amendment must be
approved by a majority of the outstanding EVI Common Stock. Under Article 4 of
EVI's Restated Certificate of Incorporation, any amendment to the Restated
Certificate of Incorporation that affects any series of outstanding preferred
stock must be approved by a majority of the holders of such series. The DGCL
does not require a vote of the EVI stockholders for the consummation of the
Merger.
DISPOSITION OF ASSETS
Under the DGCL, all sales, leases or exchanges of all, or substantially
all, of the assets of a corporation must be authorized by a resolution adopted
by the holders of a majority of the outstanding stock of the corporation
entitled to vote thereon. Article Fourth of GulfMark's Certificate of
Incorporation provides that so long as any of the preferred stock remains
outstanding, this right to sale, lease or exchange is subject to the
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<PAGE> 101
consent of the holders of a majority of the number of shares of outstanding
preferred stock voting separately as a class.
POWER TO AMEND BY-LAWS
Under the DGCL, the power to adopt, amend or repeal by-laws of a
corporation is vested in the authority of the stockholders entitled to vote,
unless the corporation's certificate of incorporation confers such power upon
its directors. However, power conferred shall not divest the stockholders of
their power to adopt, amend or repeal the by-laws. GulfMark's Certificate of
Incorporation and By-laws provide that the By-laws may be amended (i) by the
affirmative vote of a majority of the outstanding stock entitled to vote or (ii)
by a majority of the members present at a regular or special meeting of the
board of directors. EVI's By-laws do not permit amendments by its board of
directors.
QUORUM REQUIREMENTS FOR DIRECTORS' MEETINGS
The DGCL provides that a majority of the total number of directors shall
constitute a quorum for the transaction of business, unless the certificate of
incorporation or by-laws require a greater number. GulfMark's By-laws provide
that a majority of the directors shall constitute a quorum for the transaction
of business at directors' meetings. EVI's By-laws provide that a majority of the
total number of directors shall constitute a quorum for the transaction of
business.
REMOVAL OF DIRECTORS
The DGCL and EVI's By-laws provide that directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors. In addition, EVI's By-laws provide that directors
may be removed from office to the extent permitted by law, for cause by vote of
the majority of the directors then in office. Neither GulfMark's Certificate of
Incorporation nor its By-laws expressly addresses the removal of directors.
DIRECTOR ELECTIONS, QUALIFICATIONS AND NUMBER
The DGCL provides that the number of directors of a Delaware corporation
shall be fixed by, or in the manner provided in, the by-laws, unless such the
certificate of incorporation fixes such number, in which case, it can only be
changed by amending the certificate. Under the DGCL, a director need not be a
stockholder to be qualified unless so required by the corporation's certificate
of incorporation or by-laws. EVI's By-laws provide that directors are to be
elected by a plurality vote of the stockholders; provided, however, that any
vacancies occurring in the board may be filled by the remaining directors.
GulfMark's Certificate of Incorporation provides that directors are to be
elected exclusively by the holders of GulfMark Common Stock, subject to the
rights of the holders of any outstanding shares of GulfMark's preferred stock to
elect part of the Board of Directors in specified circumstances. Pursuant to
GulfMark's By-laws, if any vacancies occur in the Board or any new directorship
is created by an increase in the number of authorized number of directors, a
successor may be chosen by a majority of the directors. As to the number of
directors, GulfMark's By-laws provide for the number of directors to be not less
than three nor more than fifteen, and EVI's By-laws provide for the number of
directors to be seven members, which may be increased or decreased from time to
time by the board of directors.
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COMPARATIVE RIGHTS OF STOCKHOLDERS OF
GULFMARK AND NEW GULFMARK
The rights of holders of GulfMark Common Stock are currently governed by
Delaware law, GulfMark's Certificate of Incorporation, as amended, and
GulfMark's By-laws, as amended and restated. After the Distribution, holders of
GulfMark's Common Stock will become holders of New GulfMark Common Stock, and
their rights as holders of New GulfMark Common Stock will be governed by
Delaware law and New GulfMark's Certificate of Incorporation and Bylaws. Set
forth below is an explanation of material differences between the rights of
holders of GulfMark Common Stock and the rights of the holders of New GulfMark
Common Stock.
SPECIAL VOTE REQUIRED FOR CERTAIN COMBINATIONS
Section 203 of the DGCL applies to GulfMark and New GulfMark.
VOTE REQUIRED FOR CORPORATE TRANSACTIONS AND OTHER MATTERS
Under the DGCL, an amendment to the corporation's certificate of
incorporation requires the affirmative vote of the holders of a majority of the
outstanding stock of the corporation entitled to vote thereon and a majority of
the outstanding stock of each class entitled to vote thereon as a class unless
the corporation's certificate of incorporation provides for a higher percentage.
The DGCL also provides that the holders of a majority of the outstanding stock
of the corporation entitled to vote thereon may approve an agreement of merger
or consolidation or the dissolution of a corporation.
Article Twelfth of GulfMark's Certificate of Incorporation states that the
Certificate of Incorporation may be amended as prescribed by statute. Under the
DGCL, such amendment requires the affirmative vote of the holders of a majority
of the outstanding GulfMark Common Stock. Article Fourth of GulfMark's
Certificate of Incorporation requires the consent of holders of 2/3 of the
number of shares of outstanding preferred stock voting separately as a class if
such amendment adversely affects the rights and preferences of such preferred
stock. Under the DGCL, the affirmative vote of a majority of the outstanding
GulfMark Common Stock is required to approve an agreement of merger,
consolidation or dissolution of GulfMark. In addition, Article Fourth of
GulfMark's Certificate of Incorporation requires the consent of holders of a
majority of the number of shares of outstanding preferred stock voting
separately as a class to effect a merger, consolidation or dissolution of
GulfMark.
New GulfMark's Certificate of Incorporation provides that the corporation
may amend any provision contained in its Certificate of Incorporation in the
manner prescribed by statute. Article Fourth of New GulfMark's Certificate of
Incorporation authorizes the issuance of Preferred Stock and Common Stock and
authorizes the board of directors to establish series of Preferred Stock and to
fix the designation, powers, preferences, rights, qualifications and
restrictions of same (a "Preferred Stock Designation"). Pursuant to New
GulfMark's Certificate of Incorporation, the corporation may amend any provision
contained in any Preferred Stock Designation in any manner prescribed by
statute.
DISPOSITION OF ASSETS
Under the DGCL, all sales, leases or exchanges of all, or substantially
all, of the assets of a corporation must be authorized by a resolution adopted
by the holders of a majority of the outstanding stock of the corporation
entitled to vote thereon. Article Fourth of GulfMark's Certificate of
Incorporation provides that so long as any of the preferred stock remains
outstanding, this right to sale, lease or exchange is subject to the consent of
the holders of a majority of the number of shares of outstanding preferred stock
voting separately as a class. New GulfMark's Certificate of Incorporation
provides the holders of Common Stock the exclusive right to vote unless
otherwise provided in a Preferred Stock Designation.
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POWER TO AMEND BY-LAWS
Under the DGCL, the power to adopt, amend or repeal by-laws of a
corporation is vested in the authority of the stockholders entitled to vote,
unless the corporation's certificate of incorporation confers such power upon
its directors. However, power conferred shall not divest the stockholders of
their power to adopt, amend or repeal the by-laws. GulfMark's Certificate of
Incorporation and By-laws provide that the By-laws may be amended (i) by a
majority of the stock entitled to vote or (ii) by a majority of the members
present at a regular or special meeting of the board of directors. Similarly,
New GulfMark's Certificate of Incorporation provides that the board of directors
of New GulfMark shall have the power to adopt, amend or repeal the By-laws of
the corporation, subject to the right of the stockholders to amend the By-laws
by a majority vote of the shares represented and entitled to vote at a regular
meeting of the stockholders or at any meeting of the stockholders expressly
called for that purpose.
QUORUM REQUIREMENTS FOR DIRECTORS' MEETINGS
The DGCL provides that a majority of the total number of directors shall
constitute a quorum for the transaction of business, unless the certificate of
incorporation or by-laws require a greater number. GulfMark's By-laws provide
that the presence of a majority of the directors shall constitute a quorum for
the transaction of business at directors' meetings. New GulfMark's By-laws
conform to the DGCL and GulfMark's By-laws with the exception of Section 2 of
Article II of the By-laws which allows less than a quorum of the Board of
Directors to fill newly created directorships and vacancies on the Board of
Directors.
REMOVAL OF DIRECTORS
The DGCL provides that directors may be removed, with or without cause, by
the holders of a majority of the shares then entitled to vote at an election of
directors. Neither GulfMark's Certificate of Incorporation nor By-laws expressly
addresses removal of a director. New GulfMark's By-laws conform to the DGCL and
provide that any director may be removed from office, with or without cause, by
the holders of a majority of the shares then entitled to vote at any election of
directors.
DIRECTOR ELECTIONS, QUALIFICATIONS AND NUMBER
The DGCL provides that the number of directors of a Delaware corporation
shall be fixed by, or in the manner provided in, the by-laws, unless the
certificate of incorporation fixes the number of directors in which case it can
be changed only by amending the certificate. Under the DGCL, a director need not
be a stockholder to be qualified unless so required by the corporation's
certificate of incorporation or by-laws.
GulfMark's By-laws provide for the number of directors to be not less than
three or more than fifteen, and New GulfMark's Certificate of Incorporation
provides that the number of directors of the corporation shall be fixed by the
By-laws but in no case shall the number of directors be less than three or more
than fifteen. New GulfMark's By-laws provide for the board of directors to fix
the number of directors, subject to the rights of the holders of any outstanding
shares of New GulfMark Preferred Stock to elect additional directors under
specified circumstances. Regarding elections, GulfMark's Certificate of
Incorporation provides that directors are to be elected exclusively by the
holders of GulfMark Common Stock, subject to the rights of the holders of any
outstanding shares of GulfMark preferred stock to elect part of the Board of
Directors in specified circumstances. Pursuant to GulfMark's By-laws, if any
vacancies occur in the Board or any new directorship is created by an increase
in the authorized number of directors, a successor may be chosen by a majority
of the directors. New GulfMark's Certificate of Incorporation provides that the
holders of Common Stock shall have the exclusive right to vote for the election
of directors. A non-stockholder may serve as a director of GulfMark or New
GulfMark.
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PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
EVI Common Stock is traded on the NYSE under the symbol "EVI", and GulfMark
Common Stock is traded on The Nasdaq Stock Market under the symbol "GMRK". The
following table sets forth the range of high and low sale prices for EVI Common
Stock and GulfMark Common Stock for the periods indicated, as reported on the
NYSE and The Nasdaq Stock Market, respectively.
<TABLE>
<CAPTION>
EVI GULFMARK
---------------------- ----------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
Twelve Months Ended December 31, 1995
Quarter ended March 31, 1995.......................... $14 5/8 $11 7/8 $17 $14 3/4
Quarter ended June 30, 1995........................... 20 5/8 13 1/4 19 1/4 15 1/2
Quarter ended September 30, 1995...................... 24 17 3/8 24 18
Quarter ended December 31, 1995....................... 25 1/4 18 3/8 27 21
Twelve Months Ended December 31, 1996
Quarter ended March 31, 1996.......................... 28 7/8 22 1/4 30 1/4 24 3/4
Quarter ended June 30, 1996........................... 35 25 3/4 37 29
Quarter ended September 30, 1996...................... 40 1/2 28 46 1/2 33
Quarter ended December 31, 1996....................... 51 1/2 39 64 44
Twelve Months Ending December 31, 1997
Quarter ended March 31, 1997 (through March 25,
1997).............................................. 63 3/4 47 3/4 67 56
</TABLE>
On December 4, 1996, the last trading day prior to the announcement by EVI
and GulfMark that they had reached an agreement concerning the Merger, the
closing sale prices of EVI Common Stock as reported by the NYSE and of GulfMark
Common Stock as reported by The Nasdaq Stock Market were $48 3/4 and $54 per
share, respectively.
On March 25, 1997, the closing sale prices of EVI Common Stock as reported
by the NYSE and of GulfMark Common Stock as reported by the Nasdaq National
Market System were $58 5/8 and $67 per share, respectively.
Following the Merger, EVI Common Stock will continue to be traded on the
NYSE under the symbol "EVI", GulfMark Common Stock will cease to be traded and
there will be no further market for such stock and the New GulfMark Common Stock
will be listed upon consummation of the Distribution and the Merger and begin
trading on The Nasdaq Stock Market under the symbol "GMRK".
EVI has not paid any dividends on the EVI Common Stock since 1984 and
currently anticipates that, for the foreseeable future, any earnings will be
retained for the development of EVI's business. The declaration of all dividends
is at the discretion of EVI's Board of Directors. EVI's dividend policy will be
reviewed by the Board of Directors at such future time as may be appropriate in
light of relevant factors at the time; however, EVI and EVI's principal
operating subsidiaries are subject to certain prohibitions on the declaration
and payment of dividends under the terms of their existing credit facilities. In
addition, under the terms of the EVI Senior Notes, EVI is limited in the amount
of funds it may distribute as dividends or distributions to stockholders to an
amount generally equal to (a) the sum of (i) its earnings subsequent to December
31, 1993, (ii) the net consideration received from certain stock issuances since
March 1994, (iii) the value of certain investments in unrestricted subsidiaries
redesignated as restricted subsidiaries and (iv) $5 million, less (b) the amount
of dividends, distributions and other restricted payments made by EVI since
March 1994. EVI is also restricted under its principal working capital facility
in the amount of dividends, distributions and other restricted payments that it
may make to stockholders to an amount generally equal to (a) the sum of (i) 25%
of its earnings subsequent to March 31, 1996, (ii) the net consideration
received from certain stock issuances since June 26, 1997, (iii) the value of
certain investments in unrestricted subsidiaries designated as restricted
subsidiaries and (iv) $10 million less (b) the amount of dividends,
distributions and other restricted payments made by EVI since June 26, 1996. As
of December 31, 1996, EVI was limited in the amount of
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dividends, distributions and other restricted payments that could be made by it
under the terms of the EVI Senior Notes and EVI's credit facility to
approximately $278 million and $133 million, respectively.
GulfMark has not declared or paid any dividends during the past five years.
GulfMark, and after completion of the Transactions, New GulfMark, intends to use
cash generated from operations for further development of its business. Payment
of dividends will depend upon future operating conditions, dividend policies of
subsidiaries and investees, financial requirements, general business conditions
and other factors. Currently four of GulfMark's subsidiaries (which will be
subsidiaries of New GulfMark), Gulf Offshore N.S. Ltd. (United Kingdom), Gulf
Offshore Far East, Inc. (Panama), Gulf Offshore Marine International, Inc.
(Panama) and Gulf Offshore Shipping Services, Inc. (Panama) are restricted under
certain debt agreements from paying dividends to GulfMark without the lender's
approval. It is anticipated that after consummation of the Transactions these
subsidiaries will be similarly restricted from paying dividends to New GulfMark.
These restrictions will be a factor in the future as to whether New GulfMark
will pay dividends to its stockholders. These subsidiaries own nine vessels
operating in the North Sea, eleven vessels operating in Southeast Asia and one
vessel operating in Brazil.
STOCK OWNERSHIP AND CERTAIN BENEFICIAL OWNERS
EVI
The following table sets forth certain information with respect to each
person who as of the Record Date, was known by EVI to be the beneficial owner of
more than 5% of the outstanding shares of EVI Common Stock.
<TABLE>
<CAPTION>
BEFORE THE TRANSACTIONS AFTER THE TRANSACTIONS
------------------------------ ------------------------------
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY PERCENT BENEFICIALLY PERCENT
NAME AND ADDRESS OWNED(1) OF CLASS(%) OWNED(1) OF CLASS(%)
---------------- ---------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
GulfMark International,
Inc.(2)...................... 2,235,572 9.7 -- --
5 Post Oak Park, Suite 1170
Houston, Texas 77027
Christiana Companies, Inc. and
Sheldon B. Lubar(3).......... 1,958,731 8.5 1,958,731 8.5
777 E. Wisconsin Avenue,
#3380
Milwaukee, Wisconsin 53202
Lehman Brothers Holdings
Inc.(2) ..................... 1,120,000 4.9 1,822,247 7.2
3 World Financial Center
New York, New York 10285
John Hancock Advisors,
Inc.(4)...................... 1,203,300 5.2 1,203,300 5.2
101 Huntington Avenue
Boston, Massachusetts 02199
</TABLE>
- ---------------
(1) Unless otherwise indicated below, the persons or group listed have sole
voting and dispositive power with respect to their shares of EVI Common
Stock, and none of such shares are deemed to be owned because the holder
has the right to acquire the shares within 60 days.
(2) Lehman beneficially owns 31.4% of the outstanding shares of GulfMark Common
Stock. The beneficial ownership of EVI Common Stock of Lehman indicated in
the table above does not include any of the shares of EVI Common Stock held
by GulfMark, beneficial ownership of which is disclaimed.
(3) Includes 1,948,731 shares of EVI Common Stock owned of record by Christiana
Companies, Inc. and 10,000 shares of EVI Common Stock subject to an option
granted to Sheldon B. Lubar and exercisable within 60 days. Lubar, a
Director of EVI, is the Chairman and Chief Executive Officer of Christiana
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Companies, Inc. and is the beneficial owner, through a voting trust, of
49.9% of the common stock of Christiana Companies, Inc.
(4) John Hancock Advisors, Inc. ("JHA") has direct beneficial ownership of the
1,203,300 shares of EVI Common Stock. Each of John Hancock Mutual Life
Insurance Company, John Hancock Subsidiaries, Inc., John Hancock Asset
Management and The Berkeley Financial Group have indirect beneficial
ownership of such shares through their parent-subsidiary relationship with
JHA and each other.
GULFMARK AND NEW GULFMARK
The following table sets forth certain information with respect to each
person who as of the Record Date was known by GulfMark to be the beneficial
owner of more than 5% of the outstanding GulfMark Common Stock. Under the terms
of the Distribution Agreement, each holder of a share of GulfMark Common Stock
will receive two shares of New GulfMark Common Stock. Assuming the stockholders
named in the following table continued to hold their shares of GulfMark Common
Stock through the Distribution Record Date, such stockholders would beneficially
own the same percentage of shares of New GulfMark Common Stock as the percentage
of GulfMark Common Stock shown in the following table, with the number of shares
of New GulfMark Common Stock held by them equal to two times the number
reflected in the following table.
<TABLE>
<CAPTION>
NO. OF SHARES
BENEFICIALLY OWNED PERCENT
NAME AND ADDRESS OF AS OF THE RECORD OF
BENEFICIAL OWNER DATE (1) CLASS
------------------- ------------------ -------
<S> <C> <C>
Lehman Brothers Holdings Inc............................... 1,048,913(2) 31.4%
3 World Financial Center
New York, New York 10285
Mutual Beacon Fund......................................... 319,037(3) 9.6%
c/o Franklin Mutual Advisers, Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Estabrook Capital Management Inc........................... 383,950(4) 11.5%
430 Park Avenue, Suite 1800
New York, New York 10022
</TABLE>
- ---------------
(1) Unless otherwise indicated below, the persons or group listed have sole
voting and investment power with respect to their shares of GulfMark Common
Stock.
(2) Of the 1,048,913 shares of GulfMark Common Stock beneficially owned by
Lehman, 33,800 shares are subject to shared investment power.
(3) Mutual Beacon Fund ("Beacon") is a portfolio of Franklin Mutual Series Fund
Inc., a registered investment company for which Franklin Mutual Advisers,
Inc. ("FMAI") acts as investment advisor. Pursuant to contracts with
Beacon, FMAI has sole investment and voting power over the shares owned by
Beacon. FMAI disclaims any economic beneficial interest in these shares.
(4) Estabrook Capital Management Inc. acts as an investment advisor and in such
capacity has shared voting power and sole investment power over the shares.
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Security Ownership of Directors and Officers. The following table sets
forth, as of the Record Date, the number and percentage of GulfMark Common Stock
beneficially owned by each of GulfMark's directors, each executive officer named
in the summary compensation table included under "Executive Officers and
Compensation", and all directors and officers as a group. Assuming the persons
named in the following table continued to hold their shares of GulfMark Common
Stock through the Distribution Record Date, such persons would beneficially own
the same percentage of shares of New GulfMark Common Stock as the percentage of
GulfMark Common Stock shown in the following table, with the number of shares of
New GulfMark Common Stock held by them equal to two times the number reflected
in the following table.
<TABLE>
<CAPTION>
NO. OF SHARES
BENEFICIALLY
OWNED AS OF PERCENT
NAME RECORD DATE (1)(2) OF CLASS
---- ------------------ --------
<S> <C> <C>
David J. Butters.......................................... 86,400(4) 2.59%
Norman G. Cohen........................................... 26,991(5) --(3)
Marshall A. Crowe......................................... 12,600 --(3)
Louis S. Gimbel, 3rd...................................... 65,767(6) 1.97%
Robert B. Millard......................................... 96,400 2.89%
Frank R. Pierce........................................... 14,267 --(3)
Bruce A. Streeter......................................... 10,632 --(3)
John E. Leech(7).......................................... 6,166 --(3)
All directors and officers as a group (9 persons)(7)...... 319,223 9.56%
</TABLE>
- ---------------
(1) Unless otherwise indicated below, the persons listed have sole voting and
investment power with respect to their shares of GulfMark Common Stock.
(2) The amounts set forth in this column include the following shares of Common
Stock considered to be beneficially owned through the holder's ability to
exercise stock options to purchase such shares within 60 days: Messrs.
Butters, Cohen, Gimbel and Millard -- 15,000 shares each; Mr.
Crowe -- 12,500; Mr. Pierce -- 9,767 shares; Mr. Streeter -- 7,667 shares;
Mr. Leech -- 5,666 shares; and all directors and officers as a
group -- 95,600 shares.
(3) Less than one percent of the outstanding GulfMark Common Stock.
(4) Includes 21,500 shares of GulfMark Common Stock owned by trusts of which
Mr. Butters is the co-trustee and 20,000 shares beneficially owned by Mr.
Butters' wife.
(5) Includes 11,991 shares owned by a limited partnership in which Mr. Cohen is
a 49.5% limited partner, Mr. Cohen's wife is a 49.5% limited partner, and
the 1% general partner is a limited liability company controlled by Mr.
Cohen and his wife. Mr. Cohen has shared voting and investment power with
respect to all of such shares. Mr. Cohen disclaims beneficial interest of
the 5,995.5 shares owned by his wife through her interest in the limited
partnership.
(6) Includes 7,605 shares of Common Stock owned by trusts of which Mr. Gimbel
is the co-trustee.
(7) John E. Leech is not an executive officer of GulfMark but is an executive
officer of New GulfMark; his beneficial share ownership has been included
here but has not been included in the disclosures reported elsewhere in
this proxy statement relating to beneficial share ownership of officers and
directors of GulfMark.
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RELATIONSHIPS WITH INDEPENDENT PUBLIC ACCOUNTANTS
It is expected that representatives of Arthur Andersen LLP will be present
at the EVI Special Meeting and the GulfMark Special Meeting to respond to
appropriate questions of stockholders and make a statement if they so desire.
LEGAL MATTERS
The validity of the shares of EVI Common Stock to be issued in connection
with the Merger will be passed upon by Fulbright & Jaworski L.L.P., 1301
McKinney, Suite 5100, Houston, Texas 77010. The validity of the shares of New
GulfMark Common Stock to be issued in connection with the Distribution will be
passed upon by Griggs & Harrison, P.C., 1301 McKinney, Suite 3200, Houston,
Texas 77010. Uriel E. Dutton, a director of EVI, is a partner of Fulbright &
Jaworski L.L.P. Mr. Dutton currently holds options to purchase 30,000 shares of
EVI Common Stock, which options were granted to him pursuant to EVI's
Non-Employee Director Stock Option Plan.
EXPERTS
EVI's consolidated financial statements as of December 31, 1996 and 1995
and for each of the three years in the period ended December 31, 1996,
incorporated by reference in this Joint Proxy Statement/Prospectus and the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
GulfMark's consolidated financial statements as of December 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1996,
incorporated by reference in this Joint Proxy Statement/Prospectus and the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
New GulfMark's consolidated financial statements as of December 31, 1996
and 1995 and for each of the three years in the period ended December 31, 1996,
included in this Joint Proxy Statement/Prospectus and the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
GulfMark Retained Assets' financial statements as of December 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1996,
included in this Joint Proxy Statement/Prospectus and the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
The historical balance sheets of TCA, as of December 31, 1995 and 1994, and
the consolidated statements of income, retained earnings and cash flows for the
fiscal years ended December 31, 1995 and 1994, incorporated by reference in this
Joint Proxy Statement/Prospectus and the Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
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STOCKHOLDERS' PROPOSALS
Any proposals of holders of EVI Common Stock intended to be presented at
the Annual Meeting of Stockholders of EVI to be held in 1997 were required to
have been received by EVI, addressed to the Secretary at 5 Post Oak Park, Suite
1760, Houston, Texas 77027, no later than December 9, 1996, to be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
If the Merger is not consummated, any proposals of stockholders of GulfMark
intended to be presented at the Annual Meeting of Stockholders of GulfMark to be
held in 1997 were required to have been received by GulfMark, addressed to the
Secretary at 5 Post Oak Park, Suite 1170, Houston, Texas 77027, no later than
December 16, 1996, to be considered for inclusion in the proxy statement and
form of proxy relating to that meeting.
Any proposals of holders of New GulfMark Common Stock intended to be
presented at the Annual Meeting of Stockholders of GulfMark to be held in 1998
must be received by New GulfMark, addressed to the Secretary at 5 Post Oak Park,
Suite 1170, Houston, Texas 77027, no later than December 12, 1997, to be
considered for inclusion in the proxy statement and form of proxy relating to
that meeting.
103
<PAGE> 110
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AMV......................................................... 29
Arrow....................................................... 76
Arrow Agreement............................................. 76
Assumed Liabilities......................................... 42
Closing Date................................................ 12
Code........................................................ 12
Commission.................................................. 5
Contribution................................................ 1
Contribution Date........................................... 39
Contribution Proposal....................................... 1
Department of Justice....................................... 11
DGCL........................................................ 92
Director Plan............................................... 2
Distribution................................................ 1
Distribution Agreement...................................... 1
Distribution Record Date.................................... 10
Distribution S-4............................................ 5
EBIT........................................................ 30
EBITDA...................................................... 30
Effective Time.............................................. 11
Employee Plan............................................... 2
Environmental Conditions.................................... 42
Environmental Laws.......................................... 42
EPS......................................................... 30
Ercon....................................................... 1
Ercon Comparables........................................... 29
EVI......................................................... 1
EVI Common Stock............................................ 1
EVI MAE..................................................... 44
EVI Preferred Stock......................................... 91
EVI Special Committee....................................... 24
EVI Special Meeting......................................... 1
Exchange Act................................................ 5
Exchange Agent.............................................. 11
Exchange Ratio.............................................. 10
FTC......................................................... 11
GulfMark.................................................... 1
GulfMark Common Stock....................................... 1
GulfMark Company............................................ 39
GulfMark MAE................................................ 44
GulfMark Marine Business.................................... 1
GulfMark Retained Assets.................................... 1
GulfMark Retained Liabilities............................... 42
GulfMark Special Committee.................................. 25
GulfMark Special Meeting.................................... 1
GulfMark Stock Option Plans................................. 2
GulfMark Stock Option Policy................................ 2
GulfMark Stock Options...................................... 44
HSR Act..................................................... 11
</TABLE>
104
<PAGE> 111
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incentive Stock Options..................................... 61
IRS......................................................... 34
Jefferies................................................... 11
Jefferies Opinion........................................... 31
Lehman...................................................... 9
Lehman Brothers............................................. 86
LTM......................................................... 29
Mallard Division............................................ 8
Merger...................................................... 1
Merger Agreement............................................ 1
Merger Proposal............................................. 1
Merger S-4.................................................. 5
New GulfMark................................................ 1
New GulfMark 401(k) Plan.................................... 41
New GulfMark Common Stock................................... 1
New GulfMark Preferred Stock................................ 93
NYSE........................................................ 2
Nonqualified Stock Options.................................. 61
OPEC........................................................ 79
Oil Service Business Comparable Transactions................ 33
Parker...................................................... 8
Paying Agent................................................ 11
Plan Amendment Proposals.................................... 2
Preferred Stock Designation................................. 96
Proposals................................................... 2
Prudential Securities....................................... 11
Prudential Securities Opinion............................... 28
Record Date................................................. 9
Securities Act.............................................. 2
Sterling.................................................... 85
Sub......................................................... 1
TCA......................................................... 15
Transactions................................................ 8
Waste Materials............................................. 42
</TABLE>
105
<PAGE> 112
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
New GulfMark and Subsidiaries
Report of Independent Public
Accountants........................ F-2
Consolidated Balance Sheets at
December 31, 1996 and 1995......... F-3
Consolidated Statements of Income for
each of the three years in the
period ended December 31, 1996..... F-4
Consolidated Statements of
Stockholders' Equity for each of
the three years in the period ended
December 31, 1996.................. F-5
Consolidated Statements of Cash Flows
for each of the three years in the
period ended December 31, 1996..... F-6
Notes to Consolidated Financial
Statements......................... F-7
GulfMark Retained Assets
Report of Independent Public
Accountants........................ F-17
Balance Sheets at December 31, 1996
and 1995........................... F-18
Statements of Operations for each of
the three years in the period ended
December 31, 1996.................. F-19
Statements of Advances and Equity for
each of the three years in the
period ended December 31, 1996..... F-20
Statements of Cash Flows for each of
the three years in the period ended
December 31, 1996.................. F-21
Notes to Financial Statements......... F-22
</TABLE>
F-1
<PAGE> 113
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To GulfMark International, Inc.:
We have audited the accompanying consolidated balance sheets of New
GulfMark (a business segment of GulfMark International, Inc., a Delaware
corporation, see Note 1) and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of New GulfMark and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
February 26, 1997
F-2
<PAGE> 114
NEW GULFMARK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 17,234 $ 5,136
Accounts receivable....................................... 8,939 5,026
Inventory, prepaids and other............................. 675 1,186
-------- -------
Total current assets.............................. 26,848 11,348
VESSELS AND EQUIPMENT, at cost, net of accumulated
depreciation of $19,504,000 in 1996, and $14,722,000 in
1995...................................................... 87,405 61,343
OTHER ASSETS................................................ 2,217 2,213
-------- -------
$116,470 $74,904
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term
debt................................................... $ 9,341 $ 3,976
Accounts payable.......................................... 1,931 931
Accrued payroll and related expenses...................... 477 137
Other accrued liabilities................................. 1,151 820
-------- -------
Total current liabilities......................... 12,900 5,864
-------- -------
LONG-TERM DEBT.............................................. 50,811 33,600
DEFERRED TAXES AND OTHER.................................... 5,079 3,372
MINORITY INTEREST........................................... 501 415
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 10,000,000 shares authorized;
3,339,952 and 3,336,352 shares issued and outstanding,
respectively........................................... 3,340 3,336
Additional paid-in capital................................ 34,236 24,983
Retained earnings......................................... 10,037 6,394
Cumulative translation adjustment......................... (434) (3,060)
-------- -------
Total stockholders' equity........................ 47,179 31,653
-------- -------
$116,470 $74,904
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 115
NEW GULFMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES.................................................... $34,749 $27,233 $27,692
------- ------- -------
COST AND EXPENSES:
Direct operating expenses................................. 16,178 15,386 15,171
Selling, general and administrative expenses.............. 4,523 3,483 3,643
Depreciation and amortization............................. 5,013 5,472 5,065
------- ------- -------
25,714 24,341 23,879
------- ------- -------
Operating Income....................................... 9,035 2,892 3,813
OTHER INCOME (EXPENSES):
Interest expense.......................................... (3,936) (2,801) (2,408)
Interest income........................................... 469 188 229
Minority interest......................................... (86) 106 (124)
Gain on sale of vessel.................................... -- -- 842
Other..................................................... -- 74 112
------- ------- -------
(3,553) (2,433) (1,349)
------- ------- -------
Income before income taxes............................. 5,482 459 2,464
INCOME TAX PROVISION........................................ 1,839 91 981
------- ------- -------
NET INCOME.................................................. $ 3,643 $ 368 $ 1,483
======= ======= =======
PRO FORMA EARNINGS PER SHARE (unaudited).................... $ 1.09 $ 0.11 $ 0.45
======= ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING......................... 3,338 3,322 3,320
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 116
NEW GULFMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON ADDITIONAL CUMULATIVE TOTAL
STOCK AT PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
$1 PAR VALUE CAPITAL EARNINGS ADJUSTMENT EQUITY
------------ ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993............. $3,320 $22,917 $ 4,543 $(3,961) $26,819
Net Income........................... -- -- 1,483 -- 1,483
Issuance of stock.................... 1 9 -- -- 10
Translation adjustment............... -- -- -- 1,095 1,095
Distributions from GulfMark Retained
Assets, net....................... -- 106 -- -- 106
------ ------- ------- ------- -------
BALANCE, DECEMBER 31, 1994............. 3,321 23,032 6,026 (2,866) 29,513
Net Income........................... -- -- 368 -- 368
Issuance of stock.................... 15 163 -- -- 178
Translation adjustment............... -- -- -- (194) (194)
Distributions from GulfMark Retained
Assets, net....................... -- 1,788 -- -- 1,788
------ ------- ------- ------- -------
BALANCE, DECEMBER 31, 1995............. 3,336 24,983 6,394 (3,060) 31,653
Net Income........................... -- -- 3,643 -- 3,643
Issuance of stock.................... 4 19 -- -- 23
Translation adjustment............... -- -- -- 2,626 2,626
Distributions from GulfMark Retained
Assets, net....................... -- 9,234 -- -- 9,234
------ ------- ------- ------- -------
BALANCE, DECEMBER 31, 1996............. $3,340 $34,236 $10,037 $ (434) $47,179
====== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 117
NEW GULFMARK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 3,643 $ 368 $ 1,483
Adjustments to reconcile net income to net cash provided
by operations --
Depreciation and amortization.......................... 5,013 5,472 5,065
Deferred and other income tax provision................ 1,707 (18) 739
Minority interest...................................... -- (106) 124
Gain on sale of assets................................. -- -- (842)
Change in operating assets and liabilities --
Accounts receivable.................................. (3,445) 1,020 786
Inventory, prepaids and other........................ 530 (85) (809)
Accounts payable..................................... 1,003 42 (904)
Accrued payroll and related expenses................. 127 (451) 153
Other accrued liabilities............................ 468 (328) (83)
Other, net............................................. (507) 475 (264)
-------- -------- -------
Net cash provided by operating activities......... 8,539 6,389 5,448
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to vessels and equipment........................ (23,263) (14,121) (687)
Expenditures for drydocking and main engine overhaul...... (1,230) (1,141) (1,592)
Proceeds from sales of vessels and other equipment........ -- 169 2,021
-------- -------- -------
Net cash used in investing activities............. (24,493) (15,093) (258)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt, net of direct financing costs......... 22,227 25,098 893
Repayments of debt........................................ (4,356) (15,709) (8,873)
Proceeds from issuance of stock........................... 23 178 10
Distributions from GulfMark Retained Assets, net.......... 9,234 1,788 106
-------- -------- -------
Net cash provided by (used in) financing
activities...................................... 27,128 11,355 (7,864)
-------- -------- -------
Effect of exchange rate changes on cash..................... 924 (160) 124
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 12,098 2,491 (2,550)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 5,136 2,645 5,195
-------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 17,234 $ 5,136 $ 2,645
======== ======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................. $ 3,613 $ 2,793 $ 2,075
-------- -------- -------
Income taxes paid......................................... $ 180 $ 167 $ 360
-------- -------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 118
NEW GULFMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND AND ORGANIZATION:
On December 5, 1996, GulfMark International, Inc. (GulfMark), announced a
planned distribution to stockholders, in a tax-free spin-off, of all the shares
of stock of what will be a new publicly traded company (New GulfMark or the
Company), which will acquire all of the assets of GulfMark used in connection
with its offshore marine services business and certain related assets and will
assume certain liabilities associated with such assets. Following the spin-off,
the assets of GulfMark will consist of GulfMark's erosion control services
business (Ercon Development Co., hereinafter referred to as Ercon),
approximately 2.2 million shares of Energy Ventures, Inc. (EVI), common stock
and certain miscellaneous assets (hereinafter, and in the aggregate, referred to
as the GulfMark Retained Assets). In conjunction with the spin-off, GulfMark has
also entered into a definitive agreement with EVI, pursuant to which EVI will
acquire GulfMark, in a tax-free merger, whereby approximately 2.2 million shares
of EVI stock will be issued to the stockholders of GulfMark. In the merger,
GulfMark stockholders will receive .6695 shares of EVI common stock for each
share of GulfMark common stock held by such stockholders. The transaction is
subject to, among other things, approval by the stockholders of both GulfMark
and EVI and customary regulatory approvals. It is expected that the transaction
will be consummated during the second quarter of 1997.
