GULFMARK OFFSHORE INC, 424B1, 1997-08-15

GULFMARK OFFSHORE INC
424B1, 1997-08-15
OIL & GAS FIELD MACHINERY & EQUIPMENT

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<PAGE> 1
Filed pursuant to
Rule 424(B)(1)
Registration No. 333-31139

PROSPECTUS

1,000,000 SHARES

GULFMARK OFFSHORE, INC.

[GULFMARK LOGO] COMMON STOCK
---------------------------
The 1,000,000 shares of common stock, par value $0.01 per share (the
"Common Stock") of GulfMark Offshore, Inc. (the "Company") offered hereby (the
"Offering") are being offered by the Company. See "Underwriting."

The Common Stock is listed on the Nasdaq National Market under the symbol
"GMRK." On August 14, 1997, the last reported sales price for the Common Stock
as reported on the Nasdaq National Market was $32 5/8 per share. See "Price
Range of Common Stock and Dividend Policy."
---------------------
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
---------------------
THESE SECURITIES 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 PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
===============================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................ $32.00 $1.84 $30.16
- ---------------------------------------------------------------------------------------------------------------
Total(3)................................. $32,000,000 $1,840,000 $30,160,000
===============================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $455,300.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an aggregate of 125,000 additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $36,000,000, $2,070,000 and $33,930,000, respectively. See
"Underwriting."
---------------------------
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the Underwriters and
to certain further conditions. It is expected that delivery of the certificates
for the shares of Common Stock offered will be made at the offices of Lehman
Brothers Inc., New York, New York on or about August 20, 1997.
---------------------------
LEHMAN BROTHERS
JEFFERIES & COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY, INC.

AUGUST 14, 1997
<PAGE> 2

[PHOTOS]
<PAGE> 3

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE
PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK
OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF
THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF
REGULATION M. SEE "UNDERWRITING."

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Common Stock offered by this Prospectus. This Prospectus,
which constitutes a part of such Registration Statement, does not contain all of
the information set forth in the Registration Statement, certain items of which
are contained in exhibits to such Registration Statement as permitted by the
rules and regulations of the Commission. For further information with respect to
the Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits thereto. The Registration
Statement may be inspected without charge at the public reference facilities
maintained by the Commission and at the Regional Offices of the Commission, and
copies may be obtained from the Commission at prescribed rates. Statements made
in this 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 Statement, 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.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company 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 the Company 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 Common
Stock is traded.

3
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements (including the notes thereto)
included elsewhere in this Prospectus. Unless the context otherwise requires,
references in this Prospectus to the "Company" or "GulfMark" shall mean GulfMark
Offshore, Inc. and its subsidiaries and, for dates and periods prior to May 1,
1997, GulfMark International, Inc. and its subsidiaries. See "Recent
Developments." Unless otherwise indicated, the information in this Prospectus
assumes that the Underwriters' over-allotment option with respect to the sale of
the Common Stock will not be exercised. An investment in the Common Stock
offered hereby involves a high degree of risk and investors should carefully
consider the information set forth under the heading "Risk Factors." See
"Glossary" for the definition of certain industry terminology used herein.

THE COMPANY

GulfMark provides marine support and transportation services to companies
involved in the offshore exploration and production of oil and natural gas. The
Company's vessels transport drilling materials, supplies and personnel to
offshore facilities, as well as move and position drilling structures
(collectively, "Offshore Marine Services"). The majority of the Company's
operations are conducted in the North Sea and, with the exception of one vessel
operating offshore Brazil, the balance of the Company's operations are conducted
offshore Southeast Asia.

The Company's fleet has grown in size and capability from an original 11
vessels acquired in late 1990 to its present level of 30 vessels through
strategic acquisitions and new construction of technologically advanced vessels,
partially offset by dispositions of certain older, less profitable vessels.
Twenty-one vessels in GulfMark's fleet are owned, two vessels are bareboat
chartered and seven vessels are managed. The two bareboat charters run through
August 1998.

The age of an Offshore Marine Service vessel affects its earnings
potential, the amount of capital required to maintain the vessel and its
technological capabilities. The average age of all of the vessels owned by
GulfMark is 14 years. Excluding the six vessels acquired by the Company from
Maritime (Pte), Limited in August 1996, all of the Company's owned vessels have
been built or substantially refurbished since 1985. The average age of the
Company's nine owned platform supply vessels ("PSVs") included in the North Sea
fleet is just over nine years. According to Petrodata Limited, the average age
of the 10 North Sea PSVs recently acquired by another U.S.-based Offshore Marine
Services company was approximately 17 years.

The fleet summarized above does not include GulfMark's most modern,
technologically sophisticated vessel to date, the Highland Rover, a modified and
extended (236') UT 755 design PSV (see Glossary) currently under construction
and scheduled to be delivered in March 1998. In addition to the standard
capabilities of the technologically advanced UT 755 design, the Highland Rover
will be equipped with a computer-controlled maneuvering system (also known as
dynamic positioning) and will be capable of launching subsea remotely operated
vehicles ("ROVs") through a specialized "moon pool." Included in the fleet
described above are two other standard size (221') UT 755s, the Highland Piper
and the Highland Drummer, built in 1996 and 1997, respectively.

Additionally, the Company has recently purchased an unfinished supply
vessel hull, for which design and shipyard pricing have already commenced (the
"Gallant Project"). The Company anticipates that this vessel will be delivered
in 1998. The hull could be completed as a PSV or an anchor handling, towing and
supply ("AHTS") vessel, although the Company currently believes that the most
attractive potential application may be as a multipurpose support vessel for the
floating production, storage and offloading ("FPSO") market. For a variety of
economic reasons, exploration and production companies are increasingly
employing FPSO structures in lieu of conventional fixed platform installations.
The FPSO market typically employs more technologically advanced vessels capable
of performing multiple functions, potentially under longer term (even "life of
field") charters. The Company believes that the low cost (estimated at $11-14
million) and early delivery date of the Gallant Project should provide the
Company with a significant competitive advantage in serving the growing FPSO
market.

GulfMark generated EBITDA (as defined on page 10) and income from
continuing operations of $9.5 million and $2.7 million, respectively, for the
six months ended June 30, 1997, compared with
4
<PAGE> 5

$5.1 million and $0.9 million, respectively, for the six months ended June 30,
1996. EBITDA and income from continuing operations for the year ended December
31, 1996 were $14.0 million and $3.6 million, respectively, compared to $8.4
million and $0.4 million, respectively, for the year ended December 31, 1995.

This improved financial performance of the Company reflects both the growth
of its fleet and improving markets, especially the North Sea market. GulfMark's
average day rate for its owned North Sea PSVs for the six months ended June 30,
1997 was $9,949, compared to $7,964 for the six months ended June 30, 1996. The
comparable rate for the year ended December 31, 1996 was $8,819, compared to
$7,840 for the year ended December 31, 1995. The Company's fleet utilization (as
defined on page 12) in the North Sea for these periods exceeded 93%. In light of
the need for downtime for ordinary maintenance and repairs, the Company
generally considers full practical utilization to be 95% or above. The nine
owned vessels operating in the North Sea accounted for 84% of the Company's
vessel earnings (revenues less direct costs) for the six months ended June 30,
1997.

BUSINESS STRATEGY

GulfMark's goal is to enhance its position as a premier supplier of
Offshore Marine Services in international markets. The Company's strategy is to
profitably increase revenues and enhance shareholder value by (i) developing and
maintaining a large, diversified and technologically advanced fleet, (ii)
focusing on attractive international markets and (iii) managing its risk profile
through a balance of long-term and short-term charters. The Company also focuses
on providing dependable, high quality services to differentiate itself from its
competitors. This strategy is intended to produce higher vessel utilization,
relatively stable growth and returns on investments that are superior to those
of the Company's competitors.

Developing and Maintaining a Large, Diversified and Technologically
Advanced Fleet. The size, diversity and technologically advanced nature of
GulfMark's fleet enable it to provide offshore exploration and production
operators with a broad range of Offshore Marine Services in several strategic
markets. The Company regularly upgrades its fleet to improve capability,
reliability and customer satisfaction. Furthermore, the Company seeks to take
advantage of attractive opportunities to acquire or build new vessels to expand
its fleet.

Upon delivery of the Highland Rover in 1998, the Company will own and
operate three of the 11 UT 755 design PSVs currently in service or on order. The
UT 755 is a technologically sophisticated design that the Company helped
introduce in the North Sea with the construction of the Highland Piper and
Highland Drummer, two of the first three UT 755s (built in 1996 and 1997,
respectively). The design has been favorably received by the market and is now
gaining wide acceptance. Additionally, with the growing use of ROVs, vessels
such as the Highland Rover, with its specialized "moon pool" vehicle launching
capabilities, are expected to be especially attractive because they will provide
customers with increased launch certainty in the harsh, unpredictable weather of
the North Sea.

The Company's North Sea fleet is comprised of vessels with a wide range of
technology, size and corresponding price options. Vessels in this fleet range
from the very large and sophisticated vessels built post-1990, such as the
modern UT 705s and UT 755s, to older UT 705s that offer the same large size but
not the sophistication of the modern UT 705s, and finally to smaller PSVs such
as the Highland Legend and Highland Sprite.

The Company's Southeast Asia fleet consists of vessels that can provide the
greatest functional flexibility for the varied needs of this geographically
diverse region. Substantially all of the Company's vessels in its Southeast Asia
fleet have sufficient anchor handling and towing capability to compete for work
in areas such as Indonesia, where drilling support and combinations of
production and drilling support are major uses of offshore support vessels.
Additionally, the Company's vessels are attractive as supply vessels in locales
such as Thailand and Malaysia, where the demand for such vessels is strong
because of their combination of relatively large on deck and below deck
capacities and relatively high horsepower.

The Company will use a portion of the net proceeds from the Offering to
further invest in the expansion and quality of its fleet. Specifically, the
Company intends to finance the completion of the Highland Rover and the Gallant
Project partly through the net proceeds from the Offering. See "Use of
Proceeds."
5
<PAGE> 6

Focusing on Attractive International Markets. GulfMark has elected to focus
its operations in the North Sea and Southeast Asia markets because it believes
there are lower levels of competition, higher barriers to entry, less volatile
day rates and more potential for increasing day rates in those markets than in
other markets, such as the Gulf of Mexico. The Company's competitive position in
the North Sea is supported by the sophistication of its fleet, while its
competitive position in Southeast Asia is related to the flexibility of its
fleet. The Company's strong relationships and many years of operating experience
are also critical elements of its success in both markets. From time to time,
the Company has selectively targeted additional markets where it can supply
services under longer term contracts. An example of such a market is Brazil,
where the Company's current contract with Petrobras, the Brazilian national oil
company, was recently extended to May 1999. See "-- Overview of Major Markets."

Managing Its Risk Profile Through a Balance of Long-Term and Short-Term
Charters. The Company seeks to balance its portfolio of charters with both
long-term charters, which provide a significant degree of cash flow certainty,
and short-term charters, which provide the opportunity to benefit from
increasing day rates. The Company utilizes its many years of operating
experience to apply this strategy within the markets in which it operates.

Approximately 71% of the Company's revenues for the first six months of
1997 were derived from charters longer than six months, and are associated with
the Company's newer vessels, which are predominantly in the North Sea. The
balance of the Company's revenues were derived from shorter duration charters,
primarily in the Southeast Asia market where the Company's vessels generally are
older. The Company's current balance of charters in Southeast Asia is weighted
toward shorter duration charters because management believes that long-term
charter day rates in Southeast Asia have been relatively unattractive compared
to spot day rates and that term charter day rates are likely to increase in the
near future.

The Company has also selectively employed sharing arrangements with its
customers to enhance its profitability on longer term charters. These innovative
charters provide the Company and its customers the opportunity to benefit from
rising charter rates by subchartering contracted vessels to third parties at
prevailing market rates during any downtime in the customers' operations. If the
subcharter rate is below the original charter rate, the customer remains
obligated for the contracted rate shortfall. However, if the subcharter rate is
higher than the original charter rate, the Company and the customer share the
additional revenues. These arrangements permit both the customer and the Company
to benefit from improving market conditions and reduce any disincentive to
customers from entering into longer duration charters by minimizing the cost
associated with downtime.

OVERVIEW OF MAJOR MARKETS

The international Offshore Marine Services industry is relatively
fragmented, with more than 25 major participants and numerous small regional
competitors. Historically, few of these competitors have participated in all
five of the major markets (the Gulf of Mexico, the North Sea, offshore Southeast
Asia, offshore West Africa and the Persian Gulf). Recently, three U.S.-based
publicly traded Offshore Marine Service providers whose fleets have historically
been focused in the Gulf of Mexico purchased vessels currently employed in one
or more other markets, including the markets in which the Company operates.
Further consolidation, including acquisitions by the Company, in the markets in
which the Company operates may impact future day rates and the competitive
environment for the Company.

The North Sea Market. The Company defines the North Sea market as offshore
Norway, Denmark, the Netherlands, Germany, Great Britain and Ireland, the
Norwegian Sea and the area to the west of the Shetland Islands. Historically,
this market has been the most demanding of all oil and natural gas exploration
frontiers due to harsh weather, erratic sea conditions, significant water depths
and long sailing distances. Exploration and production operators in the North
Sea market are typically large and well capitalized entities (such as major oil
companies and state owned oil companies), in large part because of the
significant financial commitment required in this market. Projects in the region
tend to be fewer in number, but larger in scope, with longer planning horizons,
than projects in regions with less demanding environments. Consequently, vessel
demand in the North Sea tends to be steadier and less susceptible to abrupt
swings than vessel demand in other regions. The Company's fleet has operated and
grown in the North Sea market since the Company's inception.
6
<PAGE> 7

The Company believes that its North Sea fleet is well suited to take
advantage of several trends in this market. This region continues to mature as
an exploration area. The average size of new oil and natural gas developments is
now approximately 50 million barrels, compared to average developments of
approximately two billion barrels in the early 1970s. The decreasing size of
developments, in combination with such factors as increasing maintenance
requirements for aging platforms, puts additional pressure on oil companies to
reduce operating costs. One response by the oil companies has been to outsource
transportation and logistics support functions, which has given rise to the
recent creation of third-party logistics support service providers that combine
transportation and support functions that have previously been separate. These
service providers arrange vessel support for a large number of different
offshore structures with a wide range of vessel requirements. As a result, these
service providers tend to charter larger, more technologically advanced multi-
function vessels, such as the modern UT 705s and UT 755s, to avoid paying
potentially higher spot rates for incremental vessels. The Company anticipated
this increase in demand for multi-function vessels and has responded by
increasing the number of modern UT 705s and UT 755s in its North Sea fleet.

The Southeast Asia Market. The Company defines the Southeast Asia market as
offshore Asia bounded roughly on the west by the Indian subcontinent and on the
north by China. This market includes offshore Brunei, Cambodia, Indonesia,
Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. The
Company's competition in this region differs from country to country, but the
market is broadly characterized by a large number of small companies, in
contrast to many of the other major offshore areas of the world, where a few
large operators dominate the market. Affiliations and joint ventures with local
companies are generally necessary to maintain a viable marketing presence. The
Company's management has been involved in the region since the mid-1970s, and
the Company currently maintains long-standing business relationships with a
number of local companies.

The design requirements for vessels in the Southeast Asia market are
generally similar to the requirements in the Gulf of Mexico. However, the
varying weather conditions, annual monsoons and large distances between supply
centers in Southeast Asia also generate demand for more versatile vessel
designs. Advanced exploration and production technology and rapid projected
growth in energy demand among many Pacific Rim countries have led to more remote
drilling locations, which has increased both the overall demand in this market
and the technical requirements for vessels. In addition, the Company believes
that several major exploration and production projects, which are currently in
the planning stages, will significantly increase the demand for Offshore Marine
Services in the Southeast Asia market. Finally, the cost of mobilizing vessels
from the Gulf of Mexico or other offshore markets to the Southeast Asia market,
combined with the current high demand for vessels in the Gulf of Mexico and the
recent movement of vessels from the Southeast Asia market to West Africa, have
reduced the universe of economically viable vessels available in Southeast Asia.
The Company believes that the factors detailed above are likely to increase day
rates in Southeast Asia in the near future.