The accompanying consolidated financial statements include all of the
accounts of GulfMark (principally the offshore marine services business) and
exclude the assets and liabilities of GulfMark Retained Assets, whose financial
statements are presented separately elsewhere herein.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
All significant intercompany accounts and transactions between affiliated
companies have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
Statement of Cash Flows
U.S. Government securities and commercial paper with original maturities of
up to three months are included in cash and cash equivalents in the accompanying
consolidated balance sheets and consolidated statements of cash flows.
Vessels and Equipment
Vessels and equipment is stated at cost and depreciation is provided by the
straight-line method. Prior to January 1, 1996 vessels were depreciated over a
useful life of 20 years. During the first quarter of 1996, management completed
an evaluation of the useful life used for depreciating vessels in light of
recent vessel performance, changes in the materials available to protect vessel
hulls and industry practice. Based on the results, it was determined that a
useful life of 25 years for its vessels was a better estimate than the 20 years
used previously. Therefore, effective January 1, 1996, the estimated useful life
was extended to 25 years. The impact of the change on net income for the year
ended December 31, 1996 was an increase of approximately $1,202,000 or $0.36 per
share. Equipment, furniture and fixtures are depreciated over two to five years.
Maintenance and repairs that do not extend the useful life of the asset and are
not attributable to drydockings
F-7
<PAGE> 119
NEW GULFMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of vessels are charged to operations as incurred. Major renovation costs and
modifications are capitalized and amortized over the estimated remaining useful
life. Included in net income for 1996, 1995 and 1994 is $1,920,000, $1,457,000,
and $1,433,000, respectively, of costs for maintenance and repairs.
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", which was effective for the Company on January 1,
1996. The statement sets forth guidelines regarding when to recognize an
impairment of long-lived assets, including goodwill, and how to measure such
impairment. Adoption of SFAS No. 121 had no effect on the financial statements
of New GulfMark.
Other Assets
Other assets primarily consist of deferred drydocking costs and deferred
loan costs. Costs incurred in connection with drydocking are capitalized and
amortized over approximately a 2 1/2 year period which approximates the period
between required drydockings. Deferred loan costs are amortized over the
expected term of the loan.
Pro Forma Earnings Per Share
Pro forma earnings per share is based on the weighted average number of
shares of common stock outstanding for GulfMark and New GulfMark's net income
prior to the Distribution. Common stock equivalents have not been included in
the computation of earnings per share since the effect is not significant. Fully
diluted earnings per share is not presented as such amounts do not materially
differ from primary earnings per share.
Revenue Recognition
Revenues from charters for offshore marine services are recognized as
earned based on contractual charter rates. Typically, contracts are short-term
in duration.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement carrying amounts and tax bases of assets and liabilities using enacted
tax rates and laws in effect in the years in which the differences are expected
to reverse. SFAS No. 109 also requires that the likelihood and amount of future
taxable income be included in the criteria used to determine the timing and
amount of tax benefits recognized for net operating losses and tax credit
carryforwards in the financial statements. New GulfMark has been included in
consolidated federal income tax returns filed by GulfMark. However, the tax
expense reflected in the Consolidated Statements of Income and the tax
liabilities reflected in the Consolidated Balance Sheets have been prepared on a
separate return basis as though New GulfMark had filed stand-alone income tax
returns, except for the utilization of net operating loss (NOL) carryforward
benefits. These benefits have been allocated by GulfMark to New GulfMark based
on New GulfMark's pro-rata share of GulfMark's actual pre-tax financial
statement earnings for each year. Had this allocation not been made, New
GulfMark's pro forma net income would have been $3,643,000 (unaudited), $264,000
(unaudited) and $1,109,000 (unaudited) for the years ended December 31, 1996,
1995 and 1994, respectively.
F-8
<PAGE> 120
NEW GULFMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Allocation of Shared Services
Certain costs relating to the Company's general and administrative services
(including management personnel who provide legal, tax, accounting, treasury,
strategic planning and public policy services) are either directly charged to
each business segment based upon actual utilization or are allocated based upon
each business segment's operating expenses, number of employees, external
revenues, average capital and/or average equity. The Company charges each
business segment for services at fully distributed cost. New GulfMark's share of
these direct and indirect allocations was $1,381,000, $764,000, and $1,154,000
for the years ended December 31, 1996, 1995 and 1994, respectively. For the year
ended December 31, 1996, direct allocations to New GulfMark comprised
approximately 90 percent of the total shared corporate services allocated by
GulfMark.
Although management considers the above allocation methods to be
reasonable, due to the relationship between New GulfMark and GulfMark, the terms
of some or all of the transactions and allocations discussed above may not
necessarily be indicative of that which would have resulted had New GulfMark
been a stand-alone entity. Had New GulfMark operated as a separate entity,
management estimates that expense for the years ended December 31, 1996, 1995
and 1994 would have been $1,534,000, $1,007,000, and $1,209,000, respectively.
Foreign Currency Translation
Assets and liabilities of the Company's foreign affiliates, other than
those located in highly inflationary countries, are translated at year-end
exchange rates, while income and expenses are translated at average rates for
the period. For entities in highly inflationary countries, a combination of
current and historical rates is used to determine currency gains and losses
resulting from financial statement translation and those resulting from
transactions. Translation gains and losses are reported as a component of
stockholders' equity, except for those associated with highly inflationary
countries that are reported directly in the consolidated statements of income.
Transaction gains and losses are reported directly in the consolidated
statements of income.
Concentration of Credit Risk
The Company extends credit to various companies in the energy industry
which may be affected by changes in economic or other external conditions. The
Company's policy is to manage its exposure to credit risk through credit
approvals and limits. Historically, write-offs for doubtful accounts have been
insignificant.
Nature of Operations
The offshore marine services business operates twenty-nine offshore support
vessels as of December 31, 1996 principally in the North Sea and Southeast Asia.
The vessels provide transportation of materials, supplies and personnel to and
from offshore platforms and drilling rigs. Some of these vessels also perform
anchor handling and towing services.
3. VESSEL ACQUISITIONS:
In 1995, the Company contracted with a shipyard in Norway for the
construction of two new UT 755-design vessels for deployment in the North Sea.
The first vessel, named the Highland Piper, was delivered on March 15, 1996. The
second vessel, the Highland Drummer, was delivered January 3, 1997. Included in
capital expenditures for the year ended December 31, 1996, is a total of
$11,508,000 related to the final construction payment on the Highland Piper and
interim construction payments on the Highland Drummer. Final payment of
$12,850,000 was made in 1997 upon delivery of the Highland Drummer. Funding of
$7,254,000 was provided through additional borrowings under existing credit
facilities. In connection with the delivery of these two vessels, the Company is
entitled to receive a subsidy from the Norwegian government
F-9
<PAGE> 121
NEW GULFMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
equal to 9.5% of the gross construction price. The Company has accounted for
subsidies as a reduction of the purchase price of the vessels.
The Company has entered into a contract with a Norwegian shipyard to
construct an enhanced UT 755-design supply vessel at a price of approximately
$18 million denominated in Norwegian Kroner. The new ship will be a modified
version of the Company's recently delivered Highland Piper (March 1996) and
Highland Drummer (January 1997). This vessel, scheduled for delivery in the
first quarter of 1998, will be available to participate in the growing demand
for deep-water remotely operated vehicle (ROV) support, standard supply duties
and specialized services in the North Sea. The Company made interim construction
payments of approximately $.9 million in 1996 and is required to make additional
interim payments totaling approximately $2.7 million in 1997. Final payment is
due upon delivery of the vessel. The Company anticipates financing the cost of
the vessel through additional borrowings and existing funds. Subsequent to year
end, the Company entered into a contract to hedge approximately $13.9 million of
the Norwegian Kroner commitment against unfavorable fluctuations in the Sterling
to Kroner exchange rates. Upon delivery, any gain or loss will be included in
the cost of the vessel.
On August 2, 1996, the Company purchased six offshore supply vessels from
Maritime (Pte) Limited which operated in Southeast Asia. Funding for this
acquisition was provided through a new $7,000,000 facility with a bank and
drawdown available under existing facilities. The new facility requires 10
semiannual payments beginning in 1997.
On December 21, 1995, the Company acquired the Highland Warrior, a
1981-built pipe carrier/platform supply vessel which had been bareboat-chartered
by the Company since July 1993. Included in capital expenditures for 1995 is
$13,301,000 related to interim construction payments on the Highland Piper and
the purchase of the Highland Warrior.
The Company's 51 percent owned company, SeaMark Ltd., has
bareboat-chartered certain vessels from the 49 percent owner, a U.S.
owner/operator, at a combined rate of less than $2,000 per day.
4. SHORT-TERM BORROWINGS:
On July 8, 1993, the Company entered into a one-year loan facility
agreement with a bank under which the Company can borrow up to L3,300,000
($5,651,000). During 1994, 1995 and again during 1996, this facility was renewed
for one additional year. At December 31, 1996 and 1995, the Company had
borrowings of L2,100,000 ($3,596,000) and L600,000 ($932,000), respectively,
under this facility. Interest is charged at 2 1/4 percent above the lending
bank's LIBOR rate. This facility is secured by second priority mortgages on
various vessels as well as second assignments of such vessels' earnings.
During 1996 and 1995, the Company had average borrowings outstanding of
$1,229,000 and $431,000, respectively, under the facility. The weighted average
interest rate during these periods was 8.3 percent and 9.0 percent,
respectively.
F-10
<PAGE> 122
NEW GULFMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT:
The Company's long-term debt at December 31, 1996 and 1995, consisted of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Revolving $24,486,000 credit facility (L11,250,000
($19,266,000) and $5,220,000 tranches), facility reduces
by 10% semiannually beginning December 31, 1996, with
final payment due in 2000; interest at 1 5/8% over the
lending bank's LIBOR rate (7.8% as of December 31,
1996)..................................................... $17,087 $15,415
Loan facility payable in British Pound Sterling, quarterly
principal payments of L395,000 ($676,000) with final
payment of L6,475,000 ($11,088,000) due in 2002, interest
at 1 3/8% over the lending bank's LIBOR rates (7.8% as of
December 31, 1996)........................................ 25,294 13,635
Loan facility payable in British Pound Sterling, semiannual
principal payments of L350,000 ($599,000) with final
payment of L340,000 ($582,000) due in 2002, interest at
1 1/4% over the lending bank's LIBOR rate (7.7% as of
December 31, 1996)........................................ 7,175 7,594
Revolving $7,000,000 credit facility, facility reduces by
10% semiannually beginning January 31, 1997, with final
payment due in 2001; interest at 1 5/8% over the lending
bank's LIBOR rate (7.3% as of December 31, 1996).......... 7,000 --
------- -------
56,556 36,644
Less: Current maturities of long-term debt.................. 5,745 3,044
------- -------
$50,811 $33,600
======= =======
</TABLE>
The following is a summary of scheduled debt maturities by year (in
thousands):
<TABLE>
<S> <C>
1997....................................................... $ 5,745
1998....................................................... 8,348
1999....................................................... 10,746
2000....................................................... 13,466
2001....................................................... 5,305
Thereafter................................................. 12,946
-------
$56,556
=======
</TABLE>
Each of the above facilities is secured by mortgages on various vessels as
well as assignments of such vessels' earnings. The loan facility agreements
restrict Gulf Offshore N.S. Ltd., Gulf Offshore Far East, Inc., Gulf Offshore
Shipping Services, Inc. and Gulf Offshore Marine International, Inc., the
subsidiaries that own the mortgaged vessels, from making dividends or other
distributions to their parent without consent of the lenders. The amount of net
assets restricted under these loan provisions was $42.3 million as of December
31, 1996, and includes cash and cash equivalents of $11.1 million.
F-11
<PAGE> 123
NEW GULFMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES:
At December 31, 1996, the Company had long-term operating leases covering
office space and automobiles. Aggregate lease expense on operating leases for
1996, 1995 and 1994 was $380,000, $440,000, and $284,000, respectively. Future
minimum rental commitments under these operating leases are as follows (in
thousands):
<TABLE>
<S> <C>
1997........................................................ $336
1998........................................................ 195
1999........................................................ 164
2000........................................................ 81
2001 and thereafter......................................... 58
----
$834
====
</TABLE>
The Company is subject to legal proceedings and claims that arise in the
ordinary course of its business. Management believes, based on discussions with
its legal counsel and in consideration of reserves recorded, that the outcome of
these legal actions will not have a material adverse effect upon the
consolidated financial position and results of operations of the Company.
7. STOCKHOLDERS' EQUITY:
STOCK OPTIONS AND STOCK OPTION PLANS
Under the terms of the Company's 1993 Non-Employee Director Stock Option
Plan ("the 1993 Plan"), options to purchase 5,000 shares of common stock were
granted to each of the Company's five non-employee directors in 1993 and in
1996. Additionally, options to purchase 5,000 shares of common stock are to be
granted to each new non-employee director upon his or her election. The exercise
price of options granted under the 1993 Plan is fixed at the market price at the
date of grant. As of December 31, 1996, 200,000 shares were reserved for grant
under the 1993 Plan. The options are for a term of 10 years.
Under the terms of the Company's 1987 Employee Stock Option Plan ("the 1987
Plan"), options may be granted to employees to purchase common stock at
specified prices. The 1987 Plan also provides for stock appreciation rights
("SARs") that give the optionee the right, subject to certain conditions, to
surrender an option and receive cash and/or shares of common stock having a
value equal to the appreciation from date of grant of such option. As of
December 31, 1996, 131,333 shares were reserved for grant under the 1987 Plan.
Information with respect to all shares under option is summarized below:
<TABLE>
<CAPTION>
1994 1995 1996
----------------- ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year..... 86,667 $12.67 84,967 $12.80 70,000 $12.99
Granted............................ -- -- -- -- 42,000 27.88
Exercised.......................... (1,700) 6.50 (14,967) 11.88 (3,400) 6.68
------ ------- -------
Outstanding at end of year........... 84,967 12.80 70,000 12.99 108,600 18.95
====== ======= =======
Weighted average fair value of
options granted during the year.... N/A N/A $ 6.11
Exercisable as of December 31, 1996.......................................... 70,000
Shares available for future grants as of December 31, 1996................... 281,333
</TABLE>
F-12
<PAGE> 124
NEW GULFMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
NUMBER WEIGHTED
OUTSTANDING AVERAGE
RANGE OF EXERCISE PRICES AT 12/31/96 EXERCISE PRICE
- ------------------------ ----------- --------------
<S> <C> <C> <C>
$ 6.50 to $10.50.................................................. 17,900 $ 8.25
$14.75 to $17.75.................................................. 48,700 $15.18
$26.38 to $39.00.................................................. 42,000 $27.88
-------
108,600 $18.95
=======
</TABLE>
Historically, the Company has used stock options as a long-term incentive
for its employees, officers and directors under the above mentioned stock option
plans. The exercise price of options granted is equal to or greater than the
market price of the underlying stock on the date of the grant. Accordingly,
consistent with the provisions of Accounting Principles Board No. 25, Accounting
for Stock Issued to Employees ("APB 25"), no compensation expense has been
recognized in the accompanying financial statements.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123
establishes financial accounting and reporting standards for stock-based
employee compensation. The pronouncement defines a fair-value based method of
accounting for an employee stock option or similar equity instrument. SFAS No.
123 also allows an entity to continue to measure compensation cost for those
instruments using the intrinsic value-based method of accounting prescribed by
APB 25. The Company has elected to follow APB 25 and related interpretations in
accounting for employee stock options because the valuation models prescribed
for use by SFAS No. 123 to determine the fair value of options were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of the grant, no compensation expense has
been recognized in the accompanying financial statements.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123 and has been determined as if the Company had accounted
for its employee stock options under the fair value method described above. No
fair value calculations are required for 1995 as there were no options issued
during that period. The fair value for the 1996 options was estimated at the
date of the grant using the Black-Scholes option pricing model with the
following weighted average assumptions: Risk free interest rates of 5%; a
weighted average volatility factor of the expected market price of the Company's
stock of .14; no expected dividends; and weighted average expected option lives
of 4 years.
For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options' vesting period. Set forth
below is a summary of the Company's net income and earnings per share as
reported and pro forma as if the fair value based method of accounting defined
in SFAS No. 123 had been applied. The pro forma information is not meant to be
representative of the effects on reported net income for future years, because
as provided by SFAS No. 123, only the effects of awards granted in 1995 and 1996
are required to be considered in the pro forma calculations.
<TABLE>
<CAPTION>
1996
-------------------------
AS REPORTED PRO FORMA
----------- ----------
<S> <C> <C>
Net income.................................................. $3,643,000 $3,554,000
Pro forma earnings per share (unaudited).................... $ 1.09 $ 1.07
</TABLE>
PREFERRED STOCK
The Company is authorized by its Articles of Incorporation to issue up to
500,000 shares of $50 par value cumulative preferred stock. As of December 31,
1996, none have been issued.
F-13
<PAGE> 125
NEW GULFMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES:
Income before income taxes attributable to domestic and foreign operations
was (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
------ ---- ------
<S> <C> <C> <C>
U.S........................................................ $ (498) $371 $ (192)
Foreign.................................................... 5,980 88 2,656
------ ---- ------
$5,482 $459 $2,464
====== ==== ======
</TABLE>
The components of New GulfMark's tax provisions attributable to income
before income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------- --------------------------- ---------------------------
DEFERRED DEFERRED DEFERRED
CURRENT AND OTHER TOTAL CURRENT AND OTHER TOTAL CURRENT AND OTHER TOTAL
------- --------- ------ ------- --------- ----- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S....................... $ -- $ -- $ -- $ -- $ -- $-- $ -- $ -- $ --
Foreign................... 132 1,707 1,839 109 (18) 91 242 739 981
---- ------ ------ ---- ---- --- ---- ---- ----
$132 $1,707 $1,839 $109 $(18) $91 $242 $739 $981
==== ====== ====== ==== ==== === ==== ==== ====
</TABLE>
Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. The components of the net
deferred tax liability as of December 31, 1996 and 1995, were (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- -------
<S> <C> <C>
Deferred tax assets --
Net operating loss carryforwards.......................... $ 8,668 $ 6,430
Non-deductible accruals................................... 1,381 1,192
Foreign tax credits....................................... 224 387
Alternative minimum tax credits........................... 597 284
Other tax credits......................................... 175 175
Valuation allowance....................................... (267) (846)
-------- -------
10,778 7,622
-------- -------
Deferred tax liabilities --
Depreciation.............................................. (12,866) (8,400)
Foreign income not currently recognizable................. (1,017) (709)
Other..................................................... (301) (323)
-------- -------
(14,184) (9,432)
-------- -------
Net deferred tax liability.................................. $ (3,406) $(1,810)
======== =======
</TABLE>
F-14
<PAGE> 126
NEW GULFMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The difference between the provision at the statutory U.S. federal income
tax rate and the tax provision attributable to income from continuing operations
in the accompanying consolidated financial statements is analyzed below:
<TABLE>
<CAPTION>
1996 1995 1994
---- ----- -----
<S> <C> <C> <C>
U.S. federal statutory income tax rate...................... 34.0% 34.0% 34.0%
Effect of international operations.......................... (0.5) 8.4 21.0
Utilization of U.S. net operating loss carryforwards........ -- (22.6) (15.2)
---- ----- -----
33.5% 19.8% 39.8%
==== ===== =====
</TABLE>
As of December 31, 1996, New GulfMark had available the following
carryforward losses and credits for income tax purposes, that are subject to
certain limitations, to offset future taxable income (in thousands):
<TABLE>
<CAPTION>
AMOUNT EXPIRATION
------- ----------
<S> <C> <C>
U.S. tax purposes --
Foreign tax credits....................... $ 224 1997 -- 2000
Alternative minimum tax credits........... 597 Indefinite
Other tax credits......................... 175 1997 -- 2000
Foreign tax purposes --
Net operating losses...................... 26,267 Indefinite
</TABLE>
9. OPERATING SEGMENT INFORMATION:
Business Segments
The operations of New GulfMark are contained in a single business
segment -- offshore marine services. The business operates twenty-nine offshore
support vessels as of December 31, 1996 principally in the North Sea and
Southeast Asia. The vessels provide transportation of materials, supplies and
personnel to and from offshore platforms and drilling rigs. Some of the vessels
also perform anchor handling and towing services.
F-15
<PAGE> 127
NEW GULFMARK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Geographic Regions
Information by geographical area is based on the location where services
were performed. Operating income represents revenues less operating expenses and
is not reduced for interest expense and income taxes. General corporate expenses
incurred in the United States have not been allocated to foreign operations for
purposes of this disclosure.
<TABLE>
<CAPTION>
UNITED BRAZIL
STATES EUROPE FAR EAST AND OTHER TOTAL
------- ---------------- -------- --------- --------
(PRIMARILY U.K.)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1996 --
Revenues.................. $ -- $25,552 $ 7,732 $1,465 $ 34,749
Operating income (loss)... (2,513) 9,813 1,473 262 9,035
Identifiable assets....... 6,574 85,036 23,805 1,055 116,470
1995 --
Revenues.................. $ -- $20,176 $ 6,142 $ 915 $ 27,233
Operating income (loss)... (1,564) 4,027 639 (210) 2,892
Identifiable assets....... 2,153 60,318 10,939 1,494 74,904
1994 --
Revenues.................. $ -- $18,685 $ 8,178 $ 829 $ 27,692
Operating income (loss)... (2,070) 3,699 2,431 (247) 3,813
Identifiable assets....... 1,424 43,607 19,278 -- 64,309
</TABLE>
Major Customers
For the years ended December 31, 1996, 1995 and 1994, New GulfMark had
major customers who comprised more than 10% of revenues. The loss of a major
customer could have an adverse effect on the Company's financial condition and
results of operations until new charters are obtained.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Customer A.................................................. 15.4% 15.2% 13.3%
Customer B.................................................. 14.2 -- --
Customer C.................................................. -- 12.9 12.3
Customer D.................................................. -- 12.9 14.6
</TABLE>
F-16
<PAGE> 128
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To GulfMark International, Inc.:
We have audited the accompanying balance sheets of GulfMark Retained Assets
(a business segment of GulfMark International, Inc., a Delaware corporation, see
Note 1) as of December 31, 1996 and 1995, and the related statements of
operations, advances and equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GulfMark Retained Assets as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
February 26, 1997
F-17
<PAGE> 129
GULFMARK RETAINED ASSETS
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash...................................................... $ 356 $ 27
Accounts receivable --
Trade.................................................. 802 1,024
Unbilled receivables on jobs in progress............... 31 9
Claims................................................. 24 89
Inventory................................................. 157 113
Prepaids expenses......................................... 124 100
------- -------
Total current assets.............................. 1,494 1,362
INVESTMENT IN ENERGY VENTURES, INC. (EVI), including
unrealized gain of $51,483,000 in 1996 and $12,151,000 in
1995...................................................... 71,040 34,321
PROPERTY AND EQUIPMENT, at cost:
Transportation equipment.................................. 279 236
Construction equipment.................................... 129 117
Office equipment.......................................... 71 60
Furniture, fixtures and other............................. 68 63
------- -------
547 476
Less -- Accumulated depreciation.......................... (287) (237)
------- -------
Net property and equipment........................ 260 239
Other assets.............................................. 422 109
------- -------
$73,216 $36,031
======= =======
LIABILITIES AND ADVANCES AND EQUITY
CURRENT LIABILITIES:
Short-term borrowings..................................... $ -- $ 90
Trade accounts payable.................................... 414 848
Accrued job costs payable................................. -- 104
Accrued payroll and related expenses...................... 560 323
Accrued warranty expenses................................. 354 292
Other accrued liabilities................................. 426 133
------- -------
Total current liabilities......................... 1,754 1,790
DEFERRED TAXES AND OTHER.................................... 22,646 6,936
COMMITMENTS AND CONTINGENCIES ADVANCES AND EQUITY:
Advances and Retained Earnings............................ 15,923 20,361
Cumulative translation adjustment related to EVI
investment............................................. (1,086) (1,086)
Unrealized gain on EVI investment......................... 33,979 8,030
------- -------
Total advances and equity......................... 48,816 27,305
------- -------
$73,216 $36,031
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE> 130
GULFMARK RETAINED ASSETS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------ ------- ------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
CONTRACT REVENUES........................................... $6,994 $ 8,844 $6,756
COST AND EXPENSES:
Contract costs............................................ 3,922 5,963 4,350
Selling, general and administrative expenses.............. 2,068 2,323 1,994
------ ------- ------
5,990 8,286 6,344
====== ======= ======
Operating Income............................................ 1,004 558 412
EARNINGS ATTRIBUTABLE TO INVESTMENT IN EVI:
Equity in earnings of EVI................................. -- 761 1,012
Gain on sale of 300,000 EVI shares........................ 6,264 -- --
------ ------- ------
6,264 761 1,012
------ ------- ------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM........... 7,268 1,319 1,424
INCOME TAX PROVISION........................................ 2,472 3,589 127
------ ------- ------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM..................... 4,796 (2,270) 1,297
EXTRAORDINARY ITEM ATTRIBUTABLE TO EVI (Less applicable tax
benefit of $51,000)....................................... -- -- (706)
------ ------- ------
NET INCOME (LOSS)........................................... $4,796 $(2,270) $ 591
====== ======= ======
PRO FORMA EARNINGS (LOSS) PER SHARE (unaudited):
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM................... $ 1.44 $ (0.68) $ 0.39
------ ------- ------
EXTRAORDINARY ITEM ATTRIBUTABLE TO EVI.................... -- -- (0.21)
------ ------- ------
NET INCOME (LOSS)......................................... $ 1.44 $ (0.68) $ 0.18
====== ======= ======
WEIGHTED AVERAGE SHARES OUTSTANDING......................... 3,338 3,322 3,320
====== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 131
GULFMARK RETAINED ASSETS
STATEMENTS OF ADVANCES AND EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
ADVANCES AND CUMULATIVE UNREALIZED ADVANCES
RETAINED TRANSLATION GAIN ON AND
EARNINGS ADJUSTMENT INVESTMENT EQUITY
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, at December 31, 1993................. $23,934 $ (365) $ -- $23,569
Translation adjustment...................... -- (542) -- (542)
Net income.................................. 591 -- -- 591
Distributions to New GulfMark, net.......... (106) -- -- (106)
------- ------- ------- -------
BALANCE, December 31, 1994.................... 24,419 (907) -- 23,512
Translation adjustment...................... -- (179) -- (179)
Net loss.................................... (2,270) -- -- (2,270)
Unrealized gain on EVI, net of tax.......... -- -- 8,030 8,030
Distributions to New GulfMark, net.......... (1,788) -- -- (1,788)
------- ------- ------- -------
BALANCE, at December 31, 1995................. 20,361 (1,086) 8,030 27,305
Net income.................................. 4,796 -- -- 4,796
Unrealized gain on EVI, net of tax.......... -- -- 25,949 25,949
Distributions to New GulfMark, net.......... (9,234) -- -- (9,234)
------- ------- ------- -------
BALANCE, December 31, 1996.................... $15,923 $(1,086) $33,979 $48,816
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 132
GULFMARK RETAINED ASSETS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 4,796 $(2,270) $ 591
Adjustments to reconcile net income (loss) to net cash
provided by operating activities --
Depreciation........................................... 116 99 81
Equity in earnings of Energy Ventures, Inc............. -- (761) (1,012)
Deferred income tax provision.......................... 2,008 3,589 127
Gain on sale of 300,000 EVI shares..................... (6,264) -- --
Extraordinary loss..................................... -- -- 706
Changes in operating assets and liabilities --
Accounts receivable.................................. 265 749 (891)
Inventory and prepaids............................... (68) 12 (7)
Trade accounts payable............................... (434) 239 86
Accrued payroll and related expenses................. 237 2 106
Accrued warranty..................................... 62 79 91
Other, net........................................... 184 (249) 386
------- ------- -------
Net cash provided by operating activities............ 902 1,489 264
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment....................... (137) (108) (129)
Proceeds from sale of 300,000 EVI shares.................. 8,888 -- --
------- ------- -------
Net cash provided by (used in) investing
activities........................................ 8,751 (108) (129)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) under line of credit.............. (90) 90 --
Net change in advances.................................... (9,234) (1,788) (106)
------- ------- -------
Net cash used in financing activities.................. (9,324) (1,698) (106)
------- ------- -------
NET INCREASE (DECREASE) IN CASH............................. 329 (317) 29
CASH, beginning of period................................... 27 344 315
------- ------- -------
CASH, end of period......................................... $ 356 $ 27 $ 344
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 133
GULFMARK RETAINED ASSETS
NOTES TO FINANCIAL STATEMENTS
1. BACKGROUND AND ORGANIZATION:
On December 5, 1996, GulfMark International, Inc. (GulfMark or the
Company), announced a planned distribution to stockholders, in a tax-free
spin-off, of all the shares of stock of what will be a new publicly traded
company (New GulfMark), which will acquire all of the assets of GulfMark used in
connection with its offshore marine services business and will assume certain
liabilities associated with such assets. Following the spin-off, the assets of
GulfMark will consist of GulfMark's erosion control business (Ercon Development
Co., hereinafter referred to as Ercon), approximately 2.2 million shares of
Energy Ventures, Inc. (EVI), common stock and certain corporate and
miscellaneous assets (hereinafter, and in the aggregate, referred to as GulfMark
Retained Assets). In conjunction with the spin-off, GulfMark has also entered
into a definitive agreement with EVI, pursuant to which EVI will acquire
GulfMark, in a tax-free merger, whereby approximately 2.2 million shares of EVI
stock will be issued to the stockholders of GulfMark. In the merger, GulfMark
stockholders will receive .6695 shares of EVI common stock for each share of
GulfMark common stock held by such stockholders. The transaction is subject to,
among other things, approval by the stockholders of both GulfMark and EVI and
customary regulatory approvals. It is expected that the transaction will be
consummated during the second quarter of 1997.
The accompanying financial statements include the accounts of GulfMark
Retained Assets, as described in the preceding paragraph.
Ercon offers a variety of turnkey erosion control products and services to
assist customers to control soil erosion and prevent damage or destruction, by
rivers, streams and bayous, of various types of assets, including highways,
bridges, pipelines, buildings and railroads. EVI is a publicly traded
international oil field equipment and service company which manufactures
artificial lift and completion systems, drill pipe and premium tubulars.
2. SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from these estimates.
Construction Contracts
GulfMark Retained Assets reports income from construction contracts using
the percentage-of-completion method of accounting. The percentage-of-completion
on a given contract is determined considering the relationship of total cost
incurred to date to total estimated contract cost. Total revenues from claims
for additional compensation are recorded only if the scope and amount of the
claim have been agreed to by the customer (or the claim is specifically provided
for in the contract terms) and the amount of the claim can be reliably
estimated. On contracts where an ultimate loss is anticipated upon completion,
the full amount of the estimated loss is accrued when known.
Although the duration of construction contracts may exceed one year,
GulfMark Retained Assets generally invoices and collects for work performed on a
monthly basis. Accordingly, GulfMark Retained Assets' operating cycle has been
defined as one year for purposes of classifying amounts on its balance sheet as
current or noncurrent.
Unbilled receivables on construction jobs in progress represent revenues
recognized in excess of amounts billed. Generally, unbilled work is billable
within 30 days.
F-22
<PAGE> 134
GULFMARK RETAINED ASSETS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Pro Forma Earnings Per Share
Pro forma earnings per share is based on the weighted average number of
shares of common stock outstanding for GulfMark and GulfMark Retained Assets'
net income (loss) prior to the Distribution. Common stock equivalents have not
been included in the computation of earnings per share since the effect is not
significant. Fully diluted earnings per share is not presented as such amounts
do not materially differ from primary earnings per share.
Allocation of Shared Services
Certain costs relating to the Company's general and administrative services
(including management personnel who provide legal, tax, accounting, treasury,
strategic planning and public policy services) are either directly charged to
each group based upon actual utilization or are allocated based upon each
group's operating expenses, number of employees, external revenues, average
capital and/or average equity. The Company charges each group for services at
fully distributed cost. GulfMark Retained Assets' share of these direct and
indirect allocations was $153,000, $243,000 and $55,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. For the year ended December 31,
1996, direct allocations to GulfMark Retained Assets comprised approximately 10
percent of the total shared corporate services allocated by GulfMark.
Management believes the above allocated amounts approximate the amounts
which would have resulted had GulfMark Retained Assets operated as a stand-alone
entity.
Cumulative Translation Adjustment
GulfMark Retained Assets recorded its portion of EVI's cumulative
translation adjustment as a component of Advances and Equity during the periods
which GulfMark Retained Assets accounted for its investment in EVI on the equity
method.
Inventory
Inventory is stated at the lower of cost (moving-average) or market.
Inventory consists primarily of Palisade Erconet panels whose open weave of
synthetics controls water flow, Ercomat double-layered and cabled grout
injectable fabric for contoured bank armoring, and Ercorap bags of hydratable
grout for more vertical bank armoring.
Property and Equipment
Property and equipment is recorded at cost and depreciated over estimated
service lives. Depreciation is computed primarily using the straight-line
method. Estimated lives for major classes of property and equipment are as
follows:
<TABLE>
<S> <C>
Transportation equipment.................................... 3 to 4 years
Construction equipment...................................... 4 to 6 years
Office equipment, furniture, fixtures and other............. 4 to 7 years
</TABLE>
Expenditures for maintenance and repairs are charged currently to expense;
renewals and betterments are capitalized. Asset costs and accumulated
depreciation for property retired or otherwise disposed of are removed from the
accounts, with any gain or loss included in the results of operations.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires recognition of deferred tax
F-23
<PAGE> 135
GULFMARK RETAINED ASSETS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
assets and liabilities for the expected future tax consequences of events that
have been recognized in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates and laws in effect in the years
in which the differences are expected to reverse. SFAS No. 109 also requires
that the likelihood and amount of future taxable income be included in the
criteria used to determine the timing and amount of tax benefits recognized for
net operating losses and tax credit carryforwards in the financial statements.
GulfMark Retained Assets has been included in consolidated federal income
tax returns filed by GulfMark. However, the tax expense reflected in the
consolidated Statements of Operations and the tax liabilities reflected in the
Consolidated Balance Sheets have been prepared on a separate return basis as
though GulfMark Retained Assets had filed stand-alone income tax returns, except
for the utilization of net operating loss (NOL) carryforward benefits, which
have been allocated by GulfMark to GulfMark Retained Assets based on GulfMark
Retained Assets' pro-rata share of GulfMark's actual pre-tax financial statement
earnings for each year. Had this allocation of NOL not been made, GulfMark
Retained Assets' pro forma net income (loss) would have been $4,796,000
(unaudited), ($3,865,000) (unaudited) and $524,000 (unaudited) for the years
ended December 31, 1996, 1995 and 1994, respectively.
Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which was effective for the Company on January 1,
1996. The statement sets forth guidelines regarding when to recognize an
impairment of long-lived assets, including goodwill, and how to measure such
impairment. Adoption of SFAS No. 121 had no effect on the financial statements
of GulfMark Retained Assets.
3. INVESTMENT IN ENERGY VENTURES, INC.:
At December 31, 1996 the Company owned 2,235,572 shares of stock of Energy
Ventures, Inc. On July 26, 1996, the Company sold 300,000 shares of its
2,535,572 shares holding in EVI in conjunction with a public offering by EVI of
3,000,000 newly issued shares. As a result, the Company received net proceeds of
approximately $8.9 million, resulting in an after-tax gain of approximately $4.1
million. As a result of this sale and offering, the Company's ownership interest
in EVI decreased to approximately 9.7 percent.
The shares of EVI owned by the Company are held for investment purposes.
Because of, among other things, the Company ownership interest in EVI as well as
the two common directors between the two companies, the Company may be
considered an "affiliate" of EVI under federal securities rules and regulations.
As such, these EVI shares may not be able to be sold by the Company absent
registering such shares under the Securities Act of 1933 or an exemption
therefrom.
Prior to June 30, 1995, the Company accounted for EVI on the equity method;
however, the reduction in the Company's ownership interest on June 30, 1995,
required a change from the equity method to the cost method and the application
of certain requirements of SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS No. 115"). Under the cost method, the Company
no longer records its proportionate share of EVI's earnings as was done prior to
June 30, 1995, under the equity method.
In addition, under SFAS No. 115, ". . . the portion of the security that
can reasonably be expected to qualify for sale within one year . . ." must be
reported at its "fair value." If the Company is considered an "affiliate" under
the federal securities rules and regulations, approximately 1,222,100 shares as
of December 31, 1996, represents the number of shares which may be sold by the
Company without registration pursuant to Rule 144 promulgated under the
Securities Act of 1933. Accordingly, the Company has reflected in the
accompanying December 31, 1996, balance sheet approximately 1,222,100 shares of
EVI holdings at
F-24
<PAGE> 136
GULFMARK RETAINED ASSETS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the closing price quoted on the New York Stock Exchange as of December 31, 1996.
The related unrealized gain on those shares is reflected as a separate component
of Advances and Equity, net of the related deferred taxes. The remaining
1,013,472 shares are carried at historical cost.
The quoted market value of EVI shares held by the Company may not be the
value that would be realized should the Company dispose of some or all of the
shares. As of February 26, 1997, the quoted market value of EVI shares held by
the Company was $117,647,000. The equity in earnings of EVI recorded by GulfMark
Retained Assets for the six months ended June 30, 1995 and the year ended
December 31, 1994, excluding an extraordinary item, was $761,000 and $1,012,000,
respectively. In addition, the Company recognized in 1994 an extraordinary
charge of $706,000, net of tax, attributable to the prepayment of certain debt.
The following represents summarized financial information for EVI. For more
information regarding EVI's financial condition and operations, reference is
made to the EVI Form 10-K as of December 31, 1996 and 1995, filed with the
Securities and Exchange Commission.
SUMMARIZED BALANCE SHEETS
AS OF DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Current assets.............................................. $558,681 $309,185
Non-current assets.......................................... 294,162 143,940
-------- --------
$852,843.. $453,125
======== ========
Current liabilities......................................... $233,126 $ 78,291
Non-current liabilities..................................... 165,633 146,768
Stockholders' equity........................................ 454,084.. 228,066
-------- --------
$852,843.. $453,125
======== ========
</TABLE>
SUMMARIZED INCOME STATEMENTS
FOR YEAR ENDED DECEMBER 31,
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues........................................ $ 478,020 $ 271,675 $ 185,285
Expenses........................................ (431,733) (253,710) (181,647)
Other expenses, net............................. (14,741) (15,603) (13,125)
--------- --------- ---------
Income (loss) before taxes...................... 31,546 2,362 (9,487)
Tax (provision) benefit......................... (7,041) 240 3,795
--------- --------- ---------
Income (loss) from continuing operations........ 24,505 2,602 (5,692)
Discontinued operations, net of taxes........... 7,468 8,709 10,334
Gain on disposal of discontinued operations, net
of taxes...................................... 66,924 -- --
Extraordinary item.............................. (731) -- (3,784)
--------- --------- ---------
Net income...................................... $ 98,166 $ 11,311 $ 858
========= ========= =========
</TABLE>
F-25
<PAGE> 137
GULFMARK RETAINED ASSETS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES:
The components of GulfMark Retained Assets' income tax provisions, all of
which are attributable to domestic operations, are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ----
<S> <C> <C> <C>
Current.................................................... $ 464 $ -- $ --
Deferred and other......................................... 2,008 3,589 127
------ ------ ----
$2,472 $3,589 $127
====== ====== ====
</TABLE>
Included in the 1996 deferred tax provision is $2,130,000 of additional
deferred taxes associated with the sale of 300,000 shares of EVI. The deferred
provision in 1995 included $3,374,000 of additional deferred taxes related to
the change in accounting of its investment in EVI from the equity method to the
cost method.
Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. The components of the net
deferred tax liability as of December 31, 1996 and 1995, were (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- -------
<S> <C> <C>
Deferred tax assets --
Net operating loss carryforwards.......................... $ -- $ 2,722
Non-deductible accruals................................... -- 271
-------- -------
-- 2,993
-------- -------
Deferred tax liabilities --
Investment in EVI......................................... (22,646) (9,929)
-------- -------
(22,646) (9,929)
-------- -------
Net deferred tax liability.................................. $(22,646) $(6,936)
======== =======
</TABLE>
The difference between the provision at the statutory U.S. federal income
tax rate and the tax provision attributable to income from continuing operations
in the accompanying consolidated financial statements is analyzed below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
---- ------ -----
<S> <C> <C> <C>
U.S. federal statutory income tax rate...................... 34.0% 34.0% 34.0%
Differences applicable to income of unconsolidated
subsidiaries.............................................. -- 359.0 (20.4)
Utilization of U.S. net operating loss carryforwards........ -- (120.9) (4.7)
---- ------ -----
34.0% 272.1% 8.9%
==== ====== =====
</TABLE>
In conjunction with the sale of 300,000 EVI shares on July 26, 1996,
substantially all of the remaining carryforward operating losses ($8,021,000 at
December 31, 1995) were fully utilized.
F-26
<PAGE> 138
GULFMARK RETAINED ASSETS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. MAJOR CUSTOMERS:
For the years ended December 31, 1996, 1995 and 1994, GulfMark Retained
Assets had major customers who comprised more than 10% of revenues. The loss of
a major customer could have an adverse effect on the financial condition and
results of operations of GulfMark Retained Assets until new contracts are
obtained.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Customer A.................................................. 22.3% 12.7% 27.5%
Customer B.................................................. 13.9 -- 15.8
Customer C.................................................. 11.4 -- --
Customer D.................................................. -- 11.7 --
Customer E.................................................. -- -- 16.1
</TABLE>
6. COMMITMENTS AND CONTINGENCIES:
On November 14, 1995, an arbitration panel in Houston awarded a customer of
Ercon, $468,000 in connection with an erosion control system installed on the
customer's property. The project was originally installed in June 1993 and
developed problems during 1994. At December 31, 1994, management determined that
a loss on this matter was likely and after review and discussions with legal
counsel, a reserve of $165,000 was recorded to cover the probable costs of
repair or settlement. The amount was determined based on the Company's
assessment of the loss actually suffered by the customer and the belief that the
customer and his engineer were responsible for a significant part of the loss.
During 1995, the customer filed for arbitration claiming compensatory and
punitive damages and was ultimately successful in convincing an arbitration
panel that his damages suffered were higher than what was estimated by the
Company and furthermore, that the Company should be held solely responsible. The
amount of the award, net of the previously recorded $165,000, was reflected as
expense in the accompanying statements of operations in 1995. The Company made a
claim to its insurance carrier for the award and associated legal fees; however,
the insurance company initially denied coverage. In 1996, Ercon settled this
claim with the insurance company and received $117,000, which is reflected in
the statements of operations in 1996.
GulfMark Retained Assets is subject to legal proceedings and claims that
arise in the ordinary course of its business. Management believes, based on
discussions with its legal counsel and in consideration of reserves recorded,
that the outcome of these legal actions will not have a material adverse effect
upon the financial position and results of operations of GulfMark Retained
Assets.
F-27
<PAGE> 139
APPENDIX A
AGREEMENT AND PLAN OF MERGER*
AMONG
ENERGY VENTURES, INC.,
GULFMARK ACQUISITION CO.,
GULFMARK INTERNATIONAL, INC.
AND
NEW GULFMARK INTERNATIONAL, INC.
DECEMBER 5, 1996*
* As amended by the First Amendment to Agreement and Plan of Merger dated March
27, 1997.
<PAGE> 140
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
THE MERGER............................................................ 1
1.1 The Merger.................................................. 1
1.2 Closing Date................................................ 1
1.3 Consummation of the Merger.................................. 2
1.4 Effects of the Merger....................................... 2
1.5 Certificate of Incorporation; Bylaws........................ 2
1.6 Directors and Officers...................................... 2
1.7 Conversion of Securities.................................... 2
1.8 Exchange of Certificates.................................... 3
1.9 Taking of Necessary Action; Further Action.................. 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES........................................ 5
2.1 Representations and Warranties of EVI and Sub............... 5
(a) Organization and Compliance with Law.................. 5
(b) Capitalization........................................ 5
(c) Authorization and Validity of Agreement............... 5
(d) No Approvals or Notices Required; No Conflict......... 5
(e) Commission Filings; Financial Statements.............. 6
(f) Absence of Certain Charges and Events................. 6
(g) Tax Matters........................................... 6
(h) Voting Requirements................................... 7
(i) Brokers............................................... 7
(j) Information Supplied.................................. 7
2.2 Representations and Warranties of GulfMark and Spinco...... 7
(a) Organization.......................................... 7
(b) Capitalization........................................ 8
(c) Authorization and Validity of Agreement............... 8
(d) No Approvals or Notices Required; No Conflict with
Instruments to which GulfMark is a Party............ 9
(e) Commission Filings; Financial Statements.............. 10
(f) Conduct of Business in the Ordinary Course; Absence
of Certain Changes and Events....................... 10
(g) Litigation............................................ 11
(h) Employee Benefit Plans................................ 11
(i) Taxes................................................. 12
(j) Environmental Matters................................. 13
(k) Investment Company.................................... 14
(l) Severance Payments.................................... 14
(m) Voting Requirements................................... 14
(n) Brokers............................................... 14
(o) Assets and Liabilities at Closing..................... 14
(p) Compliance with Laws.................................. 15
(q) Contracts............................................. 15
(r) Title to Property..................................... 16
(s) Insurance Policies.................................... 16
(t) Loans................................................. 17
(u) No Fraudulent Transfer................................ 17
(v) Information Supplied.................................. 17
</TABLE>
i
<PAGE> 141
<TABLE>
<S> <C>
ARTICLE III
COVENANTS OF GULFMARK....................................................... 18
3.1 Conduct of Business by GulfMark Pending the Merger............... 18
3.2 Net Working Capital Requirements................................. 19
3.3 Affiliates' Agreements........................................... 20
ARTICLE IV
COVENANTS OF EVI PRIOR TO THE EFFECTIVE TIME................................ 20
4.1 Conduct of Business by EVI Pending the Merger.................... 20
4.2 Reservation of EVI Stock......................................... 20
4.3 Stock Exchange Listing........................................... 20
ARTICLE V
ADDITIONAL AGREEMENTS....................................................... 21
5.1 Joint Proxy Statement/Prospectus; Registration Statement......... 21
5.2 Accountants Letters.............................................. 21
5.3 Meetings of Stockholders......................................... 21
5.4 Filings; Consents; Reasonable Efforts............................ 21
5.5 Notification of Certain Matters.................................. 21
5.6 Expenses......................................................... 22
5.7 GulfMark's Employee Benefits..................................... 22
ARTICLE VI
CONDITIONS.................................................................. 23
6.1 Conditions to Obligation of Each Party to Effect the Merger...... 23
6.2 Additional Conditions to Obligations of EVI...................... 23
6.3 Additional Conditions to Obligations of GulfMark................. 24
ARTICLE VII
MISCELLANEOUS............................................................... 25
7.1 Termination...................................................... 25
7.2 Effect of Termination............................................ 26
7.3 Waiver and Amendment............................................. 26
7.4 Nonsurvival of Representations and Warranties.................... 26
7.5 Public Statements................................................ 26
7.6 Assignment....................................................... 26
7.7 Notices.......................................................... 26
7.8 Governing Law.................................................... 27
7.9 Arbitration...................................................... 27
7.10 Severability..................................................... 28
7.11 Counterparts..................................................... 28
7.12 Headings......................................................... 28
7.13 Confidentiality Agreement........................................ 28
7.14 Entire Agreement: Third Party Beneficiaries...................... 28
7.15 Disclosure Letters............................................... 28
GLOSSARY OF DEFINED TERMS................................................... 41
</TABLE>
LIST OF EXHIBITS
Exhibit A -- Form of Agreement and Plan of Distribution
Exhibit B -- Amended and Restated Certificate of Incorporation of GulfMark
ii
<PAGE> 142
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of the 5th day of December,
1996 as amended by the First Amendment to Agreement and Plan of Merger dated
March 27, 1997 (this "Agreement"), is among ENERGY VENTURES, INC., a Delaware
corporation ("EVI"), GULFMARK ACQUISITION CO., a Delaware corporation and
wholly-owned subsidiary of EVI ("Sub"), GULFMARK INTERNATIONAL, INC., a Delaware
corporation ("GulfMark"), and NEW GULFMARK INTERNATIONAL, INC., a Delaware
corporation and wholly-owned subsidiary of GulfMark ("Spinco").
WHEREAS, subject to and in accordance with the terms and conditions of this
Agreement, the respective Boards of Directors of EVI, Sub and GulfMark, and EVI
as sole stockholder of Sub, have approved the merger of Sub with and into
GulfMark (the "Merger"), whereby each issued and outstanding share of common
stock, par value $1.00 per share, of GulfMark ("GulfMark Common Stock") not
owned directly or indirectly by GulfMark will be converted into the right to
receive .6695 of one share of common stock, par value $1.00 per share, of EVI
("EVI Common Stock"); and
WHEREAS, as a condition to the Merger, GulfMark will contribute to Spinco
(a) all of the stock of GulfMark's subsidiaries other than Ercon (the "Marine
Subsidiaries") and (b) the general corporate assets of GulfMark (excluding (i)
all EVI Common Stock held by GulfMark, (ii) any and all property, assets, claims
and rights, tangible and intangible of Ercon, as defined herein, (iii) the
original tax, accounting and other corporate records of GulfMark and (iv) all of
the shares of common stock and other ownership interests held by GulfMark in
American Independent Oil Company ("AIOC"), such excluded assets being referred
to herein as the "Excluded Assets") (the "Assets") and Spinco will assume
certain liabilities associated with the Assets, the Marine Subsidiaries and
GulfMark (the "Contribution") pursuant to an Agreement and Plan of Distribution
between GulfMark, Spinco and EVI in substantially the form attached hereto as
Exhibit A (the "Distribution Agreement");
WHEREAS, as a condition to the Merger, GulfMark will distribute to its
stockholders prior to the Merger all of the outstanding stock of Spinco (the
"Distribution");
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(1)(B) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the Contribution
and Distribution qualify as transactions within the meaning of Sections
368(a)(1)(D) and 355 of the Code; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to and in accordance with the terms and conditions
of this Agreement and in accordance with the General Corporation Law of the
State of Delaware ("DGCL"), at the Effective Time (as defined in Section 1.3),
Sub shall be merged with and into GulfMark. As a result of the Merger, the
separate corporate existence of Sub shall cease and GulfMark shall continue as
the surviving corporation (sometimes referred to herein as the "Surviving
Corporation"), and all the properties, rights, privileges, powers and franchises
of Sub and GulfMark shall vest in the Surviving Corporation, without any
transfer or assignment having occurred, and certain liabilities, debts and
duties of Sub and GulfMark shall attach to the Surviving Corporation, all in
accordance with the DGCL and subject to the provisions of the Distribution
Agreement.
1.2 CLOSING DATE. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Fulbright &
Jaworski L.L.P, Houston, Texas, as soon as practicable after the satisfaction or
waiver of the conditions set forth in Article VI or at such other time and place
and on such
1
<PAGE> 143
other date as EVI and GulfMark shall agree; provided that the closing conditions
set forth in Article VI shall have been satisfied or waived at or prior to such
time. The date on which the Closing occurs is herein referred to as the "Closing
Date."
1.3 CONSUMMATION OF THE MERGER. As soon as practicable on the Closing
Date, the parties hereto will cause the Merger to be consummated by filing with
the Secretary of State of Delaware a certificate of merger in such form as
required by, and executed in accordance with, the relevant provisions of the
DGCL. The "Effective Time" of the Merger, as that term is used in this
Agreement, shall mean such time as a certificate of merger is duly filed with
the Delaware Secretary of State or at such later time (not to exceed 90 days
from the date the Certificate is filed) as is specified in the certificate of
merger pursuant to the mutual agreement of EVI and GulfMark.
1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the applicable provisions of the DGCL. If at any time after the Effective Time
of the Merger, the Surviving Corporation shall consider or be advised that any
further assignments or assurances in law or otherwise are necessary or desirable
to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, all rights, title and interests in all real estate and other
property and all privileges, powers and franchises of GulfMark and Sub, the
Surviving Corporation and its proper officers and directors, in the name and on
behalf of GulfMark and Sub, shall execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary and proper to
vest, perfect or confirm title to such property or rights in the Surviving
Corporation and otherwise to carry out the purpose of this Agreement, and the
proper officers and directors of the Surviving Corporation are fully authorized
in the name of GulfMark or otherwise to take any and all such action.
1.5 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation
of GulfMark, as amended by the amendment set forth in Exhibit B attached hereto,
shall be the Certificate of Incorporation of the Surviving Corporation and
thereafter shall continue to be its Certificate of Incorporation until amended
as provided therein or under the DGCL. The bylaws of Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation and thereafter shall continue to be its bylaws until amended as
provided therein or under the DGCL.
1.6 DIRECTORS AND OFFICERS. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation at and after
the Effective Time, each to hold office in accordance with the Certificate of
Incorporation and bylaws of the Surviving Corporation, and the officers of Sub
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation at and after the Effective Time, in each case until the earlier of
their resignation or removal or their respective successors are duly elected or
appointed and qualified.
1.7 CONVERSION OF SECURITIES. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of EVI, GulfMark, Sub or their stockholders:
(a) Subject to adjustment pursuant to Section 1.7(e) hereof, each
share of GulfMark Common Stock issued and outstanding immediately prior to
the Effective Time (the "Shares"), shall be converted into the right to
receive .6695 of a share of EVI Common Stock (the "Exchange Ratio");
provided, however, that no fractional shares of EVI Common Stock shall be
issued and in lieu thereof, a cash payment shall be made in accordance with
Section 1.7(d) hereof. Except as set forth in the preceding sentence with
respect to cash in lieu of fractional shares, no other consideration will
be paid to GulfMark or its stockholders.
(b) Each Share owned directly or indirectly by GulfMark as treasury
stock and each Share owned by Sub, EVI or any direct or indirect
wholly-owned subsidiary of EVI or of GulfMark immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
(c) Each share of common stock, par value $1.00 per share, of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and nonassessable share of common stock,
$1.00 par value per share, of the Surviving Corporation.
2
<PAGE> 144
(d) No fractional shares of EVI Common Stock shall be issued in the
Merger. All fractional shares of EVI Common Stock that a holder of Shares
would otherwise be entitled to receive as a result of the Merger shall be
aggregated and if a fractional share of EVI Common Stock results from such
aggregation (i) such fractional share of EVI Common Stock shall be
disregarded and the shares of EVI Common Stock issuable to such holder
shall be rounded off to the nearest whole share of EVI Common Stock if such
fractional share of EVI Common Stock represents less than one-half of one
percent of the total shares of EVI Common Stock such holder is entitled to
receive in the Merger and (ii) in all other cases, such holder shall be
entitled to receive, in lieu of a fractional share of EVI Common Stock, an
amount in cash determined by multiplying the average of the daily closing
sale price per share of EVI Common Stock on the New York Stock Exchange
("NYSE") for the ten trading days immediately preceding the Effective Time
of the Merger by the fraction of a share of EVI Common Stock to which such
holder would otherwise have been entitled. No such cash in lieu of
fractional shares of EVI Common Stock shall be paid to any holder of
fractional shares of EVI Common Stock until Certificates (as defined in
Section 1.8(c)) representing such shares of EVI Common Stock are
surrendered and exchanged in accordance with Section 1.8(c). The total
amount of cash to be received by the stockholders of GulfMark in lieu of
fractional shares of EVI Common Stock will not exceed one percent of the
total fair market value of the EVI Common Stock (as of the date on which
the Effective Time occurs) to be issued in the Merger.
The Exchange Ratio is based on (i) 3,338,852 shares of GulfMark Common Stock
being issued and outstanding immediately prior to the Effective Time. In the
event the number of shares of GulfMark Common Stock outstanding immediately
prior to the Effective Time is greater or less than 3,338,852, or the number of
shares of EVI Common Stock held by GulfMark is greater or less than 2,235,572,
the Exchange Ratio shall be adjusted to equal the number of shares of EVI Common
Stock held by GulfMark immediately prior to the Effective Time divided by the
number of shares of GulfMark Common Stock issued and outstanding immediately
prior to the Effective Time.
1.8 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. Prior to the Effective Time of the Merger, EVI
shall select a bank or trust company to act as exchange agent (the
"Exchange Agent") for the issue of shares of EVI Common Stock upon
surrender of certificates representing Shares.
(b) Payment of Merger Consideration. EVI shall take all steps
necessary to enable and cause there to be provided to the Exchange Agent on
a timely basis, as and when needed after the Effective Time of the Merger,
certificates for the shares of EVI Common Stock to be issued upon the
conversion of the Shares pursuant to Section 1.7. EVI or the Surviving
Corporation shall timely make available to the Exchange Agent any cash
necessary to make payments in lieu of fractional shares.
(c) Exchange Procedure. As soon as reasonably practical after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder
of record of a certificate or certificates that immediately prior to the
Effective Time of the Merger represented outstanding Shares (the
"Certificates"), other than EVI, Sub and GulfMark and any directly or
indirectly wholly-owned subsidiary of EVI, Sub or GulfMark, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in a form and have such
other provisions as EVI and Sub may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for the certificates representing the shares of EVI Common Stock
and any cash in lieu of a fractional share. Upon surrender of a Certificate
for cancellation to the Exchange Agent or to such other agent or agents as
may be appointed by the Surviving Corporation, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate or certificates
representing the number of whole shares of EVI Common Stock into which the
Shares theretofore represented by such Certificate shall have been
converted pursuant to Section 1.7 and any cash payable in lieu of a
fractional Share, and the Certificate so surrendered shall forthwith be
canceled. If the shares of EVI Common Stock are to be
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issued to an individual, corporation, limited liability company,
partnership, governmental authority or any other entity (a "Person"), other
than the person in whose name the Certificate so surrendered is registered,
it shall be a condition of exchange that such Certificate shall be properly
endorsed or otherwise in proper form for transfer and that the Person
requesting such exchange shall pay any transfer or other taxes required by
reason of the exchange to a Person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 1.8, each Certificate shall be deemed at any
time after the Effective Time of the Merger to represent only the right to
receive upon such surrender the number of shares of EVI Common Stock and
cash, if any, in lieu of fractional shares of EVI Common Stock into which
the Shares theretofore represented by such Certificate shall have been
converted pursuant to Section 1.7. The Exchange Agent shall not be entitled
to vote or exercise any rights of ownership with respect to the shares of
EVI Common Stock held by it from time to time hereunder, except that it
shall receive and hold all dividends or other distributions paid or
distributed with respect thereto for the account of Persons entitled
thereto.
(d) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time of the Merger
with respect to the shares of EVI Common Stock with a record date after the
Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of EVI Common Stock
represented thereby and no cash payment in lieu of fractional shares shall
be paid to any such holder pursuant to Section 1.7(d) until the holder of
record of such Certificate shall surrender such Certificate. Subject to the
effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the record holder of the Certificates representing
the shares of EVI Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any cash payable
in lieu of a fractional share of EVI Common Stock to which such holder is
entitled pursuant to Section 1.7(d) and the amount of dividends or other
distributions with a record date after the Effective Time of the Merger
theretofore paid with respect to such whole shares of EVI Common Stock, as
the case may be, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective
Time of the Merger but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of EVI Common Stock.
(e) No Further Ownership Rights in Shares. All shares of EVI Common
Stock issued upon the surrender of Certificates in accordance with the
terms of this Article I, together with any dividends payable thereon to the
extent contemplated by this Section 1.8, shall be deemed to have been
exchanged and paid in full satisfaction of all rights pertaining to the
Shares theretofore represented by such Certificates and there shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the Shares that were outstanding immediately prior
to the Effective Time of the Merger. If, after the Effective Time of the
Merger, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
(f) None of EVI, Sub, GulfMark, the Surviving Corporation or their
transfer agents shall be liable to a holder of the Shares for any amount
properly paid to a public official pursuant to applicable property, escheat
or similar laws.
1.9 TAKING OF NECESSARY ACTION; FURTHER ACTION. The parties hereto shall
take all such reasonable and lawful action as may be necessary or appropriate in
order to effectuate the Merger and the Distribution as promptly as possible. If,
at any time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement or the Distribution
Agreement, and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
GulfMark or Sub as of the Effective Time, such corporations shall direct their
respective officers and directors to take all such lawful and necessary action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF EVI AND SUB. EVI and Sub hereby
jointly and severally represent and warrant to GulfMark that:
(a) Organization and Compliance with Law. Each of EVI and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware and has all requisite corporate power and
corporate authority to own, lease and operate all of its properties and
assets and to carry on its business as now being conducted, except where
the failure to be so organized, existing or in good standing would not have
a material adverse effect on the financial condition of EVI and its
subsidiaries (the "EVI Subsidiaries"), taken as a whole (an "EVI MAE").
Each of EVI and Sub is duly qualified to do business, and is in good
standing, in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except in such jurisdictions where the failure to
be duly qualified would not have an EVI MAE. Each of EVI and Sub is in
compliance with all applicable laws, judgments, orders, rules and
regulations, except where such failure would not have an EVI MAE. EVI has
heretofore delivered to GulfMark true and complete copies of EVI's
Certificate of Incorporation (the "EVI Certificate") and Sub's Certificate
of Incorporation and their respective bylaws as in existence on the date
hereof.
(b) Capitalization.
(i) The authorized capital stock of EVI consists of 40,000,000
shares of EVI Common Stock, par value $1.00 per share, and 3,000,000
shares of preferred stock, par value $1.00 per shares ("EVI Preferred
Stock"). As of September 30, 1996, there were issued and outstanding
22,939,625 shares of EVI Common Stock. As of October 8, 1996,
1,550,268 shares of EVI Common Stock were reserved for issuance
pursuant to EVI's 1981 Employee Stock Option Plan, 1992 Employee Stock
Option Plan, Non-Employee Director Stock Option Plan and restricted
stock plan for foreign key employees, of which 834,268 shares of EVI
Common Stock were reserved for issuance upon exercise of outstanding
options. At October 8, 1996, there were no shares of EVI Preferred
Stock issued or outstanding. No holder of EVI Common Stock is entitled
to preemptive rights under Delaware law or EVI's Certificate of
Incorporation.
(ii) As of the date hereof, the authorized capital stock of Sub
consists of 1,000 shares of common stock, par value $1.00 per share,
all of which are validly issued, fully paid and nonassessable and are
owned by EVI.
(iii) Each share of EVI Common Stock to be issued hereunder as a
result of the Merger will be fully paid and non-assessable upon
issuance.
(c) Authorization and Validity of Agreement. The execution and
delivery by EVI and Sub of this Agreement and the consummation by each of
them of the transactions contemplated hereby have been duly authorized by
all necessary corporate action (subject only, with respect to the Merger,
to approval of this Agreement by each of their stockholders as provided for
in Section 5.3). On or prior to the date hereof, the Board of Directors of
EVI or duly authorized committee thereof has determined to recommend
approval of the Merger to the stockholders of EVI, and such determination
is in effect on the date hereof. This Agreement has been duly executed and
delivered by EVI and Sub and is the valid and binding obligation of EVI and
Sub, enforceable against EVI and Sub in accordance with its terms.