The Company believes that its Southeast Asia fleet is well suited for the
demand in this market. The Company's fleet includes 12 vessels that have an
attractive combination of relatively high horsepower and relatively large on
deck and below deck capacities, which enables them to perform small anchor
handling functions in areas such as Indonesia and supply functions in areas such
as Malaysia and Thailand, all of which are important areas of activity in the
Southeast Asia market.
7
<PAGE> 8

THE OFFERING

Common Stock Offered....... 1,000,000 shares

Common Stock Outstanding:

Before the Offering(a)... 6,765,893 shares

After the Offering(a).... 7,765,893 shares

Use of Proceeds............ The net proceeds to the Company from the sale of
the Common Stock offered hereby are estimated to be
approximately $29.7 million. The Company intends to
use the net proceeds from the Offering to fund its
capital expenditures, including building and
acquiring new vessels and upgrading its fleet, to
repay a portion of its indebtedness and, to the
extent of any remaining proceeds, for other general
corporate purposes. See "Use of Proceeds."

Nasdaq National Market
Symbol................... GMRK
- ---------------

(a) Does not include an aggregate of 497,646 shares of Common Stock subject to
outstanding options as of June 30, 1997 granted under the Company's 1987
Stock Option Plan, Amended and Restated 1993 Non-Employee Director Stock
Option Plan and 1988 Non-Employee Director Option Policy. See
"Management -- Director and Executive Officer Compensation" and "Description
of Capital Stock."
8
<PAGE> 9

SUMMARY OF CONSOLIDATED FINANCIAL DATA

The following table presents for the periods indicated certain historical
consolidated financial data for the Company. The following information should be
read together with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements, including the notes thereto, contained in
this Prospectus. The results for the six months ended June 30, 1997 are not
necessarily indicative of results for the full year. The Consolidated Financial
Statements included in the Prospectus, as well as the financial data presented
in the table below, present the net assets and results of operations of the
non-marine businesses of the Company's predecessor as discontinued operations of
the Company for all periods presented. See "Recent Developments."

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF VESSELS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.............................. $ 21,031 $ 14,493 $ 34,749 $ 27,233 $27,692 $ 22,564 $ 18,115
Direct operating expenses............. 8,886 7,282 16,178 15,386 15,171 12,060 7,488
General and administrative expenses... 2,670 2,106 4,523 3,483 3,643 3,280 3,075
Depreciation and amortization......... 3,284 2,264 5,013 5,472 5,065 3,752 3,351
-------- -------- -------- -------- ------- -------- --------
Operating income...................... 6,191 2,841 9,035 2,892 3,813 3,472 4,201
Gain on sale of vessel................ -- -- -- -- 842 -- --
Interest expense, net................. (2,401) (1,613) (3,467) (2,613) (2,179) (2,047) (2,351)
Other income (expense), net........... 44 75 (86) 180 (12) 68 285
Income tax provision.................. (1,120) (371) (1,839) (91) (981) (534) (601)
-------- -------- -------- -------- ------- -------- --------
Income from continuing operations..... 2,714 932 3,643 368 1,483 959 1,534
Income (loss) from discontinued
operations, net of taxes............ (648) (129) 4,796 (2,270) 591 1,685 334
Loss on disposal of segment, net of
taxes............................... (1,426) -- -- -- -- -- --
-------- -------- -------- -------- ------- -------- --------
Net income (loss)............. $ 640 $ 803 $ 8,439 $ (1,902) $ 2,074 $ 2,644 $ 1,868
======== ======== ======== ======== ======= ======== ========
Earnings per share from continuing
operations(a)....................... $ 0.40 $ 0.14 $ 0.55 $ 0.06 $ 0.22 $ 0.14 $ 0.23
Weighted average common shares(a)..... 6,807 6,672 6,676 6,644 6,640 6,624 6,620
STATEMENT OF CASH FLOWS DATA:
Cash provided by operating activities
of continuing operations............ $ 4,819 $ 1,889 $ 8,539 $ 6,389 $ 5,448 $ 2,653 $ 5,547
Cash provided by (used in) investing
activities.......................... (17,660) (13,929) (24,493) (15,093) (258) (16,836) (12,610)
Cash provided by (used in) financing
activities.......................... 3,343 11,067 17,894 9,567 (7,970) 12,810 6,259
Effect of exchange rate changes on
cash................................ (445) 26 924 (160) 124 (56) (560)
OTHER DATA:
EBITDA(b)............................. $ 9,475 $ 5,105 $ 14,048 $ 8,364 $ 8,878 $ 7,224 $ 7,552
Cash dividends per share.............. -- -- -- -- -- -- --
Total vessels in fleet(c)............. 30 23 28 22 20 25 15
Average number of owned or chartered
vessels(d).......................... 22.0 14.6 17.3 14.0 15.1 14.4 11.1
</TABLE>

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<PAGE> 10

<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JUNE 30, ------------------------------------------------
1997 1996 1995 1994 1993 1992
-------- -------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 5,931 $ 17,234 $ 5,136 $ 2,645 $ 5,195 $ 6,541
Vessels and equipment, net................................ 97,556 87,405 61,343 51,175 53,002 44,717
Net assets of discontinued operations(e).................. -- 14,837 19,275 23,512 23,569 22,166
Total assets including discontinued operations............ 120,356 131,307 94,179 87,821 90,727 78,509
Total assets excluding discontinued operations............ 120,356 116,470 74,904 64,309 67,158 56,343
Long-term debt(f)......................................... 47,970 50,811 33,600 26,727 30,169 18,730
Total stockholders' equity................................ 46,638 62,016 50,928 53,025 50,388 48,306
Total stockholders' equity excluding discontinued
operations(g)........................................... 46,638 47,179 31,653 29,513 26,819 26,140
</TABLE>

- ---------------

(a) Earnings per share is based on the weighted average number of shares of
Common Stock outstanding. Common Stock equivalents have not been included in
the computation of earnings per share prior to January 1, 1997, since the
effect was not significant. For the six months ended June 30, 1997, Common
Stock equivalents represented 102,000 weighted average common shares (using
the treasury stock method), and have been included in the computation of
earnings per share. Fully diluted earnings per share is not presented as
such amounts do not materially differ from primary earnings per share.

(b) As used herein, EBITDA is operating income plus depreciation and
amortization. EBITDA can be used by management of the Company as a
supplemental financial measurement in the evaluation of its business and in
establishing its capital budget and should not be considered as an
alternative to net income, as an indicator of the operating performance of
the Company, as an alternative to cash flows or as a measure of liquidity.
Because EBITDA is not uniformly calculated among and across industry groups,
this measure may not be comparable to similarly titled measures reported by
other companies. EBITDA is presented here to provide additional information
about the Company.

(c) Includes managed vessels, in addition to those that are owned and chartered.
See pages 36 and 37 for further information concerning the Company's fleet.

(d) Includes owned and chartered PSVs and AHTS vessels only. Adjusted for
additions and dispositions occurring during each period. See pages 36 and 37
for further information concerning the Company's fleet.

(e) Reflects the financial statement information for the non-marine businesses
of the Company's predecessor.

(f) Excludes current portion of long-term debt.

(g) Discontinued operations were disposed of on May 1, 1997.
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SUMMARY FLEET INFORMATION

The following table sets forth certain fleet information with respect to
the Company as of the dates indicated. See "Glossary," "Business -- The Offshore
Marine Services Industry -- Vessel Classifications" and "Business -- The
Company -- The Company's Fleet" for further detail and fleet definitions.

<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, ------------------------------------------
1997 1996 1995 1994 1993 1992
-------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NORTH SEA FLEET
Owned Vessels:
Large Platform Supply(a)................ 7 6 5 4 4 2
Platform Supply......................... 2 2 2 2 2 2
Anchor Handling, Towing and Supply...... -- -- -- -- 1 1
------ ------ ------ ------ ------ ------
Total.............................. 9 8 7 6 7 5
Managed Vessels(b):
Large Platform Supply(a)................ 3 3 2 3 4 --
Anchor Handling, Towing and Supply...... 2 1 1 1 1 1
Specialty Vessel........................ 2 2 4 2 4 --
------ ------ ------ ------ ------ ------
Total.............................. 7 6 7 6 9 1
------ ------ ------ ------ ------ ------
Total North Sea Vessels............ 16 14 14 12 16 6
SOUTHEAST ASIA FLEET
Owned Vessels:
Small Anchor Handling, Towing and
Supply................................ 10 10 4 4 5 5
Crewboat................................ 1 1 1 1 1 1
------ ------ ------ ------ ------ ------
Total.............................. 11 11 5 5 6 6
Chartered Vessels(b):
Small Anchor Handling, Towing and
Supply................................ 1 1 1 1 1 1
Platform Supply......................... 1 1 1 1 1 1
------ ------ ------ ------ ------ ------
Total.............................. 2 2 2 2 2 2
------ ------ ------ ------ ------ ------
Total Southeast Asia Vessels....... 13 13 7 7 8 8
BRAZIL
Owned Vessels:
Anchor Handling, Towing and Supply...... 1 1 1 1 1 1
------ ------ ------ ------ ------ ------

TOTAL VESSELS IN COMPANY'S FLEET... 30 28 22 20 25 15
====== ====== ====== ====== ====== ======
</TABLE>

- ---------------

(a) Platform supply vessels with pipe carrying capabilities such as the UT 705s
and UT 755s.

(b) Managed and chartered vessels are on year-to-year contracts, except for the
two vessels in Southeast Asia that are chartered through August 1998 to
SeaMark Ltd., a Panamanian corporation owned 51% by the Company and 49% by
the vessels' owners.
11
<PAGE> 12

SUMMARY HISTORICAL OPERATING INFORMATION

The following table sets forth certain summary operating information for
the Company relating to average day and utilization rates for the Company's PSVs
and AHTS vessels and the average number of such vessels owned or bareboat
chartered during the periods indicated. These vessels generate substantially all
of the Company's revenues and operating profit. The information detailed below
is utilized by the Company's management to evaluate the performance of the
business.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Rates Per Day Worked(a)(b):
North Sea Fleet(c)............. $9,949 $7,964 $8,819 $7,840 $7,551 $7,231 $7,690
Southeast Asia Fleet(d)........ 3,657 3,320 3,347 3,146 3,047 3,462 3,896
Overall Utilization(a)(b):
North Sea Fleet................ 94.9% 93.8% 95.1% 96.4% 92.7% 78.9% 74.6%
Southeast Asia Fleet(d)........ 63.5% 78.6% 77.5% 80.5% 82.9% 83.0% 84.8%
Average Owned or Chartered
Vessels(a)(e):
North Sea Fleet................ 9.0 7.6 7.8 7.0 7.5 6.4 4.8
Southeast Asia Fleet(d)........ 13.0 7.0 9.5 7.0 7.7 8.0 6.3
------ ------ ------ ------ ------ ------ ------
Total.................. 22.0 14.6 17.3 14.0 15.2 14.4 11.1
====== ====== ====== ====== ====== ====== ======
</TABLE>

- ---------------

(a) Includes all owned or bareboat chartered PSVs and AHTS vessels. The
Company's only crewboat and only standby rescue vessel (which was chartered
until December 31, 1996) are excluded, as are all managed vessels.

(b) Rates per day worked is total charter revenues divided by number of days
worked. Utilization rate is defined as the total number of days worked
divided by the total number of days in the period.

(c) Revenues for vessels in the North Sea fleet are earned in Sterling (L) and
have been converted to U.S. Dollars ($) at the average exchange rate ($/L)
for the periods indicated. The average exchange rates were L = $1.6344 and L
= $1.5284 for the six months ended June 30, 1997 and June 30, 1996,
respectively. The average exchange rates for the years ended December 31,
1996, 1995, 1994, 1993 and 1992 were L = $1.5623, L = $1.5778, L = $1.5360,
L = $1.4962 and L = $1.7586, respectively.

(d) Includes the vessel operating in Brazil.

(e) Adjusted for vessel additions and dispositions occurring during each period.
12
<PAGE> 13

RECENT DEVELOPMENTS

THE CONTRIBUTION, DISTRIBUTION AND MERGER

The Company was incorporated on December 4, 1996 under the name of "New
GulfMark, Inc.," a wholly owned subsidiary of the corporation then known as
GulfMark International, Inc. (the "Predecessor"). The Company was formed to
facilitate the Predecessor's separation of its international Offshore Marine
Services business from its only U.S. operations, an erosion control business
("Ercon"), and its large holding of common stock of Energy Ventures, Inc. (now
known as EVI, Inc. ("EVI")). In order to accomplish this separation, the
Predecessor agreed to transfer the assets, liabilities and operations of its
Offshore Marine Services business to the Company (the "Contribution"). On April
30, 1997, the Contribution occurred and the Offshore Marine Services business
was separated from the Predecessor through the distribution of all of the then
outstanding Common Stock of the Company to the Predecessor's common stockholders
(the "Distribution") in accordance with the Agreement and Plan of Distribution
dated December 5, 1996 (the "Distribution Agreement") among the Company, the
Predecessor and EVI. Following the Distribution, on May 1, 1997, a subsidiary of
EVI was merged (the "Merger") with and into the Predecessor, whose assets then
consisted primarily of Ercon and its investment in approximately 2.2 million
shares of EVI common stock. Immediately after the Merger, the Predecessor ceased
public trading of its common stock.

The Consolidated Financial Statements included in this Prospectus present
the net assets and results of operations of Ercon and the common stock of EVI
owned by the Predecessor as discontinued operations of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Notes 1 and 4 to the Consolidated Financial Statements of the
Company.

In connection with the Distribution, two shares of the Company's Common
Stock were issued for each share of the Predecessor's common stock. Also, in
connection with the Merger, the Predecessor's stockholders received shares of
EVI common stock.

The Predecessor received a tax opinion that the Contribution, Distribution
and Merger described above will not be taxable to the Company, the Predecessor
or EVI. See "Risk Factors -- Tax Indemnity to EVI" and "Business -- The
Company -- Distribution Agreement Obligations and Indemnities." One of the
criteria for such tax-free status required the Predecessor to distribute an
amount of stock that constituted control in GulfMark. The Offering was
contemplated at the time of the Contribution, Distribution and Merger, as a
result of which the shares issued in the Offering will be taken into account in
determining whether the shares involved in the Distribution constituted a
controlling interest in the Company. Consequently, to preserve the tax-free
status of the Contribution, the Distribution and the Merger, the number of
shares of Common Stock that the Company may issue in the Offering is limited.
The Company's tax advisor has advised the Company that the issuance of the
number of shares offered by this Prospectus (including the shares subject to the
over-allotment option) will not exceed the limitations set forth in the tax
opinion.

13
<PAGE> 14

RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk. The following factors should be carefully considered together with the
information provided elsewhere in this Prospectus in evaluating an investment in
the Common Stock.

DEPENDENCE ON OIL AND GAS INDUSTRY; MARKET VOLATILITY

The Company's operations are dependent on activity in the offshore oil and
natural 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 natural gas prices which, in turn, are related to the demand
for petroleum products and the current availability of oil and natural gas
resources. The level of offshore activity is also related to local policies that
influence drilling activities. In recent years, oil and natural gas prices have
reacted to actual and perceived changes in the supply of and demand for oil and
natural gas, which has resulted in volatile levels of offshore exploration and
drilling activity. A significant or prolonged decline in future oil and natural
gas prices would likely 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 the Company's financial
condition and results of operations. See "Business -- The Offshore Marine
Services Industry" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Charter rates for the Company's vessels are also 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 Services, construction of new vessels and
migration of vessels between markets. The addition of new capacity to the
worldwide offshore marine fleet could increase competition in those markets
where the Company presently operates, which, in turn, could have a material
adverse effect on the Company's financial condition and results of operations.