(d) No Approvals or Notices Required; No Conflict. Neither the
execution and delivery of this Agreement nor the performance by EVI or Sub
of its obligations hereunder, nor the consummation of the transactions
contemplated hereby by EVI and Sub, will (i) conflict with the EVI
Certificate or the bylaws of EVI or Sub; (ii) assuming satisfaction of the
requirements set forth in clause (iii) below, violate any provision of law
applicable to EVI or any of the EVI Subsidiaries; (iii) except for (A)
requirements of Federal or state securities laws, (B) requirements arising
out of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), (C) requirements of notice filings in such
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foreign jurisdictions as may be applicable, and (D) the filing of a
Certificate of Merger by Sub in accordance with the DGCL, require any
consent or approval of, or filing with or notice to, any public body or
authority, domestic or foreign, under any provision of law applicable to
EVI or any of the EVI Subsidiaries; or (iv) require any consent, approval
or notice under, or violate, breach, be in conflict with or constitute a
default (or an event that, with notice or lapse of time or both, would
constitute a default) under, or permit the termination of any provision of,
or result in the creation or imposition of any lien, mortgage, pledge,
security interest, restriction on transfer, option, charge, right of any
third Person or any other encumbrance of any nature (a "Lien") upon any
properties, assets or business of EVI or any of the EVI Subsidiaries under,
any note, bond, indenture, mortgage, deed of trust, lease, franchise,
permit, authorization, license, contract, instrument or other agreement or
commitment or any order, judgment or decree to which EVI or any of the EVI
Subsidiaries is a party or by which EVI or any of the EVI Subsidiaries or
any of its or their assets or properties is bound or encumbered, except (A)
those that have already been given, obtained or filed and (B) those that,
in the aggregate, would not have an EVI MAE.
(e) Commission Filings; Financial Statements. EVI has filed all
reports and documents required to filed with the Securities and Exchange
Commission (the "Commission") since December 31, 1993. All reports,
registration statements and other filings (including all notes, exhibits
and schedules thereto and documents incorporated by reference therein)
filed by EVI with the Commission since December 31, 1993, through the date
of this Agreement, together with any amendments thereto, are sometimes
collectively referred to as the "EVI Commission Filings." EVI has
heretofore delivered to, or made accessible to, GulfMark copies of the EVI
Commission Filings. As of the respective dates of their filing with the
Commission, the EVI Commission Filings complied in all material respects
with the applicable requirements of the Securities Act of 1934 (the
"Securities Act"), the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules and regulations of the Commission thereunder, and did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(f) Absence of Certain Charges and Events. Since December 31, 1995,
except as contemplated by this Agreement or as disclosed in the EVI
Commission Filings filed with the Commission prior to the date hereof,
there has been no EVI MAE.
(g) Tax Matters.
(i) Except as set forth in Section 2.1(f) of the disclosure letter
delivered by EVI to GulfMark on the date hereof (the "EVI Disclosure
Letter"), all returns and reports, including, without limitation,
information and withholding returns and reports ("Tax Returns"), of or
relating to any foreign, federal, state or local tax, assessment or
other governmental charge ("Taxes" or a "Tax") that are required to be
filed on or before the Closing Date by or with respect to EVI or any of
the EVI Subsidiaries, or any other corporation that is or was a member
of an affiliated group (within the meaning of Section 1504(a) of the
Code) of corporations of which EVI was a member for any period ending on
or prior to the Closing Date, have been or will be duly and timely
filed, and all Taxes, including interest and penalties, due and payable
pursuant to such Tax Returns have been paid or, except as set forth in
Section 2.1(f) of the EVI Disclosure Letter, adequately provided for in
reserves established by EVI, except where the failure to file, pay or
provide for would not have a EVI MAE.
(ii) EVI has no present plan or intention after the Merger to (A)
liquidate the Surviving Corporation, (B) merge the Surviving Corporation
with or into another corporation, (C) sell or otherwise dispose of the
stock of the Surviving Corporation, (D) cause or permit the Surviving
Corporation to sell or otherwise dispose of any of the assets of
GulfMark or the assets of Sub vested in the Surviving Corporation except
for dispositions made in the ordinary course of business or transfers of
assets to a corporation controlled by the Surviving Corporation within
the meaning of Section 368(a)(2)(C) of the Code, (E) reacquire any of
the stock issued to the GulfMark
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stockholders pursuant to the Merger, (F) cause or permit the Surviving
Corporation to discontinue the historic business of GulfMark, or (G)
acquire Spinco or Spinco Assets.
(iii) EVI is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code or as defined in the Investment
Company Act of 1940 and the rules and regulations promulgated
thereunder.
(h) Voting Requirements. The affirmative vote of the holders of a
majority of the shares of EVI Common Stock present at the special
stockholders' meeting and entitled to vote is the only vote of the holders
and any class or series of the capital stock of EVI necessary to approve
this Agreement and the Merger.
(i) Brokers. Except for fees and expenses payable by EVI to Prudential
Securities Corporation, no broker, investment banker, or other Person
acting on behalf of EVI is or will be entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement.
(j) Information Supplied. None of the information supplied or to be
supplied by EVI for inclusion or incorporation by reference in (i) the
Registration Statement (as defined in Section 5.1) will, at the time the
Registration Statement is filed with the Commission, and at any time it is
amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and (ii) the Proxy Statement will,
at the date the Proxy Statement is first mailed to EVI's stockholders and
at the time of the EVI Stockholders Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder.
For purposes of this Agreement, the parties agree that the statements made
and information in the Registration Statement and the Proxy Statement
relating to the Federal income tax consequences of the transactions
contemplated hereby shall be deemed to be supplied by GulfMark and Spinco
and not by EVI or Sub.
2.2 REPRESENTATIONS AND WARRANTIES OF GULFMARK AND SPINCO. Each of
GulfMark and Spinco, jointly and severally hereby represents and warrants to EVI
that:
(a) Organization. Each of GulfMark and Spinco is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Delaware and Ercon Development Company, a wholly owned subsidiary
of GulfMark to be merged into GulfMark prior to the Effective Time
("Ercon") is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Each of GulfMark, Spinco and
Ercon has all requisite corporate power and corporate authority and all
necessary governmental authorizations to own, lease and operate all of its
properties and assets and to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing
or to have such governmental authority would not (i) have a material
adverse effect on the financial condition of GulfMark or Ercon after giving
effect to the Distribution or (ii) prevent or adversely affect the ability
of GulfMark and Spinco to perform and comply with their respective
obligations under this Agreement, the Distribution Agreement or any other
agreement to be executed and delivered in connection with the transactions
contemplated hereby or thereby (a "GulfMark MAE"). Except as set forth in
Section 2.2(a) of the disclosure letter delivered by GulfMark to EVI on the
date hereof (the "GulfMark Disclosure Letter"), each of GulfMark, Ercon and
Spinco is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except in such jurisdictions where the failure to
be duly qualified does not and would not have a GulfMark MAE. Each of
GulfMark, Ercon and Spinco is in compliance with all applicable laws,
judgments, orders, rules and regulations, domestic and foreign, except
where failure to be in such compliance would not have a GulfMark MAE.
GulfMark has heretofore delivered to EVI true and
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complete copies of GulfMark's Certificate of Incorporation (the "GulfMark
Certificate") and bylaws, Spinco's Certificate of Incorporation and bylaws
and Ercon's Articles of Incorporation and bylaws as in existence on the
date hereof.
(b) Capitalization.
(i) The authorized capital stock of GulfMark consists of 10,000,000
shares of GulfMark Common Stock, par value $1.00 per share and 500,000
shares of Preferred Stock, par value $50.00 per share. As of September
30, 1996, there were issued and outstanding 3,338,852 shares of GulfMark
Common Stock and no shares of GulfMark Common Stock were held as
treasury shares. There are no outstanding shares of GulfMark Preferred
Stock. A total of 390,833 shares of GulfMark Common Stock have been
reserved for issuance pursuant to the stock option plans described in
Section 2.2(b)(iii). All issued and outstanding shares of GulfMark
Common Stock are validly issued, fully paid and nonassessable and no
holder thereof is entitled to preemptive rights. GulfMark is not a party
to, and is not aware of, any voting agreement, voting trust or similar
agreement or arrangement relating to any class or series of its capital
stock, or any agreement or arrangement providing for registration rights
with respect to any capital stock or other securities of GulfMark.
(ii) The authorized capital stock of Ercon consists of 10,000
shares of Ercon Common Stock, par value $1.00 per share. As of September
30, 1996, there were issued and outstanding 10,000 shares of Ercon
Common Stock and no shares of Ercon Common Stock were held as treasury
shares. All issued and outstanding shares of Ercon Common Stock are
validly issued, fully paid and nonassessable and no holder thereof is
entitled to preemptive rights. Ercon is not a party to, any voting
agreement, voting trust or similar agreement or arrangement relating to
any class or series of its capital stock, or any agreement or
arrangement providing for registration rights with respect to any
capital stock or other securities of Ercon. GulfMark owns all of the
issued and outstanding Common Stock of Ercon.
(iii) As of the date hereof, there are outstanding options (the
"GulfMark Options") to purchase an aggregate of 109,500 shares of
GulfMark Common Stock under the 1987 Stock Option Plan and the Amended
and Restated 1993 Non-Employee Director Stock Option Plan (collectively
the "GulfMark Plans"). All GulfMark Options will be transferred to
Spinco's Adjustment Plans prior to the Effective Time. As of the
Effective Time, there will be no options outstanding under the GulfMark
Plans. There are not now (other than as set forth in this Section
2.2(b)), and at the Effective Time there will not be, any (A) shares of
capital stock or other equity securities of GulfMark outstanding other
than GulfMark Common Stock issued pursuant to the exercise of GulfMark
Options or (B) outstanding options, warrants, scrip, rights to subscribe
for, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of any
class of capital stock of GulfMark, or contracts, understandings or
arrangements to which GulfMark is a party, or by which it is or may be
bound, to issue additional shares of its capital stock or options,
warrants, scrip or rights to subscribe for, or securities or rights
convertible into or exchangeable for, any additional shares of its
capital stock.
(iv) GulfMark owns all of the issued and outstanding Common Stock
of Spinco.
(v) Section 2.2(b)(v) of the GulfMark Disclosure Letter sets forth
a list of all corporations, partnerships, limited liability companies
and other entities of which GulfMark owns directly or indirectly, an
equity interest (such entities, excluding EVI and its subsidiaries
referred to herein as the "GulfMark Subsidiaries").
(c) Authorization and Validity of Agreement. Each of GulfMark and
Spinco has all requisite corporate power and authority to enter into this
Agreement, the Distribution Agreement and the other agreements and
instruments contemplated to be executed and delivered in connection with
the Merger and the Distribution (the Distribution Agreement and such other
agreements and instruments contemplated to be executed and delivered in
connection with the Merger and the Distribution being referred to
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as the "Other Agreements") and to perform its obligations hereunder and
thereunder. The execution and delivery by GulfMark and Spinco of this
Agreement and the Other Agreements to which it is a party and the
consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action (subject only, with
respect to the Merger and the Distribution, to approval of this Agreement
and the Contribution and Distribution by the GulfMark stockholders as
provided for in Section 5.3). On or prior to the date hereof the Board of
Directors of GulfMark has determined to recommend approval of the Merger
and the Contribution and Distribution to the stockholders of GulfMark, and
such determination is in effect as of the date hereof. This Agreement has
been duly executed and delivered by GulfMark and Spinco and is the valid
and binding obligation of GulfMark and Spinco, enforceable against them in
accordance with its terms. The Other Agreements, when executed and
delivered by GulfMark and Spinco, as applicable, will constitute valid and
binding obligations of GulfMark and Spinco, enforceable against them in
accordance with their respective terms.
(d) No Approvals or Notices Required; No Conflict with Instruments to
which GulfMark is a Party. The execution and delivery of this Agreement and
the Other Agreements do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof
and thereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of or "put"
right with respect to any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of GulfMark, Ercon Spinco or any of their subsidiaries under, any
provision of (i) the GulfMark Certificate or bylaws of GulfMark, the Ercon
Articles of Incorporation or bylaws of Ercon, the Spinco Certificate of
Incorporation or bylaws of Spinco or any provision of the comparable
organizational documents of their subsidiaries, (ii) except as set forth in
Section 2.2(d) of the GulfMark Disclosure Letter, any loan or credit
agreement, note, bond, mortgage, indenture, lease, guaranty or other
financial assurance agreement or other agreement, instrument, permit,
concession, franchise or license applicable to GulfMark or Ercon, or their
respective properties or assets, (iii) except as set forth in Section
2.2(d) of the GulfMark Disclosure Letter, any loan or credit agreement,
note, bond, mortgage, indenture, lease, guaranty or other financial
assurance agreement or other agreement, instrument, permit, concession,
franchise or license applicable to Spinco or any other GulfMark Subsidiary
(other than Ercon), or their respective properties or assets and (iv)
subject to governmental filing and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation or arbitration award applicable to GulfMark, Ercon,
Spinco or any of their subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii) and (iii), any such
conflicts, violations, defaults, rights or Liens that individually or in
the aggregate would not have a GulfMark MAE. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
agency, domestic or foreign, including local authorities (a "Governmental
Entity"), is required by or with respect to GulfMark, Ercon, Spinco or any
of their subsidiaries in connection with the execution and delivery of this
Agreement by GulfMark, and Spinco or the consummation by GulfMark, Ercon
and Spinco of the transactions contemplated hereby, except for (i) the
filing of a pre-merger notification and report form by GulfMark under the
HSR Act, (ii) the filing with the Commission of (A) a proxy or information
statement relating to Stockholder Approval (such proxy or information
statement as amended or supplemented from time to time, the "Proxy
Statement"), and (B) such reports under Section 13(a) of the Exchange Act
as may be required in connection with this Agreement and the transactions
contemplated hereby, (iii) the filing of a Certificate of Merger with the
Delaware Secretary of State and the Texas Secretary of State with respect
to the merger of Ercon into GulfMark and the filing of appropriate
document(s) with the relevant authority of other states in which each of
Ercon and GulfMark is qualified to do business, (iv) the filing of the
Certificate of Merger with the Delaware Secretary of State with respect to
the Merger as provided in the DGCL and appropriate documents with the
relevant authorities of other states in which each of GulfMark and Spinco
is qualified to do business and (v) such other consents, approvals, orders,
authorizations, registrations, declarations, filings and notices as are set
forth in Section 2.2(d) of the GulfMark Disclosure Letter.
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(e) Commission Filings; Financial Statements. GulfMark has filed all
reports, registration statements and other filings, together with any
amendments required to be made with respect thereto, that they have been
required to file with the Commission. All reports, registration statements
and other filings (including all notes, exhibits and schedules thereto and
documents incorporated by reference therein) filed by GulfMark with the
Commission since December 31, 1993 through the date of this Agreement,
together with any amendments thereto, are sometimes collectively referred
to as the "GulfMark Commission Filings." GulfMark has heretofore delivered
to EVI copies of the GulfMark Commission Filings. As of the respective
dates of their filing with the Commission, the GulfMark Commission Filings
complied in all material respects with the Securities Act, the Exchange Act
and the rules and regulations of the Commission thereunder, and did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. To the best knowledge of GulfMark, all material contracts of
GulfMark and its subsidiaries have been included in the GulfMark's filings
with the Commission since the initial registration of its stock under the
Exchange Act, except for those contracts not required to be filed pursuant
to the rules and regulations of the Commission.
Each of the consolidated financial statements (including any related
notes or schedules) included in the GulfMark Commission Filings was
prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be noted therein or in the
notes or schedules thereto) and complied with the rules and regulations of
the Commission. Such consolidated financial statements fairly present the
consolidated financial position of GulfMark as of the dates thereof and the
results of operations, cash flows and changes in stockholders' equity for
the periods then ended (subject, in the case of the unaudited interim
financial statements, to normal year-end audit adjustments on a basis
comparable with past periods). As of the date hereof, GulfMark has no
liabilities, absolute or contingent, that may reasonably be expected to
have a GulfMark MAE, that are not reflected in the GulfMark Commission
Filings, except (i) those incurred in the ordinary course of business
consistent with past operations and not relating to the borrowing of money,
and (ii) those set forth in Section 2.2(e) of the GulfMark Disclosure
Letter.
(f) Conduct of Business in the Ordinary Course; Absence of Certain
Changes and Events. Since December 31, 1995, except as contemplated by this
Agreement, the Distribution Agreement or as disclosed in the GulfMark
Commission Filings or set forth in Section 2.2(f) of the GulfMark
Disclosure Letter, GulfMark and its subsidiaries have conducted their
respective businesses only in the ordinary and usual course in accordance
with past practice, and there has not been: (i) a GulfMark MAE or any other
material adverse change in the financial condition, results of operations,
assets or business of GulfMark, taken as a whole, or (ii) to the knowledge
of GulfMark, any other condition, event or development that reasonably may
be expected to result in any such material adverse change or a GulfMark
MAE; (iii) any change by GulfMark or Ercon in its accounting methods,
principles or practices; (iv) any revaluation by GulfMark or Ercon of any
of its assets, including, without limitation, writing down the value of
inventory or writing off notes or accounts receivable other than in the
ordinary course of business and consistent with past practice; (v) any
entry by GulfMark or Ercon into any commitment or transaction that would be
material to GulfMark or Ercon; (vi) any declaration, setting aside or
payment of any dividends or distributions in respect of the GulfMark Common
Stock or any redemption, purchase or other acquisition of any of its
securities; (vii) any damage, destruction or loss (whether or not covered
by insurance) adversely affecting the properties or business of GulfMark or
Ercon; (viii) any increase in indebtedness of borrowed money other than
borrowing under existing credit facilities as disclosed in Section 2.2(f)
of the GulfMark Disclosure Letter; (ix) any granting of a security interest
or Lien on any property or assets of GulfMark or Ercon, other than (A)
Liens for taxes not due and payable and (B) inchoate mechanics',
warehousemen's and other statutory Liens incurred in the ordinary course of
business (collectively, "Permitted Liens"); or (x) any increase in or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other
employee benefit plan or any other increase in the compensation payable or
to become
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payable to any directors, officers or key employees of GulfMark or Ercon or
which GulfMark or Ercon would be responsible.
(g) Litigation. Except as disclosed in the GulfMark Commission Filings
or as set forth in Section 2.2(g) of the GulfMark Disclosure Letter, there
are no claims, actions, suits, investigations, inquiries or proceedings,
("Demands"), pending or, to the knowledge of GulfMark, threatened against
or affecting (i) GulfMark or Ercon or any of their respective properties at
law or in equity, or any of their employee benefit plans or fiduciaries of
such plans, or (ii) Spinco or any GulfMark or Spinco subsidiaries or any of
their respective properties at law or in equity, or any of their respective
employee benefit plans or fiduciaries of such plans, before or by any
federal, state, municipal or other governmental agency or authority, or
before any arbitration board or panel (each a "Governmental Entity"),
wherever located (i) that exist today or (ii) that would otherwise, if
adversely determined, have a GulfMark MAE. None of GulfMark, Ercon or
Spinco is subject to any judicial, governmental or administrative order,
writ, judgment, injunction or decree.
(h) Employee Benefit Plans.
(i) Section 2.2(h) of the GulfMark Disclosure Letter provides a
description of each of the following which is sponsored, maintained or
contributed to by GulfMark or any corporation, trade, business or entity
under common control with GulfMark within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001 of ERISA (a "GulfMark ERISA
Affiliate") for the benefit of its employees, or has been so sponsored,
maintained or contributed to within three years prior to the Closing
Date.
(A) each "employee benefit plan," as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), ("Plan"); and
(B) each stock option plan, collective bargaining agreement,
bonus plan or arrangement, incentive award plan or arrangement,
vacation policy, severance pay plan, policy or agreement, deferred
compensation agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement, employment
agreement and each other employee benefit plan, agreement,
arrangement, program, practice or understanding that is not described
in Section 2.2(h)(i)(A) to which GulfMark or Ercon is a party or has
any obligation ("Benefit Program or Agreement").
True and complete copies of each of the Plans, Benefit Programs or
Agreements, related trusts, if applicable, and all amendments thereto,
together with (i) the Forms 5500, 990 and 1041, as applicable, for the
three most recent fiscal years, (ii) all current summary plan
descriptions for each such Plan, (iii) the most recent Internal Revenue
Service determination letters for each such Plan, as applicable, and all
correspondence with the Internal Revenue Service and the Department of
Labor relating to such Plans, Benefit Programs and Agreements have been
furnished to EVI.
(ii) Except as otherwise set forth in Section 2.2(h) of the
GulfMark Disclosure Letter,
(C) None of GulfMark or any GulfMark ERISA Affiliate contributes
to or has an obligation to contribute to, or has at any time
contributed to or had an obligation to contribute to, a plan subject
to Title IV of ERISA, including, without limitation, a multi employer
plan within the meaning of Section 3(37) of ERISA, nor have such
companies engaged in any transaction described in Sections 406 and
407 of ERISA (unless exempt under Section 408) or Section 4975 of the
Code (unless exempt);
(D) Each Plan and each Benefit Program or Agreement has been
administered, maintained and operated in all material respects in
accordance with the terms thereof and in compliance with its
governing documents and applicable law (including, where applicable,
ERISA and the Code and timely filing of Form 5500's for each year);
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(E) There is no matter pending with respect to any of the Plans
before any governmental agency, and there are no actions, suits or
claims pending (other than routine claims for benefits) or, to the
knowledge of GulfMark or Spinco, threatened against, or with respect
to, any of the Plans or Benefit Programs or Agreements or their
assets;
(F) No act, omission or transaction has occurred which would
result in imposition on GulfMark or any GulfMark ERISA Affiliate of
breach of fiduciary duty liability damages under Section 409 of
ERISA, a civil penalty assessed pursuant to subsections (c), (i) or
(l) of Section 502 of ERISA or a tax imposed pursuant to Chapter 43
of Subtitle D of the Code; and
(G) Except as provided in Section 5.7, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby will not require GulfMark or any GulfMark ERISA
Affiliate to make a larger contribution to, or pay greater benefits
under, any Plan, Benefit Program or Agreement than it otherwise would
or create or give rise to any additional vested rights or service
credits under any Plan or Benefit Program or Agreement or cause the
companies to make accelerated payments.
(iii) Except as set forth in Section 2.2(h) of the GulfMark
Disclosure Letter, termination of employment of any employee of GulfMark
or Ercon immediately after consummation of the transactions contemplated
by this Agreement would not result in payments under the Plans, Benefit
Programs or Agreements which, in the aggregate, would result in
imposition of the sanctions imposed under Sections 280G and 4999 of the
Code.
(iv) Each Plan may be unilaterally amended or terminated in its
entirety without liability except as to benefits accrued thereunder
prior to such amendment or termination.
(v) Except as set forth in Section 2.2(h) of the GulfMark
Disclosure Letter, none of the employees of GulfMark or Ercon are
subject to union or collective bargaining agreements.
(vi) None of GulfMark or any of the GulfMark ERISA Affiliates has
agreed or is obligated to provide retiree medical coverage and each of
such companies has fully complied with all obligations under COBRA
applicable to it.
(i) Taxes.
(i) Except as set forth in Section 2.2(i) of the GulfMark
Disclosure Letter, all Tax Returns of or relating to any Tax that are
required to be filed on or before the Closing Date by or with respect to
GulfMark or any GulfMark Subsidiary, or any other corporation that is or
was a member of an affiliated group (within the meaning of Section
1504(a) of the Code) of corporations of which GulfMark was a member for
any period ending on or prior to the Closing Date, have been or will be
duly and timely filed, and all Taxes, including interest and penalties,
due and payable pursuant to such Tax Returns have been or will be duly
and timely paid or adequately provided for in reserves established by
GulfMark or any such GulfMark Subsidiary, except where the failure to
file, pay or provide for would not have a material adverse effect on the
financial condition, results of operations, or business of GulfMark or
otherwise result in a GulfMark MAE. All income Tax returns of or with
respect to GulfMark or any GulfMark Subsidiary have been audited by the
applicable Governmental Authority, or the applicable statute of
limitations has expired, for all periods up to and including the tax
year ended December 31, 1991. There is no material claim against
GulfMark or any GulfMark Subsidiary with respect to any Taxes, and no
material assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to GulfMark
or any GulfMark Subsidiary that has not been adequately provided for in
reserves established by GulfMark or such GulfMark Subsidiary. The total
amounts set up as liabilities for current and deferred Taxes in the
consolidated financial statements included in the GulfMark Commission
Filings have been prepared in accordance with generally accepted
accounting principles and are sufficient to cover the payment of all
material Taxes, including any penalties or interest thereon and whether
or not assessed or disputed, that are, or are hereafter found to be, or
to have been, due with respect to the
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operations of GulfMark or any GulfMark Subsidiary through the periods
covered thereby. GulfMark has (and as of the Closing Date will have)
made estimated tax payments for taxable years for which the United
States consolidated federal income Tax return is not yet due required
with respect to Taxes. Except as set forth in Section 2.2(i) of the
GulfMark Disclosure Letter, no waiver or extension of any statute of
limitations as to any federal, state, local or foreign Tax matter has
been given by or requested from GulfMark or any GulfMark Subsidiary.
Except for statutory Liens for current Taxes not yet due, no Liens for
Taxes exist upon the assets of GulfMark. Except as set forth in
paragraph 2.2(i) of the GulfMark Disclosure Letter, none of GulfMark or
any GulfMark Subsidiary has filed consolidated income Tax Returns with
any corporation, other than consolidated federal, state or foreign
income Tax returns by GulfMark for any taxable period which is not now
closed by the applicable statute of limitations. None of GulfMark or any
GulfMark Subsidiary has any deferred intercompany gain as defined in
Treasury Regulations Section 1.1502-13.
(ii) As of the Closing Date, to GulfMark's knowledge, there is no
plan or intention by the stockholders of GulfMark to sell, exchange or
otherwise dispose of a number of shares of EVI received in the Merger
that would reduce the GulfMark stockholders' ownership of EVI shares to
a number of shares having a value, as of the date of the Merger, of less
than 50% of the value of all of the formerly outstanding Shares as of
the same date. For purposes of this representation, Shares exchanged for
cash or other property or exchanged in lieu of fractional shares of EVI
will be treated as outstanding Shares on the date of the Merger.
Moreover, the shares of EVI held by the GulfMark stockholders and
otherwise sold, redeemed or disposed of prior or subsequent to the
Merger will be considered in making this representation.
(iii) GulfMark is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(iv) GulfMark is not under the jurisdiction of a court in a Title
11 or similar case with the meaning of Section 368(a)(3)(A) of the Code.
(v) There is no intercorporate indebtedness existing between
GulfMark and EVI that was issued, acquired or will be settled at a
discount.
(j) Environmental Matters. Except as set forth in Section 2.2(j) of
the GulfMark Disclosure Letter, (i) the properties, operations and
activities of GulfMark and each of its subsidiaries complies in all
material respects with all applicable Environmental Laws; (ii) none of
GulfMark or any of its GulfMark Subsidiaries is subject to any existing,
pending or, to the knowledge of GulfMark, threatened action, suit,
investigation, inquiry or proceeding by or before any governmental
authority under any Environmental Law; (iii) except where the failure would
have a GulfMark MAE, all notices, permits, licenses, or similar
authorizations, if any, required to be obtained or filed by GulfMark or
Ercon under any Environmental Law in connection with any aspect of the
business of GulfMark, Ercon or any GulfMark Subsidiary, including without
limitation those relating to the treatment, storage, disposal or release of
a hazardous substance or solid waste, have been duly obtained or filed and
will remain valid and in effect after the Merger and the Distribution, and
GulfMark and Ercon is in compliance with the terms and conditions of all
such notices, permits, licenses and similar authorizations; (iv) GulfMark
and each of its subsidiaries has satisfied and are currently in compliance
with all financial responsibility requirements applicable to their
operations and imposed by any governmental authority under any other
Environmental Law, and none of such parties has received any notice of
noncompliance with any such requirements; (v) to GulfMark's knowledge,
there are no physical or environmental conditions existing on any property
currently owned or previously owned by GulfMark or any entity in which it
has or had ownership interest that could reasonably be expected to give
rise to any on-site or off-site remedial obligations under any
Environmental Laws; and (vi) to GulfMark's knowledge, since the effective
date of the relevant requirements of applicable Environmental Laws, all
hazardous substances or solid wastes generated by GulfMark or used in
connection with their properties or operations have been transported only
by carriers authorized under Environmental Laws to transport such
substances and wastes, and disposed of only at treatment, storage, and
disposal facilities authorized under environmental laws to
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treat, store or dispose of such substances and wastes, and, to the
knowledge of GulfMark, such carriers and facilities have been and are
operating in compliance with such authorizations and are not the subject of
any existing, pending, or overtly threatened action, investigation, or
inquiry by any governmental authority in connection with any Environmental
Laws.
For purposes of this Agreement, the term "Environmental Laws" shall
mean any and all laws, statutes, ordinances, rules, regulations, orders or
determinations of any Governmental Authority pertaining to health or the
environment currently in effect in any and all jurisdictions in which the
party in question and its subsidiaries own property or conduct business,
including without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of
1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Hazardous & Solid Waste Amendments Act of 1984, as amended,
the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, the Oil Pollution Act
of 1990 ("OPA"), any state laws pertaining to the handling of oil and gas
exploration and production wastes or the use, maintenance, and closure of
pits and impoundments, and all other environmental conservation or
protection laws. For purposes of this Agreement, the terms "hazardous
substance" and "release" have the meanings specified in RCRA; provided,
however, that to the extent the laws of the state in which the property is
located establish a meaning for "hazardous substance," "release," "solid
waste" or "disposal" that is broader than that specified in either CERCLA
or RCRA, such broader meaning shall apply. For purposes of this Agreement,
the term "Governmental Authority" includes the United States, any foreign
jurisdiction, the state, county, city, and political subdivisions in which
the party in question owns property or conducts business, and any agency,
department, commission, board, bureau or instrumentality of any of them.
(k) Investment Company. GulfMark is not an investment company as
defined in the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder.
(l) Severance Payments. Except as set forth in Section 2.2(l) of the
GulfMark Disclosure Letter, GulfMark will not have any liability or
obligation to pay a severance payment or similar obligation to any of their
respective employees, officers, or directors as a result of the Merger or
the transactions contemplated by this Agreement, nor will any of such
Persons be entitled to an increase in severance payments or other benefits
as a result of the Merger, the Contribution, the Distribution or the
transactions contemplated by this Agreement or the Other Agreements in the
event of the subsequent termination of their employment.
(m) Voting Requirements. The affirmative vote of the holders of a
majority of the outstanding shares of GulfMark Common Stock is the only
vote of the holders of any class or series of the capital stock of GulfMark
necessary to approve this Agreement, the Merger, the Contribution, the
Distribution and the transactions contemplated hereby and by the Other
Agreements in order to comply with the DGCL, GulfMark's Certificate of
Incorporation and Bylaws and the rules and regulations of The NASDAQ Stock
Market.
(n) Brokers. Except for Jefferies & Company, Inc., whose fees shall be
paid by GulfMark, no broker, investment banker, or other Person acting on
behalf of GulfMark is or will be entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement.
(o) Assets and Liabilities at Closing. At the Effective Time:
(i) the assets of GulfMark shall consist of (1) 2,235,572 shares of
EVI Common Stock, which shall be held free and clear of all Liens, (2)
200 shares of Common Stock of AIOC, which represents all of the
ownership interest of GulfMark and the GulfMark Subsidiaries in AIOC,
(3) all assets used in connection with the business and operations
previously conducted by Ercon, (4) all tax, financial, accounting and
other general corporate records, including records relating to all
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past operations and subsidiaries (including partnerships and joint
ventures) other than those constituting a part of the Assets, (5)
GulfMark's accounts receivable (billed and unbilled) relating to the
business conducted by Ercon, (6) cash in the amount of $300,000 and (7)
cash in the amount of the transactional expenses of GulfMark to be paid
by GulfMark relating to the Contribution, the Distribution and the
Merger;
(ii) the liabilities of GulfMark shall consist only of certain
expenses related to the Merger and the Distribution which shall have
been fully reserved for in the Net Working Capital, and GulfMark's
accounts payable relating to the business conducted by Ercon, which
shall have been fully reserved for in the Net Working Capital;
(iii) all obligations and liabilities (fixed or contingent, known
or unknown) of GulfMark shall have been assumed by Spinco other than
liabilities described in clause (ii) and the obligation to perform in
the future under contracts relating to Ercon that will be identified on
schedules to the Distribution Agreement; and
(iv) the Net Working Capital of GulfMark shall equal $300,000. "Net
Working Capital" shall mean the current assets of GulfMark excluding
inventory, less the liabilities of GulfMark as reflected on the balance
sheet of GulfMark as of the Effective Time on an unconsolidated basis.
Current assets and liabilities shall have the meaning attributable to
them by generally accepted account principles as applied historically by
GulfMark, provided, however, for purposes of the definition of Net
Working Capital, (i) accounts receivable shall be net of reserves for
bad debt and doubtful accounts, (ii) the stock of AIOC shall not be
considered a current asset and (iii) liabilities shall mean the full
undiscounted amount of any liabilities of GulfMark and Ercon, including
any liabilities that will accrue as a result of the Merger, the
Contribution or the Distribution, whether or not such liabilities would
be required to be reflected as a liability by generally accepted
accounting principles.