RELIANCE ON SIGNIFICANT CUSTOMERS

The Company's principal customers are major integrated oil companies and
large independent oil and natural gas exploration and production companies
operating in international markets, as well as foreign government owned or
controlled organizations and companies that provide logistics, construction and
other services to such oil companies and foreign government organizations. The
percentage of the Company's revenues attributable to any particular customer
varies from time to time depending on the level of oil and natural gas
exploration undertaken by that customer, the suitability of the Company's
vessels for the customer's projects and other factors, many of which are beyond
the Company's control. For the year ended December 31, 1996, approximately 14%
and 15% of the Company's total revenues were received from Shell U.K.
Exploration & Production ("Shell") and Aberdeen Services Company (North Sea)
("ASCO"), respectively. For the six months ended June 30, 1997, approximately
18%, 16%, 12% and 10% of the Company's total revenues were received from Shell,
ASCO, Marathon Oil U.K., Ltd. ("Marathon") and European Marine Contractors,
respectively. See "Business -- The Company -- Customers, Charter Terms and
Competition."

ENVIRONMENTAL AND GOVERNMENT REGULATION

The Company's operations are materially affected by government regulation
in the form of international conventions, federal and state laws and regulations
in jurisdictions where the Company's vessels operate and/or are registered.
These conventions, laws and regulations govern oil spills and other matters of
environmental protection and worker health and safety, as well as the manning,
construction and operation of vessels.

The Company believes that it is presently in material compliance with the
environmental laws and regulations to which the Company's operations are
subject. The Company is not a party to any pending environmental litigation or
other proceeding and is unaware of any threatened environmental litigation or
proceeding, which, if adversely determined, would have a material adverse effect
on the financial condition or results of operations of the Company. However, the
risk of incurring substantial compliance costs, liabilities and penalties for
noncompliance is inherent in Offshore Marine Services operations. There can be
no

14
<PAGE> 15

assurance that significant costs, liabilities and penalties will not be incurred
by or imposed on the Company in the future. See "Business -- The
Company -- Environmental and Government Regulation."

OPERATIONAL RISKS AND INSURANCE

The Company's operations are subject to various risks, including
catastrophic marine disaster, adverse weather conditions, mechanical failure,
collision, oil and hazardous substance spills and navigation errors, all of
which represent a threat to the safety of personnel and to the Company's
vessels, cargo, equipment under tow and other property, as well as the
environment. The occurrence of any of the foregoing events could result in loss
of revenue, casualty loss, increased costs or significant liability of the
Company to third parties. Because a significant majority of the Company's vessel
earnings are produced by the nine owned vessels in its North Sea fleet, the
occurrence of such events with respect to any of those vessels could have a
disproportionate effect on the Company's revenues and earnings. The Company
maintains insurance coverage that it considers adequate against the casualty and
liability risks listed above, and it has not in the past experienced a loss in
excess of policy limits. There can be no assurance, however, that the Company'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. See
"Business -- The Company -- Operational Risks and Insurance."

RELIANCE ON FOREIGN OPERATIONS

For each of the past five years, substantially all of the Company's
revenues from continuing operations were derived from foreign sources. The
Company's foreign 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, exchange rate fluctuations, import-export quotas and other forms
of public and governmental regulation, all of which are beyond the control of
the Company. Although the Company's operations historically 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 the Company's financial condition and results of operations.
See "Business -- The Offshore Marine Services Industry -- The North Sea Market,"
"Business -- The Offshore Marine Services Industry -- The Southeast Asia Market"
and "Business -- The Offshore Marine Services Industry -- The Brazilian Market."

CURRENCY FLUCTUATIONS

Due to its foreign operations, the Company is exposed to currency
fluctuations and exchange rate risks. To minimize the financial impact of these
risks, the Company attempts to match the currency of its vessel debt and
operating costs with the currency of the charter revenues. For financial
statement reporting purposes, these accounts are translated into U.S. Dollars at
the weighted average exchange rates for the relevant period. From time to time,
the Company hedges certain transactions that are not in the functional currency
of the Company or its operating subsidiaries. During the first quarter of 1997,
the Company entered into a contract to hedge 92.8 million Norwegian Kroner
(approximately $13.9 million) of its commitment under a vessel construction
contract against unfavorable fluctuations in the British Pound Sterling
("Sterling") to Norwegian Kroner exchange rates. Because the Company conducts
substantially all its operations in foreign currencies, to the extent the U.S.
Dollar appreciates in relation to applicable foreign currencies, such
appreciation potentially could adversely affect the Company's operating revenues
when translated into U.S. Dollars. To date, currency fluctuations have not had a
material impact on the Company's financial condition or results of operations.
In the last few weeks, the Malaysian ringgit, in which the Company received
approximately $1.6 million of its 1996 revenues, has experienced downward
pressure and has moved below the relatively narrow range in which it traded in
1994-1996. Management will continue to assess this situation to determine
appropriate measures to minimize these risks. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Currency
Fluctuations and Inflation."

ONGOING CAPITAL EXPENDITURE REQUIREMENTS

As of June 30, 1997, the average age of the Company's owned offshore
support vessel fleet was approximately 14 years. The Company believes that,
after an offshore support vessel has been in service for approximately 25 years,
the amount of expenditures (which typically increase with vessel age) necessary
to

15
<PAGE> 16

satisfy required marine certification standards may not be economically
justifiable. There can be no assurance that the Company's financial resources
will be sufficient to enable it to maintain its fleet by extending the economic
life of existing vessels through major refurbishment or by acquiring new or used
vessels. See "Business -- The Company -- The Company's Fleet."

COMPETITION

The Company operates in a highly competitive industry. In addition to
price, service and reputation, the principal competitive factors for offshore
support vessel fleets include the existence of national flag preferences,
operating conditions and intended use (both of which determine the suitability
of vessel types), complexity of maintaining logistical support and the cost of
transferring equipment from one market to another. Some of the Company's
competitors have significantly greater financial resources than the Company. See
"Business -- The Company -- Customers, Charter Terms and Competition."

HIGH LEVERAGE AND DEBT SERVICE

Upon completion of the Offering, the Company will continue to have
substantial indebtedness. As of June 30, 1997, the Company's total outstanding
indebtedness was $62.0 million. In addition, the Company actively pursues vessel
acquisition opportunities and has significant future payment obligations for the
vessels currently under construction. The Company's leverage poses certain
risks, including the risk that the Company may not generate sufficient cash flow
to service its indebtedness; that the Company may not be able to renegotiate the
terms of its indebtedness; that the Company may be unable to obtain additional
financing in the future; that, to the extent it is more leveraged than its
competitors, the Company may be placed at a competitive disadvantage; and that
the Company's ability to borrow to the extent necessary to respond to market
conditions and other factors may be adversely affected. The Company'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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

DISTRIBUTION INDEMNITY TO EVI

Pursuant to the Distribution Agreement, the Company has agreed to indemnify
the Predecessor, EVI and certain of their affiliates against (i) liabilities for
all past and future claims and litigation against EVI or the Predecessor
stemming from the Predecessor's or the Company's Offshore Marine Services
operations and (ii) liabilities for claims and litigation against EVI or the
Predecessor and its current or past subsidiaries and affiliates, including
Ercon, for periods prior to May 1, 1997 (the "Distribution Indemnity"). Although
the Company has established a reserve on its Consolidated Balance Sheet which it
believes to be adequate to cover such contingencies, there can be no assurance
that the reserve is adequate. In addition, the Distribution Agreement requires
that these indemnities be assumed by any future successor to the Company. This
requirement may have the effect of delaying, deferring or preventing a change of
control of the Company. See "Business -- The Company -- Distribution Agreement
Obligations and Indemnities" and "Recent Developments -- The Contribution,
Distribution and Merger."

TAX INDEMNITY TO EVI

In addition to the Distribution Indemnity, the Company has agreed to
indemnify EVI against any tax liabilities in the event the Contribution,
Distribution or Merger is determined to be taxable. EVI and the Predecessor
received a tax opinion that the Contribution, Distribution and Merger would be
tax-free under the Internal Revenue Code of 1986, as amended. If, however,
contrary to the opinion, the Contribution, Distribution or Merger is ever
determined to be taxable, the potential tax liability to the Company has been
estimated to be between $23 million and $36 million. This indemnity must be
assumed by any future successor to the Company. The requirement of a successor's
assumption of this indemnity may have the effect of delaying, deferring or
preventing a change of control of the Company. See "Business -- The Company --
Distribution Agreement Obligations and Indemnities" and "Recent
Developments -- The Contribution, Distribution and Merger."

16
<PAGE> 17

ABSENCE OF SIGNIFICANT TRADING MARKET; VOLATILITY OF MARKET PRICE

There has been a trading market for the Common Stock only since May 1,
1997. There can be no assurance as to the prices at which trading in the Common
Stock will occur after the completion of the Offering. Until an orderly market
develops for the Common Stock after the Offering, the trading price may be
especially volatile. Prices for shares of Common Stock will be determined in the
marketplace and may be influenced by many factors, including quarterly operating
results of the Company; changes in general conditions in the economy, the
financial markets or the Offshore Marine Services industry; changes in market
prices for oil and natural gas; or other developments affecting the Company, its
competitors or the financial markets. In recent years, the stock market,
including the stocks of Offshore Marine Services companies, has experienced
significant price and volume fluctuations. This volatility has affected the
market prices of securities issued by many companies for reasons unrelated to
their operating performance. In addition, the Company's operating results in
future periods may be below the expectations of securities analysts and
investors. In such event, the price of the Common Stock would likely decline,
perhaps substantially.

SUBSTANTIAL CONTROL BY EXISTING STOCKHOLDER

Upon completion of the Offering, Lehman Brothers Holdings Inc. will
beneficially own approximately 26.1% (25.7% if the over-allotment option is
exercised in full) of the issued and outstanding shares of Common Stock. In
addition, the Chairman of the Board of Directors of the Company and one
additional director are employees of Lehman Brothers Inc., an affiliate of
Lehman Brothers Holdings Inc. The stock ownership and current Board
representation of Lehman Brothers Holdings Inc. gives it the ability to exercise
substantial influence over the election of the Company's directors and other
corporate matters requiring stockholder or Board of Directors approval. This may
have the effect of delaying, deferring or preventing a change in control of the
Company. See "Principal Stockholders and Stock Ownership of Directors and
Officers."

FORWARD-LOOKING INFORMATION

Certain statements and information in this Prospectus constitute
forward-looking statements within the meaning of the Federal Private Securities
Litigation Reform Act of 1995. Such forward-looking statements typically include
words or phrases such as "anticipate," "estimate," "project," "believe" and
words or phrases of similar import. Such statements are subject to certain
risks, uncertainties and assumptions, including, without limitation, those set
forth in this section. Should one or more of these risks or uncertainties
materialize, or should these underlying assumptions prove incorrect, actual
results may vary materially from those anticipated, estimated or projected.

17
<PAGE> 18

THE COMPANY

GulfMark Offshore, Inc. was incorporated in Delaware in December 1996 and
commenced operations on May 1, 1997, the day after the Contribution,
Distribution and Merger. The Company provides Offshore Marine Services to
companies involved in offshore exploration and production of oil and natural
gas. The Company's vessels transport drilling materials, supplies and personnel
to offshore facilities, as well as move and position drilling structures. The
majority of the Company's operations are conducted in the North Sea and, with
the exception of one vessel operating offshore Brazil, the balance are conducted
in Southeast Asia.

The principal executive offices of the Company are located at 5 Post Oak
Park, Suite 1170, Houston, Texas 77027-3414, and its telephone number at that
address is (713) 963-9522.

USE OF PROCEEDS

The estimated net proceeds to be received by the Company from the Offering,
after deducting underwriting discounts and commissions and other estimated
expenses payable by the Company, are approximately $29.7 million ($33.5 million
if the Underwriters' over-allotment option is exercised in full).

A portion of these proceeds will be used for the Company's capital
expenditures, including building and acquiring new vessels and upgrading the
Company's fleet, with emphasis on specific ongoing projects. The Company has
contracted for the construction of the Highland Rover, the Company's most
modern, technologically sophisticated PSV to date, and anticipates delivery in
March 1998. The Company previously obtained a bank revolving credit facility
that fully covers the remaining balance of the cost of construction of the
Highland Rover (approximately $13.9 million). However, the Company intends to
use a portion of the proceeds of the Offering to fund part or all of the
remaining balance of such cost. In addition, the Company has recently acquired
the Gallant Project, an unfinished vessel hull, and anticipates that the
completed vessel will be delivered in 1998. The hull could be completed as a PSV
or AHTS vessel. The Company currently believes, however, that the most
attractive potential application could be as a multipurpose support vessel
serving the growing FPSO market. It is anticipated that a portion of the cost of
the Gallant Project (estimated to be between $11 million and $14 million) will
be funded from the proceeds of the Offering.

The Company will use $3.4 million of the net proceeds of the Offering to
prepay indebtedness outstanding under a loan facility. The borrowings under this
facility bear interest at LIBOR plus 2 1/4% and mature on the earlier of
December 31, 1997 or the completion of the Offering.

The balance of the net proceeds of the Offering, if any, will be used by
the Company for general corporate purposes, including satisfaction of working
capital needs, building and acquiring vessels and other purposes. The Company is
exploring the opportunity to build additional vessels, and, if it should build
such vessels, a portion of the proceeds of the Offering may be used to finance
part of the cost of these vessels. Pending such uses, the net proceeds will be
invested in short-term, interest-bearing, investment-grade securities.

18
<PAGE> 19

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Common Stock is traded on the Nasdaq National Market under the symbol
"GMRK." The following table sets forth the range of high and low sales prices
for Common Stock for the periods indicated, as reported on the Nasdaq National
Market.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
May 1, 1997 (first post-Distribution trading day; "when
issued" basis)............................................ $141/2 $13
Period ended June 30, 1997.................................. $26 $13
Quarter ended September 30, 1997 (through August 14,
1997)..................................................... $323/4 $261/2
</TABLE>

On August 14, 1997, the closing sale price of the Common Stock as reported
by the Nasdaq National Market was $32 5/8 per share.

The Company has not declared or paid any dividends during the past five
years. The Company currently anticipates that, for the foreseeable future, any
earnings will be retained for the development of the Company's business. The
declaration of dividends is at the discretion of the Company's Board of
Directors. The Company's dividend policy will be reviewed by the Board of
Directors at such time as may be appropriate in light of future operating
conditions, dividend restrictions of subsidiaries and investees, financial
requirements, general business conditions and other factors. Currently, four of
the Company's subsidiaries, 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 the Company without the
lender's approval. These subsidiaries own nine vessels currently operating in
the North Sea, 10 vessels currently operating in Southeast Asia and one vessel
currently operating in Brazil.

19
<PAGE> 20

CAPITALIZATION

The following table sets forth the historical consolidated capitalization
of the Company as of June 30, 1997 and as adjusted to reflect the issuance by
the Company of 1,000,000 shares of Common Stock offered hereby and the pro forma
application of the net proceeds therefrom as described under "Use of Proceeds."
This table should be read in conjunction with the Consolidated Financial
Statements of the Company, including the notes thereto, contained herein.

<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term borrowings and current portion of long-term
debt...................................................... $ 14,012 $ 10,612
Long-term debt.............................................. 47,970 47,970
-------- --------
Total debt........................................ 61,982 58,582
-------- --------
Stockholders' equity:
Common Stock, $0.01 par value, 15,000,000 shares
authorized; 6,765,893 historically and 7,765,893 (as
adjusted) shares issued and outstanding(a)............. 68 78
Preferred stock, no par value, 2,000,000 shares
authorized; no shares issued and outstanding........... -- --
Additional paid-in capital................................ 27,015 56,709
Retained earnings......................................... 20,790 20,790
Cumulative foreign currency adjustment.................... (1,235) (1,235)
-------- --------
Total stockholders' equity........................ 46,638 76,342
-------- --------
Total capitalization........................................ $108,620 $134,924
======== ========
</TABLE>

- ---------------

20
<PAGE> 21

SELECTED CONSOLIDATED FINANCIAL DATA

The historical financial data presented in the table below for and at the
end of each of the years in the five-year period ended December 31, 1996 are
derived from the Consolidated Financial Statements of the Company audited by
Arthur Andersen LLP, independent accountants. The historical financial data
presented in the table below for and as of the end of each of the six-month
periods ended June 30, 1997 and June 30, 1996 are derived from the unaudited
consolidated condensed financial statements of the Company. In the opinion of
management of the Company, such unaudited consolidated condensed financial
statements include all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the financial data for such periods. The
results for the six months ended June 30, 1997 are not necessarily indicative of
the results to be achieved for the full year.

The Consolidated Financial Statements included in this Prospectus, as well
as the financial data presented in the table below, present the net assets and
results of operations of Ercon and the common stock of EVI owned by the
Predecessor as discontinued operations of the Company for all periods presented.
The data presented below should be read in conjunction with the Company's
Consolidated Financial Statements and the notes thereto included elsewhere in
this Prospectus, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Recent Developments -- The Contribution,
Distribution and Merger."

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF VESSELS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues............................. $ 21,031 $ 14,493 $ 34,749 $ 27,233 $27,692 $ 22,564 $ 18,115
Direct operating expenses............ 8,886 7,282 16,178 15,386 15,171 12,060 7,488
General and administrative
expenses........................... 2,670 2,106 4,523 3,483 3,643 3,280 3,075
Depreciation and amortization........ 3,284 2,264 5,013 5,472 5,065 3,752 3,351
-------- -------- -------- -------- ------- -------- --------
Operating income..................... 6,191 2,841 9,035 2,892 3,813 3,472 4,201
Gain on sale of vessel............... -- -- -- -- 842 -- --
Interest expense, net................ (2,401) (1,613) (3,467) (2,613) (2,179) (2,047) (2,351)
Other income (expense), net.......... 44 75 (86) 180 (12) 68 285
Income tax provision................. (1,120) (371) (1,839) (91) (981) (534) (601)
-------- -------- -------- -------- ------- -------- --------
Income from continuing operations.... 2,714 932 3,643 368 1,483 959 1,534
Income (loss) from discontinued
operations, net of taxes........... (648) (129) 4,796 (2,270) 591 1,685 334
Loss on disposal of segment, net of
taxes.............................. (1,426) -- -- -- -- -- --
-------- -------- -------- -------- ------- -------- --------
Net income (loss).................... $ 640 $ 803 $ 8,439 $ (1,902) $ 2,074 $ 2,644 $ 1,868
======== ======== ======== ======== ======= ======== ========
Earnings per share from continuing
operations(a)...................... $ 0.40 $ 0.14 $ 0.55 $ 0.06 $ 0.22 $ 0.14 $ 0.23
Weighted average common shares(a).... 6,807 6,672 6,676 6,644 6,640 6,624 6,620
STATEMENT OF CASH FLOWS DATA:
Cash provided by (used in) operating
activities of continuing
operations......................... $ 4,819 $ 1,889 $ 8,539 $ 6,389 $ 5,448 $ 2,653 $ 5,547
Cash provided by (used in) investing
activities......................... (17,660) (13,929) (24,493) (15,093) (258) (16,836) (12,610)
Cash provided by (used in) financing
activities......................... 3,343 11,067 17,894 9,567 (7,970) 12,810 6,259
Effect of exchange rate changes on
cash............................... (445) 26 924 (160) 124 (56) (560)
OTHER DATA:
EBITDA(b)............................ $ 9,475 $ 5,105 $ 14,048 $ 8,364 $ 8,878 $ 7,224 $ 7,552
Cash dividends per share............. -- -- -- -- -- -- --
Total vessels in fleet(c)............ 30 23 28 22 20 25 15
Average number of owned or chartered
vessels(d)......................... 22.0 14.6 17.3 14.0 15.1 14.4 11.1
</TABLE>

21
<PAGE> 22

<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
JUNE 30, ------------------------------------------------
1997 1996 1995 1994 1993 1992
-------- -------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 5,931 $ 17,234 $ 5,136 $ 2,645 $ 5,195 $ 6,541
Vessels and equipment, net...................... 97,556 87,405 61,343 51,175 53,002 44,717
Net assets of discontinued operations(e)........ -- 14,837 19,275 23,512 23,569 22,166
Total assets including discontinued
operations.................................... 120,356 131,307 94,179 87,821 90,727 78,509
Total assets excluding discontinued
operations.................................... 120,356 116,470 74,904 64,309 67,158 56,343
Long-term debt(f)............................... 47,970 50,811 33,600 26,727 30,169 18,730
Total stockholders' equity...................... 46,638 62,016 50,928 53,025 50,388 48,306
Total stockholders' equity excluding
discontinued operations(g).................... 46,638 47,179 31,653 29,513 26,819 26,140
</TABLE>

- ---------------

(c) Includes managed vessels in addition to those that are owned and chartered.
See pages 36 and 37 for further information concerning the Company's fleet.

(e) Reflects the financial statement information for the non-marine businesses
of the Company's Predecessor.

(f) Excludes current portion of long-term debt.

(g) Discontinued operations were disposed of on May 1, 1997.

22
<PAGE> 23

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

This information should be read in conjunction with the Company's
Consolidated Financial Statements, including the notes thereto, contained in
this Prospectus. See also "Selected Consolidated Financial Data."

GENERAL

The Company was incorporated on December 4, 1996 under the name of "New
GulfMark, Inc.," a wholly owned subsidiary of the Predecessor. The Company was
formed to facilitate the Predecessor's separation of its international Offshore
Marine Services business from its only U.S. business operation, Ercon, and its
large holding of common stock of EVI. In order to accomplish this separation,
the Predecessor agreed to transfer the assets, liabilities and operations of its
Offshore Marine Services business to the Company. On April 30, 1997, the
Contribution occurred, and the Offshore Marine Services business was separated
from the Predecessor through the distribution of all of the then outstanding
common stock of the Company to the Predecessor's common stockholders in
accordance with the Distribution Agreement. Following the Distribution, on May
1, 1997, a subsidiary of EVI was merged with and into the Predecessor, whose
assets then consisted principally of Ercon and its investment in approximately
2.2 million shares of EVI common stock. Immediately after the Merger, the
Predecessor ceased public trading of its common stock.

In connection with the Distribution, two shares of the Company's Common
Stock were issued for each share of the Predecessor common stock. Also, in
connection with the Merger, the Predecessor's stockholders received shares of
EVI common stock. See Notes 1 and 4 to the Consolidated Financial Statements.

The Company's operations currently consist of the Offshore Marine Services
business, which represents over half of the assets, revenues and operating
income of the businesses, operations and companies previously constituting the
Predecessor. Consequently, the following Management's Discussion and Analysis of
Financial Condition and Results of Operations, and the Consolidated Financial
Statements included elsewhere herein, present the net assets and results of
operations of Ercon and the common stock of EVI owned by the Predecessor as
discontinued operations of the Company for all periods presented. See Notes 1
and 4 to the Consolidated Financial Statements.

Unless otherwise indicated, references to "GulfMark" or the "Company" are
(i) for all periods through April 30, 1997, the effective date of the
Contribution and Distribution, to the Predecessor and its consolidated
subsidiaries (treating Ercon and the investment in EVI as discontinued
operations for all periods), and (ii) for all periods subsequent to April 30,
1997, to GulfMark Offshore, Inc. and its consolidated subsidiaries.

The Company provides marine support and transportation services to
companies involved in the offshore exploration and production of oil and natural
gas. The Company's vessels transport drilling materials, supplies and personnel
to offshore facilities, as well as move and position drilling structures. The
majority of its operations are conducted in the North Sea and, with the
exception of one vessel operating in Brazil, the balance of the Company's
operations are conducted in Southeast Asia. The Company's fleet has grown in
size and capability from an original 11 vessels acquired in late 1990 to its
present level of 30 vessels through strategic acquisitions and new construction
of technologically advanced vessels, partially offset by dispositions of certain
older, less profitable vessels. Twenty-one vessels in GulfMark's fleet are
owned, two are bareboat chartered and seven are managed. The two bareboat
charters run through August 1998.

The Company's results of operations are affected primarily by day rates,
fleet utilization and the number and type of vessels in its fleet. These factors
are driven by trends within the oil and natural gas exploration and production
industry, which generally affect the demand for vessels, as well as by trends
impacting the broader economy and capital markets, which generally affect the
supply of vessels. While offshore support vessels service existing oil and
natural gas production platforms and exploration and development activities,
incremental demand depends primarily upon drilling activity, which, in turn, is
related to both short-term and long-term trends in oil and natural gas prices.
As a result, trends in oil and natural gas prices may significantly affect fleet
utilization and day rates.

An additional factor affecting operating earnings is the mix of vessels
owned versus bareboat chartered by the Company. Owned and bareboat chartered
vessels generate operating revenues and may incur expenses at

23
<PAGE> 24

similar rates. However, chartered vessels also incur bareboat charter hire
expense instead of depreciation expense, which is generally less than charter
hire expense.

In addition, the Company provides management services to other vessel
owners for a fee. Charter revenues and vessel expenses of such vessels are not
included in the Company's operating results, but management fees are included in
operating revenues. These vessels, the Company's only crewboat and a standby
rescue vessel that was chartered by the Company through December 31, 1996, have
been excluded for purposes of calculating fleet rates per day worked and
utilization in the applicable years.

The Company's operating costs are primarily a function of fleet size and
utilization levels. The most significant direct operating costs are wages paid
to vessel crews, maintenance and repairs and marine insurance. Generally,
fluctuations in vessel utilization affect only that portion of the Company's
direct operating costs that is incurred when the vessels are active. As a
result, direct operating costs as a percentage of revenues may vary
substantially due to changes in day rates and utilization.

In addition to these variable costs, the Company incurs fixed charges
related to the depreciation of its fleet and costs for routine drydock
inspections and maintenance and repairs designed to ensure compliance with
applicable regulations and to maintain certifications for its vessels with
various international classification societies. Maintenance and repair expenses
and marine inspection amortization charges are generally determined by the
aggregate number of drydockings and other repairs undertaken in a given period.
Costs incurred for drydock inspection and regulatory compliance are capitalized
and amortized over the period between such drydockings, typically two to three
years.

Under applicable maritime regulations, vessels must be drydocked twice in a
five-year period for inspection and routine maintenance and repair. Should the
Company undertake a large number of drydockings in a particular fiscal period,
comparative results may be affected. For the six months ended June 30, 1997, the
Company completed the drydocking of nine vessels at an aggregate cost of $2.2
million, as compared to five drydockings at an aggregate cost of $1.0 million in
the comparable period of 1996. For the year ended December 31, 1996, the Company
completed the drydocking of five vessels at an aggregate cost of $1.2 million,
versus six vessels drydocked at an aggregate cost of $1.1 million in 1995 and
seven vessels at an aggregate cost of approximately $1.6 million in 1994.

Results of operations are also affected by the purchase and sale of
vessels. During 1994, the Company sold two of the original 11 vessels it
acquired in 1990. In June 1994, the 20-year old Highland Sentinel was sold and a
pretax gain of $0.8 million was recognized. Revenues earned by this vessel in
1994 were minimal, as its advancing age had become a disadvantage in the highly
competitive North Sea market. In December 1994, the Company sold the 1969-built
Seawind. The sale had only a small impact on earnings. Although the vessel's
utilization was good, the cost of routine maintenance and drydocking had reached
the level where it was no longer economically feasible to continue operating the
25-year old vessel.

The Company contracted with a Norwegian shipyard in December 1994 for the
construction of two UT 755 design PSVs for deployment in the North Sea. Delivery
of the first vessel, the Highland Piper, was made on March 15, 1996. The second
vessel, the Highland Drummer, was delivered January 3, 1997. The Company made
the final payment on the Highland Piper and interim construction payments on the
Highland Drummer (a total of $11.5 million) during 1996 and a final payment on
the Highland Drummer of $12.9 million in 1997. Funding of $7.3 million in 1997
was provided by additional borrowings under existing credit facilities.

In December 1995, the Company purchased the Atlantic Warrior (renamed the
Highland Warrior), a 1981-built pipe carrier/PSV that had been bareboat
chartered by the Company since July 1993, when the Company acquired the charter
as part of its acquisition of BP Shipping's offshore assets.

In August 1996, the Company purchased six offshore supply vessels in
Southeast Asia from Maritime (Pte), Limited (the "Maritime Acquisition").
Funding for the Maritime Acquisition was provided through a new $7.0 million
bank facility and a drawdown under existing loan facilities.

On November 1, 1996, the Company entered into a contract with a Norwegian
shipyard to construct the Highland Rover, an enhanced UT 755 design PSV, at a
price of approximately $18.0 million denominated in Norwegian Kroner. This new
vessel, scheduled for delivery in March 1998, will be available to participate
in

24
<PAGE> 25

the growing demand for deepwater ROV support, standard supply duties and
specialized services in the North Sea. The Company made interim construction
payments of $0.9 million in 1996 and is required to make an additional $2.7
million of such payments in 1997, of which $0.9 million was made in April 1997.
Final payment is due upon delivery of the vessel. The Company anticipates
financing the cost of the vessel through some combination of additional
borrowings, proceeds from the Offering and existing funds. In March 1997, the
Company entered into a contract to hedge 92.8 million Norwegian Kroner
(approximately $13.9 million) of its commitment on the Highland Rover against
unfavorable fluctuations in the British Pound Sterling to Norwegian Kroner
exchange rate. Upon delivery, any gain or loss under the hedging contract (a
loss of approximately $1.6 million as of June 30, 1997) will be included in the
cost of the vessel, but will be offset by the corresponding change in the price
of the vessel due to the exchange rate fluctuation.

The Company is exploring the opportunity to build additional vesels, and,
if it should build such vessels, a portion of the proceeds of the Offering may
be used to finance part of the cost of these vessels.

RESULTS OF OPERATIONS

The table below sets forth, by region, the average day and utilization
rates for the Company's PSVs and AHTS vessels and the average number of such
vessels owned or bareboat chartered during the periods indicated. These vessels
generate substantially all of the Company's revenues and operating profit. The
information detailed below is utilized by the Company's management to evaluate
the performance of the business.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------- --------------------------
1997 1996 1996 1995 1994
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Rates Per Day Worked(a)(b):
North Sea Fleet(c)................. $ 9,949 $7,964 $8,819 $7,840 $7,551
Southeast Asia Fleet(d)............ 3,657 3,320 3,347 3,146 3,047
Overall Utilization(a)(b):
North Sea Fleet.................... 94.9% 93.8% 95.1% 96.4% 92.7%
Southeast Asia Fleet(d)............ 63.5% 78.6% 77.5% 80.5% 82.9%
Average Owned or Chartered
Vessels(a)(e):
North Sea Fleet.................... 9.0 7.6 7.8 7.0 7.5
Southeast Asia Fleet(d)............ 13.0 7.0 9.5 7.0 7.7
------- ------ ------ ------ ------
Total...................... 22.0 14.6 17.3 14.0 15.2
======= ====== ====== ====== ======
</TABLE>

- ---------------

(b) Rates per day worked is defined as total charter revenues divided by number
of days worked. Utilization rate is defined as the total number of days
worked divided by the total number of days in the period.

(c) Revenues for vessels in the North Sea fleet are earned in Sterling (L) and
have been converted to U.S. Dollars ($) at the average exchange rate ($/L)
for the periods indicated. The average exchange rates were L = $1.6344 and L
= $1.5284 for the periods ended June 30, 1997 and June 30, 1996,
respectively. The average exchange rates for the years ended December 31,
1996, 1995 and 1994 were L = $1.5623, L = $1.5778 and L = $1.5360,
respectively.