(p) Compliance with Laws. GulfMark, Spinco, Ercon and each of their
respective subsidiaries hold all required, necessary or applicable permits,
licenses, variances, exemptions, orders, franchises and approvals of all
Governmental Entities, except where the failure to so hold could not
reasonably be expected to have a GulfMark MAE (the "GulfMark Permits"). All
applications with respect to such permits, licenses, variances, exemptions,
orders, franchises and approvals were complete and correct in all material
respects when made and neither GulfMark nor Spinco know of any reason why
any of such permits, licenses, variances, exemptions, orders, franchises
and approvals would be subject to cancellation. GulfMark, Spinco, Ercon,
and each of their respective subsidiaries are in compliance with the terms
of the GulfMark Permits except where the failure to so comply could not
reasonably be expected to have a GulfMark MAE. None of GulfMark, Spinco,
Ercon, nor any of their respective subsidiaries has violated or failed to
comply with any statute, law, ordinance, regulation, rule, permit or order
of any Federal, state or local government, domestic or foreign, or any
Governmental Entity, any arbitration award or any judgment, decree or order
of any court or other Governmental Entity, applicable to GulfMark, Spinco,
Ercon or any of their respective subsidiaries or their respective business,
assets or operations, except for violations and failures to comply that
would not have a GulfMark MAE.
(q) Contracts.
(i) Section 2.2(q) to the GulfMark Disclosure Letter contains a
complete list of the following contracts, agreements, arrangements and
commitments: (i) all employment or consulting contracts or agreements to
which GulfMark or Ercon is contractually obligated; (ii) current leases,
sales contracts and other agreements with respect to any property, real
or personal, of GulfMark or Ercon or to which GulfMark or Ercon is
contractually obligated; (iii) contracts or commitments for capital
expenditures or acquisitions in excess of $30,000 to which GulfMark or
Ercon is obligated; (iv) agreements, contracts, indentures or other
instruments relating to the borrowing of money, or the guarantee of any
obligation for the borrowing of money, to which GulfMark, Ercon, Spinco
or any of their subsidiaries is a party or any of their respective
properties is bound; (v) contracts or
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agreements or amendments thereto that would be required to be filed as
an exhibit to an Annual Report on Form 10-K filed by GulfMark as of the
date hereof that has not been filed as an exhibit to the GulfMark's
Annual Report on Form 10-K for the year ended December 31, 1995, filed
by it with the Commission or any report filed with the Commission under
the Exchange Act since such date; (vi) all outstanding proposals to
which Ercon is subject to as of November 21, 1996; (vii) all
corporations, partnerships, limited liability companies and other
entities which GulfMark has owed, directly or indirectly, an equity
interest since 1969, in which the officers of GulfMark are aware after
reasonable investigation, (viii) all material indemnification and
guaranty or other similar obligations to which GulfMark or Ercon is
bound and which the officers of GulfMark or Ercon, after reasonable
investigation, are aware, (ix) any outstanding bonds, letters of credit
posted or guaranteed by GulfMark or Ercon with respect to any Person,
(x) any covenants not to compete or other obligations affecting GulfMark
or Ercon that would restrict the Surviving Corporation or EVI and its
affiliates from engaging in any business or activity which the officers
of GulfMark or Ercon are aware, after reasonable investigation and (xi)
contracts, agreements, arrangements or commitments, other than the
foregoing that could reasonably be considered to be material to GulfMark
or Ercon.
(ii) True and correct copies of all the instruments described in
Section 2.2(q) of the GulfMark Disclosure Letter have been furnished or
made a available to EVI. Except as noted in the GulfMark Disclosure
Letter, all such agreements, arrangements or commitments are valid and
subsisting and each of GulfMark, Ercon, Spinco and their respective
subsidiaries to the extent each is a party, has duly performed its
obligations thereunder in all material respects to the extent such
obligations have accrued, and no breach or default thereunder by
GulfMark, Ercon, Spinco or their respective subsidiaries or, to the
knowledge of GulfMark, any other party thereto has occurred that could
impair the ability of each of GulfMark, Ercon, Spinco or their
respective subsidiaries to enforce any material rights thereunder. There
are no material liabilities of any of the parties to any of the
contracts between GulfMark, Ercon, Spinco or any of their subsidiaries
and third parties arising from any breach of or default in any provision
thereof or which would permit the acceleration of any obligation of any
party thereto or the creation of a Lien upon any asset of GulfMark,
Ercon, Spinco or any of their subsidiaries. Neither GulfMark nor Ercon
has any information that might reasonably indicate that any of the
material customers or suppliers to Ercon intend to cease purchasing
from, selling to or dealing with it, nor has any information been
brought to the attention of GulfMark or Ercon that might reasonably lead
either to believe any such customer or supplier intends to alter in any
material respect the amount of such purchases, sales or the extent of
dealings with GulfMark or Ercon or would alter in any significant
respect such purchases, sales or dealings in the event of the
consummation of the transactions contemplated hereby.
(r) Title to Property.
(i) At the Effective Time, GulfMark will have good and marketable
title to, or valid leasehold interests in, all its properties and
assets. GulfMark has good and valid title to 2,235,572 shares of EVI
Common Stock, free and clear of all Liens. GulfMark has good and valid
title to 200 shares of AIOC Common Stock, free and clear of all Liens.
(ii) Each of GulfMark and Ercon has complied in all material
respects with the terms of all leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and
effect. Each of GulfMark and Ercon enjoys peaceful and undisturbed
possession under all such leases.
(s) Insurance Policies. Section 2.2(s) of the GulfMark Disclosure
Letter contains a correct and complete description of all insurance
policies of GulfMark covering GulfMark, Ercon and their subsidiaries, any
employees or other agents of GulfMark and its subsidiaries or any assets of
GulfMark, Ercon and their subsidiaries. Each such policy is in full force
and effect, is with responsible insurance carriers and is substantially
equivalent in coverage and amount to policies covering companies of the
size of GulfMark and in the business in which GulfMark and its subsidiaries
is engaged, in light of the risk to
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which such companies and their employees, businesses, properties and other
assets may be exposed. All retroactive premium adjustments under any
worker's compensation policy of GulfMark or any of its subsidiaries have
been recorded in GulfMark's financial statements in accordance with
generally accepted accounting principles and are reflected in the financial
statements contained in the Commission Filings.
(t) Loans. Section 2.2(t) of the GulfMark Disclosure Letter sets forth
all existing loans, advances or other extensions of credit (excluding
accounts receivable arising in the ordinary course of business) by GulfMark
or Ercon subsidiaries to any party other than intercompany loans, advances,
guaranties or extensions of credit. All items listed in Section 2.2(t) of
the GulfMark Disclosure Letter will be repaid in full, or assumed by
Spinco, prior to the Effective Time of the Merger. All intercompany
obligations and loans between GulfMark and its subsidiaries, including
Spinco, will be extinguished prior to the Distribution without any ongoing
liability to GulfMark or Spinco with respect thereto, except as set forth
herein or in the Distribution Agreement.
(u) No Fraudulent Transfer. GulfMark has not within the last twelve
months made any transfer or incurred any obligation with actual intent to
hinder, delay or defraud any entity to which it was or may become indebted
and it has not transferred any material property without receiving
reasonably equivalent value for any such transfer obligation. Both
immediately prior to and immediately after the Distribution and the Merger,
(i) the fair value of GulfMark's assets and Spinco's assets after the
Distribution at a fair valuation exceeds its debts and liabilities,
subordinated, contingent or otherwise, (ii) the present fair saleable value
of GulfMark's and Spinco's property is greater than the amount that will be
required to pay its probable liability on its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and mature, (iii) GulfMark prior to the Distribution and Spinco
after the Distribution each reasonably expect to be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, and (iv) GulfMark before the
Distribution and Spinco after the Distribution will not have unreasonably
small capital with which to conduct the business in which it is engaged as
such business is now conducted and is proposed to be conducted. For all
purposes of clauses of (i) through (iv), the amount of contingent
liabilities at any time shall be computed as the amount that, in light of
all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
(v) Information Supplied. None of the information supplied or to be
supplied by GulfMark for inclusion or incorporation by reference in (i) the
Registration Statement (as defined in Section 5.1) will, at the time the
Registration Statement is filed with the Commission, and at any time it is
amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and (ii) the Proxy Statement will,
at the date the Proxy Statement is first mailed to GulfMark's stockholders
and at the time of the GulfMark Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Proxy Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder.
For purposes of this Agreement, the parties agree that the statements made
and information in the Registration Statement and the Proxy Statement
relating to the Federal income tax consequences of the transactions
contemplated hereby shall be deemed to be supplied by GulfMark and Spinco
and not by EVI or Sub.
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ARTICLE III
COVENANTS OF GULFMARK
3.1 CONDUCT OF BUSINESS BY GULFMARK PENDING THE MERGER. GulfMark covenants
and agrees that, from the date of this Agreement until the Effective Time,
unless EVI shall otherwise agree in writing or as otherwise expressly
contemplated by this Agreement or the Distribution Agreement or set forth in
Section 3.1 of the GulfMark Disclosure Letter:
(a) the business of GulfMark, including that of Ercon, and the
GulfMark Subsidiaries shall be conducted only in, and GulfMark and the
GulfMark Subsidiaries shall not take any action except in, the ordinary
course of business and consistent with past practice; provided, however,
that GulfMark shall cause Ercon to be merged into it prior to the Effective
Time;
(b) GulfMark shall not directly or indirectly do any of the following:
(i) issue, sell, pledge, dispose of or encumber any capital stock of
GulfMark except upon the exercise of GulfMark Options; (ii) split, combine,
or reclassify any outstanding capital stock, or declare, set aside, or pay
any dividend payable in cash, stock, property, or otherwise with respect to
its capital stock whether now or hereafter outstanding; (iii) redeem,
purchase or acquire or offer to acquire any of its capital stock; (iv)
acquire, agree to acquire or make any offer to acquire for cash or other
consideration, any equity interest in or assets of any corporation,
partnership, joint venture, or other entity in an amount greater than
$500,000; or (v) enter into any contract, agreement, commitment, or
arrangement with respect to any of the matters set forth in this Section
3.1(b);
(c) GulfMark shall not transfer, dispose or otherwise convey any of
the shares of EVI Common Stock held by it or grant or permit there to exist
any Lien on such shares;
(d) GulfMark shall not enter into any contract regarding the business
of Ercon having a term greater than 120 days or involving an amount in
excess of $50,000 or commit to do the same provided, it is understood that
EVI shall send a representative to Ercon's weekly sales meetings to approve
or reject pending proposals and contracts. If no EVI representative attends
the weekly meeting to make such decisions, Ercon shall forward the weekly
proposals listing to the EVI representative; unless EVI objects in writing,
proposals and contracts shall be deemed approved by EVI two (2) business
days after receipt of the weekly proposals listing;
(e) GulfMark shall not become bound by any agreement or obligation in
an amount in excess of $500,000 in the aggregate for all such agreements
and obligations unless by the terms of such agreement or obligation such
agreement or obligation will be assumed by Spinco as of the Distribution
and GulfMark will have no further obligations with respect thereto;
(f) GulfMark shall not pledge or encumber any of the assets to be held
by GulfMark following the Distribution;
(g) GulfMark shall not enter into any employment or consulting
contracts;
(h) GulfMark shall not enter into any contract or agreement that if
effective on the date hereof would be required to be identified as a
disclosure pursuant to Section 2.2(q)(i), (ii) or (x) of the GulfMark
Disclosure Letter;
(i) GulfMark shall not sell, lease, mortgage, pledge, grant a Lien on
or otherwise encumber or otherwise dispose of any of GulfMark's or Ercon's
properties or assets, except sales of inventory in the ordinary course of
business consistent with past practice;
(j) Neither GulfMark nor Ercon shall directly or indirectly incur any
indebtedness for borrowed money or guarantee any such indebtedness of
another Person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of GulfMark or Ercon, guarantee any
debt securities of another Person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another Person
or enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings incurred in the ordinary course
of business consistent with
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past practice which obligations in respect of GulfMark and Ercon shall be
released in connection with the Distribution, or make or permit to remain
outstanding any loans, advances or capital contributions to, or investments
in, any other Person, other than to GulfMark or any direct or indirect
wholly owned subsidiary of GulfMark;
(k) GulfMark shall not make any election relating to Taxes;
(l) Neither GulfMark nor Ercon shall not change any accounting
principle used by it or applicable to Ercon;
(m) GulfMark shall use its reasonable efforts (i) to preserve intact
the business organization of GulfMark and Ercon, (ii) to maintain in effect
any material authorizations or similar rights of GulfMark or Ercon, (iii)
to preserve the goodwill of those having material business relationships
with it; (iv) to maintain and keep each of GulfMark's and Ercon's
properties in the same repair and condition as presently exists, except for
deterioration due to ordinary wear and tear and damage due to casualty; and
(v) to maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it and Ercon;
(n) GulfMark shall, and shall cause the GulfMark Subsidiaries to,
perform their respective obligations under any contracts and agreements to
which it is a party or to which any of its assets is subject, except to the
extent such failure to perform would not have a GulfMark MAE, and except
for such obligations as GulfMark in good faith may dispute;
(o) GulfMark shall cause there to exist immediately prior to the
Effective Time Net Working Capital of not less than $300,000;
(p) Neither GulfMark nor Ercon shall settle or compromise any
litigation (whether or not commenced prior to the date of this Agreement)
other than settlements or compromises: (i) of litigation where the amount
paid in settlement or compromise does not exceed $500,000, or if greater,
the amount of the reserve therefor reflected in the most recent SEC
Documents and the terms of the settlement would not otherwise have a
GulfMark MAE, or (ii) in consultation and cooperation with EVI, and, with
respect to any such settlement, with the prior written consent of EVI;
(q) GulfMark shall cause the Distribution Agreement to be executed and
delivered by GulfMark and Spinco and the Contribution and Distribution to
be effected prior to the Merger immediately prior to the Effective Time;
and
(r) GulfMark shall not authorize any of, or commit or agree to take
any of, or permit any GulfMark Subsidiary to take any of, the foregoing
actions to the extent prohibited by the foregoing and shall not, and shall
not permit any of the GulfMark Subsidiaries to, take any action that would,
or that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming untrue
or any of the conditions to the Merger set forth in Article VI not being
satisfied. GulfMark promptly shall advise EVI orally and in writing of any
change or event having, or which, insofar as reasonably can be foreseen,
would have, a material adverse effect on GulfMark and the GulfMark
Subsidiaries, taken as a whole; or cause a GulfMark MAE.
3.2 NET WORKING CAPITAL REQUIREMENTS. GulfMark covenants that as of the
Effective Time it shall have Net Working Capital equal to $300,000. Net Working
Capital shall have the meaning set forth in Section 2.2(o) of this Agreement.
Spinco and GulfMark covenant and agree that they will adjust the Net Working
Capital 90 days after the Effective Date as follows ("Adjustment Date");
(a) to the extent there exists on the Adjustment Date any uncollected
accounts receivable (including uncollected unbilled accounts receivable) or
notes receivable which were counted in the calculation of Net Working
Capital as of the Effective Date ("Uncollected Receivables"), Spinco shall
purchase from GulfMark such Uncollected Receivables for the face amounts
thereof and GulfMark shall assign such Uncollected Receivables to Spinco
without recourse;
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(b) on the Adjustment Date after any purchase of Uncollected
Receivables, if it is determined that as of the Effective Time Net Working
Capital exceeded $300,000, GulfMark shall remit any amounts in excess of
$300,000 to Spinco in cash;
(c) on the Adjustment Date, after any purchase of Uncollected
Receivables, it is determined that Net Working Capital was less than
$300,000 at the Effective Time, Spinco shall remit to GulfMark an amount
equal to the difference between $300,000 and the amount of Net Working
Capital as the Effective Time (after consideration of purchases of
Uncollected Receivables);
(d) the provisions of this Section 3.2 shall not affect Spinco's
obligations under the Distribution Agreement to assume and indemnify EVI as
set forth therein.
3.3 AFFILIATES' AGREEMENTS. Prior to the Closing Date, GulfMark shall
deliver to EVI a letter identifying all Persons that are, at the time this
Agreement is submitted for approval to the stockholders of GulfMark,
"affiliates" of GulfMark for purposes of Rule 145 under the Securities Act.
GulfMark shall use its reasonable efforts to cause each such Person to deliver
to EVI on or prior to the Closing Date a written agreement confirming such
Person's obligations under Rule 145.
ARTICLE IV
COVENANTS OF EVI PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS BY EVI PENDING THE MERGER. EVI covenants and
agrees that, from the date of this Agreement until the Effective Time, unless
GulfMark shall otherwise agree in writing or as otherwise expressly contemplated
by this Agreement, it will not take any action that would, or that reasonably
could be expect to, result in any of the representations and warranties set
forth in this Agreement becoming untrue or any of the conditions to the Merger
set forth in Article VI not being satisfied.
4.2 RESERVATION OF EVI STOCK. EVI shall reserve for issuance, out of its
authorized but unissued capital stock, such number of shares of EVI Common Stock
as may be issuable upon consummation of the Merger.
4.3 STOCK EXCHANGE LISTING. EVI shall use reasonable efforts to cause the
shares of EVI Common Stock to be issued in the Merger to be approved for listing
on the New York Stock Exchange, subject to official notice of issuance, prior to
the Closing Date.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As promptly
as reasonably practicable after the execution of this Agreement, EVI and
GulfMark shall prepare and file with the Commission preliminary proxy materials
that shall constitute the Proxy Statement of EVI and GulfMark and the
registration statement with respect to the EVI Common Stock to be issued in
connection with the Merger (the "Registration Statement"). As promptly as
reasonably practicable after final comments are received from and cleared by the
Commission on the preliminary proxy materials, EVI and GulfMark shall file with
the Commission a combined joint proxy statement and registration statement on
Form S-4 (or on such other form as shall be appropriate) relating to the
approval and adoption of the Merger and this Agreement by the stockholders of
EVI and the stockholders of GulfMark and the issuance by EVI of EVI Common Stock
in connection with the Merger and shall use their reasonable efforts to cause
the Registration Statement to become effective as soon as practicable. Subject
to the terms and conditions set forth in Section 6.2 and the fiduciary
obligations of the Board of Directors of EVI with respect to such matters, the
Proxy Statement shall contain a statement that the Board of Directors of EVI
recommended that the stockholders of EVI approve and adopt the Merger and this
Agreement. Subject to the terms and conditions set forth in Section 6.3 and the
fiduciary obligations of the Board of Directors of GulfMark with respect to such
matters, the Proxy Statement shall contain a statement that the Board of
Directors of GulfMark recommended that the stockholders of GulfMark approve and
adopt the Merger and this Agreement.
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5.2 ACCOUNTANTS LETTERS.
(a) GulfMark shall use its reasonable efforts to cause Arthur Andersen
LLP to deliver a letter dated as of the date of the Proxy Statement and
confirmed and updated at the Closing as of the Closing Date, and addressed
to itself and EVI, in the form and substance reasonably satisfactory to EVI
and customary in the scope and substance for agreed upon procedures letters
delivered by independent public accountants in connection with registration
statements and proxy statements similar to the Registration Statement and
Proxy Statement.
(b) EVI shall use its reasonable efforts to cause Arthur Andersen LLP
to deliver a letter dated as of the date of the Proxy Statement and
confirmed and updated at the Closing as of the Closing Date, and addressed
to itself and GulfMark, in form and substance reasonably satisfactory to
GulfMark and customary in scope and substance for agreed upon procedures
letters delivered by independent public accountants in connection with
registration statements and proxy statements similar to the Registration
Statement and Proxy Statement.
5.3 MEETINGS OF STOCKHOLDERS.
(a) GulfMark shall promptly take all action reasonably necessary in
accordance with the DGCL and its Certificate of Incorporation and bylaws to
convene a meeting of its stockholders to consider and vote upon the
adoption and approval of the Merger and this Agreement and the
Distribution. Subject to the terms and conditions set forth in Section 6.3
and the fiduciary obligations of the Board of Directors of GulfMark with
respect to such matters, the Board of Directors of GulfMark (i) shall
recommend at such meeting that the stockholders of GulfMark vote to adopt
and approve the Merger and this Agreement and the Distribution, (ii) shall
use its reasonable efforts to solicit from stockholders of GulfMark proxies
in favor of such adoption and approval and (iii) shall take all other
action reasonably necessary to secure a vote of its stockholders in favor
of the adoption and approval of the Merger and this Agreement.
(b) EVI shall promptly take all action reasonably necessary in
accordance with the DGCL and its Certificate of Incorporation and bylaws to
convene a meeting of its stockholders to consider and vote upon the
adoption and approval of the Merger and this Agreement. Subject to the
terms and conditions set forth in Section 6.2 and the fiduciary obligations
of the Board of Directors of EVI with respect to such matters, the Board of
Directors of EVI (i) shall recommend at such meeting that the stockholders
of EVI vote to adopt and approve the Merger and this Agreement, (ii) shall
use its reasonable efforts to solicit from stockholders of EVI proxies in
favor of such adoption and approval and (iii) shall take all other action
reasonably necessary to secure a vote of its stockholders in favor of the
adoption and approval of the Merger and this Agreement.
(c) EVI and GulfMark shall coordinate and cooperate with respect to
the timing of such meetings and shall endeavor to hold such meetings on the
same day and as soon as practicable after the date hereof.
5.4 FILINGS; CONSENTS; REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, GulfMark and EVI shall (i) make all necessary
filings with respect to the Merger and this Agreement under the HSR Act, the
Securities Act, the Exchange Act, and applicable blue sky or similar securities
laws and shall use all reasonable efforts to obtain required approvals and
clearances with respect thereto; (ii) use reasonable efforts to obtain all
consents, waivers, approvals, authorizations, and orders required in connection
with the authorization, execution, and delivery of this Agreement and the
consummation of the Merger; and (iii) use reasonable efforts to take, or cause
to be taken, all appropriate action, and do, or cause to be done, all things
necessary, proper, or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement.
5.5 NOTIFICATION OF CERTAIN MATTERS. GulfMark shall give prompt notice to
EVI, and EVI shall give prompt notice to GulfMark, orally and in writing, of (i)
the occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate at any time from the date hereof to the
Effective Time; and (ii) any material failure of
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GulfMark or EVI, as the case may be, or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
compiled with or satisfied by it hereunder.
5.6 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
those out-of-pocket expenses (which do not include fees for attorneys and
accountants) incurred in connection with (i) the registration fees for the EVI
Common Stock under the Securities Act to be issued in the Merger, (ii) the
registration and qualification of the EVI Common Stock under any state
securities and blue sky laws, (iii) the listing of the EVI Common Stock on the
NYSE, (iv) the HSR filing fee and (v) the printing and mailing of the
Registration Statement and the Proxy Statement shall be paid equally by EVI and
GulfMark; provided, however, that if this Agreement shall have been terminated
pursuant to Section 7.1 as a result of the willful breach by a party of any of
its representations, warranties, covenants, or agreements set forth in this
Agreement, such breaching party shall pay the direct out-of-pocket costs and
expenses of the other parties in connection with the transactions contemplated
by this Agreement.
5.7 GULFMARK'S EMPLOYEE BENEFITS.
(a) GulfMark shall take action prior to the Merger and the
Distribution to cause the GulfMark Options to be assumed by Spinco and
converted into or exchanged for and represent options to purchase Spinco
Common Stock and to cause the GulfMark Plans to be transferred to and
assumed by Spinco, such that all obligations of GulfMark thereunder are
terminated, and neither GulfMark nor EVI will have any obligations under
the GulfMark Plans following the Merger.
(b) Subject to the receipt of a favorable Internal Revenue Service
determination letter under Section 401(a) and 501(a) of the Code with
respect to GulfMark 401(k) Plan and resolution of any outstanding issues
regarding the GulfMark 401(k) Plan in a manner satisfactory to EVI's
counsel, EVI will cause the GulfMark 401(k) Plan to be merged into an EVI
plan qualified under Section 401(a) and 501(a) of the Code ("EVI Plan").
Spinco shall be responsible for and perform any and all obligations
relating to the (i) filing of the GulfMark 401(k) Plan for a determination
letter under Section 401(a) and 501(a) of the Code and (ii) resolution of
any issues regarding the GulfMark 401(k) Plan, both to the satisfaction of
EVI's counsel, so that EVI will cause the GulfMark 401(k) Plan to be merged
into the EVI Plan. GulfMark and EVI, upon being satisfied with the filings
and documentation prepared by Spinco in satisfaction of obligations (i) and
(ii) above, shall execute and deliver such filings and documents as
required to effect the merger of the GulfMark 401(k) Plan and the EVI Plan.
All reasonable costs, including attorneys fees, filing fees, transfer fees,
settlement payments and other expenses, not otherwise satisfied by Spinco
as stated herein, relating to the continuation, qualification and merger of
the GulfMark 401(k) Plan shall be paid by Spinco. Once the GulfMark 401(k)
Plan is merged into an EVI Plan, Spinco shall not be responsible for
liabilities relating to the GulfMark 401(k) Plan occurring after the
merging of such plans.
(c) GulfMark shall transfer to Spinco all employees of GulfMark who
are not directly associated with the business conducted by Ercon without
any liability to the Surviving Corporation. Spinco shall be responsible for
all severance and other obligations with respect to such terminated
employees, if any.
(d) Within 180 days following the Effective Time, Spinco shall file a
registration statement on Form S-8 (or other appropriate form) with respect
to the shares of Spinco Common Stock subject to the adjusted and assumed
GulfMark Options, and shall use its best efforts to maintain the
effectiveness of such registration statement (and maintain the current
status of any prospectus contained therein) for so long as any of such
options remain outstanding.
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ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) Ercon shall have been merged into GulfMark.
(b) This Agreement and the Merger (and the Contribution and the
Distribution in the case of GulfMark) shall have been approved and adopted
by the requisite vote of the stockholders of GulfMark and EVI, as may be
required by law, by the rules of The Nasdaq Stock Market and the New York
Stock Exchange and by any applicable provisions of their respective
charters or bylaws;
(c) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated;
(d) No order shall have been entered and remain in effect in any
action or proceeding before any foreign, federal or state court or
governmental agency or other foreign, federal or state regulatory or
administrative agency or commission that would prevent or make illegal the
consummation of the Contribution, Distribution and Merger;
(e) The Registration Statement shall be effective on the Closing Date,
and all post-effective amendments filed shall have been declared effective
or shall have been withdrawn; and no stop-order suspending the
effectiveness thereof shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of the parties,
threatened by the Commission;
(f) There shall have been obtained any and all material permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other governmental body or agency, that reasonably
may be deemed necessary so that the consummation of the Merger and the
transactions contemplated thereby will be in compliance with applicable
laws, the failure to comply with which would have a GulfMark MAE or EVI
MAE;
(g) The shares of EVI Common Stock issuable upon consummation of the
Merger shall have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance; and
(h) All approvals and consents of third Persons (i) the granting of
which is necessary for the consummation of the Merger, the Distribution or
the transactions contemplated in connection therewith and (ii) the
non-receipt of which would have a GulfMark MAE or an EVI MAE.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF EVI. The obligation of EVI to
effect the Merger is, at the option of EVI, also subject to the fulfillment at
or prior to the Closing Date of the following conditions:
(a) The representations and warranties of GulfMark contained in
Section 2.2 shall be accurate as of the date of this Agreement and (except
to the extent such representations and warranties speak specifically as of
an earlier date) as of the Closing Date as though such representations and
warranties had been made at and as of that time; all of the terms,
covenants and conditions of this Agreement to be complied with and
performed by GulfMark on or before the Closing Date shall have been duly
complied with and performed in all material respects; and a certificate to
the foregoing effect dated the Closing Date and signed by the executive
vice president of GulfMark shall have been delivered to EVI;
(b) There shall not have occurred or exist any fact or condition that
would reasonably result in a GulfMark MAE or would constitute a material
fixed or contingent liability to GulfMark, and EVI shall have received a
certificate signed by the executive vice president of GulfMark dated the
Closing Date to such effect;
(c) The Board of Directors of EVI shall have received from Prudential
Securities Corporation, financial advisor to EVI, a written opinion,
satisfactory in form and substance to the Board of Directors of
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EVI, to the effect that consideration to be received by EVI in the Merger
is fair to EVI from a financial point of view, which opinion shall have
been confirmed in writing to such Board as of a date reasonably proximate
to the date the Proxy Statement is first mailed to the stockholders of EVI
and not subsequently withdrawn;
(d) GulfMark shall have received, and furnished written copies of EVI
of, the GulfMark affiliates' agreements pursuant to Section 3.3;
(e) EVI shall have received from Griggs & Harrison P.C., counsel to
GulfMark, an opinion dated the Closing Date covering customary matters
relating to the Agreement, the Distribution Agreement, the Merger, the
Contribution and the Distribution;
(f) EVI shall have received from Arthur Andersen, LLP a written
opinion, in form and substance satisfactory to EVI, dated as of the date
that the Proxy Statement is first mailed to the Stockholders of GulfMark
and EVI to the effect that (i) the Merger will be treated for U.S. federal
income tax purposes as a reorganization within the meaning of Section
368(a)(1)(B) of the Code, (ii) the Distribution will not result in any gain
or loss to GulfMark under the Code, (iii) EVI, Sub and GulfMark will each
be a party to that reorganization within the meaning of Section 368(b) of
the Code, (iv) EVI, Sub and GulfMark shall not recognize any gain or loss
for U.S. federal or state income tax purposes as a result of the Merger or
the Distribution and (v) GulfMark and Spinco shall not recognize any gain
or loss for U.S. federal or state income tax purposes as a result of the
Contribution or Distribution, and such opinion shall be confirmed at the
Closing;
(g) Spinco shall have executed and delivered to GulfMark and EVI the
Distribution Agreement in form and substance, including schedules,
acceptable to EVI;
(h) The conveyances and assumptions under the Distribution Agreement
shall have occurred;
(i) The Distribution under the Distribution Agreement shall have
occurred; and
(j) GulfMark shall have delivered to EVI a pro forma balance sheet
after giving effect to the Distribution reflecting Net Working Capital in
an amount of not less than $300,000.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF GULFMARK. The obligation of
GulfMark to effect the Merger is, at the option of GulfMark, also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of EVI and Sub contained in
Section 2.1 shall be accurate as of the date of this Agreement and (except
to the extent such representations and warranties speak specifically as of
an earlier date) as of the Closing Date as though such representations and
warranties had been made at and as of that time; all the terms, covenants
and conditions of this Agreement to be complied with and performed by EVI
on or before the Closing Date shall have been duly complied with and
performed in all material respects; and a certificate to the foregoing
effect dated the Closing Date and signed by the chief executive officer of
EVI shall have been delivered to GulfMark;
(b) The Board of Directors of GulfMark shall have received from
Jefferies & Company, Inc., financial advisor to GulfMark, a written
opinion, satisfactory in form and substance to the Board of Directors of
GulfMark, to the effect that the exchange ratio for the Merger is fair to
the stockholders of GulfMark from a financial point of view, which opinion
shall have been confirmed in writing to such Board as of a date reasonably
proximate to the date the Proxy Statement is first mailed to the
stockholders of GulfMark and EVI and not subsequently withdrawn;
(c) GulfMark shall have received from Fulbright & Jaworski, L.L.P.
counsel to EVI, an opinion dated the Closing Date covering customary
matters relating to this Agreement and the Merger;
(d) GulfMark shall have received from Arthur Andersen LLP, a written
opinion, in form and substance satisfactory to GulfMark, dated as of the
date that the Proxy Statement is first mailed to stockholders of GulfMark
and EVI to the effect that (i) the Merger will be treated for U.S. federal
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income tax purposes as a reorganization within the meaning of Section
368(a)(1)(B) of the Code; (ii) the Distribution will not result in any gain
or loss to GulfMark under the Code, (iii) EVI, Sub and GulfMark will each
be a party to that reorganization within the meaning of Section 368(b) of
the Code, (iv) EVI, Sub and GulfMark shall not recognize any gain or loss
for U.S. federal or state income tax purposes as a result of the Merger or
the Distribution, and (v) GulfMark and Spinco shall not recognize any gain
or loss for U.S. federal or state income tax purposes as a result of the
Contribution or Distribution, and such opinion shall be confirmed at the
Closing;
(e) The Contribution under the Distribution Agreement shall have
occurred; and
(f) The Distribution under the Distribution Agreement shall have
occurred.
ARTICLE VII
MISCELLANEOUS
7.1 TERMINATION. This Agreement may be terminated and the Merger and the
other transactions contemplated herein may be abandoned at any time prior to the
Effective Time, whether prior to or after approval by the stockholders of EVI or
the stockholders of GulfMark:
(a) by mutual written consent of EVI and GulfMark;
(b) by either EVI or GulfMark if (i) the Merger has not been
consummated on or before May 31, 1997 (provided that the right to terminate
this Agreement under this clause (i) shall not be available to any party
whose breach of any representation or warranty or failure to fulfill any
covenant or agreement under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date);
(ii) any court of competent jurisdiction, or some other governmental body
or regulatory authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Merger; (iii) the stockholders of GulfMark shall not approve the
Contribution, the Distribution or the Merger at the GulfMark stockholder
meeting or at any adjournment thereof; (iv) the stockholders of EVI shall
not approve the Merger at the EVI stockholder meeting or any adjournment
thereof; or (v) in the exercise of its good faith judgment as to its
fiduciary duties to its stockholders imposed by law, as advised by outside
counsel, the Board of Directors of GulfMark or EVI determines that such
termination is appropriate in complying with its fiduciary obligations.
(c) by GulfMark if (i) EVI shall have failed to comply in any material
respect with any of the covenants or agreements contained in this Agreement
to be complied with or performed by EVI or Sub at or prior to such date of
termination (provided such breach has not been cured within 30 days
following receipt by EVI of written notice from GulfMark of such breach and
is existing at the time of termination of this Agreement); (ii) any
representation or warranty of EVI contained in this Agreement shall not be
true in all respects when made (provided such breach has not been cured
within 30 days following receipt by EVI of written notice from GulfMark of
such breach and is existing at the time of termination of this Agreement)
or on and as of the Effective Time as if made on and as of the Effective
Time (except to the extent it relates to a particular date), except for
such failures to be so true and correct which would not individually or in
the aggregate, reasonably be expected to have an EVI MAE, assuming the
effectiveness of the Merger; or (iii) the Board of Directors of EVI
withdraws, modifies or changes its recommendation of this Agreement or the
Merger in a manner adverse to GulfMark or shall have resolved to do any of
the foregoing.
(d) by EVI if (i) GulfMark shall have failed to comply in any material
respect with any of the covenants or agreements contained in this Agreement
to be complied with or performed by it at or prior to such date of
termination (provided such breach has not been cured within 30 days
following receipt by GulfMark of written notice from EVI of such breach and
is existing at the time of termination of this Agreement; (ii) any
representation or warranty of GulfMark contained in this Agreement shall
not be true in all respects when made (provided such breach has not been
cured within 30 days following receipt by GulfMark of written notice from
EVI of such breach and is existing at the time of termination of this
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Agreement) or on and as of the Effective Time as if made on and as of the
Effective Time (except to the extent it relates to a particular date),
except for such failures to be so true and correct which would not
individually or in the aggregate, reasonably be expected to have a GulfMark
MAE assuming the effectiveness of the Merger or (iii) the Board of
Directors of GulfMark withdraws, modifies or changes its recommendation of
this Agreement or the Merger in a manner adverse to EVI or shall have
resolved to do any of the foregoing.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either EVI or GulfMark as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of EVI, Sub or GulfMark, except (i) with respect to this Section 7.2, Section
5.7 and Section 7.13, and (ii) such termination shall not relieve any party
hereto for any intentional breach prior to such termination by a party hereto of
any of its representations or warranties or of any of its covenants or
agreements set forth in this Agreement.
7.3 WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party that is, or whose stockholders are, entitled to the
benefits thereof. This Agreement may not be amended or supplemented at any time,
except by an instrument in writing signed on behalf of each party hereto,
provided that after this Agreement has been approved and adopted by the
stockholders of EVI and GulfMark, this Agreement may be amended only as may be
permitted by applicable provisions of the DGCL. The waiver by any party hereto
of any condition or of a breach of another provision of this Agreement shall not
operate or be construed as a waiver of any other condition or subsequent breach.
The waiver by any party hereto of any of the conditions precedent to its
obligations under this Agreement shall not preclude it from seeking redress for
breach of this Agreement other than with respect to the condition so waived.
7.4 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties of Spinco contained herein, which shall survive
without limitation, none of the representations and warranties in this Agreement
shall survive the Effective Time.
7.5 PUBLIC STATEMENTS. GulfMark and EVI agree to consult with each other
prior to issuing any press release or otherwise making any public statement with
respect to the transactions contemplated hereby, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law or applicable stock exchange policy.
7.6 ASSIGNMENT. This Agreement shall inure to the benefit of and will be
binding upon the parties hereto and their respective legal representatives,
successors and permitted assigns. Except as set forth in this Agreement, this
Agreement shall not be assignable by the parties hereto.
7.7 NOTICES. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i) delivered
in Person or by courier, (ii) sent by telecopy or facsimile transmission, answer
back requested, or (iii) mailed, certified first class mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
<TABLE>
<S> <C>
if to GulfMark or Spinco: GulfMark International, Inc.
5 Post Oak Park, Suite 1170
Houston, Texas 77027
Attn: Frank R. Pierce
Facsimile: (713) 963-9796
with a copy to: Griggs & Harrison, P.C.
1301 McKinney, Suite 3200
Houston, Texas 77010-3033
Attn: W. Garney Griggs, Esq.
Facsimile: (713) 651-1944
</TABLE>
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if to EVI or Sub: Energy Ventures, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Bernard J. Duroc-Danner
Facsimile: (713) 297-8488
with a copy to: Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Curtis W. Huff
Facsimile: (713) 651-5246
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 7.7. Such notices shall be
effective, (i) if delivered in Person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when the
answer back is received, or (iii) if mailed, upon the earlier of five days after
deposit in the mail and the date of delivery as shown by the return receipt
therefor.
7.8 GOVERNING LAW. All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach shall be governed by the laws of the State
of Delaware, without regard to conflict of laws principles.
7.9 ARBITRATION. Any disputes, claims or controversies connected with,
arising out of, or related to, this Agreement and the rights and obligations
created herein, or the breach, validity, existence or termination hereof, shall
be settled by Arbitration to be conducted in accordance with the Commercial
Rules of Arbitration of the American Arbitration Association, except as such
Commercial Rules may be changed by this Section 7.9. The disputes, claims or
controversies shall be decided by three independent arbitrators (that is,
arbitrators having no substantial economic or other material relationship with
the parties), one to be appointed by Spinco and one to be appointed by EVI
within fourteen days following the submission of the claim to the parties hereto
and the third to be appointed by the two so appointed within five days. Should
either party refuse or neglect to join in the timely appointment of the
arbitrators, the other party shall be entitled to select both arbitrators.
Should the two arbitrators fail timely to appoint a third arbitrator, either
party may apply to the Chief Judge of the United States District Court for the
Southern District of Texas to make such appointment. The arbitrators shall have
ninety days after the selection of the third arbitrator within which to allow
discovery, hear evidence and issue their decision or award and shall in good
faith attempt to comply with such time limits; provided, however, if two of the
three arbitrators believe additional time is necessary to reach a decision, they
may notify the parties and extend the time to reach a decision in thirty day
increments, but in no event to exceed an additional ninety days. Discovery of
evidence shall be conducted expeditiously by the Parties, bearing in mind the
Parties desire to limit discovery and to expedite the decision or award of the
arbitrators at the most reasonable cost and expense of the parties. Judgment
upon an award rendered pursuant to such Arbitration may be entered in any court
having jurisdiction, or application may be made to such court for a judicial
acceptance of the award, and an order of enforcement, as the case may be. The
place of Arbitration shall be Houston, Texas. The decision of the arbitrators,
or a majority thereof, made in writing, shall be final and binding upon the
parties hereto as to the questions submitted, and each party shall abide by such
decision. Notwithstanding the provisions of this Section 7.9, neither party
shall be prohibited from seeking injunctive relief pending the completion of any
arbitration. The costs and expenses of the arbitration proceeding, including the
fees of the arbitrators and all costs and expenses, including legal fees and
witness fees, incurred by the prevailing party, shall be borne by the losing
party.
Solely for purposes of injunctive relief, orders in aid of arbitration and
entry of the arbitrators' award:
(a) each of the parties hereto irrevocably consents to the
non-exclusive jurisdiction of, and venue in, any state court located in
Harris County, Texas or any federal court sitting in the Southern District
of Texas in any suit, action or proceeding seeking injunctive relief,
orders in aid of arbitration, or entry of an arbitral award arising out of
or relating to this Agreement or any of the other agreements contemplated
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hereby and any other court in which a matter that may result in a claim for
indemnification hereunder by an EVI Indemnified Party may be brought with
respect to any claim for indemnification by an EVI Indemnified Party;
(b) each of the parties hereto waives, to the fullest extent permitted
by law, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding seeking injunctive relief, orders
in aid of arbitration or entry of an arbitral award arising out of or
relating to this Agreement or any of the other agreements contemplated
hereby brought in any state court located in Harris County, Texas or any
federal court sitting in the Southern District of Texas or any other court
in which a matter that may result in a claim for indemnification hereunder
by an EVI Indemnified Party may be brought with respect to any claim for
indemnification by an EVI Indemnified Party, and further irrevocably waive
any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum;
(c) each of the parties hereto irrevocably designates, appoints and
empowers CT Corporation System, Inc. and any successor thereto as its
designee, appointee and agent to receive, accept and acknowledge for and on
its behalf, and in respect of its property, service of any and all legal
process, summons, notices and documents which may be served in any suit,
action or proceeding arising out of or relating to this Agreement or any of
the other agreements contemplated hereby for the purposes of injunctive
relief, orders in aid of arbitration and entry of an arbitral award.
7.10 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provision, covenants and restrictions
of this Agreement shall continue in full force and effect and shall in no way be
affected, impaired or invalidated.
7.11 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
7.12 HEADINGS. The Section headings herein are for convenience only and
shall not affect the construction hereof.
7.13 CONFIDENTIALITY AGREEMENT. The Confidentiality Agreement entered into
between EVI and GulfMark on October 21, 1996 (the "Confidentiality Agreement")
is hereby incorporated by reference herein and made a part hereof.
7.14 ENTIRE AGREEMENT: THIRD PARTY BENEFICIARIES. This Agreement, the
Other Agreements and the Confidentiality Agreements constitute the entire
agreement and supersede all other prior agreements and understandings, both oral
and written, among the parties or any of them, with respect to the subject
matter hereof and neither this nor any document delivered in connection with
this Agreement confers upon any Person not a party hereto any rights or remedies
hereunder except as provided in Sections 5.6 and 5.7.
7.15 DISCLOSURE LETTERS.
(a) The GulfMark Disclosure Letter, executed by GulfMark as of the
date hereof, and delivered to EVI on the date hereof, contains all
disclosure required to be made by GulfMark under the various terms and
provisions of this Agreement. Each item of disclosure set forth in the
GulfMark Disclosure Letter specifically refers to the Article and Section
of the Agreement to which such disclosure responds, and shall not be deemed
to be disclosed with respect to any other Article or Section of the
Agreement.
(b) The EVI Disclosure Letter, executed by EVI as of the date hereof,
and delivered to GulfMark on the date hereof, contains all disclosure
required to be made by EVI under the various terms and provisions of this
Agreement. Each item of disclosure set forth in the EVI Disclosure Letter
specifically refers to the Article and Section of the Agreement to which
such disclosure responds, and shall not be deemed to be disclosed with
respect to any other Article or Section of the Agreement.
[signatures on the following page]
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IN WITNESS WHEREOF, each of the parties caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
ENERGY VENTURES, INC.
By: /s/ JAMES G. KILEY
------------------------------------
James G. Kiley
Vice President
GULFMARK ACQUISITION CO.
By: /s/ JAMES G. KILEY
------------------------------------
James G. Kiley
Vice President
GULFMARK INTERNATIONAL, INC.
By: /s/ FRANK R. PIERCE
------------------------------------
Frank R. Pierce
Executive Vice President
NEW GULFMARK INTERNATIONAL, INC.
By: /s/ FRANK R. PIERCE
------------------------------------
Frank R. Pierce
Executive Vice President
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APPENDIX B
AGREEMENT AND PLAN OF DISTRIBUTION
BY AND AMONG
GULFMARK INTERNATIONAL, INC.,
NEW GULFMARK INTERNATIONAL, INC.
AND
ENERGY VENTURES, INC.
DECEMBER 5, 1996
<PAGE> 172
AGREEMENT AND PLAN OF DISTRIBUTION
THIS AGREEMENT AND PLAN OF DISTRIBUTION (this "Agreement") is dated as of
December 5, 1996, by and among GULFMARK INTERNATIONAL, INC., a Delaware
corporation ("GulfMark"), NEW GULFMARK INTERNATIONAL, INC., a Delaware
corporation ("Spinco") and ENERGY VENTURES, INC. ("EVI"), a Delaware
corporation.
WITNESSETH:
WHEREAS, Spinco is a wholly owned subsidiary of GulfMark; and
WHEREAS, GulfMark owns certain Assets used in the operation of the Business
and owns the Subsidiaries' Stock, all as hereinafter defined; and
WHEREAS, pursuant to this Agreement the Assets and the Subsidiaries' Stock
will be contributed by GulfMark to Spinco, in consideration for the issuance by
Spinco to GulfMark of additional shares of Spinco common stock, and the
assumption by Spinco of the Assumed Liabilities (as hereinafter defined) (the
transactions described in this paragraph are referred to collectively herein as
the "Contribution"); and
WHEREAS, after the transfer of the Assets and the Subsidiaries' Stock to
Spinco, and the assumption of the Assumed Liabilities by Spinco, GulfMark will
distribute to its stockholders all of the outstanding stock of Spinco (the
"Distribution") as further defined in Article III hereof; and
WHEREAS, immediately following the Distribution, and as a condition to the
Distribution, GulfMark will merge with GulfMark Acquisition Co., a Delaware
corporation and wholly owned subsidiary of EVI (the "Merger"); and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(1)(B) of
the Internal Revenue Code of 1986, as amended (the "Code") and the Contribution
and Distribution will qualify as transactions pursuant to Sections 368(a)(1)(D)
and 355 of the Code;
NOW, THEREFORE, in consideration of the premises and the mutual terms,
covenants and conditions herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the following
respective meanings:
1.1 "ADDITIONAL SHARES" shall mean that number of shares of Spinco common
stock as shall be equal to two times the number of shares of GulfMark common
stock outstanding on the Record Date for the Distribution.
1.2 "AFFILIATE" means, as to the person specified, any person controlling,
controlled by or under common control with such person, with the concept of
control in such context meaning the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
another, whether through the ownership of voting securities, by contract or
otherwise.
1.3 "AGREEMENT" has the meaning specified in the preamble.
1.4 "ASSETS" means, collectively, all the property, assets and rights,
tangible and intangible, (other than the Excluded Assets) of GulfMark or Ercon
which are used directly or indirectly, in the Business and are acquired by
Spinco pursuant to this Agreement, which include the following:
(a) all cash on hand or in the banks on the Contribution Date, except
such amounts as are required to remain in GulfMark pursuant to the Net
Working Capital requirements Sections 2.2(o) and 3.2 of the Merger
Agreement;
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(b) all accounts receivable and notes receivable of GulfMark,
excluding those relating to Ercon, existing on the Contribution Date;
(c) the Vessel SEARUNNER, together with her respective machinery and
equipment engines, machinery, mooring systems and equipment, covers,
anchors, chains, cables, tackle, rigging, apparel, furniture, computers and
computer equipment, computer software, fittings and equipment, tools, pumps
and pumping equipment, spare components and parts, bunkers and lubricating
oils, racking, supporting inventory and stores, and all other appurtenances
thereto appertaining or belonging, excluding, however, equipment and stores
owned by third-party suppliers (the "Vessel");
(d) all machinery and equipment, engines, mooring systems, covers,
anchors, chains, cables, tackle, rigging, apparel, furniture, computers,
computer equipment and computer software, fittings and equipment, tools,
pumps and pumping equipment, spare components and parts, supporting
inventory and stores, wherever located that are owned by GulfMark and are
used or maintained in connection with the Business (collectively,
"Inventory and Equipment");
(e) the following tangible and intangible assets used or held for use
in connection with the Business, to the extent assignable by law:
(i) all Transferred Intellectual Property (as hereinafter defined)
owned by GulfMark relating to, or used in connection with the operation
of, the Business, and all rights to recover for infringement thereon;
(ii) the certificates, licenses, permits, consents, operating
authorities, orders, exemptions, franchises, approvals, registrations
and other authorizations and applications therefor specifically
associated with the operation of the Business ("Permits");
(iii) the benefit and burden, after the date hereof, of all right,
title and interest of GulfMark (excluding the Ercon) under contracts or
other charters or arrangements, and any amendments thereto relating to
the Business and existing on or before the Contribution Date (the
"Contracts"); and
(iv) all records to be delivered to Spinco pursuant to Section 2.6;
(f) the corporate office assets identified on Schedule 1.4(f) attached
hereto;
(g) the Louisiana assets, other than Inventory and Equipment,
identified on Schedule 1.4(g) attached hereto; and
(h) all other miscellaneous assets owned and used by GulfMark or Ercon
in the operation of the Business.
1.5 "ASSUMED LIABILITIES" shall mean any and all Liabilities and
Environmental Liabilities that are not Retained Liabilities and to which
GulfMark or any of the Assets may now or at any time in the future become
subject (whether directly or indirectly, including by reason of GulfMark or any
GulfMark Company owning, controlling or operating any business or assets of any
Person (including any current or past Affiliate)), resulting from, arising out
of or relating to (i) any GulfMark Company, (ii) any GulfMark Taxes for periods
ending on or before the Effective Date, (iii) any obligation, matter, fact,
circumstance or action or omission by any Person in any way relating to or
arising from the business, operations or assets of GulfMark that existed on or
prior to the Effective Date, (iv) any product or service provided by GulfMark or
any GulfMark Company prior to the Effective Date, (v) the Merger, the
Contribution, the Distribution or any of the other transactions contemplated
hereby, (vi) previously conducted operations of GulfMark or any GulfMark Company
or (vii) the Assets. The term "Assumed Liabilities" shall also include, without
limitation, the following:
(a) Any and all Liabilities and Environmental Liabilities resulting
from, arising out of or relating to (i) the assets, activities, operations,
current or former facilities, actions or omissions of GulfMark or any of
its respective officers, directors, employees, independent contractors or
agents, occurring on or before the Effective Date, (ii) the assets,
activities, operations, current or former facilities, actions or omissions
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of any GulfMark Company or any of its respective officers, directors,
employees, independent contractors or agents, (iii) any product liability
claim, recall, replacement, returns or customer allowances of or relating
to GulfMark or any GulfMark Company (excluding those obligations with
respect to those contracts and permits retained by GulfMark in the Retained
Liabilities) or (iv) any contract or permit of GulfMark or any GulfMark
Company (excluding those retained by GulfMark in the Retained Liabilities
but, regardless of whether the contract or permit is assigned, conveyed or
leased hereunder or under any other agreement contemplated hereby);
(b) Any and all accounts and notes payable of GulfMark or any GulfMark
Company, excluding, however, the accounts payable which have been accounted
for in the calculation of the required Net Working Capital set forth in the
Merger Agreement;
(c) Any and all Liabilities relating to the GulfMark 401(k) Plan and
the GulfMark Employee Benefit Plans except that once GulfMark's 401(k) Plan
is merged into an EVI plan qualified under Sections 401(a) and 501(a) of
the Code, Spinco shall not be responsible for Liabilities relating to the
GulfMark 401(k) Plan occurring after the merging of such plans;
(d) Any and all Liabilities and Environmental Liabilities to, on
behalf of, or which arise from or relate to (i) active employees, or
retired and inactive employees, of GulfMark or any GulfMark Company for
claims occurring on or before the Effective Date and (ii) active employees,
or retired and inactive employees, of any GulfMark Company after the
Effective Date, including, without limitation, (1) liability for any
salaries, wages, tax equalization payments, vacation pay, sick leave,
personal leave, severance pay, wrongful dismissal or discrimination claims;
(2) liability for or under any employee benefit plan, policy or arrangement
not covered by subsection (c) above including, without limitation,
retirement, pension, medical, dental, profit sharing, unemployment,
supplemental unemployment or disability plan policy or arrangement; (3)
liability for any payroll taxes, social security or similar taxes or
withholding; (4) liability arising from claims or litigation and (5)
liability arising from any injury, death, loss, disability, occupational
disease or claims under any workers' compensation laws;
(e) Any and all Liabilities and Environmental Liabilities resulting
from, arising out of, relating to or occurring on the Properties, including
those Properties listed on Schedule 1.5(e) hereto, the operations on any of
the foregoing, and any off-site Environmental Liabilities related to any of
the foregoing, including, without limitation, those under any
indemnification agreement or obligation of GulfMark or any GulfMark Company
and any documents related thereto; provided, however, that Liabilities and
Environmental Liabilities resulting from, arising out of, relating to or
occurring on the Post-Effective Date Properties after the Effective Date
shall not be Assumed Liabilities but shall be Retained Liabilities
hereunder (Schedule 1.5(e) shall list all Properties;
(f) Any and all Liabilities of Ercon with respect to any projects or
transactions performed or engaged in by it prior to the Effective Date,
excluding those Liabilities which are Retained Liabilities;
(g) Any and all litigation and claims Liabilities of GulfMark or any
GulfMark Company existing as of the Effective Date, excluding those
Liabilities which are Retained Liabilities;
(h) Any and all Liabilities for GulfMark Taxes, arising out of, or
related to, GulfMark for taxable periods on or before the Effective Date,
but excluding those Liabilities which are Retained Liabilities;
(i) Any and all liability for GulfMark Taxes, arising out of or
related to any GulfMark Company whether for taxable periods ending before
or after the Effective Date;
(j) Any misrepresentation or incorrect representation or warranty of
GulfMark under the Merger Agreement without regard to any materiality or
knowledge qualification; and
(k) Any and all legal, accounting, consulting and expert fees and
expenses incurred in investigating, preparing, defending, settling or
discharging any claim or action arising under, out of or in connection with
any of the Assumed Liabilities or Assets other than those associated with
EVI's counsel's evaluation of the Contribution hereunder, the Merger or the
Distribution.
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1.6 "BUSINESS" means all businesses engaged in by any GulfMark Company,
other than Ercon or the business of owning the EVI Common Stock and the Common
Stock of American Independent Oil Company, as conducted on or before the
Distribution Date.
1.7 "BUSINESS DAY" means a day on which national banks are generally open
for the transaction of business in Houston, Texas.
1.8 "CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. sec. 9601 et seq.
1.9 "CIRCUMSTANCE" has the meaning specified in Section 6.2 hereof.
1.10 "CONSENT REQUIRED CONTRACT" has the meaning specified in Section 2.5
hereof.
1.11 "CONTRACTS" has the meaning specified in paragraph (e)(iii) of the
definition of Assets set forth in Section 1.4 hereof.
1.12 "CONTRIBUTION" shall have the meaning specified in the third
"WHEREAS" clause hereof.
1.13 "DISTRIBUTION" means the distribution by GulfMark to its stockholders
of all of the outstanding shares of Spinco and all transactions occurring
immediately prior to the distribution in connection therewith, including the
transfer of Assets to Spinco, the transfer of the Subsidiaries' Stock to Spinco
and the assumption of the Assumed Liabilities relating thereto.
1.14 "DISTRIBUTION DATE" shall mean the time and date as of which the
Distribution is effective.
1.15 "CONTRIBUTION DATE" shall mean the time and date immediately prior to
the Distribution Date as of which the Contribution is effective.
1.16 "EFFECTIVE DATE" shall mean the time and date the Merger is made
effective.
1.17 "ENVIRONMENTAL CONDITIONS" means any pollution, contamination,
degradation, damage or injury caused by, related to, arising from or in
connection with the generation, handling, use, treatment, storage,
transportation, disposal, discharge, release or emission of any Waste Materials.
1.18 "ENVIRONMENTAL LAW" or "ENVIRONMENTAL LAWS" means all laws, rules,
regulations, statutes, ordinances, decrees or orders of any governmental entity
now or at any time in the future in effect relating to (i) the control of any
potential pollutant or protection of the air, water or land, (ii) solid, gaseous
or liquid waste generation, handling, treatment, storage, disposal or
transportation, and (iii) exposure to hazardous, toxic or other substances
alleged to be harmful. The term "Environmental Law" or "Environmental Laws"
includes, without limitation, (1) the terms and conditions of any license,
permit, approval or other authorization by any governmental entity and (2)
judicial, administrative or other regulatory decrees, judgments and orders of
any governmental entity. The term "Environmental Law" or "Environmental Laws"
includes, but is not limited to the following statutes and the regulations
promulgated thereunder: the Clean Air Act, 42 U.S.C. sec. 7401 et seq., the
Clean Water Act, 33 U.S.C. sec. 1251 et seq., the Resource Conservation Recovery
Act, 42 U.S.C. sec. 6901 et seq., the Superfund Amendments and Reauthorization
Act, 42 U.S.C. sec. 11011 et seq., the Toxic Substances Control Act, 15 U.S.C.
sec. 2601 et seq., the Water Pollution Control Act, 33 U.S.C. sec. 1251, et
seq., the Safe Drinking Water Act, 42 U.S.C. sec. 300f et seq., CERCLA and any
state, county or local regulations similar thereto.
1.19 "ENVIRONMENTAL LIABILITIES" means any and all liabilities,
responsibilities, claims, suits, losses, costs (including remediation, removal,
response, abatement, clean-up, investigative or monitoring costs and any other
related costs and expenses), other causes of action recognized now or at any
later time, damages, settlements, expenses, charges, assessments, liens,
penalties, fines, pre-judgment and post-judgment interest, attorney fees and
other legal fees (i) pursuant to any agreement, order, notice, requirement,
responsibility or directive (including directives embodied in Environmental
Laws), injunction, judgment or similar documents (including settlements) arising
out of or in connection with any Environmental Laws, or (ii) pursuant to any
claim by a governmental entity or other person or entity for personal injury,
property damage, damage to
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natural resources, remediation or similar costs or expenses incurred or asserted
by such entity or person pursuant to common law or statute.
1.20 "ERCON" means the wholly owned subsidiary of GulfMark, Ercon
Development Corporation, and upon its merger into GulfMark, the Ercon division
of GulfMark.
1.21 "EVI" shall mean Energy Ventures, Inc., a Delaware corporation.
1.22 "EVI INDEMNIFIED PARTIES" shall have the meaning set forth in Section
6.1(a) hereof.
1.23 "EXCLUDED ASSETS" means (i) any and all property, assets, claims and
rights, tangible and intangible of Ercon, (ii) the EVI Common Stock owned by
GulfMark, (iii) 200 shares of common stock of American Independent Oil Company
and (iv) the original tax, accounting and other corporate records of GulfMark.
1.24 "GMDB" shall mean Gulf Marine do Brazil, a Brazilian corporation.
1.25 "GNSL" shall mean GulfMark North Sea, Ltd., a U.K. corporation.
1.26 "GOMI" shall mean Gulf Offshore Marine International, Inc., a
Panamanian corporation.
1.27 "GULFMARK", for purposes of the assumption and indemnification
provisions of this Agreement, includes GulfMark International, Inc. and Ercon
Development Corporation and any and all predecessors thereto, whether by merger,
purchase or other acquisition of assets or otherwise, and any and all
predecessors to such entities.
1.28 "GULFMARK 401(K) PLAN" shall mean the GulfMark International, Inc.
401(k) Plan.
1.29 "GULFMARK COMMON STOCK" means shares of common stock, $1.00 par value
per share, of GulfMark.
1.30 "GULFMARK COMPANY" means any corporation, partnership, limited
liability company, association or other entity, excluding GulfMark and Ercon, of
which GulfMark or any GulfMark Company now or at any time in the past owned,
directly or indirectly, an ownership interest in (whether or not such ownership
interest constituted control of the entity and whether or not such interest
represented a passive or active investment), including, without limitation,
those companies and entities described on Schedule 1.30 hereto.
1.31 "GULFMARK EMPLOYEE BENEFIT PLANS" shall have the meaning specified in
Section 4.3 hereof.
1.32 "GULFMARK TAXES" means any and all taxes to which GulfMark or any
GulfMark Company may be obligated relating to or arising from (i) the current or
past operations or assets of GulfMark or any GulfMark Company through the
Effective Date, (ii) the Contribution and the Distribution, (iii) the Merger,
(iv) any tax return filed by any current or past member of GulfMark's
consolidated group, (v) any Tax for which GulfMark may be alleged to be liable
by reason of being affiliated with any other Person for all periods prior to the
Effective Date, (vi) property taxes with respect to the assets of GulfMark or
any GulfMark Company for all periods prior to the Effective Date (with property
taxes for the assets of GulfMark after the Distribution being prorated) and
(vii) any transfer taxes or value added in connection with the transactions
contemplated by the Contribution, Distribution and the Merger.
1.33 "INVENTORY AND EQUIPMENT" has the meaning specified in paragraph (d)
of the definition of Assets.
1.34 "LIABILITY" means any and all claims, demands, liabilities,
responsibilities, disputes, causes of action and obligations of every nature
whatsoever, liquidated or unliquidated, known or unknown, matured or unmatured,
or fixed or contingent.
1.35 "MERGER" means the merger of GulfMark Acquisition Co. with and into
GulfMark as contemplated by the Merger Agreement.
1.36 "MERGER AGREEMENT" means the Agreement and Plan of Merger dated
December 5, 1996, by and among EVI, GulfMark, GulfMark Acquisition Co. and New
GulfMark International, Inc.
1.37 "PERMITS" has the meaning specified in paragraph (e)(ii) of the
definition of Assets.
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1.38 "PERSON" means an individual, corporation, limited liability company,
partnership, governmental authority or any other entity.
1.39 "POST-EFFECTIVE DATE PROPERTIES" shall mean only the Properties
owned, leased or operated by GulfMark or Ercon after the Effective Date.
1.40 "PROPERTIES" means the properties currently or previously owned or
operated by GulfMark or any GulfMark Company.
1.41 "RECORD DATE" shall have the meaning specified in Section 3.3 hereof.
1.42 "RETAINED INTELLECTUAL PROPERTY" means patents, trademarks, service
marks, trade names, service names, brand names, copyrights, trade secrets,
know-how, inventions, computer software (including documentation and object and
source codes) and similar rights used in Ercon, including without limitation,
all right, title and interest of GulfMark in and to the name "Ercon" and any
derivative thereof, including without limitation, "Ercon Development
Corporation" and all registrations, applications, licenses and rights with
respect to any of the foregoing.
1.43 "RETAINED LIABILITIES" shall mean and be limited solely to (i) those
accounts payable relating to the business of Ercon that are reflected on the
Effective Date balance sheet of GulfMark (ii) those accounts payable reflected
on the Effective Date balance sheet of GulfMark and agreed to by EVI prior to
the Effective Date and (iii) the obligations of GulfMark and Ercon that arise
after the Effective Date (other than obligations relating to matters existing or
occurring on or prior to the Effective Date and indemnification, warranty and
product liability, wrongful death or property claims associated with actions or
omissions prior to the Effective Date or any business conducted prior to the
Effective Date) including those obligations set forth under the express terms of
the contracts of GulfMark listed on Schedule 1.43 and any new contracts of
GulfMark that are added to such Schedule prior to the Effective Date subject to
the limitations on new contracts set forth in Article III of the Merger
Agreement.
1.44 "SERVICE OF PROCESS" shall have the meaning specified in Section 6.1
hereof.
1.45 "SPINCO" shall have the meaning specified in the preamble.
1.46 "SPINCO 401(K) PLAN" shall have the meaning specified in Section 4.2
hereof.
1.47 "SPINCO COMMON STOCK" means shares of common stock, $1.00 par value
per share, of Spinco.
1.48 "SPINCO EMPLOYEE BENEFIT PLANS" shall have the meaning specified in
Section 4.3 hereof.
1.49 "STOCK OPTION PLANS" means the following stock option plans
maintained by GulfMark:
(a) 1993 Amended and Restated Non-Employee Director Stock Option
Plan;
(b) the 1987 Stock Option Plan, as amended, and
(c) the 1988 Non-Employee Director Option Plan.
1.50 "SUBSIDIARIES" shall mean Gulf Offshore Marine International, Inc., a
Panamanian corporation; GulfMark North Sea, Ltd., a U.K. corporation; and a
ninety percent (90%) interest in Gulf Marine do Brazil, a Brazilian corporation.
1.51 "SUBSIDIARIES' STOCK" shall mean all of the issued and outstanding
capital stock of GOMI and GNSL and a ninety percent (90%) interest in the
capital stock of GMdB.
1.52 "TAXES" shall mean all federal, state, local, foreign and other
taxes, charges, fees, duties, levies, imposts, customs or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, profit share, license,
lease, service, service use, value added, withholding, payroll, employment,
excise, estimated, severance, stamp, occupation, premium, property, windfall
profits, or other taxes, fees, assessments, customs, duties, levies, imposts, or
charges of any kind whatsoever, together with any interest, penalties, additions
to tax, fines or other additional amounts imposed thereon or related thereto,
and the term "Tax" means any one of the foregoing Taxes.
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1.53 "TRANSFER AGENT" shall mean American Stock Transfer & Trust Company
located at 40 Wall Street, New York, New York.
1.54 "TRANSFERRED INTELLECTUAL PROPERTY" means patents, trademarks,
service marks, trade names, service names, brand names, copyrights, trade
secrets, know-how, inventions, computer software (including documentation and
object and source codes) and similar rights used in the Business, including
without limitation, all right, title and interest of the GulfMark Company in and
to the name "GulfMark" and any derivative thereof, including without limitation,
"GulfMark International, Inc." and all registrations, applications, licenses and
rights with respect to any of the foregoing.
1.55 "VESSEL" has the meaning specified in paragraph (c) of the definition
of Assets.
1.56 "WASTE MATERIALS" means any (i) toxic or hazardous materials or
substances; (ii) solid wastes, including asbestos, polychlorinated biphenyls,
mercury, buried contaminants, chemicals, flammable or explosive materials; (iii)
radioactive materials; (iv) petroleum wastes and spills or releases of petroleum
products; and (v) any other chemical, pollutant, contaminant, substance or waste
that is regulated by any governmental entity under any Environmental Law.
ARTICLE II
CONTRIBUTION AND ASSUMPTION TRANSACTIONS
2.1 CONTRIBUTION OF ASSETS AND SUBSIDIARIES' STOCK.
(a) Effective as of the Contribution Date, GulfMark hereby
contributes, assigns, transfers, conveys and delivers to Spinco and Spinco
hereby acquires and accepts, as hereinafter provided, all of GulfMark's
right, title and interest in and to the Assets and the Subsidiaries' Stock.
Notwithstanding the foregoing, GulfMark hereby retains all of GulfMark's
right, title and interest in and to the Excluded Assets.