(d) Includes the vessel operating in Brazil.

(e) Adjusted for vessel additions and dispositions occurring during each period.

Comparison of the Six Months Ended June 30, 1997 with the Six Months Ended
June 30, 1996.

Changes to the Company's fleet were significant between the two periods.
Two large PSVs, the Highland Piper and the Highland Drummer, were purchased and
added to the Company's North Sea fleet on March 15, 1996 and January 3, 1997,
respectively, while vessels under management decreased by one. Management of

25
<PAGE> 26

the large PSV Safe Truck was added to the fleet, while contracts to manage two
other specialty vessels were terminated. The Southeast Asia fleet operated with
an additional six vessels in the six months ended June 30, 1997 compared to the
six months ended June 30, 1996, as a result of the Maritime Acquisition in
August 1996.

Revenues and earnings for the six months ended June 30, 1997 increased
sharply as compared to the six months ended June 30, 1996. Income from
continuing operations was $2.7 million, or $0.40 per share, as compared to $0.9
million, or $0.14 per share, for the same period in 1996. Revenues increased
$6.5 million, or 45%, from the comparable period.

Two-thirds of the revenue increase and substantially all of the increase in
income from continuing operations for the first six months of 1997, as compared
to the first six months of 1996, came from the North Sea fleet. In excess of 50%
of the increase in revenue and one-third of the increased earnings were
attributable to the additions of the Highland Piper in March 1996 and the
Highland Drummer in January 1997. The balance of the increases came from broadly
improved day rates in the region. The average day rate for the North Sea fleet
was up approximately 25% from the prior year. The rate increases were caused by
both improved market conditions, which accounted for 17% of the increase, and a
favorable move in the Sterling to U.S. Dollar exchange rate, which accounted for
the additional 8% of the increase. The average utilization rate for the North
Sea fleet increased from 94% in the 1996 period to 95% in the 1997 period.

In Southeast Asia, revenues increased approximately 80%, or $2.2 million,
and vessel earnings increased more than 70%, or $0.7 million, due to the
addition of six vessels in the Maritime Acquisition. The average day rate for
the Southeast Asia fleet improved but the improvement has come at the expense of
lower utilization

The increase in general and administrative expenses of approximately $0.6
million was attributable to the addition of staff to support the increased size
of the Company's Singapore operations and to provide additional support for
construction and project work worldwide.

Increases in depreciation of $1.0 million and interest expense of $0.9
million were both related to the addition of the two new vessels in the North
Sea and the six additional vessels in Southeast Asia. Interest rates during the
two periods were not materially different.

In the six months ended June 30, 1997, the Company reflected an operating
loss from discontinued operations of $0.6 million, compared to a loss of $0.1
million for the same period in 1996. The increased loss in the 1997 period was
primarily due to provisions for certain legal and tax issues related to Ercon's
operations.

Comparison of the Fiscal Years Ended December 31, 1996 and December 31, 1995.

The number of vessels in the fleet increased from 22 at December 31, 1995
to 28 at December 31, 1996. In March 1996, the Company took delivery of the
Highland Piper, which was immediately chartered. In August 1996, the Company
acquired six offshore supply vessels in Southeast Asia and, effective December
31, 1996, the Company terminated its bareboat charter of the standby rescue
vessel, Atlantic Guardian, and returned it to its owner. In addition, the
Company secured a management contract for the UT 755 Safe Truck, and the
management contract for the Whalley Supporter was terminated. These changes
brought the total fleet to 28 vessels at the end of 1996. Fourteen of the
vessels were in the North Sea fleet, 13 were in the Southeast Asia fleet and one
vessel was operating under a long-term charter offshore Brazil.

Revenues and operating income for 1996 were $34.7 million and $9.0 million,
respectively, compared to $27.2 million and $2.9 million, respectively, for
1995. The increased revenues were primarily attributable to the addition of the
Highland Piper to the North Sea fleet, as well as sharply increased day rates in
the North Sea. The rate increases were most notable late in the period for the
Highland Pride and Highland Fortress. The addition of six vessels to the
Company's Southeast Asia fleet in the Maritime Acquisition also contributed to
the increase in revenue. Approximately 75% of the increase in earnings is
attributable to the North Sea fleet, whose day rates increased sharply while
utilization and operating costs per day remained stable. In addition, the
acquisition of the Highland Warrior late in 1995 contributed significantly to
earnings, while not materially increasing revenue, since it had been under
charter to the Company since 1993. Although depreciation increased as a result
of the acquisition of this vessel, the increase was more than offset by the
elimination of the bareboat charter fee.

26
<PAGE> 27

The balance of the increase in earnings came from (i) the additions to the
Southeast Asia fleet, (ii) increased utilization of the Seapower, which
commenced a two-year charter in Brazil effective May 1995 (recently extended
through May 1999) and (iii) increased utilization of the crewboat Searunner. The
utilization rate for the Seapower increased to 100%, from 63% in 1995, and the
utilization rate for the Searunner increased to 58%, from 39% in 1995. The
average day rate for the Southeast Asia fleet for 1996 increased approximately
6% over the average rate for 1995, and the average operating costs per day
decreased slightly, while utilization dropped to approximately 78% from the 1995
level of 81%. These averages include the vessel in Brazil but do not include the
Company's only crewboat, the Searunner.

The increase in general and administrative expenses of approximately $1.0
million was attributable to the addition of staff to support the increased size
of the Company's Southeast Asia operations and to provide additional support for
construction and project work Company-wide, as well as the generally increased
level of activity.

Earnings benefited from reduced depreciation rates resulting from the
Company's change (effective January 1, 1996) in its estimate of vessel useful
lives from 20 years to 25 years. The effect of this benefit on 1996 earnings was
offset in Southeast Asia by increased depreciation associated with the 1996
Southeast Asia fleet additions and in the North Sea by increased depreciation
associated with the addition of the Highland Piper and Highland Warrior.

Interest expense, net of interest income, increased from $2.6 million in
1995 to $3.5 million in 1996 due to the overall increase in debt associated with
the various vessel additions. These increases were partially offset by a
decrease in average Sterling interest rates for the respective periods from 9.4%
to 7.7%. At December 31, 1996, approximately 81% of the Company's debt was
Sterling denominated.

Comparison of the Fiscal Years Ended December 31, 1995 and December 31, 1994.

The number of vessels in the fleet increased from 20 at year-end 1994 to 22
at year-end 1995. In August 1994, the Company sold the Highland Sentinel from
the North Sea fleet, and in December 1994, the Company sold the Seawind from the
Southeast Asia fleet. Proceeds from the sale of the Seawind approximated book
value, while the Company realized a gain of $0.8 million on the sale of the
Highland Sentinel.

The Company purchased the Atlantic Warrior (renamed the Highland Warrior)
in December 1995. This vessel had been on bareboat charter to the Company since
July 1993, when its charter was acquired as part of the Company's acquisition of
BP Shipping's offshore assets. In addition, in August 1995, the Company was
selected as the prime marine contractor for the Liverpool Bay Development
Project, a $1.6 billion plan to produce the first oil from the Irish Sea. This
project added three vessel management contracts (the Clwyd Supporter, the
Whalley Supporter and the Sefton Supporter) and required the maintenance of an
inventory of pollution containment equipment and an on-site manager. The
Company's involvement is as manager only and does not require significant
investment. None of the Company's owned vessels are employed in the project.
Also during 1995, the Company's management contract for a standby rescue vessel
was not renewed due to the sale of the vessel.

As a result of the activity noted above, the Company's North Sea fleet
(adjusted for part-year availability) averaged 7.5 units during 1994, as
compared to 7.0 units during 1995, and the average Southeast Asia fleet
decreased from 7.7 to 7.0 units. This decrease contributed to a reduction in
1995 results of operations. While revenues decreased slightly from $27.7 million
in 1994 to $27.2 million in 1995, operating income declined more sharply, from
$3.8 million in 1994 to $2.9 million in 1995. A 2% increase in North Sea
revenues was more than offset by an 11% decline in Southeast Asia revenues. The
decline in operating income came from the Southeast Asia fleet, offset partially
by a small decrease in general and administrative expenses.

For the North Sea fleet, earnings associated with increased utilization of
the Highland Sprite and the chartered standby rescue vessel, the Atlantic
Guardian, were offset by the absence of any earnings in 1995 from the vessel
sold in 1994 and by a 10% increase in average operating costs per day. The
increase in operating costs was attributable to increased repair and maintenance
costs, principally for the Highland Pride and Highland Fortress, and increased
personnel costs.

27
<PAGE> 28

The average day rates for the Company's North Sea fleet in 1994 and 1995
were relatively flat after adjustment for the effects of changes in the British
Pound Sterling to U.S. Dollar exchange rate between the periods, as well as the
effect of a change in the mix of the fleet due to the sale of the Highland
Sentinel.

Fleet utilization improved from 93% in 1994 to 96% in 1995. This
improvement was in part due to the sale of the Highland Sentinel, an older
vessel whose utilization rate historically had been below the average of the
fleet. However, of the seven owned or chartered supply vessels in the fleet at
the end of 1995, three were at full practical utilization in both years. Of the
remaining four vessels, three vessels achieved full practical utilization for
1995. Only one vessel in the fleet finished the year with a materially lower
utilization rate for 1995 than 1994.

Operating income from the Southeast Asia fleet decreased approximately $0.9
million in 1995, as compared to 1994. Approximately one-third of the decrease
was attributable to a reduction in vessels resulting from the 1994 sale of the
Seawind. An additional one-third of the decrease was attributable to the
combination of marginally lower utilization rates for the AHTS vessels and a
significant drop in utilization for the crewboat, Searunner, which decreased
from 66% to 39%. The balance of the decrease was attributable to an increase in
direct vessel operating costs, principally supplies, repairs and maintenance.

LIQUIDITY AND CAPITAL RESOURCES

The Company's ongoing liquidity requirements arise primarily from its need
to service debt, fund working capital, acquire or improve equipment and make
other investments. Since its inception, the Company has been active in the
acquisition of additional vessels through both the resale market and new
construction. Bank financing and internally generated funds have provided
funding for these activities. Currently, the Company has significant lending
relationships with two major European commercial banks.

At June 30, 1997, the Company had outstanding debt of $62.0 million, all of
which was borrowed under various facilities with these banks. These facilities
are secured by preferred ship mortgages on 19 of the Company's vessels and
assignments of such vessels' earnings. Interest on the borrowings accrued at
rates between LIBOR plus 1% and LIBOR plus 2 1/4% per annum. Scheduled debt
repayments are expected to total $8.5 million for the remainder of 1997. The
loan facility agreements place certain restrictions on the ability of the
Company's subsidiaries to pay dividends to the Company. Cash held by these
subsidiaries was $2.4 million as of June 30, 1997. In connection with the
pending completion of the Highland Rover's construction, the Company has
obtained a bank revolving credit facility which reduces the interest rate from
its previous level of LIBOR plus 1 1/4 to 1 3/8% to LIBOR plus 1% and provides
up to an additional L9.0 million (approximately $14.9 million) for the Highland
Rover's final payment upon delivery (expected March 1998).

Net cash provided by operating activities of continuing operations was $4.8
million for the period ended June 30, 1997, as compared to $1.9 million for the
same period in 1996. This increase resulted from the increase in earnings.

Net cash used in investing activities was $17.7 million and $13.9 million
for the periods ended June 30, 1997 and 1996, respectively. Each of these
periods reflect significant vessel acquisitions. In 1997, the Company took
delivery of the Highland Drummer and in 1996, theHighland Piper. For the first
six months of 1997, the Company also experienced a higher level of expenditures
related to the routine drydockings of nine of its vessels, as compared to five
drydockings in the comparable period of 1996.

Net cash provided by financing activities was $3.3 million and $11.1
million for the periods ended June 30, 1997 and June 30, 1996, respectively. The
decrease in cash provided from financing activities was largely due to the fact
that the final payment on the Highland Piper in March 1996 was entirely funded
with additional debt, while the final payment on the Highland Drummer in January
1997 included approximately $5.6 million of internally generated funds.

Substantially all of the Company'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. The Company
believes that the 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. Such
investments may require the expenditure of significant resources, either in
cash, notes or a combination thereof.

28
<PAGE> 29

CURRENCY FLUCTUATIONS AND INFLATION

Substantially all of the operations of the Company are overseas. As a
result, the Company is exposed to currency fluctuations and exchange rate risks.
Charters for vessels in the North Sea fleet are primarily denominated in
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/U.S. Dollar exchange rate ranged from a high of
L = $1.71 to a low of L = $1.49, with an average of L = $1.56 for the year. As
of June 30, 1997, the Sterling/U.S. Dollar exchange rate was L = $1.66.

The Company reduces its exposure to currency fluctuations by arranging for
the debt financing on, and operating expenses of, each vessel to be in the same
currency in which the vessel's revenues will be earned. The effect on cash flows
of fluctuations in the Sterling/U.S. Dollar exchange rates is largely offset by
the Sterling denominated borrowings, which accounted for $48.7 million, or 81%,
of total debt as of December 31, 1996 and represented $4.4 million, or 100%, of
the debt repayments made in 1996.

Reflected in the accompanying balance sheet for June 30, 1997 is a $1.2
million cumulative translation adjustment primarily relating to the lower
Sterling exchange rate as of June 30, 1997 in comparison to the exchange rate
when the Company 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 associated with the North Sea fleet.

Several of the Company's Southeast Asia charters are denominated in
Malaysian ringgits, as are a portion of its operating costs. Revenues in this
currency were approximately $1.6 million for 1996. Malaysian currency rates were
relatively stable for each of the years 1994-1996, with the exchange rate of
ringgits to U.S. Dollars averaging M$ = U.S.$0.40 during 1996 and the high and
low during those three years within 3% of this average. The Company does not
currently hedge this currency. In the last few weeks, this currency, like most
other Southeast Asian currencies, has experienced downward pressure, falling as
low as M$ = U.S.$0.36 through August 13, 1997. Management will continue to
assess this situation to determine appropriate measures to minimize these risks.
Where currency risks are potentially high, as in Brazil, the Company 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 the Company.

ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("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
did not have an effect on the Company's Consolidated Financial Statements.

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which is effective after December 15, 1997. SFAS No.
128 revises the methodology to be used in computing earnings per share ("EPS")
to require that the computations of primary and fully diluted EPS be replaced
with computations of "basic" and "diluted" EPS. Basic EPS is computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the year. Diluted EPS is computed in the same manner as fully
diluted EPS, except that, among other changes, the average share price for the
period is used in all cases when applying the treasury stock method to
potentially dilutive outstanding options. The statement requires restatement for
all prior period EPS data presented. EPS calculated in accordance with SFAS No.
128 would not be materially different for the periods presented.

FORWARD-LOOKING STATEMENTS

This Prospectus, particularly the sections entitled "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," contains certain forward-looking
statements and other statements that are not historical facts concerning, among
other

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<PAGE> 30

things, market conditions, the demand for marine support services and future
capital expenditures. Such statements are subject to certain risks,
uncertainties and assumptions, including, without limitation, dependence on the
oil and natural gas industry, ongoing capital expenditure requirements,
uncertainties surrounding environmental and government regulation, risks
relating to leverage, risks of foreign operations, assumptions concerning
competition and risks of currency fluctuations and other matters described in
"Risk Factors." There can be no assurance that the Company has accurately
identified and properly weighed all of the factors which affect market
conditions and demand for the Company's vessels, that the information upon which
the Company has relied is accurate or complete, that the Company's analysis of
the market and demand for its vessels is correct or that the strategy based on
such analysis will be successful. See "Risk Factors" for a more detailed summary
of factors which could affect future results.

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<PAGE> 31

BUSINESS

THE OFFSHORE MARINE SERVICES INDUSTRY
OVERVIEW

The Offshore Marine Services industry employs vessels to provide services
that support the construction, positioning and ongoing operation of offshore oil
and natural gas drilling rigs and platforms. The industry employs various types
of vessels, referred to broadly as offshore support vessels, that are used to
transport materials, supplies, equipment and personnel. Offshore Marine Services
providers are employed by oil and natural gas companies and other companies that
participate in the offshore exploration and production of oil and natural gas.
Services provided by companies in this industry are performed in numerous
locations worldwide. In excess of 100 vessels are being employed in each of the
following major markets: the Gulf of Mexico, the North Sea, offshore Southeast
Asia, offshore West Africa and the Persian Gulf. Vessel usage is also
significant in other international areas, including offshore Brazil, India and
Australia and the Mediterranean Sea.

The industry is relatively fragmented, with more than 25 major participants
and numerous small regional competitors. Historically, few of these competitors
have participated in all five of the major markets. The Company currently
operates a fleet of 30 offshore support vessels, primarily in the North Sea (16
vessels) and Southeast Asia (13 vessels). Additionally, the Company operates one
vessel offshore Brazil. The Company expects delivery of three new vessels by the
end of 1998.

The Offshore Marine Services industry is directly impacted by the level of
activity in worldwide offshore oil and natural gas exploration, development and
production, which, in turn, is impacted by changes in oil and natural gas
prices. Oil and natural gas prices are affected by a host of geopolitical and
economic forces, including the fundamental principles of supply and demand.
Declines in oil and natural 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, barriers such as mobilization
costs and vessel suitability 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 are affected differently by the above-described forces because of each
area's unique blend of political, operating and economic factors.

Contract or charter durations vary from single day to multi-year in length,
based upon many different factors that vary by market. Historically, term
charters in the Offshore Marine Services industry have generally extended from
six months to one year in length. Additionally, there have been "evergreen"
charters (also known as "life of field" or "forever" charters), and at the other
end of the spectrum, there have been "spot" charters, which can vary from single
voyage to short duration charters of less than six months. Longer duration
charters are more common where equipment is not as readily available or specific
equipment is required. In the North Sea, multi-year charters have been more
common, and the Company believes that term charters constitute the majority of
the market. Term charters in Southeast Asia are currently somewhat less common
than in the North Sea and generally are two years or shorter in length. In
addition, FPSO support charters are typically "life of field" or "full
production horizon" charters. Recently, there have been several five-year
charters, and one even longer charter has recently been executed in Norway for a
supply vessel. The Gulf of Mexico has been a uniquely competitive environment
where the general availability of vessels historically has permitted oil
companies to avoid term charters. Typically, a charter of a year's length or
less in the Gulf of Mexico has a three-day or similar cancellation clause,
indicating the spot nature of the charter.

VESSEL CLASSIFICATIONS

Offshore support vessels generally fall into seven functional
classifications derived from their primary or predominant operating
characteristics or capabilities. However, these classifications are neither
precise nor rigid, and it is not unusual for a vessel to fit in more than one of
these categories. These functional classifications are: (i) platform supply
vessels, (ii) anchor handling, towing and supply vessels,

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<PAGE> 32

(iii) construction support vessels, (iv) standby rescue vessels, (v) crewboats,
(vi) specialty vessels and (vii) utility vessels.

- PLATFORM SUPPLY VESSELS ("PSVS") serve drilling and production facilities
and support offshore construction and maintenance work. They are
differentiated from other offshore support vessels by their cargo
handling capabilities, particularly their large capacity and versatility.
Utilizing space on deck and below deck, they are used to transport
supplies such as fuel, water, drilling fluids, equipment and provisions.
PSVs range in size from 150' to 200'. Large PSVs ("LgPSVs") range up to
275' and are particularly suited for supporting large concentrations of
offshore production locations because of their large clear after decks
and below deck capacities. The Company operates 10 LgPSVs in the North
Sea (seven of which are owned by the Company) that function primarily in
this classification but also are capable of service in construction
support. In addition, the Company operates two PSVs in the North Sea and
one in Southeast Asia that operate exclusively in this function and 11
SmAHTS vessels (as defined below) in Southeast Asia that often support
production operations as PSVs.

- ANCHOR HANDLING, TOWING AND SUPPLY VESSELS ("AHTS") are used to set
anchors for drilling rigs and tow mobile drilling rigs and equipment from
one location to another. In addition, these vessels typically can be used
in limited supply roles when they are not performing anchor handling and
towing services. They are characterized by large horsepower (up to 18,000
brake horsepower ("BHP") for the most powerful North Sea Class AHTS
vessels), shorter after decks and special equipment such as towing
winches. Vessels of this type with less than 7,000 BHP are referred to as
small AHTS vessels ("SmAHTS"), while AHTS vessels in excess of 10,000 BHP
are referred to as large AHTS vessels ("LgAHTS"). The Company operates
two AHTS vessels in the North Sea and 11 in Southeast Asia. From time to
time, all of the Company's AHTS vessels function as PSVs.

- CONSTRUCTION SUPPORT VESSELS are vessels such as pipelaying barges or
specially designed vessels, such as pipe carriers, used to transport the
large cargos of material and supplies required to support the
construction and installation of offshore platforms and pipelines. As
indicated in the PSV section above, the Company operates 10 vessels
(seven of which are owned by the Company) fitting the definition of pipe
carriers (LgPSVs). The Company's North Sea fleet has the distinction of
being the only significant concentration of pipe carrier capable vessels
outside of Scandinavian control.

- STANDBY RESCUE VESSELS ("STBY") perform a safety patrol function for an
area and are required for all manned locations in the United Kingdom
sector of the North Sea. These vessels typically remain on station to
provide a safety backup to offshore rigs and production facilities and
carry special equipment to rescue personnel. They are equipped to provide
first aid and shelter and, in some cases, also function as supply
vessels. The Company does not own any vessels of this type, but presently
manages two specialty vessels which operate in this capacity.

- CREWBOATS ("CREW") transport personnel and cargo to and from production
platforms and rigs. Older crewboats (early 1980s build) are typically
100' to 120' in length and are designed for speed and to transport
personnel. Newer crewboat designs are generally larger, 130' to 165' in
length, and have greater cargo carrying capacities. They are used
primarily to transport cargo on a time-sensitive basis. The Company
operates one of these vessels in Southeast Asia.

- SPECIALTY VESSELS ("SPV") generally have special features to meet the
requirements of specific jobs. The special features include large deck
spaces, high electrical generating capacities, slow controlled speed and
varied propulsion thruster configurations, extra berthing facilities and
long range capabilities. These vessels are primarily used to support
FPSOs, diving operations, ROVs, survey operations and seismic data
gathering, as well as oil recovery, oil spill response and well
stimulation. One of the Company's owned vessels, the Highland Fortress,
frequently provides specialty functions, and two managed vessels are
chartered for specialty functions (the Clwyd Supporter and the Sefton
Supporter). In addition, the ability to operate in specialty modes is one
of the key marketing concepts for the Highland Rover, which is currently
under construction.

- UTILITY VESSELS are typically 90' to 150' in length and are used to
provide limited crew transportation, some transportation of oilfield
support equipment and, in some locations, standby functions. The Company
does not operate any vessels in this category.

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<PAGE> 33

THE NORTH SEA MARKET

The Company defines the North Sea market as offshore Norway, Denmark, the
Netherlands, Germany, Great Britain and Ireland, the Norwegian Sea and the area
West of Shetlands. Historically, this has been the most demanding of all
exploration frontiers due to harsh weather, erratic sea conditions, significant
water depth and long sailing distances. Exploration and production operators in
the North Sea market are typically large and well capitalized entities (such as
major oil companies and state owned oil companies), in large part because of the
significant financial commitment required in this market. Projects in the region
tend to be fewer in number, but larger in scope, with longer planning horizons,
than projects in regions with less demanding environments, such as the Gulf of
Mexico. Consequently, vessel demand in the North Sea is generally more steady
and less susceptible to abrupt swings than vessel demand in other regions. The
Company's fleet has operated and grown in the North Sea market since the
Company's inception.

The market can be broadly divided into three areas: exploration, production
platform support and field development or construction. Support of the volatile
exploration segment of the market represents the primary demand for AHTS
vessels. While supply vessels also support the exploration segment, they
additionally support the production and field construction segments, which
generally are not affected by frequent short-term swings in demand. However,
since AHTS vessels are capable of performing in a supply role during periods of
weakness in the exploration segment, AHTS vessels can put downward pressure on
PSV demand.

The Company's North Sea fleet is oriented toward supply vessels which work
in the more stable segments of production platform support and field development
or construction and includes nine owned vessels (all PSVs) and seven managed
vessels (three PSVs, two AHTS vessels and two SpVs). These vessels are supported
by onshore bases in Aberdeen, Scotland and Liverpool, England. As of and for the
year ended December 31, 1996, the North Sea fleet accounted for 80% of the
Company's vessel assets measured by net book value, and approximately 78% of the
Company's revenues and approximately 74% of the Company's EBITDA.

The following table summarizes the PSVs working or available for work in
the North Sea market, according to Seascope Offshore, a vessel broker in the
North Sea market.

NORTH SEA PLATFORM SUPPLY VESSELS(A)
AS OF MAY 1997

<TABLE>
<CAPTION>
OWNER LGPSVS SMPSVS TOTAL PSVS
----- --------- --------- -----------
<S> <C> <C> <C>
Farstad Shipping..................................... 10 1 11
Saevik............................................... 7 3 10
Stirling............................................. 10 -- 10
Tidewater (formerly O. I. L. Limited)................ 6 4 10
GulfMark Offshore, Inc............................... 7 2 9
Skandi Brovig/DOF.................................... 7 -- 7
Maersk............................................... 5 -- 5
TOISA................................................ -- 5 5
Seacor/Smit.......................................... 2 2 4
Others (three or fewer vessels each)................. 24 3 27
--------- --------- -----------
Total...................................... 78 20 98
========= ========= ===========
</TABLE>

- ---------------

(a) Does not include managed vessels. The Company manages three PSVs.

Vessel demand in the North Sea began to decline late in 1991 and continued
to remain low as oil companies reduced exploration activity in response to lower
world oil prices and changes in certain United Kingdom tax incentives. In
addition, construction seasons during this period were unusually short, which
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

33
<PAGE> 34

surrounding the resumption of Iraqi oil exports. Although oil prices recovered
during 1995, 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 area to the west of the Shetland
Islands.

Over the past three years, the North Sea market has experienced
consistently high vessel utilization rates and increasing day rates. A number of
long-term drilling contracts were signed during 1995, increasing the demand for
vessels in 1996. Drilling activity continued to increase during 1996 and into
1997, as many semisubmersible drilling units were relocated to the North Sea. In
addition, the Company believes that long-term construction projects already
underway indicate the North Sea market for construction support vessels will be
strong for the remainder of 1997 and further indicates that demand in the region
should 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
construction. Limited new construction occurred in 1990 and 1991, and only a few
vessels were delivered between 1990 and 1995. In 1995 and 1996, the first
significant construction activity since the early 1980s occurred, with a number
of orders placed for delivery in 1996 and 1997. A total of 19 additional orders
have been placed through June 1997, with deliveries anticipated between 1997 and
1999. All of the new deliveries to date have been chartered, and the Company
believes that the market is capable of absorbing the number of vessels currently
on order.

THE SOUTHEAST ASIA MARKET

The Company defines the Southeast Asia market as offshore Asia bounded
roughly on the west by the Indian subcontinent and on the north by China. This
market includes offshore Brunei, Cambodia, Indonesia, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Vietnam. The design requirements for
vessels in this market are generally similar to the requirements in the Gulf of
Mexico. However, advanced exploration technology and rapid growth in energy
demand among many Pacific Rim countries have led to more remote drilling
locations, which has increased both the overall demand in this market and the
technical requirements for vessels. (The International Energy Agency estimates
that oil demand for non-Organization for Economic Cooperation and Development
Asian countries will grow at approximately 6% per annum during 1995-2000.) In
addition, the Company believes that several major exploration and production
projects, which are currently in the planning stages, will significantly
increase the demand for Offshore Marine Services in the Southeast Asia market.

The current shortage of vessels in the Gulf of Mexico has reduced the
universe of economically viable vessels available to be utilized in Southeast
Asia. Past practice has been for U.S. operators to transfer vessels out of the
Gulf of Mexico to work out their remaining useful lives in the Southeast Asia
market. In recent years, however, there has been pressure (most notably from
Malaysia) to upgrade offshore support vessel capabilities by establishing limits
on the age of vessels working in certain countries' territorial waters and
encouraging construction of new vessels designed particularly to operate in this
region.

In the Gulf of Mexico, there is currently little vessel attrition because
day rates are at levels that make substantial rehabilitation economic even with
relatively moderate extensions of vessel life. At the same time, there have been
announcements of meaningful new construction activity for Gulf of Mexico
vessels. An increase in the supply of Gulf of Mexico vessels may increase the
supply of vessels in Southeast Asia, although not all vessels currently
operating in the Gulf of Mexico would be able to operate in the Southeast Asia
market. Furthermore, transferring a vessel from the Gulf of Mexico market to
Southeast Asia would involve significant cash and opportunity costs.

The Southeast Asia market differs country by country, but the competitive
environment is broadly 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 generally necessary to maintain a viable
marketing presence. The Company's management has been involved in the region
since the mid-1970s, and the Company currently maintains long-standing business
relationships with a number of local companies.

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<PAGE> 35

Vessels in this market are typically smaller than in certain other areas,
such as the North Sea. Yet, the varying weather conditions, annual monsoons and
long distances between supply centers in Southeast Asia have allowed for a
variety of vessel designs to compete in this market, each suited for a
particular set of operating parameters.

Indonesia is the only member of OPEC in the region. Oil and natural gas
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 with local authorities. 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 their exploration budgets, resulting in
lower-than-expected activity in 1995 and only marginal improvement in 1996 and
into early 1997.

The rapid economic growth of many countries in the Pacific Rim has resulted
in increased demand for energy and a related increase in oil and natural 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 Southeast Asia. Virtually every country in
the region has known or potential reserves for oil and natural gas. However,
exploration activity suffered during 1993 and 1994, when oil prices declined,
and has been slow to recover. Exploration budgets for the region appear to be
higher for 1997, but there has been a reduction in available drilling rigs
because rigs have been redeployed to meet demand that has accelerated faster in
other areas of the world.

THE BRAZILIAN MARKET

In May 1995, the Seapower returned to Brazil to begin working under a
two-year contract (which has recently been extended through May 1999) with
Petrobras, the Brazilian national oil company. Although, in the past, Brazil has
experienced periods of high inflation and changing political climates, the
Company has experienced no problems with its operations in this market. As the
Brazilian government continues to privatize the oil and natural gas industry,
the Company expects that additional charter opportunities may become available.

Similar to the North Sea, the Offshore Marine Services market in Brazil
requires a large number of highly sophisticated vessels due to the harsh
operating environment. The Company's ability to secure (and subsequently renew)
a multi-year commitment payable substantially in U.S. Dollars is an example of
the terms and conditions offered to attract such high quality vessels.

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<PAGE> 36

THE COMPANY
THE COMPANY'S FLEET

The fleet includes 30 vessels, 21 of which are owned (19 are mortgaged
under various debt agreements), two are bareboat chartered and seven are under
management. The following table summarizes information as of June 30, 1997 with
respect to each of these vessels, as well as three additional vessels currently
under construction: the Leopard Bay, an AHTS vessel being built for Sanko
Shipping to be bareboat chartered by the Company, the Gallant Project and the
Highland Rover. Each of these vessels is scheduled to be delivered in 1998.