(b) GULFMARK MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
WITH RESPECT TO THE ASSETS (CURRENT, FIXED, PERSONAL, REAL, TANGIBLE OR
INTANGIBLE), INCLUDING, BUT NOT LIMITED TO, CONDITION OR WORKMANSHIP
THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT,
CAPACITY, SUITABILITY, UTILITY, SALABILITY, AVAILABILITY, COLLECTIBILITY,
OPERATIONS, CONDITIONS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, IT BEING THE EXPRESS AGREEMENT OF SPINCO AND GULFMARK THAT, EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SPINCO WILL OBTAIN THE ASSETS IN
THEIR PRESENT CONDITION AND STATE OF REPAIR, ON AN "AS IS AND WHERE IS,
WITH ALL FAULTS" BASIS.
2.2 ASSUMPTION. Effective as of the Contribution Date, as an inducement to
EVI to merge with GulfMark, Spinco hereby unconditionally assumes and undertakes
to pay, satisfy and discharge when due the Assumed Liabilities. Notwithstanding
the foregoing, GulfMark hereby retains and Spinco will have no liability with
respect to the Retained Liabilities.
2.3 CONSIDERATION. The aggregate consideration for the transactions
provided for herein shall consist of (a) the issuance to GulfMark of the
Additional Shares and (b) the assumption by Spinco of the Assumed Liabilities.
2.4 ABSOLUTE ASSUMPTION. IT IS THE INTENT OF THE PARTIES THAT THE
LIABILITIES AND ENVIRONMENTAL LIABILITIES ASSUMED BY SPINCO UNDER THIS AGREEMENT
SHALL BE WITHOUT REGARD TO THE CAUSE THEREOF OR THE NEGLIGENCE OF ANY PERSON,
WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE, AND
WHETHER SUCH LIABILITY OR ENVIRONMENTAL LIABILITY IS BASED ON STRICT LIABILITY,
ABSOLUTE LIABILITY OR ARISING AS AN OBLIGATION OF CONTRIBUTION. SPINCO HEREBY
WAIVES AND RELEASES FOR ITSELF AND ON BEHALF OF SPINCO'S AFFILIATES ANY CLAIMS,
DEFENSES OR CLAIMS FOR CONTRIBUTION THAT IT HAS OR MAY HAVE AGAINST GULFMARK,
EVI OR ANY OF THEIR RESPECTIVE AFFILIATES WITH RESPECT TO THE ASSUMED
LIABILITIES.
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2.5 LIMITATION ON ASSIGNMENTS. Notwithstanding any other provision hereof,
this Agreement shall not constitute nor require an assignment to Spinco of any
Contract, Permit, license or other right if an attempted assignment of the same
without the consent of any party would constitute a breach thereof or a
violation of any law or any judgment, decree, order, writ, injunction, rule or
regulation of any governmental entity unless and until such consent shall have
been obtained. In the case of any such Contract, Permit, license or other right
that cannot be effectively transferred to Spinco without such consent (a
"Consent Required Contract"), GulfMark agrees that it will attempt to enter into
a reasonable arrangement designed to provide Spinco with the benefit of
GulfMark's rights under such Consent Required Contract, including enforcement of
any and all rights of GulfMark against any other party as Spinco may reasonably
request, all such actions to be at Spinco's sole cost and expense.
2.6 DELIVERY OF RECORDS. Spinco shall be entitled to all books, records,
papers and instruments of GulfMark of whatever nature that relate to the Assets,
the Subsidiaries or the operation of the Business, including, without
limitation, all financial and accounting records, on the Closing Date, and all
books and records relating to employees, the purchase of materials, supplies and
services, research and development, engineering drawings, designs, schematics,
blueprints, instruction manuals, flowsheets, models, maintenance schedules and
similar technical records, and dealings with customers, vendors and suppliers of
the Business, and including computerized books and records and other
computerized storage media and the software (including documentation and object
and source codes) used in connection therewith; provided that GulfMark shall be
entitled to retain all originals of its corporate, financial, accounting, legal,
tax and auditing records, and GulfMark shall be entitled to retain copies at its
expense of any such other books and records that are necessary for its tax,
accounting or legal purposes.
ARTICLE III
RECAPITALIZATION OF SPINCO; MECHANICS OF DISTRIBUTION
3.1 SPINCO CAPITALIZATION. The current equity capitalization of Spinco
consists of one issued and outstanding share of Spinco Common Stock (the
"Existing Spinco Common Stock"), all of which is outstanding and owned
beneficially and of record by the Company.
3.2 RECAPITALIZATION OF SPINCO. Immediately prior to the Distribution
Date, the GulfMark shall cause Spinco to exchange the Existing Spinco Common
Stock owned by GulfMark for the Additional Shares.
3.3 MECHANICS OF DISTRIBUTION. The Distribution shall be effected by the
distribution to each holder of record of GulfMark Common Stock, as of the record
date designated for the Distribution by or pursuant to the authorization of the
Board of Directors of GulfMark (the "Record Date"), of certificates representing
two shares of Spinco Common Stock for each share of GulfMark Common Stock held
by such holder.
3.4 TIMING OF DISTRIBUTION. The Board of Directors of the GulfMark shall
formally declare the Distribution and shall authorize GulfMark to pay it
immediately prior to the Effective Date, subject to the satisfaction or waiver
of the conditions set forth in Article VIII, by delivery of certificates for
Spinco Common Stock to the Transfer Agent for delivery to the holders entitled
thereto. The Distribution shall be deemed to be effective upon notification by
GulfMark to the Transfer Agent that the Distribution has been declared and that
the Transfer Agent is authorized to proceed with the distribution of Spinco
Common Stock.
ARTICLE IV
EMPLOYEE BENEFIT PLANS
4.1 EMPLOYEE BENEFITS GENERALLY. All obligations of the Spinco under this
Article IV with respect to employee benefit plans, arrangements or policies for
the benefit of employees and former employees (and their beneficiaries) of
GulfMark and the GulfMark Companies in place immediately prior to the
Contribution Date shall be treated as Assumed Liabilities and not as Retained
Liabilities under this Agreement.
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4.2 As soon as administratively possible after the Distribution Date,
Spinco shall establish a defined contribution plan (the "Spinco 401(k) Plan")
which shall be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended, and effective as of the Distribution Date. As soon as
administratively feasible following the Distribution Date, and in accordance
with the terms of the GulfMark 401(k) Plan, GulfMark shall cause the account
balance attributable to each individual who will cease to be an employee of
GulfMark following the Distribution Date to be distributed directly to such
individual, or upon the request of any such individual, transferred to another
qualified rollover investment (including the Spinco 401(k) Plan if such
individual is eligible to participate therein) specified in such request to the
extent that such transfer or distribution is permitted by law. Each individual
who becomes an employee of Spinco on the Distribution Date shall, for
eligibility and vesting purposes under the Spinco 401(k) Plan, be credited with
the same service with which he or she is credited for such purposes under the
GulfMark 401(k) Plan immediately prior to the Distribution Date.
4.3 EMPLOYEE HEALTH, LIFE AND DISABILITY INSURANCE PLANS. Effective as of
the Distribution Date, Spinco shall establish such employee health, life and
disability insurance plans and other employee welfare or fringe benefit
arrangements (collectively the "Spinco Employee Benefit Plans") which are
comparable in the aggregate to the health, life and disability insurance plans
and other employee welfare or fringe benefit arrangements which had been
maintained by GulfMark for its employees and the employees of its Subsidiaries
prior to the Distribution Date (collectively the "GulfMark Employee Benefit
Plans"). Service by any employee with GulfMark or its Subsidiaries prior to the
Distribution Date shall be counted for purposes of determining any period of
eligibility to participate in, or to vest in benefits (including vacation
rights) provided under, the Spinco Employee Benefit Plans, and any amounts
previously expended by any such employees of GulfMark or its Subsidiaries prior
to the Distribution Date for purposes of satisfying such plan year's deductible,
co-payment limitations maximum out-of-pocket provisions and applicable annual
and/or life-time maximum benefit limitations shall be credited for purposes of
satisfying such plan year's deductible, co-payment limitations under the Spinco
Employee Benefit Plans and any coverage waiting period for pre-existing
conditions for such employees shall be waived under the Spinco Employee Benefit
Plans.
ARTICLE V
GULFMARK STOCK OPTION PLANS
5.1 As of the Distribution Date, Spinco shall assume the GulfMark Stock
Option Plans, and pursuant to the equitable adjustment provisions of the
applicable Stock Option Plan, each outstanding stock option previously granted
pursuant to any of GulfMark's Stock Option Plans to an employee, officer or
director of GulfMark who will, following the Distribution, become an employee,
officer or director of Spinco, will be converted into and represent an option to
acquire shares of Spinco Common Stock.
5.2 The number of shares of Spinco Common Stock subject to, and the
exercise price of, each such Spinco option will be adjusted in accordance with
the requirements of Section 424 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, to reflect the Distribution
as set forth in Section 5.3 so that (i) the aggregate intrinsic value
(difference between market value per share and exercise price) of each option
immediately after the Distribution is not greater than the aggregate intrinsic
value of such option immediately before the Distribution, and (ii) the ratio of
the exercise price per option to the market value per share is not reduced. The
vesting provisions and option period of the new Spinco options will remain
unchanged from the GulfMark options so replaced.
5.3 As of the Distribution Date, to effect the adjustment described in
Section 5.2, (i) the number of shares of Spinco Common Stock covered by each new
Spinco option shall be the number of shares covered by the GulfMark option being
replaced thereby, multiplied by a fraction equal to the ratio of the
pre-Distribution market price per share of GulfMark Common Stock to the
post-Distribution market price per share of Spinco Common Stock, and (ii) the
exercise price per share of each new Spinco option shall be the exercise price
per share of the GulfMark option being replaced thereby, multiplied by a
fraction equal to the ratio of the post-Distribution market price per share of
the Spinco Common Stock to the pre-Distribution market price per share of
GulfMark Common Stock.
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5.4 For purposes of the foregoing adjustments, (i) the pre-Distribution
market price per Share of GulfMark Common Stock shall be deemed to be the
average of the arithmetic mean between the highest and lowest sales prices per
share of GulfMark Common Stock as reported by the NASDAQ Stock Market on each of
the ten trading days before the Distribution or such other market price as the
Board of Directors of Spinco deems equitable, and (ii) the postDistribution
market price per share of Spinco Common Stock shall be deemed to be the average
of the arithmetic mean between the highest and lowest sales prices per share of
Spinco Common Stock as reported by the NASDAQ Stock Market on each of the ten
trading days beginning on the eleventh trading day after the Distribution or
such other market price as the Board of Directors of Spinco deems equitable.
5.5 GulfMark and Spinco will cooperate and take all action necessary
(including obtaining the consent of the holders of GulfMark options, if
required) to amend (if necessary) the GulfMark Stock Option Plans or otherwise
provide for adjustments of authorized shares and outstanding option awards under
the GulfMark Stock Option Plans, and to effect Spinco's assumption of the
GulfMark Stock Option Plans, in accordance with the provisions of this Article
V.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION MATTERS.
(a) Indemnification. Spinco hereby agrees to indemnify, defend and
hold GulfMark, EVI and their respective officers, directors, employees,
agents and assigns (collectively, the "EVI Indemnified Parties") harmless
from and against any and all Liabilities or Environmental Liabilities
(including, without limitation, reasonable fees and expenses of attorneys,
accountants, consultants and experts) that the EVI Indemnified Parties
incur, are subject to a claim for, or are subject to, that are based upon,
arising out of, relating to or otherwise in respect of:
(i) any breach of any covenant or agreement of Spinco contained in
this Agreement or any other agreement contemplated hereby;
(ii) the acts or omissions of GulfMark or any GulfMark Company on
or before the Effective Date;
(iii) the acts or omissions of any GulfMark Company, Spinco or any
of Spinco's Affiliates or the conduct of any business by them on or
after the Effective Date;
(iv) the Assumed Liabilities;
(v) the Assets, regardless of any GulfMark Company's prior use of
any such Asset;
(vi) the conveyance, assignment, sale, lease or making available of
the Assets;
(vii) the conveyance, assignment, sale, merger or contribution of
the stock or share capital or assets of Ercon Development Corporation to
GulfMark;
(viii) any Taxes as a result of the Distribution, the Contribution
or the Merger subsequently being determined to be a taxable transaction
for foreign, federal, state or local law purposes regardless of the
theory or reason for the transactions being subject to Tax;
(ix) any and all amounts for which GulfMark or EVI may be liable on
account of any claims, administrative charges, self-insured retentions,
deductibles, retrospective premiums or fronting provisions in insurance
policies, including as the result of any uninsured period, insolvent
insurance carriers or exhausted policies, arising from claims by
GulfMark's or any GulfMark Company's Affiliates, or the employees of any
of the foregoing, or claims by insurance carriers of GulfMark or any
GulfMark Company for indemnity arising from or out of claims by or
against GulfMark or any GulfMark Company for acts or omissions of
GulfMark or any GulfMark Company, or related to any
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current or past business of GulfMark or any GulfMark Company or any
product or service provided by GulfMark or any GulfMark Company in whole
or part prior to the Effective Date;
(x) any COBRA Liability with respect to any employees of GulfMark
or any GulfMark Company who become employees of Spinco after the
Distribution;
(xi) any settlements or judgments in any litigation commenced by
one or more insurance carriers against GulfMark or EVI on account of
claims by Spinco or any GulfMark Company or employees of Spinco or any
GulfMark Company;
(xii) any and all Liabilities incurred by GulfMark or EVI pursuant
to its obligations hereunder in seeking to obtain or obtaining any
consent or approval to assign, transfer or lease any interest in any
asset or instrument, contract, lease, permit or benefit arising
thereunder or resulting therefrom;
(xiii) any Liability relating to the failure to comply with any
bulk sales or transfer laws in connection herewith or with any of the
other agreements contemplated hereby;
(xiv) the on-site or off-site handling, storage, treatment or
disposal of any Waste Materials generated by GulfMark or any GulfMark
Company on or prior to the Effective Date or any GulfMark Company at any
time;
(xv) any and all Environmental Conditions, known or unknown,
existing on, at or underlying any of the Post-Effective Date Properties
on or prior to the Effective Date;
(xvi) any and all Environmental Conditions, known or unknown,
existing on, at or underlying any of the Properties other than the
Post-Effective Date Properties;
(xvii) any acts or omissions of GulfMark or any GulfMark Company
relating to the ownership or operation of the business of GulfMark or
any GulfMark Company or the Properties on or prior to the Effective
Date;
(xviii) any Liability relating to any claim or demand by any
stockholder of GulfMark or EVI with respect to the Merger, the
Contribution, the Distribution or the transactions relating thereto; and
(xix) any Liability relating to the GulfMark 401(k) Plan and the
other employee benefit or welfare plans of GulfMark or any GulfMark
Company arising out of circumstances occurring on or prior to the
Effective Date.
(b) Absolute Indemnity. NONE OF THE EVI INDEMNIFIED PARTIES WILL BE
OBLIGATED TO INSTITUTE ANY LEGAL PROCEEDINGS IN CONNECTION WITH THE
COLLECTION OR PURSUIT OF ANY INSURANCE IN ORDER TO EXERCISE AN
INDEMNIFICATION REMEDY UNDER THIS ARTICLE VI. UNLESS OTHERWISE SPECIFICALLY
EXPRESSED, THIS INDEMNITY OBLIGATION SHALL APPLY WITHOUT REGARD TO WHETHER
THE LIABILITY OR ENVIRONMENTAL LIABILITY WAS CAUSED BY THE ORDINARY OR
GROSS NEGLIGENCE OF ANY OF THE EVI INDEMNIFIED PARTIES (WHETHER SUCH
NEGLIGENCE BE SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE), OR WHETHER
THE LIABILITY OR ENVIRONMENTAL LIABILITY IS BASED ON STRICT LIABILITY,
ABSOLUTE LIABILITY OR ARISES AS AN OBLIGATION OF CONTRIBUTION OR INDEMNITY.
SPINCO ACKNOWLEDGES THAT IT IS AWARE OF VARIOUS THEORIES KNOWN AS THE
"EXPRESS NEGLIGENCE" DOCTRINE AND OTHER SIMILAR DOCTRINES AND THEORIES THAT
MAY LIMIT INDEMNIFICATION AND AGREES AND STIPULATES THAT THE PROVISIONS OF
THIS AGREEMENT REFLECT THE EXPRESS INTENT OF THE PARTIES THAT THE
INDEMNIFICATION TO BE PROVIDED BY SPINCO APPLY NOTWITHSTANDING THE FACT
THAT THE LIABILITY OR ENVIRONMENTAL LIABILITY (I) MAY NOT CURRENTLY BE
KNOWN BY IT OR MANIFEST ITSELF IN ANY REGARD, (II) MAY ARISE UNDER A
STATUTE OR THEORY THAT MAY NOT CURRENTLY EXIST OR BE KNOWN TO SPINCO, (III)
MAY ARISE AS A RESULT OF A
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NEGLIGENT ACT OR OMISSION BY ANY OF THE EVI INDEMNIFIED PARTIES (WHETHER
SUCH CONDUCT BE SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OR (IV) MAY
CONSTITUTE A VIOLATION OF ANY APPLICABLE CIVIL OR CRIMINAL LAW OR
REGULATION.
6.2 NOTICE OF CIRCUMSTANCE. After receipt by EVI of notice, or EVI's
actual discovery, of any action, proceeding, claim, demand or potential claim
which could give rise to a right to indemnification pursuant to any provision of
this Agreement (any of which is individually referred to as a "Circumstance"),
EVI shall give Spinco written notice describing the Circumstance in reasonable
detail; provided, however, that no delay by EVI in notifying Spinco shall
relieve Spinco from any Liability or Environmental Liability hereunder unless
(and then solely to the extent) Spinco's position is actually adversely
prejudiced. In the event Spinco notifies EVI within 15 days after such notice
that Spinco is assuming the defense thereof, (i) Spinco will defend the EVI
Indemnified Parties against the Circumstances with counsel of its choice,
provided such counsel is reasonably satisfactory to EVI, (ii) the EVI
Indemnified Parties may retain separate co-counsel at its or their sole cost and
expense (except that Spinco will be responsible for the fees and expenses for
the separate co-counsel to the extent EVI concludes reasonably that the counsel
Spinco has selected has a conflict of interest), (iii) the EVI Indemnified
Parties will not consent to the entry of any judgment or enter into any
settlement with respect to the Circumstances without the written consent of
Spinco and (iv) Spinco will not consent to the entry of any judgment with
respect to the Circumstances, or enter into any settlement which (x) requires
any payments by or continuing obligations of an EVI Indemnified Party, (y)
requires an EVI Indemnified Party to admit any facts or liability that could
reasonably be expected to adversely affect an EVI Indemnified Party in any other
matter or (z) does not include a provision whereby the plaintiff or claimant in
the matter releases the EVI Indemnified Parties from all Liability with respect
thereto, without the written consent of EVI. In the event Spinco does not notify
EVI within 15 days after EVI has given notice of the Circumstance that Spinco is
assuming the defense thereof, the EVI Indemnified Parties may defend against, or
enter into any settlement with respect to, the Circumstance in any manner the
EVI Indemnified Parties reasonably may deem appropriate, at Spinco's sole cost.
The foregoing provisions shall not apply to the provisions of Section 5.7 of the
Merger Agreement.
6.3 INSURANCE. Spinco shall not be obligated to indemnify the EVI
Indemnified Parties for amounts which shall have been covered and paid by
insurance of the EVI Indemnified Parties, provided, however, insurance shall not
include deductibles or self-insured retentions.
6.4 SCOPE OF INDEMNIFICATION. INDEMNIFICATION UNDER THIS ARTICLE VI SHALL
BE IN ADDITION TO ANY REMEDIES THE GULFMARK, EVI OR ANY EVI INDEMNIFIED PARTY
MAY HAVE AT LAW OR EQUITY. THERE SHALL BE NO TIME LIMIT AS TO SPINCO'S
INDEMNIFICATION OBLIGATIONS HEREUNDER.
6.5 INDEMNITY FOR CERTAIN ENVIRONMENTAL LIABILITIES. It is the intention
of the parties that the indemnity provided herein with respect to Environmental
Liabilities under CERCLA and corresponding provisions of state law is an
agreement expressly not barred by 42 U.S.C. sec. 9607(e)(i) and corresponding
provisions of state law.
ARTICLE VII
ADDITIONAL COVENANTS OF SPINCO
7.1 EMPLOYMENT. Spinco shall offer employment or continued employment from
the Contribution Date to all employees of GulfMark, except those employed by
Ercon, on terms that are substantially the same as the terms on which they were
employed by GulfMark immediately prior to the Contribution Date; provided,
however, that nothing contained in this Section 7.1 is intended to confer upon
any employee who so continues to be employed or who accepts such an offer of
employment by Spinco ("Spinco Group Continuing Employees") any right to
continued employment after the Contribution Date. GulfMark hereby consents to
Spinco making such offers. Spinco shall recognize the service with GulfMark
through the Contribution Date of each Spinco Group Continuing Employee and shall
credit on the Contribution Date, such service with
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Spinco (i) for all plan purposes under any employee benefit plan, arrangement or
policy of the Spinco Group in effect as of the Contribution Date in which they
are then participating and (ii) for eligibility and vesting purposes only under
any employee benefit plan, arrangement or policy for which they become eligible
on or following the Contribution Date.
7.2 SPINCO COVENANTS. To assure the performance of the obligations of
Spinco under this Agreement, Spinco hereby covenants and agrees that it will
not, and will cause its Subsidiaries to not, merge, convert into another entity,
engage in a share exchange for a majority of its shares, liquidate or transfer,
assign or otherwise convey or allocate, directly or indirectly, in one or more
transactions, whether or not related, a majority of Spinco's assets (determined
in good faith by a board resolution prior to the transaction on a fair value and
consolidated basis) to any Person unless the acquiring Person expressly assumes
the obligations of Spinco hereunder, (ii) executes and delivers to GulfMark and
EVI an agreement agreeing to be bound by each and every provision of this
Agreement as if it were Spinco and (iii) has a net worth on a pro forma basis
after giving effect to the acquisition or business combination equal to or
greater than that of Spinco (on a consolidated basis).
7.3 TAX ALLOCATION AGREEMENT. Prior to the Distribution, GulfMark, Spinco
and EVI shall enter into a Tax Allocation Agreement acceptable in all respects
to EVI and Spinco, which will set forth each party's rights and obligations with
respect to payments and refunds, if any, of Taxes for periods before and after
the Effective Date and related matters such as the filing of tax returns and the
conduct of audits and other tax proceedings.
ARTICLE VIII
CONDITIONS
8.1 CONDITIONS TO OBLIGATIONS OF GULFMARK. The obligations of the GulfMark
to consummate the Distribution hereunder shall be subject to the fulfillment of
each of the following conditions:
(a) All of the transactions contemplated by Article II shall have been
consummated.
(b) The recapitalization of Spinco in accordance with Section 3.2
shall have been consummated.
(c) Each condition to the Closing of the Merger Agreement set forth in
Article VI thereof, other than conditions as to the consummation of the
Contribution and the Distribution, shall have been fulfilled or waived by
the party for whose benefit such condition exists.
(d) The Board of Directors of GulfMark shall be reasonably satisfied
that, after giving effect to the Contribution, (i) GulfMark will not be
insolvent and will not have unreasonably small capital with which to engage
in its businesses and (ii) the GulfMark surplus would be sufficient to
permit, without violation of Section 170 of the DGCL, the Distribution.
ARTICLE IX
MISCELLANEOUS
9.1 GOVERNING LAW. All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach shall be governed by the laws of the State
of Texas, without regard to conflict of laws principles.
9.2 ARBITRATION. Any disputes, claims or controversies connected with,
arising out of, or related to, this Agreement and the rights and obligations
created herein, or the breach, validity, existence or termination hereof, shall
be settled by Arbitration to be conducted in accordance with the Commercial
Rules of Arbitration of the American Arbitration Association, except as such
Commercial Rules may be changed by this Section 9.2. The disputes, claims or
controversies shall be decided by three independent arbitrators (that is,
arbitrators having no substantial economic or other material relationship with
the parties), one to be appointed by Spinco and one to be appointed by EVI
within fourteen days following the submission of the
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claim to the parties hereto and the third to be appointed by the two so
appointed within five days. Should either party refuse or neglect to join in the
timely appointment of the arbitrators, the other party shall be entitled to
select both arbitrators. Should the two arbitrators fail timely to appoint a
third arbitrator, either party may apply to the Chief Judge of the United States
District Court for the Southern District of Texas to make such appointment. The
arbitrators shall have ninety days after the selection of the third arbitrator
within which to allow discovery, hear evidence and issue their decision or award
and shall in good faith attempt to comply with such time limits; provided,
however, if two of the three arbitrators believe additional time is necessary to
reach a decision, they may notify the parties and extend the time to reach a
decision in thirty day increments, but in no event to exceed an additional
ninety days. Discovery of evidence shall be conducted expeditiously by the
Parties, bearing in mind the parties desire to limit discovery and to expedite
the decision or award of the arbitrators at the most reasonable cost and expense
of the parties. Judgment upon an award rendered pursuant to such Arbitration may
be entered in any court having jurisdiction, or application may be made to such
court for a judicial acceptance of the award, and an order of enforcement, as
the case may be. The place of Arbitration shall be Houston, Texas. The decision
of the arbitrators, or a majority thereof, made in writing, shall be final and
binding upon the parties hereto as to the questions submitted, and each party
shall abide by such decision. Notwithstanding the provisions of this Section
9.2, neither party shall be prohibited from seeking injunctive relief pending
the completion of any arbitration. The costs and expenses of the arbitration
proceeding, including the fees of the arbitrators and all costs and expenses,
including legal fees and witness fees, incurred by the prevailing party, shall
be borne by the losing party.
Solely for purposes of injunctive relief, orders in aid of arbitration and
entry of the arbitrator's award:
(a) each of the parties hereto irrevocably consents to the
non-exclusive jurisdiction of, and venue in, any state court located in
Harris County, Texas or any federal court sitting in the Southern District
of Texas in any suit, action or proceeding seeking injunctive relief,
arising out of or relating to this Agreement or any of the other agreements
contemplated hereby and any other court in which a matter that may result
in a claim for indemnification hereunder by an EVI Indemnified Party may be
brought with respect to any claim for indemnification by an EVI Indemnified
Party;
(b) each of the parties hereto waives, to the fullest extent permitted
by law, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding seeking injunctive relief, orders
in aid of arbitration or entry of an arbitration arising out of or relating
to this Agreement or any of the other agreements contemplated hereby
brought in any state court located in Harris County, Texas or any federal
court sitting in the Southern District of Texas or any other court in which
a matter that may result in a claim for indemnification hereunder by an EVI
Indemnified Party may be brought with respect to any claim for
indemnification by an EVI Indemnified Party, and further irrevocably waive
any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum;
(c) each of the parties hereto irrevocably designates, appoints and
empowers CT Corporation System, Inc. and any successor thereto as its
designee, appointee and agent to receive, accept and acknowledge for and on
its behalf, and in respect of its property, service of any and all legal
process, summons, notices and documents which may be served in any suit,
action or proceeding arising out of or relating to this Agreement or any of
the other agreements contemplated hereby.
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<PAGE> 186
9.2 NOTICES. All notices and other communications required or permitted to
be given or made hereunder by either party hereto shall be in writing and shall
be deemed to have been duly given if delivered personally or transmitted by
first class registered or certified mail, postage prepaid, return receipt
requested, or sent by prepaid overnight delivery service, or sent by cable,
telegram, telefax or telex, to the parties at the following addresses (or at
such other addresses as shall be specified by the parties by like notice):
<TABLE>
<S> <C>
If to Spinco: GulfMark International, Inc.
5 Post Oak Park, Suite 1170
Houston, Texas 77027
Attn: Frank R. Pierce
Telephone: (713) 963-9522
Facsimile: (713) 963-9796
with a copy to: Griggs & Harrison, P.C.
1301 McKinney, Suite 3200
Houston, Texas 77010
Attn: W. Garney Griggs
Telephone: (713) 651-0600
Facsimile: (713) 651-1944
If to GulfMark or EVI: Energy Ventures, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Bernard J. Duroc-Danner
Telephone: (713) 297-8400
Facsimile: (713) 297-8488
and with a copy to: Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Curtis W. Huff
Telephone: (713) 651-5151
Fax: (713) 651-5246
</TABLE>
9.4 ENTIRE AGREEMENT. This Agreement, including the Schedules, Exhibits
and other writings referred to herein or delivered pursuant hereto, constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
9.5 AMENDMENTS AND WAIVER; RIGHTS AND REMEDIES. This Agreement may be
amended, superseded, canceled, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by the parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of either party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either party of any such right,
power or privilege, or any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
9.6 GOVERNING LAW. The parties agree that the laws of the State of Texas
(without giving effect to the principles of conflicts of laws thereof) shall
govern the interpretation and enforcement of this Agreement and all disputes
arising under or in connection with this Agreement.
9.7 BINDING EFFECT; ASSIGNMENT; NO THIRD PARTY BENEFIT.
(a) This Agreement and all the provisions hereof shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns.
15
<PAGE> 187
(b) Nothing in this Agreement, express or implied, is intended to or
shall confer upon any person other than Spinco, GulfMark, EVI, and the EVI
Indemnified Parties any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
9.8 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
9.9 REFERENCES. All references in this Agreement to Articles, Sections and
other subdivisions refer to the Articles, Sections and other subdivisions of
this Agreement unless expressly provided otherwise. The words "this Agreement,"
"herein," "hereof," "hereby," "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless expressly
so limited.
9.10 SEVERABILITY OF PROVISIONS. If any provision of this Agreement is
held to be unenforceable, this Agreement shall be considered divisible and such
provision shall be deemed inoperative to the extent it is deemed unenforceable,
and in all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by applicable law.
9.11 GENDER. Pronouns in masculine, feminine, and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
9.12 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted or
convenience of reference only, do not constitute a part of this Agreement, and
shall not affect in any manner the meaning or interpretation of this Agreement.
9.13 CURRENCY. All dollar amounts in this Agreement are stated in United
States dollars.
[signatures of the following page]
16
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers hereunto duly authorized as of the date first above
written.
GULFMARK: GULFMARK INTERNATIONAL, INC.
By: /s/ FRANK R. PIERCE
------------------------------------
Frank R. Pierce
Executive Vice President
SPINCO: NEW GULFMARK INTERNATIONAL, INC.
By: /s/ FRANK R. PIERCE
------------------------------------
Frank R. Pierce
Executive Vice President
EVI: ENERGY VENTURES, INC.
By: /s/ JAMES G. KILEY
------------------------------------
James G. Kiley
Vice President
17
<PAGE> 189
APPENDIX C
[PRUDENTIAL LETTERHEAD]
March 21, 1997
Board of Directors
Energy Ventures, Inc.
5 Post Oak Park
Suite 1760
Houston, TX 77027
GulfMark International, Inc. ("GulfMark"), GulfMark Offshore, Inc. ("New
GulfMark") and Energy Ventures, Inc. ("EVI") have entered into an Agreement and
Plan of Distribution dated December 5, 1996 (the "Distribution Agreement"),
whereby all of the outstanding stock of New GulfMark will be distributed to the
stockholders of GulfMark (the "Distribution"), and EVI, GulfMark, New GulfMark
and GulfMark Acquisition Co., a wholly-owned subsidiary of EVI, have entered
into an Agreement and Plan of Merger dated December 5, 1996 (the "Agreement"),
whereby, subsequent to the Distribution, GulfMark Acquisition Co. will merge
with and into GulfMark (the "Merger"). In the Merger, EVI will exchange .6695
shares of EVI common stock, par value $1.00 per share, for each outstanding
share of GulfMark common stock, par value $1.00 per share (the "Exchange
Ratio").
In connection with the Merger, you have requested our opinion (the
"Opinion") as to the fairness, from a financial point of view, of the Exchange
Ratio to the stockholders of EVI. In conducting our analysis and arriving at the
Opinion expressed herein, we have reviewed such materials and considered such
financial and other factors as we deemed relevant under the circumstances,
including, among others, the following:
1. the Distribution Agreement;
2. the Agreement;
3. the audited consolidated financial statements of EVI for the three
years ended December 31, 1995;
4. the unaudited interim consolidated financial statements of EVI for
the nine months ended September 30, 1996;
5. the audited consolidated financial statements of GulfMark for the
three years ended December 31, 1996;
6. the unaudited interim consolidated financial statements of GulfMark
for the year ended December 31, 1996;
7. the unaudited financial statements for Ercon Development Company
("Ercon") for the five years ended December 31, 1996;
8. the opinion from Arthur Andersen LLP with respect to the tax
consequences of the Distribution and the Merger to EVI, GulfMark
Acquisition Co. and GulfMark described in the Joint Proxy
Statement/Prospectus of EVI and GulfMark (the "Arthur Andersen Opinion");
9. publicly available operating data and stock market data concerning
certain publicly-traded companies which we deemed reasonably similar to
Ercon;
10. the pro forma impact of the Merger on the earnings per share of
EVI; and
11. such other financial studies, analyses and investigations as we
deemed appropriate.
We also had discussions with members of the senior management of GulfMark
regarding the financial forecasts, prospects and business plans for GulfMark and
Ercon.
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In preparing our opinion, we have assumed that the Contribution (as defined
in the Agreement), the Distribution, and the Merger would not subject EVI,
GulfMark Acquisition Co., or GulfMark to federal income taxes, Texas Franchise
taxes or Louisiana income and franchise taxes based upon the Arthur Andersen
Opinion and we have assumed that such taxes are the only relevant taxes for
purposes of this Opinion. We note that under the Merger Agreement, New GulfMark
is obligated to indemnify GulfMark for all liabilities, including tax
liabilities, in the event the Contribution, the Distribution, or the Merger were
to result in any taxes being imposed on EVI, GulfMark Acquisition Co., or
GulfMark.
In preparing our opinion, we have, with your consent, assumed and relied
upon the accuracy and completeness of all information supplied or otherwise made
available to us from public sources or by GulfMark and EVI and have not
independently verified such information. We have neither made nor obtained any
independent evaluation or appraisal of the assets or liabilities of either EVI
or GulfMark.
With respect to the financial forecasts of Ercon provided to us by
GulfMark, we have assumed that they have been reasonably prepared and reflect
the best currently available estimates and judgment of GulfMark's management as
to the future financial performance of Ercon and have not undertaken any
independent analysis to verify the reasonableness of the assumptions underlying
such forecasts.
Our Opinion is necessarily based upon information available to us and on
economic, financial, market and other conditions as they exist and can be
evaluated as of the date hereof. No limitations were imposed on, or instructions
given by either EVI or GulfMark with respect to our investigation or the
procedures we followed in rendering our opinion, and the management of EVI and
GulfMark cooperated fully in connection with our investigation. In the past,
Prudential Securities has provided financing services for EVI and received
compensation for such services. In addition, we make a market in EVI common
stock and in the ordinary course of business may actively trade EVI common stock
or GulfMark common stock for our own account or for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities. Prudential Securities also provides equity research coverage for
EVI.
Our advisory services and the Opinion expressed herein are provided for the
use of the Board of Directors of EVI in its evaluation of the proposed Merger,
and our Opinion is not intended to be and does not constitute a recommendation
to any stockholder as to how such stockholder should vote on the Merger. This
Opinion may be reproduced in full in any proxy or information statement mailed
to stockholders of EVI but may not otherwise be disclosed publicly, referred to
or communicated by you in any manner without or prior written approval and this
Opinion must be treated as confidential. Any summary of the Opinion included in
such proxy statement must be in a form acceptable to Prudential Securities
Incorporated.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Exchange Ratio is fair, from a financial point of view, to
the stockholders of EVI.
Very truly yours,
Prudential Securities Incorporated
By: /s/ ALLEN S. MORTON
---------------------------------
Allen S. Morton
Managing Director
2
<PAGE> 191
APPENDIX D
[JEFFERIES LETTERHEAD]
March 20, 1997
The Board of Directors
GulfMark International, Inc.
5 Post Oak Park, Suite 1170
Houston, Texas 77027
Members of the Board:
You have advised us that GulfMark International, Inc. ("GulfMark" or the
"Company") proposes to spin-off its marine assets to existing GulfMark
stockholders and to merge GulfMark into Energy Ventures, Inc. ("EVI") via an
exchange offer in which GulfMark stockholders would receive 0.6695 shares of EVI
common stock for each share of GulfMark common stock held (the "Merger").
The exchange will be effected pursuant to an Agreement and Plan of Merger
(the "Merger Agreement") dated December 5, 1996, to which GulfMark, New GulfMark
International, Inc. ("New GulfMark"), EVI and GulfMark Acquisition Co. are
parties. Under the Agreement and Plan of Distribution dated December 5, 1996, by
and among GulfMark, New GulfMark and EVI ("Distribution Agreement"), GulfMark
will contribute all of the assets of GulfMark used in connection with the supply
boat business conducted by GulfMark's subsidiaries and the general corporate
assets of GulfMark (excluding the property and assets of Ercon, GulfMark's
erosion control subsidiary ("Ercon"), all EVI common stock held by GulfMark,
certain shares of American Independent Oil Company held by GulfMark, $300,000 of
net working capital and the original tax, accounting and other records of
GulfMark) and will assume certain liabilities in connection with the
contribution and GulfMark will then distribute to its stockholders prior to the
merger all of the outstanding stock of New GulfMark (the "Distribution") (the
Distribution and the Merger are collectively referred to herein as the
"Transactions").
For federal income tax purposes, it is intended that the merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the Distribution shall
qualify as a tax-free distribution pursuant to Section 355 of the Code.
You have requested our Opinion (the "Opinion") as to whether the
Transactions are fair, from a financial point of view, to the holders of
GulfMark common stock.
Jefferies & Company, Inc. ("Jefferies") will receive a cash fee of
$150,000, contingent upon the completion of the Transactions and payable upon
delivery of this Opinion. In the ordinary course of Jefferies' business, it
actively trades the securities of GulfMark and EVI for its own account and for
the accounts of its customers, and, accordingly, may at any time hold a long or
short position in such securities. Jefferies has not rendered any investment
banking or financial advisory services to GulfMark prior to the rendering of
this Opinion. Jefferies has rendered investment banking services to EVI in the
past.
In conducting our review and analysis and in arriving at our Opinion, we
have assumed and relied upon, without independent verification, upon the
accuracy and completeness of all of the historical and projected financial and
other information provided to us by GulfMark. With respect to the above noted
historical and projected financial information, the management of GulfMark has
advised us that such information has been reasonably prepared and reflects such
management's best currently available estimates and judgments, including the
impact of the Transactions on the Company's projections, and you have instructed
us to rely on such information in rendering this Opinion. We have not conducted
a physical inspection of any of the properties or facilities of GulfMark or EVI,
nor have we made or considered any independent evaluations or appraisals of any
of such properties or facilities.
In conducting our analysis and rendering our Opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others: (i) the terms and
conditions of a draft of the Merger Agreement and the Distribution Agreement and
the
1
<PAGE> 192
financial terms of the Transactions as set forth therein; (ii) historical and
current financial condition and results of operations of GulfMark and EVI,
including certain public filings of each of GulfMark and EVI; (iii) certain
non-public financial and non-financial information prepared by GulfMark; (iv)
published information regarding the financial performance and operating
characteristics of a selected group of companies that we deemed comparable to
GulfMark and Ercon; (v) business prospects of GulfMark with its current asset
base and after giving effect to the impact of the Transactions; (vi) the
historical and current market price for GulfMark common stock; (vii) publicly
available information, including research reports on companies we considered
relevant to our inquiry; (viii) recent transactions in the oil service industry;
(ix) the value of certain intangible benefits that may accrue to the Company as
a result of the Transactions; (x) drafts of opinions of Arthur Andersen LLP
dated March 10, 1997 relating to the tax-free nature of the Distribution and the
Merger; and (xi) such other factors as we deemed relevant to our Opinion. We
have also taken into account general economic, monetary, political, market and
other conditions as well as our experience in connection with similar
transactions and securities valuations generally. Our Opinion is based upon all
of such conditions, including the level of oil and gas prices, as they exist
currently and can be evaluated on the date hereof. Existing conditions are
subject to rapid and unpredictable change and any such changes could impact
Jefferies' Opinion.
Based upon and subject to the foregoing, we are of the Opinion that, as of
the date hereof, the Transactions are fair, from a financial point of view, to
the holders of GulfMark common stock.
Our engagement and the Opinion expressed herein are for the information of
the Board of Directors of the Company and does not constitute a recommendation
to any holder of GulfMark common stock as to whether such holder should vote to
approve the Transactions. This Opinion may be reproduced in full in any proxy,
prospectus or information statement mailed to stockholders of GulfMark in
connection with the Transactions but may not otherwise be quoted or referred to,
in whole or in part, in any public filing or in any written document or used for
any other purpose, without our prior written consent. Any summary of the Opinion
included in such proxy, prospectus or information statement must be in a form
acceptable to Jefferies.
Very truly yours,
/s/ JEFFERIES & COMPANY, INC.
Jefferies & Company, Inc.
2
<PAGE> 193
APPENDIX E
AMENDMENT NO. 1
TO THE
GULFMARK INTERNATIONAL, INC.
AMENDED AND RESTATED
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Pursuant to the terms and provisions of Section 13 of the GulfMark
International, Inc. Amended and Restated 1993 Non-Employee Director Stock Option
Plan (the "Plan"), GulfMark International, Inc., a Delaware corporation (the
"Company"), hereby adopts the following Amendment No. 1 to the Plan (the
"Amendment No. 1").
1.
The second, third, fourth, fifth, sixth, seventh and eighth paragraphs of
Section 12 of the Plan are hereby amended in their entirety by substituting the
following therefor:
"In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock
split, combination of shares, rights offering, or extraordinary
dividend or divestiture (including a spin-off), or any other change in
the corporate structure or shares of the Company, the Board of
Directors (or, if the Company is not the surviving corporation in any
such transaction, the board of directors of the surviving corporation)
shall make adjustments, determined by the Board of Directors in its
discretion to be appropriate, as to the number and kind of securities
reserved under and subject to the automatic grant provisions of the
Plan and, in order to prevent dilution or enlargement of rights of
participants, as to the number, kind and where applicable, the option
exercise price, of securities subject to outstanding awards or
securities subject to options issued in replacement of outstanding
awards."
2.
Each amendment made by this Amendment No. 1 to the Plan has been effected
in conformity with the provisions of the Plan. This Amendment No. 1 was adopted
by the Board of Directors of the Company on December 5, 1996 and approved by the
stockholders of the Company on , 1997.
3.
At the time of the adoption of this Amendment No. 1 to the Plan,
shares of the Company's common stock, $1.00 par value per share, were
outstanding and entitled to vote, were represented in person or by proxy,
of which shares were voted for this Amendment No. 1, shares were
voted against this Amendment No. 1 and shares abstained from voting.
Dated: , 1997.
GULFMARK INTERNATIONAL, INC.
By:
------------------------------------
Frank R. Pierce
Executive Vice President
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<PAGE> 194
APPENDIX F
AMENDMENT TO THE
GULFMARK INTERNATIONAL, INC.
1987 STOCK OPTION PLAN, AS AMENDED
Pursuant to the terms and provisions of Article IX of the GulfMark
International, Inc. 1987 Stock Option Plan, as amended (the "Plan"), GulfMark
International, Inc., a Delaware corporation formerly known as Gulf Applied
Technologies, Inc. (the "Company"), hereby adopts the following Amendment to the
Plan (the "Amendment").
1.
The first sentence of Article V of the Plan is hereby amended in its
entirety by substituting the following therefor:
"The aggregate number of shares which may be issued under Options
granted pursuant to the Plan shall not exceed 200,000 shares of Stock,
subject to adjustment in accordance with the antidilution adjustment
provisions of paragraph (b) of Article VIII."
2.
The fifth sentence of Article V of the Plan providing for an adjustment in
the number of shares issuable pursuant to the Plan to reflect a change in the
capitalization of the Company, such as a stock dividend or a stock split, is
hereby deleted in its entirety.
3.
Paragraph (b) of Article VIII of the Plan is hereby amended in its entirety
by substituting the following therefor:
"(b) In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock
split, combination of shares, rights offering, or extraordinary
dividend or divestiture (including a spin-off), or any other change in
the corporate structure or shares of the Company, the Board (or, if
the Company is not the surviving corporation in any such transaction,
the board of directors of the surviving corporation) shall make
adjustments, determined by the Board in its discretion to be
appropriate, as to the number and kind of securities subject to and
reserved under the Plan and, in order to prevent dilution or
enlargement of rights of participants, as to the number, kind and
where applicable, the option exercise price, of securities subject to
outstanding awards or securities subject to options issued in
replacement of outstanding awards."
4.
The first sentence of Paragraph (c) of Article VIII of the Plan is hereby
deleted in its entirety.
5.
Article IX of the Plan is hereby amended in its entirety by substituting
the following therefor:
"The Board in its discretion may terminate the Plan at any time
with respect to any shares for which Options have not theretofore been
granted. The Board shall have the right to alter or amend the Plan or
any part thereof from time to time; provided, that no change in any
Option theretofore granted may be made which would impair the rights
of the optionee; and provided further that the Board may not make any
alteration or amendment which would materially increase the benefits
accruing to participants under the Plan, increase the aggregate number
of shares which may be
1
<PAGE> 195
issued under the Plan (other than pursuant to the antidilution
adjustment provisions of paragraph (b) of Article VIII), change the
class of individuals eligible to receive Options under the Plan, or
extend the term of the Plan, without the approval of the stockholders
of the Company."
6.
Each amendment made by this Amendment to the Plan has been effected in
conformity with the provisions of the Plan. This Amendment was adopted by the
Board of Directors of the Company on December 5, 1996 and approved by the
stockholders of the Company on , 1997.
7.
At the time of the adoption of this Amendment to the Plan, shares
of the Company's common stock, $1.00 par value per share, were outstanding and
entitled to vote, were represented in person or by proxy, of which
shares were voted for this Amendment, shares were voted
against this Amendment and shares abstained from voting.
Dated: , 1997.
GULFMARK INTERNATIONAL, INC.
By:
------------------------------------
Frank R. Pierce
Executive Vice President
2
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by the corporation of stock or any
transaction from which the director derived an improper personal benefit. The
Registrant's Certificate of Incorporation provides that the Registrant's
directors are not personally liable to the Registrant or its stockholders for
monetary damages for breach of their fiduciary duty, subject to the described
exceptions specified by Delaware law.
Section 145 of the Delaware General Corporation Law grants to the
Registrant the power to indemnify each officer and director of the Registrant
against liabilities and expenses incurred by reason of the fact that he is or
was an officer or director of the Registrant 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 Registrant and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Certificate of
Incorporation of the Registrant provides for indemnification of each officer and
director of the Registrant to the fullest extent permitted by Delaware law.
Messrs. David J. Butters and Robert B. Millard, employees of Lehman Brothers
Inc. ("Lehman Brothers"), constitute two of the five members of the Board of
Directors of the Registrant. Under the restated certificates of incorporation,
as amended to date, of Lehman Brothers and its parent, Lehman Brothers Holdings
Inc. ("Holdings"), both Delaware corporations, Messrs. Butters and Millard, in
their capacity as directors of the Registrant, are to be indemnified by Lehman
Brothers and Holdings to the fullest extent permitted by Delaware law. Messrs.
Butters and Millard are serving as directors of the Registrant at the request of
Lehman Brothers and Holdings.
Section 145 of the Delaware General Corporation Law also empowers the
Registrant to purchase and maintain insurance on behalf of any person who is or
was an officer or director of the Registrant against liability asserted against
or incurred by him in any such capacity, whether or not the Registrant would
have the power to indemnify such officer or director against such liability
under the provisions of Section 145. The Registrant has purchased and maintains
a directors' and officers' liability policy for such purposes. Messrs. Butters
and Millard are insured against certain liabilities which they may incur in
their capacity as directors pursuant to insurance maintained by Holdings.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<C> <S>
2.1 -- Agreement and Plan of Merger dated December 5, 1996, by
and among Energy Ventures Inc., GulfMark Acquisition Co.,
GulfMark International, Inc., and New GulfMark
International, Inc., as amended (included as Appendix A
to the Joint Proxy Statement/Prospectus forming part of
this Form S-4 Registration Statement)
2.2 -- Agreement and Plan of Distribution dated December 5,
1996, by and among GulfMark International, Inc., New
GulfMark International, Inc. and Energy Ventures, Inc.
(included as Appendix B to the Joint Proxy
Statement/Prospectus forming part of this Form S-4
Registration Statement)
2.3 -- First Amendment to Agreement and Plan of Merger dated as
of March 27, 1997, by and among Energy Ventures, Inc.,
GulfMark Acquisition Co., GulfMark International, Inc.
and GulfMark Offshore, Inc. (incorporated by reference to
Exhibit No. 2.3 to the Registration Statement on Form S-4
No. 333-24141)
3.1 -- Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit No. 3.1 to the
Registration Statement on Form S-4 No. 333-24141).
</TABLE>
II-1
<PAGE> 197
<TABLE>
<C> <S>
3.2 -- Certificate of Amendment to Certificate of Incorporation
of the Registrant (incorporated by reference to Exhibit
No. 3.2 to the Registration Statement on Form S-4 No.
333-24141).
3.3 -- By-laws of the Registrant (incorporated by reference to
Exhibit No. 3.3 to the Registration Statement on Form S-4
No. 333-24141).
4.1 -- See Exhibit Nos. 3.1 and 3.2 for provisions of the
Certificate of Incorporation and By-laws of the
Registrant defining the rights of the holders of Common
Stock.
5.1 -- Opinion of Griggs & Harrison, P.C., regarding legality of
securities (incorporated by reference to Exhibit No. 5.1
to the Registration Statement on Form S-4 No. 333-24141).
8.1 -- Opinion of Arthur Andersen LLP, regarding certain tax
matters (incorporated by reference to Exhibit No. 8.1 to
the Registration Statement on Form S-4 No. 333-24141).
10.1 -- GulfMark International, Inc. 1987 Stock Option Plan
(incorporated by reference to Exhibit No. 10.1 to the
Registration Statement on Form S-4 No. 333-24141)
10.2 -- Form of Stock Option Agreement for GulfMark
International, Inc. 1987 Stock Option Plan (incorporated
by reference to Exhibit 4.2 to GulfMark International,
Inc. Registration Statement on Form S-8 No. 33-838855).
10.3 -- Amendment to the GulfMark International, Inc. 1987 Stock
Option Plan (included as Appendix F to the Joint Proxy
Statement/Prospectus forming part of this S-4
Registration Statement).
10.4 -- Instrument of Assumption and Adjustment of the GulfMark
International, Inc. 1987 Stock Option (incorporated by
reference to Exhibit No. 10.4 to the Registration
Statement on Form S-4 No. 333-24141).
10.5 -- GulfMark International, Inc. Amended and Restated 1993
Non-Employee Director Stock Option Plan (incorporated by
reference to GulfMark International, Inc. Schedule 14A
filed April 1, 1996, File No. 0-457).
10.6 -- Form of Stock Option Agreement for the GulfMark
International, Inc. Amended and Restated 1993
Non-Employee Director Stock Option Plan (incorporated by
reference to Exhibit No. 10.6 to the Registration
Statement on Form S-4 No. 333-24141).
10.7 -- Amendment No. 1 to the GulfMark International, Inc. 1993
Amended and Restated Stock Option Plan (included as
Appendix E to the Joint Proxy Statement/Prospectus
forming part of this S-4 Registration Statement).
10.8 -- Instrument of Assumption and Adjustment of the GulfMark
International Inc. Amended and Restated 1993 Non-Employee
Director Stock Option Plan (incorporated by reference to
Exhibit No. 10.8 to the Registration Statement on Form
S-4 No. 333-24141).
10.9 -- Form of Stock Option Agreement for the GulfMark
International, Inc. Non-Employee Director Plan
(incorporated by reference to Exhibit 4.5 to GulfMark
International, Inc. Registration Statement on Form S-8
No. 33-79212).
10.10 -- Instrument of Assumption and Adjustment of outstanding
options granted pursuant to the GulfMark International,
Inc. 1988 Non-Employee Director Plan (incorporated by
reference to Exhibit No. 10.10 to the Registration
Statement on Form S-4 No. 333-24141).
10.11 -- Loan Facility Agreements dated as of July 8, 1993, made
by and between the Chase Manhattan Bank, N.A. and
GulfMark North Sea Limited, Gulf Offshore Marine
International, Inc., Gulf Offshore North Sea Ltd. And
Gulf Offshore Far East, Inc. (incorporated by reference
to Exhibit 10.2 to Form 10-Q of GulfMark International,
Inc. for the Quarter ended June 30, 1993, File No.
0-457).
</TABLE>
II-2
<PAGE> 198
<TABLE>
<C> <S>
10.12 -- Loan Facility Agreement dated as of June 7, 1995, made by
and between Christiania Bank og Kreditkasse and Gulf
Offshore N.S. Limited (incorporated by reference to
Exhibit 10.4 to Form 10-Q of GulfMark International, Inc.
for the Quarter ended June 30, 1995, File No. 0-457).
10.13 -- Agreement dated October 20, 1995 amending and Restating
the Loan Facility Agreement dated July 8, 1993, made by
and between the Chase Manhattan Bank N.A. and GulfMark
North Sea Limited, Gulf Offshore Marine International,
Inc., Gulf Offshore N.S. Limited and Gulf Offshore Far
East, Inc. (incorporated by reference to Exhibit 10.5 to
GulfMark International, Inc. Annual Report on Form 10-K
for December 31, 1995, File No. 0-457).
10.14 -- Loan Facility Agreement dated December 21, 1995 made by
and between Christiania Bank og Kreditkasse and Gulf
Offshore N.S. Limited (incorporated by reference to
Exhibit 10.6 to GulfMark International, Inc. Annual
Report on Form 10-K for December 31, 1995, File No.
0-457).
10.15 -- Loan facility agreement dated as of July 26, 1996, made
between Chase Manhattan Bank, Chase Manhattan
International Limited, as Agent, Gulf Offshore Shipping
Services, Inc., GulfMark International, Inc., GulfMark
North Sea Limited and Gulf Offshore Marine International,
Inc. (incorporated by reference to Exhibit 10.7 to Form
10-Q of GulfMark International, Inc. for the Quarter
ended September 30, 1996, File No. 0-457).
23.1 -- Consent of Griggs & Harrison, P.C. (included in Exhibit
5.1).
23.2 -- Consent of Arthur Andersen LLP, with respect to the Tax
Opinion (included in Exhibit 8.1).
*23.3 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of GulfMark International, Inc.
*23.4 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of GulfMark Offshore, Inc.
*23.5 -- Consent of Arthur Andersen LLP, with respect to the
Retained Assets financial statements.
*23.6 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of Energy Ventures, Inc.
23.7 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of Tubular Corporation of America
(incorporated by reference to Exhibit No. 23.7 to the
Registration Statement on Form S-4 No. 333-24141).
23.8 -- Consent of Jefferies & Company, Inc. with respect to
their fairness opinion (included in Appendix D to the
Joint Proxy/Prospectus forming part of this S-4
Registration Statement).
23.9 -- Consent of Prudential Securities Incorporated with
respect to their fairness opinion (included in Appendix C
to the Joint Proxy/Prospectus forming part of this S-4
Registration Statement).
24.1 -- Power of Attorney (incorporated by reference to Exhibit
No. 24.1 to the Registration Statement on Form S-4 No.
333-24141).
27.1 -- Financial Data Schedule (GulfMark Offshore, Inc.)
(incorporated by reference to Exhibit No. 27.1 to the
Registration Statement on Form S-4 No. 333-24141)
99.1 -- Proxy card for use at Special Meeting of Stockholders of
GulfMark International, Inc. (incorporated by reference
to Exhibit No. 99.1 to the Registration Statement on Form
S-4 No. 333-24141)
99.2 -- Proxy card for use at Special Meeting of Stockholders of
Energy Ventures, Inc. (incorporated by reference to
Exhibit No. 99.2 to the Registration Statement on Form
S-4 No. 333-24141)
</TABLE>
II-3
<PAGE> 199
- ---------------
* Filed herewith.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Art 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 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, 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 foregoing provisions, 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.
The undersigned Registrant hereby undertakes that:
(1) Prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form; and
(2) Every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act, and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, 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.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and GulfMark
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-4
<PAGE> 200
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on March 31, 1997.
GULFMARK OFFSHORE, INC.
By: /s/ FRANK R. PIERCE
------------------------------------
Frank R. Pierce
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
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
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <C>
/s/ BRUCE A. STREETER President (Principal Executive March 31, 1997
- -------------------------------------------------- Officer)
Bruce A. Streeter
/s/ FRANK R. PIERCE Executive Vice President and Chief March 31, 1997
- -------------------------------------------------- Financial Officer (Principal
Frank R. Pierce Financial Officer)
/s/ KEVIN D. MITCHELL Controller (Principal Accounting March 31, 1997
- -------------------------------------------------- Officer)
Kevin D. Mitchell
/s/ DAVID J. BUTTERS* Director and Chairman of the Board March 31, 1997
- --------------------------------------------------
David J. Butters
/s/ NORMAN G. COHEN* Director March 31, 1997
- --------------------------------------------------
Norman G. Cohen
/s/ MARSHALL A. CROWE* Director March 31, 1997
- --------------------------------------------------
Marshall A. Crowe
/s/ LOUIS A. GIMBEL, 3RD* Director March 31, 1997
- --------------------------------------------------
Louis A. Gimbel, 3rd
/s/ ROBERT B. MILLARD* Director March 31, 1997
- --------------------------------------------------
Robert B. Millard
*By: /s/ FRANK R. PIERCE
------------------------------------------------
Frank R. Pierce
Pursuant to Power of Attorney
</TABLE>
II-5
<PAGE> 201
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1 -- Agreement and Plan of Merger dated December 5, 1996, by
and among Energy Ventures Inc., GulfMark Acquisition Co.,
GulfMark International, Inc., and New GulfMark
International, Inc., as amended (included as Appendix A
to the Joint Proxy Statement/Prospectus forming part of
this Form S-4 Registration Statement)
2.2 -- Agreement and Plan of Distribution dated December 5,
1996, by and among GulfMark International, Inc., New
GulfMark International, Inc. and Energy Ventures, Inc.
(included as Appendix B to the Joint Proxy
Statement/Prospectus forming part of this Form S-4
Registration Statement)
2.3 -- First Amendment to Agreement and Plan of Merger dated as
of March 27, 1997, by and among Energy Ventures, Inc.,
GulfMark Acquisition Co., GulfMark International, Inc and
GulfMark Offshore, Inc. (incorporated by reference to
Exhibit No. 2.3 to the Registration Statement on Form S-4
No. 333-24141)
3.1 -- Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit No. 3.1 to the
Registration Statement on Form S-4 No. 333-24141).
3.2 -- Certificate of Amendment to Certificate of Incorporation
of the Registrant (incorporated by reference to Exhibit
No. 3.2 to the Registration Statement on Form S-4 No.
333-24141).
3.3 -- By-laws of the Registrant (incorporated by reference to
Exhibit No. 3.3 to the Registration Statement on Form S-4
No. 333-24141).
4.1 -- See Exhibit Nos. 3.1 and 3.2 for provisions of the
Certificate of Incorporation and By-laws of the
Registrant defining the rights of the holders of Common
Stock.
5.1 -- Opinion of Griggs & Harrison, P.C., regarding legality of
securities (incorporated by reference to Exhibit No. 5.1
to the Registration Statement on Form S-4 No. 333-24141).
8.1 -- Opinion of Arthur Andersen LLP, regarding certain tax
matters (incorporated by reference to Exhibit No. 8.1 to
the Registration Statement on Form S-4 No. 333-24141).
10.1 -- GulfMark International, Inc. 1987 Stock Option Plan
(incorporated by reference to Exhibit No. 10.1 to the
Registration Statement on Form S-4 No. 333-24141).
10.2 -- Form of Stock Option Agreement for GulfMark
International, Inc. 1987 Stock Option Plan (incorporated
by reference to Exhibit 4.2 to GulfMark International,
Inc. Registration Statement on Form S-8 No. 33-838855).
10.3 -- Amendment to the GulfMark International, Inc. 1987 Stock
Option Plan (included as Appendix F to the Joint Proxy
Statement/Prospectus forming part of this S-4
Registration Statement).
10.4 -- Instrument of Assumption and Adjustment of the GulfMark
International, Inc. 1987 Stock Option (incorporated by
reference to Exhibit No. 10.4 to the Registration
Statement on Form S-4 No. 333-24141).
10.5 -- GulfMark International, Inc. Amended and Restated 1993
Non-Employee Director Stock Option Plan (incorporated by
reference to GulfMark International, Inc. Schedule 14A
filed April 1, 1996, File No. 0-457).
10.6 -- Form of Stock Option Agreement for the GulfMark
International, Inc. Amended and Restated 1993
Non-Employee Director Stock Option Plan (incorporated by
reference to Exhibit No. 10.6 to the Registration
Statement on Form S-4 No. 333-24141).
</TABLE>
<PAGE> 202
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.7 -- Amendment No. 1 to the GulfMark International, Inc. 1993
Amended and Restated Stock Option Plan (included as
Appendix E to the Joint Proxy Statement/Prospectus
forming part of this S-4 Registration Statement).
10.8 -- Instrument of Assumption and Adjustment of the GulfMark
International Inc. Amended and Restated 1993 Non-Employee
Director Stock Option Plan (incorporated by reference to
Exhibit No. 10.8 to the Registration Statement on Form
S-4 No. 333-24141).
10.9 -- Form of Stock Option Agreement for the GulfMark
International, Inc. Non-Employee Director Plan
(incorporated by reference to Exhibit 4.5 to GulfMark
International, Inc. Registration Statement on Form S-8
No. 33-79212).
10.10 -- Instrument of Assumption and Adjustment of outstanding
options granted pursuant to the GulfMark International,
Inc. 1988 Non-Employee Director Plan (incorporated by
reference to Exhibit No. 10.10 to the Registration
Statement on Form S-4 No. 333-24141).
10.11 -- Loan Facility Agreements dated as of July 8, 1993, made
by and between the Chase Manhattan Bank, N.A. and
GulfMark North Sea Limited, Gulf Offshore Marine
International, Inc., Gulf Offshore North Sea Ltd. And
Gulf Offshore Far East, Inc. (incorporated by reference
to Exhibit 10.2 to Form 10-Q of GulfMark International,
Inc. for the Quarter ended June 30, 1993, File No.
0-457).
10.12 -- Loan Facility Agreement dated as of June 7, 1995, made by
and between Christiania Bank og Kreditkasse and Gulf
Offshore N.S. Limited (incorporated by reference to
Exhibit 10.4 to Form 10-Q of GulfMark International, Inc.
for the Quarter ended June 30, 1995, File No. 0-457).
10.13 -- Agreement dated October 20, 1995 amending and Restating
the Loan Facility Agreement dated July 8, 1993, made by
and between the Chase Manhattan Bank N.A. and GulfMark
North Sea Limited, Gulf Offshore Marine International,
Inc., Gulf Offshore N.S. Limited and Gulf Offshore Far
East, Inc. (incorporated by reference to Exhibit 10.5 to
GulfMark International, Inc. Annual Report on Form 10-K
for December 31, 1995, File No. 0-457).
10.14 -- Loan Facility Agreement dated December 21, 1995 made by
and between Christiania Bank og Kreditkasse and Gulf
Offshore N.S. Limited (incorporated by reference to
Exhibit 10.6 to GulfMark International, Inc. Annual
Report on Form 10-K for December 31, 1995, File No.
0-457).
10.15 -- Loan facility agreement dated as of July 26, 1996, made
between Chase Manhattan Bank, Chase Manhattan
International Limited, as Agent, Gulf Offshore Shipping
Services, Inc., GulfMark International, Inc., GulfMark
North Sea Limited and Gulf Offshore Marine International,
Inc. (incorporated by reference to Exhibit 10.7 to Form
10-Q of GulfMark International, Inc. for the Quarter
ended September 30, 1996, File No. 0-457).
23.1 -- Consent of Griggs & Harrison, P.C. (included in Exhibit
5.1).
23.2 -- Consent of Arthur Andersen LLP, with respect to the Tax
Opinion (included in Exhibit 8.1).
*23.3 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of GulfMark International, Inc.
*23.4 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of GulfMark Offshore, Inc.
*23.5 -- Consent of Arthur Andersen LLP, with respect to the
Retained Assets financial statements.
</TABLE>
<PAGE> 203
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
*23.6 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of Energy Ventures, Inc.
23.7 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of Tubular Corporation of America
(incorporated by reference to Exhibit No. 23.7 to the
Registration Statement on Form S-4 No. 333-24141).
23.8 -- Consent of Jefferies & Company, Inc. with respect to
their fairness opinion (included in Appendix D to the
Joint Proxy Statement/Prospectus forming part of this S-4
Registration Statement).
23.9 -- Consent of Prudential Securities Incorporated with
respect to their fairness opinion (included in Appendix C
to the Joint Proxy Statement/Prospectus forming part of
this S-4 Registration Statement).
24.1 -- Power of Attorney (incorporated by reference to Exhibit
No. 24.1 to the Registration Statement on Form S-4 No.
333-24141).
27.1 -- Financial Data Schedule (GulfMark Offshore, Inc.)
(incorporated by reference to Exhibit No. 27.1 to the
Registration Statement on Form S-4 No. 333-24141).
99.1 -- Proxy card for use at Special Meeting of Stockholders of
GulfMark International, Inc. (incorporated by reference
to Exhibit No. 99.1 to the Registration Statement on Form
S-4 No. 333-24141).
99.2 -- Proxy card for use at Special Meeting of Stockholders of
Energy Ventures, Inc. (incorporated by reference to
Exhibit No. 99.2 to the Registration Statement on Form
S-4 No. 333-24141).
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Prospectus constituting part of this Registration Statement
on Form S-4 of our report dated February 26, 1997, incorporated by reference in
GulfMark International, Inc.'s Form 10-K for the year ended December 31, 1996
and to all references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
March 28, 1997
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated February 26, 1997 in this Registration Statement on Form S-4 of our
audits of the consolidated financial statements of New GulfMark and Subsidiaries
at December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996 and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
March 28, 1997
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated February 26, 1997 in this Registration Statement on Form S-4 of our
audits of the financial statements of GulfMark Retained Assets (a business
segment of GulfMark International, Inc.) at December 31, 1996 and 1995 and each
of the three years in the period ended December 31, 1996 and to all references
to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
March 28, 1997
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-4 of our report dated
February 10, 1997 included in Energy Ventures, Inc.'s Form 10-K/A for the fiscal
year ended December 31, 1996, and to all references to our Firm included in or
made a part of this Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
March 28, 1997