<TABLE>
<CAPTION>
YEAR LENGTH
LOCATION VESSEL TYPE(A) FLAG BUILT (FEET) BHP(B) DWT(C)
-------- ------ ------- ------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
CHARTERED
North Sea Leopard Bay(d) AHTS TBD 1998(d) 241 15,000 2,900
OWNED
TBD Gallant Project(e) TBD TBD 1998(e) TBD TBD TBD
North Sea Highland Rover(f) LgPSV UK 1998(f) 236 5,450 3,700
North Sea Highland Drummer LgPSV UK 1997 221 5,450 3,115
North Sea Highland Piper LgPSV UK 1996 221 5,450 3,115
North Sea Highland Pride LgPSV UK 1992 265 6,600 4,000
North Sea Highland Star LgPSV UK 1991 265 6,600 4,000
North Sea Highland Fortress LgPSV UK 1982 255 6,120 3,200
North Sea Highland Warrior LgPSV Bermuda 1981 265 5,300 3,890
North Sea Highland Champion LgPSV UK 1979 265 4,800 3,320
North Sea Highland Legend PSV UK 1986 194 3,590 1,442
North Sea Highland Sprite PSV UK 1986 194 3,590 1,442
MANAGED
North Sea Sea Truck LgPSV UK 1979 266 4,600 2,477
North Sea North Prince LgPSV UK 1978 259 6,000 2,717
North Sea Clwyd Supporter SpV UK 1984 266 10,700 1,400
North Sea Sefton Supporter SpV UK 1971 250 1,620 1,233
North Sea Portosalvo AHTS UK 1982 227 12,750 2,085
North Sea Safe Truck LgPSV UK 1996 221 5,450 2,800
North Sea Gargano AHTS UK 1975 211 8,480 1,374
OWNED
Southeast Asia Sem Courageous SmAHTS Malaysia 1981 191 4,000 1,000
Southeast Asia Sem Valiant SmAHTS Malaysia 1981 191 4,000 1,000
Southeast Asia Seawhip SmAHTS Panama 1983 192 3,900 1,200
Southeast Asia Seawitch SmAHTS Panama 1983 192 3,900 1,200
Southeast Asia Sea Explorer SmAHTS Panama 1981 192 5,750 1,420
Southeast Asia Sea Diligent SmAHTS Panama 1981 192 4,610 1,219
Southeast Asia Sea Endeavor SmAHTS Panama 1981 191 4,000 1,000
Southeast Asia Sea Conquest SmAHTS Panama 1977 185 3,850 1,142
Southeast Asia Sea Searcher SmAHTS Panama 1976 185 3,850 1,215
Southeast Asia Sea Eagle SmAHTS Panama 1976 185 3,850 1,215
Southeast Asia Searunner Crew US 1982 120 2,720 126
CHARTERED
Southeast Asia SeaMark South Carolina(g) SmAHTS Panama 1983 180 3,000 1,000
Southeast Asia SeaMark Mississippi(g) PSV Panama 1982 180 2,250 1,000
OWNED
Brazil Seapower SmAHTS Panama 1974 222 7,040 1,205
</TABLE>

- ---------------

(a) Legend:

LgPSV -- Large platform supply (UT 705s and UT 755s)
PSV -- Platform supply vessel
AHTS -- Anchor handling, towing and supply vessel
SmAHTS -- Small anchor handling, towing and supply vessel
Crew -- Crewboat
SpV -- Specialty vessel, including towing and oil spill response
TBD -- To be determined

(b) Brake horsepower.

(d) This North Sea class AHTS vessel is being built for Sanko Shipping and will
be bareboat chartered to the Company for up to five years. The Company
anticipates this vessel will be delivered in July 1998.

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<PAGE> 37

(e) The Company recently acquired this unfinished supply vessel hull, for which
design and shipyard pricing have already commenced. The Company anticipates
this vessel will be delivered in 1998.

(f) This modified and extended UT 755 design PSV is under construction and is
expected to be delivered in March 1998.

(g) The SeaMark South Carolina and SeaMark Mississippi are bareboat chartered
(with a purchase option) through August 1998 to SeaMark Ltd., a Panamanian
corporation owned 51% by the Company and 49% by the vessels' owners.

The vessels in the fleet are capable of transporting supplies and personnel
to offshore drilling platforms and rigs, production platforms and other
installations. Twenty of the 21 owned vessels are used primarily for carriage of
cargo. Seven of those 20 vessels are large PSVs, capable of supporting offshore
construction in the North Sea or large capacity platform supply duties. Ten
owned vessels are capable of performing light anchor handling and towing
services for moving rigs and platforms between locations. The crewboat is
smaller in length and is used primarily to transport crews to and from offshore
facilities.

The fleet summarized above includes GulfMark's most modern, technologically
sophisticated vessel to date, the Highland Rover, a modified and extended (236')
UT 755 design PSV currently under construction and scheduled to be delivered in
March 1998. In addition to the standard capabilities of the technologically
advanced UT 755 design, the Highland Rover will be equipped with a computer
controlled maneuvering system (also known as dynamic positioning) and will be
capable of launching ROVs through a specialized "moon pool."

The table also reflects the Company's recent purchase of an unfinished
supply vessel hull, the Gallant Project, for which design and shipyard pricing
have already commenced. The Company anticipates that delivery of this vessel
will be in 1998. The hull could be completed as a PSV or an AHTS vessel,
although the Company currently believes that the most attractive potential
application may be as a multi-purpose support vessel for the FPSO market. For a
variety of economic reasons, exploration and production companies are
increasingly employing FPSO structures in lieu of conventional fixed platform
installations. The FPSO market typically employs more technologically advanced
vessels capable of performing multiple functions, potentially under longer term
(even "life of field") charters. The Company believes that the low cost
(estimated at $11-14 million) and early delivery date of the Gallant Project
should provide a significant competitive advantage in serving the growing FPSO
market.

CUSTOMERS, CHARTER TERMS AND COMPETITION

The Company's principal customers are major integrated oil companies and
large independent oil and natural gas exploration and production companies
working in international markets, as well as foreign government owned or
controlled organizations and companies that provide logistic, construction and
other services to such oil companies and foreign government organizations.
During 1996, as a result of multiple charters in the ordinary course of
business, two customers each accounted for 10% or more of total consolidated
revenues: ASCO, at 15%, and Shell, at 14%. For the six months ended June 30,
1997, approximately 18%, 16%, 12% and 10% of the Company's total revenues were
received from Shell, ASCO, Marathon and European Marine Contractors,
respectively. ASCO is a logistics coordinator primarily serving major
international oil companies (such as British Petroleum, Conoco and Amoco).
European Marine Contractors is a construction company jointly owned by Brown &
Root and Saipem, a subsidiary of ENI, the Italian national oil company. The
charters with these customers are industry standard time charters. The charters
involved various of the Company'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 the Company's financial
condition and results of operations until a replacement is obtained.

As of June 30, 1997, 12 of the Company's owned and bareboat chartered
vessels are on term charters with initial charter periods of one year or longer.
Ten are on charters of less than one year but over 30 days and one of the
vessels is on a charter of less than 30 days.

Substantially all of the Company's charters are denominated in Sterling and
U.S. Dollars. The Company reduces currency risk by matching each vessel's
operating expenses to the currency in which it generates

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<PAGE> 38

revenue. See "Risk Factors -- Currency Fluctuations" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Currency Fluctuations and Inflation."

Offshore Marine Services 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 local companies. The Company has
attempted to mitigate some of the impact of such preferences through
affiliations and joint ventures with local companies.

The Company competes with approximately 20 similar companies in the North
Sea market and numerous small and large competitors in the Southeast Asia
market. Some of these competitors have significantly greater financial resources
than the Company.

ENVIRONMENTAL AND GOVERNMENT REGULATION

All of the Company's vessels are subject to various international
conventions, including certain safety, environmental and construction standards.
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. These
regulations govern oil spills and other matters of environmental protection,
worker health and safety and the manning, construction and operation of vessels.
The Company believes that it presently is in material compliance with the
environmental laws and regulations to which the Company's operations are
subject. 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 in Panama, the United Kingdom
or Malaysia. The Company is not a party to any pending environmental litigation
or other proceeding, and is unaware of any threatened environmental litigation
or proceeding which, if adversely determined, would have a material adverse
effect on the financial condition or results of operations of the Company.
However, the risks of incurring substantial compliance costs and liabilities and
penalties for noncompliance 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 the Company in the future. See "Risk
Factors -- Environmental and Government Regulation."

OPERATIONAL RISKS AND INSURANCE

The operation of offshore support vessels is subject to various risks, such
as catastrophic marine disasters, adverse weather conditions, mechanical
failures, collisions, oil and hazardous substance spills and navigation errors,
all of which represent a threat to the safety of personnel and to the Company's
vessels, cargo, equipment and other property, as well as the environment. All of
the Company's 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 instability, possible vessel seizure, nationalization of assets,
currency restrictions, exchange rate fluctuations, import/export quotas and
other forms of public and governmental regulation, all of which are beyond the
control of the Company. The occurrence of any of these events could result in
loss of revenue, casualty loss, increased costs or significant liability to
third parties.

The Company maintains insurance coverage against the casualty and liability
risks listed above which 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.
The Company has not in the past experienced a loss in excess of policy limits.
There can be no assurance, however, that such insurance coverage will be
adequate to cover losses that the Company may incur or that adequate insurance
rates that the Company considers commercially reasonable will continue to be
available. See "Risk Factors -- Operational Risks and Insurance" and
" -- Reliance on Foreign Operations."

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 November to February. Vessels
operating in Southeast Asia are generally at their lowest utilization rates
during the monsoon season, which moves across the Asian continent between
September and early March. The actual monsoon season for a specific Southeast
Asia location is about two months. In addition, operations in any

38
<PAGE> 39

market may be affected by unusually long or short construction seasons due to,
among other things, abnormal weather conditions.

EMPLOYEES

At December 31, 1996, the Company had 539 employees located in the United
States, the United Kingdom, Southeast Asia and Brazil. 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 Company has no other collective bargaining
agreements. Relations with the employees are considered satisfactory. To date,
the operations of neither the Company nor its Predecessor have been interrupted
by strikes or work stoppages.

PROPERTIES

The principal executive offices for the Company are located in Houston,
Texas, while operations are headquartered in Lafayette, Louisiana. For local
support, the Company has offices and warehouse facilities in Singapore and
Aberdeen, Scotland. All facilities except the one in Aberdeen, Scotland are
under lease. The Company'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 the Company 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 the Company. As of
the date hereof, no claims have been made against the Company pursuant to the
indemnities described below under "-- Distribution Agreement Obligations and
Indemnities." The Company cannot predict whether any such claims may be made in
the future.

DISTRIBUTION AGREEMENT OBLIGATIONS AND INDEMNITIES

Indemnification Obligations to EVI. The Company has agreed under the
Distribution Agreement to indemnify, defend and hold the Predecessor, 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 the
Company contained in the Distribution Agreement or any other agreement
contemplated thereby; (ii) the acts or omissions of the Predecessor or any of
its current or past subsidiaries or affiliated companies ("Predecessor
Companies"), including Ercon, on or before the effective time of the
Distribution; (iii) the acts or omissions of any Predecessor Company (other than
Ercon), the Company or any of the Company's affiliates or the conduct of any
business by them on or after the effective time of the Distribution; (iv) the
Assumed Liabilities (as defined below) under the Distribution Agreement; (v) the
assets being contributed to the Company, regardless of the Predecessor's or any
Predecessor 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 the Predecessor; (viii) any taxes as a result of
the Contribution, the Distribution 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 the Predecessor 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 the Predecessor's or any
Predecessor Company's affiliates, or the employees of any of the foregoing, or
claims by insurance carriers of the Predecessor or any Predecessor Company for
indemnity arising from or out of claims by or against the Predecessor or any
Predecessor Company for acts or omissions of the Predecessor or any Predecessor
Company, or related to any current or past business of the Predecessor or any
Predecessor

39
<PAGE> 40

Company or any product or service provided by the Predecessor or any Predecessor
Company in whole or part prior to the effective time of the Distribution; (x)
any liability under the Consolidated Omnibus Budget Reconciliation Act of 1986
with respect to any employees of the Predecessor or any Predecessor Company who
become employees of the Company after the Distribution; (xi) any settlements or
judgments in any litigation commenced by one or more insurance carriers against
the Predecessor or EVI on account of claims by the Company or any Predecessor
Company or employees of the Company or any Predecessor Company; (xii) any and
all liabilities incurred by the Predecessor 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 defined below) generated by the Predecessor or any
Predecessor Company on or prior to the effective time of the Distribution or any
Predecessor Company (other than Ercon) at any time; (xv) any and all
Environmental Conditions (as defined below) on or prior to the effective time of
the Distribution, known or unknown, existing on, at or underlying any of the
properties owned, leased or operated by the Predecessor or Ercon on or after the
effective time of the Distribution; (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 the Predecessor or any Predecessor Company
other than the properties owned, leased or operated by the Predecessor or Ercon
after the effective time of the Distribution; (xvii) any acts or omissions on or
prior to the effective time of the Distribution of the Predecessor or any
Predecessor Company relating to the ownership or operation of the business of
the Predecessor or any Predecessor Company or the properties currently or
previously owned or operated by the Predecessor or any Predecessor Company;
(xviii) any liability relating to any claim or demand by any stockholder of the
Predecessor or EVI with respect to the Contribution, the Distribution, the
Merger or the transactions relating thereto; and (xix) any liability relating to
the Predecessor's 401(k) Plan and the other employee benefit or welfare plans of
the Predecessor or any Predecessor Company arising out of circumstances
occurring on or prior to the effective time.

Covenants of the Company Relating to the EVI Indemnification. The Company
agreed in the Distribution Agreement that it will not, and will cause its
subsidiaries not to, 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 the Company'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 the Company under the Distribution
Agreement, (ii) executes and delivers to the Predecessor and EVI an agreement
agreeing to be bound by each and every provision of the Distribution Agreement
as if the acquiring person were the Company 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 the Company (on a consolidated basis).

Certain Definitions Under the Distribution Agreement. 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 Predecessor Retained Liabilities (as defined below)
to which the Predecessor or any of the assets being contributed to the
Predecessor may now or at any time in the future become subject (whether
directly or indirectly, including by reason of the Predecessor or any
Predecessor 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 Predecessor Company, (ii)
any taxes to which the Predecessor or any Predecessor Company may be obligated
for periods ending on or before the effective time of the Distribution, (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 the
Predecessor or Ercon that existed on or prior to the effective time of the
Distribution, (iv) any product or service provided by the Predecessor or any
Predecessor Company prior to the effective time of the Distribution, (v) the
Contribution, the Distribution, the Merger or any of the other transactions
contemplated by the Distribution Agreement, (vi) previously conducted operations
of the Predecessor or any Predecessor Company or (vii) the assets contributed to
the Company.

40
<PAGE> 41

"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.

"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.

The "Predecessor Retained Liabilities" means, and is limited solely to, (i)
accounts payable relating to the business of Ercon that are reflected on the
balance sheet of the Predecessor at the effective time of the Distribution, (ii)
accounts payable reflected on the balance sheet of the Predecessor at the
effective time of the Distribution and agreed to by EVI and (iii) the
obligations of the Predecessor and Ercon that arise after the effective time of
the Distribution (other than obligations relating to matters existing or
occurring on or prior to the effective time of the Distribution and
indemnification, warranty and product liability, wrongful death or property
claims associated with actions or omissions prior to the effective time of the
Distribution or any business conducted prior to the effective time of the
Distribution), including those obligations set forth under the express terms of
the contracts of the Predecessor 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 (as
defined above).

41
<PAGE> 42

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
Company's executive officers and directors. Unless otherwise indicated, (i) the
business address for each person listed below is GulfMark Offshore, Inc., 5 Post
Oak Park, Suite 1170, Houston, Texas 77027-3414, and (ii) each individual listed
below is a citizen of the United States. All of the directors of the Company are
elected annually.

<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
---- --- ----------------
<S> <C> <C>
David J. Butters.................. 56 Chairman of the Board
Bruce A. Streeter................. 48 Director, President and Chief Operating Officer
Norman G. Cohen................... 75 Director
Marshall A. Crowe................. 76 Director
Louis S. Gimbel, 3rd.............. 68 Director
Robert B. Millard................. 47 Director
Frank R. Pierce................... 47 Executive Vice President, Secretary and Treasurer
John E. Leech..................... 44 Vice President
Kevin D. Mitchell................. 29 Controller and Assistant Secretary
</TABLE>

David J. Butters is Chairman of the Board and a member of the Executive and
Audit Committees. He is a Managing Director of Lehman Brothers, an investment
banking firm and division of Lehman Brothers Inc., which is a subsidiary of
Lehman Brothers Holdings Inc., 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. Mr. Butters has served as a director of the Company
since its formation in 1996 and served as a director of the Predecessor from
1989 until the Merger.

Bruce A. Streeter was elected President of the Predecessor's Marine
Division in November 1990 and continued in that capacity up to the effective
time of the Merger. Prior to November 1990, he was with Offshore Logistics, Inc.
for a period of 12 years, serving in a number of capacities including General
Manager, Marine Division. Mr. Streeter has served as President and Chief
Operating Officer of the Company since January 1997. Mr. Streeter was elected a
director of the Company in April 1997.

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. Mr. Cohen has served as a director of the Company since its
formation in 1996 and served as a director of the Predecessor from 1972 until
the Merger.

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 has served as a director of the Company since its
formation in 1996 and served as a director of the Predecessor from 1978 until
the Merger. Mr. Crowe is a Canadian citizen.

Louis S. Gimbel, 3rd is a member of the Executive and Compensation
Committees. He is President, Chief Executive Officer and a Director of S. S.
Steiner, Inc., 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.
Mr. Gimbel has served as a director of the Company since its formation in 1996
and served as a director of the Predecessor from 1970 until the Merger.

42
<PAGE> 43

Robert B. Millard is a member of the Executive Committee. He is a Managing
Director of Lehman Brothers Inc., where he has been employed for more than the
past five years. Mr. Millard also serves as a director of EVI. Mr. Millard has
served as a director of the Company since its formation in 1996 and served as a
director of the Predecessor from 1989 until the Merger.

Frank R. Pierce was elected Executive Vice President, Secretary and
Treasurer of the Predecessor in December 1990, serving in that capacity up to
the effective time of the Merger. Mr. Pierce had been employed by the
Predecessor since July 1987, serving as its Vice President, Finance until
December 1990. Mr. Pierce was elected Executive Vice President, Secretary and
Treasurer of the Company in January 1997.

John E. Leech was elected Vice President of the Company in January 1997. He
served as Vice President of the Predecessor's Marine Division from its formation
in November 1990 up to the effective time of the Merger. Prior to November 1990,
Mr. Leech was with Offshore Logistics, Inc. for a period of 15 years, serving in
a number of capacities, including Manager, Domestic Operations and International
Operations Manager.

Kevin D. Mitchell was elected Controller and Assistant Secretary of the
Predecessor in September 1996, serving in that capacity up to the effective time
of the Merger. Prior to that, he served as controller for one year with E-Stamp
Corporation, a start-up software company, having previously completed five years
with Arthur Andersen LLP. Mr. Mitchell was elected Controller and Assistant
Secretary of the Company in January 1997.

COMMITTEES AND MEETINGS OF DIRECTORS

The standing committees of the Board of Directors of the Company are the
Executive Committee, the Audit Committee and the 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 Predecessor's
Board of Directors met five times, the Audit Committee met three times and the
Compensation Committee met twice. During 1996, each director attended 100% of
the combined meetings of the Predecessor's Board of Directors and the 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 Company's
Audit Committee. The Audit Committee makes recommendations to the Board
concerning the selection and discharge of the Company's independent auditors,
reviews professional services performed by the auditors, the results of their
audit engagement and the fees charged for services performed by the auditors and
evaluates the Company's system of internal accounting controls.

Messrs. Cohen and Gimbel are the current members of the Company's
Compensation Committee, the principal functions of which are to recommend to the
Board of Directors the salaries to be paid to the officers of the Company and to
administer the compensation and benefit plans of the Company.

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.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee of the Company is or was an officer
or employee of the Company or had any relationship requiring disclosure under
applicable rules, except that Mr. Butters has a retainer arrangement with the
Company pursuant to which Mr. Butters receives $6,250 per month for serving as
Chairman of the Board of the Company. In 1996, Mr. Butters received $90,500 in
director fees and retainers from the Predecessor.

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<PAGE> 44

DIRECTOR AND EXECUTIVE OFFICER COMPENSATION

Retainer Arrangements. Each non-employee director of the Company is paid
$1,000 for each meeting of the Board of Directors and $500 for each committee
meeting he attends. In addition, a $2,000 retainer is paid to each non-employee
director of the Company for each quarter of the year in which such director
serves as a director. The Company has a retainer arrangement with Mr. Butters
pursuant to which he receives $6,250 per month for serving as Chairman of the
Board. Total compensation paid by the Predecessor 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, the Company furnishes Messrs. Cohen, Crowe and
Gimbel with a $250,000 life insurance policy. Premiums paid by the Predecessor
during 1996 for such policies were $12,757 for Mr. Cohen, $15,428 for Mr. Crowe
and $6,805 for Mr. Gimbel.

Director Stock Option Plans. On December 8, 1993, each of the Company's
current directors received options to purchase shares of the Predecessor's
common stock under the Amended and Restated 1993 Non-Employee Director Stock
Option Plan (the "Director Plan"). An additional grant of stock options was made
to each director serving on the Predecessor's Board of Directors on March 18,
1996.

The Company assumed the Director Plan on the date of the Distribution.
Pursuant to the equitable adjustment provisions of the Director Plan, each
outstanding stock option previously granted pursuant to the Director Plan was
converted to an option to acquire shares of the Company's Common Stock and was
adjusted 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 Common Stock covered by the automatic grant provisions of the Director
Plan was doubled to reflect the Distribution. Accordingly, each non-employee
director will receive options to purchase 10,000 shares of Common Stock at an
exercise price equal to the fair market value of such shares of Common Stock on
the date of grant, upon his re-election as a director at the Company's annual
stockholders' meetings in 1999, 2002 and 2005. As of June 30, 1997, there were
221,121 option shares outstanding under the Director Plan and 300,000 shares
available for grant upon the election of a new director or under the automatic
grant provisions discussed above.

In 1988, the Predecessor adopted the 1988 Non-Employee Director Option
Policy (the "Director Policy"), under which each non-employee director of the
Predecessor was granted options to purchase shares of Common Stock of the
Predecessor. Each of the Company's current directors, except Mr. Streeter, has
received options under this arrangement. As of the effective time of the
Distribution, the Company assumed and adjusted the outstanding stock options
issued pursuant to this policy to preserve the aggregate intrinsic value of each
option and the ratio of exercise price to market value per share. As of June 30,
1997, there were 49,136 option shares outstanding under the Director Policy.
There are no further option shares available for grant under this policy.

Employee Plan. The 1987 Stock Option Plan (the "Employee Plan") was adopted
by the Board of Directors of the Predecessor on May 20, 1987, and approved by
the Predecessor's stockholders on May 18, 1988. A total of 200,000 shares of the
Predecessor's common stock was initially reserved for issuance thereunder. The
Employee Plan expired for future grant purposes on May 20, 1997. On June 30,
1997, there were 227,389 option shares outstanding under the Employee Plan.

As of the effective time of the Distribution, the Company assumed 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 was converted into or exchanged for an option to acquire shares of
the Company's Common Stock. The number of shares of Common Stock subject to, and
the exercise price of, each such option assumed were adjusted to preserve the
aggregate intrinsic value of each option and the ratio of the exercise price to
market value per share.

The Employee Plan is administered by the Compensation Committee of the
Board of Directors, currently consisting of Messrs. Cohen and Gimbel. The
Employee Plan contains appropriate provisions to assure that the Compensation
Committee satisfies the non-employee director administration provisions of
Section 16(b) of the Exchange Act and the rules promulgated thereunder. The
Compensation 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
Compensation Committee is authorized to interpret the Employee Plan and may
adopt such rules and

44
<PAGE> 45

regulations as it may deem advisable to carry out the Employee Plan. All
decisions made by the Compensation Committee in selecting employees for option
grants and the number of shares issued under each option are final.

The aggregate compensation paid by the Predecessor for services rendered
during the last three years in all capacities to each of 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
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(A) OPTIONS(B) COMPENSATION
------------------ ---- -------- ------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Bruce A. Streeter............. 1996 $175,000 $75,000 $ -- 39,310 $2,848(c)
President 1995 $140,000 $70,000 $ -- -- $2,765
1994 $135,000 $50,000 $ -- -- $2,708
Frank R. Pierce............... 1996 $135,000 $25,000 $ -- 9,828 $1,755(c)
Executive Vice President, 1995 $130,000 $15,000 $ -- -- $1,706
Secretary and Treasurer 1994 $125,000 $ 8,000 $ -- -- $1,663
John E. Leech................. 1996 $120,000 $50,000 $ -- 19,656 $2,623(c)
Vice President 1995 $110,000 $45,000 $ -- -- $2,550
1994 $105,000 $35,000 $ -- -- $2,525
</TABLE>

- ---------------

(a) 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.

(b) As adjusted to preserve the aggregate intrinsic value of the options and the
ratio of exercise price to market value per share on the date of the
Distribution.

(c) Includes matching contributions made by the Predecessor 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.

The Company expects to enter into employment agreements with Messrs.
Streeter and Leech, effective as of July 1, 1997, pursuant to which Mr. Streeter
will be entitled to be employed as President of the Company and to receive an
annual salary of not less than $180,000 for each year during the three-year term
of the agreement and Mr. Leech will be entitled to be employed as a Vice
President of the Company and to receive an annual salary of not less than
$125,000 for each year during the two-year term of the agreement. In addition to
annual salary, Messrs. Streeter and Leech may receive a bonus at the sole
discretion of the Company. Prior to a change of control of the Company or more
than twelve months after a change of control of the Company, any termination of
Messrs. Streeter's or Leech's employment without cause, or his resignation in
certain circumstances, would entitle him to the payment of his annual salary for
the time remaining under the term of his employment agreement and the
proportionate share of his annualized bonus for the previous fiscal year for the
time remaining under the term of his employment agreement, together with certain
other benefits and any unpaid salary, bonus amount, deferred compensation and
vacation pay accrued to the date of termination. Upon a change of control of the
Company, Mr. Streeter would be entitled to the payment of two times his annual
salary and two times his annualized bonus for the previous fiscal year. Within
twelve months after a change of control of the Company, any termination of Mr.
Streeter's employment without cause, or his resignation in certain
circumstances, would entitle Mr. Streeter to the payment of two times his annual
salary and two times his annualized bonus for the previous fiscal year, together
with certain other benefits and any unpaid salary, bonus amount, deferred
compensation and vacation pay accrued to the date of termination, less any
amount paid to Mr. Streeter under the agreement upon the change of control.
Within twelve months after a change of control of the Company, any termination
of Mr. Leech's employment without cause, or his resignation in certain
circumstances, would entitle Mr. Leech to the payment of his annual salary and
his

45
<PAGE> 46

annualized bonus for the previous fiscal year, together with certain other
benefits and any unpaid salary, bonus amount, deferred compensation and vacation
pay accrued to the date of termination.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ------------------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF $ OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS/SARS(A) EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME(B) GRANTED(#)(C) FISCAL YEAR ($/SH)(C) DATE 5%($) 10%($)
------- --------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bruce A. Streeter.......... 39,310 47.1% $5.3675 03-18-06 $132,697 $336,280
Frank R. Pierce............ 9,828 11.8% $5.3675 03-18-06 $ 33,174 $ 84,070
John E. Leech.............. 9,828 11.8% $5.3675 03-18-06 $ 33,174 $ 84,070
John E. Leech.............. 9,828 11.8% $7.9368 09-05-06 $ 49,054 $124,312
</TABLE>

- ---------------

(a) One-third of the options granted became exercisable at each of one year, two
years and three years, respectively, from the date of grant.

(b) On May 1, 1997, options to purchase 30,000 shares, 2,000 shares and 12,000
shares were granted to Messrs. Streeter, Pierce and Leech, respectively,
with an exercise price of $13.75 per share. Those options are not reflected
in the table.

(c) As adjusted to preserve aggregate intrinsic value of the options and the
ratio of exercise price to market value per share on the date of the
Distribution.

The following table presents the total number of options to purchase Common
Stock held by the named executive officers of the Company as of December 31,
1996:

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR END FISCAL YEAR END
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(A) UNEXERCISABLE(B) UNEXERCISABLE(C)
---- ----------- ----------- ---------------- --------------------
<S> <C> <C> <C> <C>
Bruce A. Streeter................... -- $ -- 24,569/39,310 $215,000/$253,000
Frank R. Pierce..................... 1,800(b) $46,350 44,716/ 9,828 $437,200/$ 63,250
John E. Leech....................... -- $ -- 24,569/19,656 $215,000/$101,250
</TABLE>

- ---------------

(a) Value based on difference in market value on date of exercise and exercise
price.

(b) As adjusted to preserve aggregate intrinsic value of the options and the
ratio of exercise price to market value per share on the date of the
Distribution.

(c) Value based on the difference between the market value of the common stock
of the Predecessor on December 31, 1996 and the 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.

46
<PAGE> 47

PRINCIPAL STOCKHOLDERS AND
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS

Principal Stockholders and Officers. The following table sets forth certain
information with respect to each person who as of June 30, 1997 was known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock.

<TABLE>
<CAPTION>
NO. OF SHARES PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIALLY OWNED AS OF ---------------------------------
BENEFICIAL OWNER JUNE 30, 1997(A) BEFORE OFFERING AFTER OFFERING
------------------- ------------------------ --------------- --------------
<S> <C> <C> <C>
Lehman Brothers Holdings Inc......... 2,030,226 30.0% 26.1%
3 World Financial Center
New York, New York 10285
Estabrook Capital Management Inc..... 767,900(b) 11.3% 9.9%
430 Park Avenue, Suite 1800
New York, New York 10022
Mutual Beacon Fund................... 642,074(c) 9.5% 8.3%
c/o Franklin Mutual Advisers, Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
</TABLE>

- ---------------

(a) Unless otherwise indicated below, the persons or group listed have sole
voting and investment power with respect to their shares of Common Stock.

(b) Estabrook Capital Management Inc. acts as an investment advisor and in such
capacity has shared voting power and sole investment power over the shares.

(c) 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.

Security Ownership of Directors and Officers. The following table sets
forth, as of June 30, 1997, the number of shares and percentage of Common Stock
beneficially owned by each of the Company'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.

<TABLE>
<CAPTION>
PERCENT OF CLASS
NO. OF SHARES ---------------------------------
NAME BENEFICIALLY OWNED(A)(B) BEFORE OFFERING AFTER OFFERING
---- ------------------------ --------------- --------------
<S> <C> <C> <C>
David J. Butters.................... 216,506(c) 3.20% 2.79%
Norman G. Cohen..................... 97,688(d) 1.44% 1.26%
Marshall A. Crowe................... 61,622 * *
Louis S. Gimbel, 3rd................ 175,240(e) 2.59% 2.26%
Robert B. Millard................... 236,506 3.50% 3.05%
Frank R. Pierce..................... 56,991 * *
Bruce A. Streeter................... 43,602 * *
John E. Leech....................... 28,845 * *
All directors and officers as a
group (9 persons)................. 917,000 13.55% 11.81%
</TABLE>

- ---------------

* Less than one percent of the outstanding Common Stock.

(a) Unless otherwise indicated below, the persons listed have sole voting and
investment power with respect to their shares of Common Stock.

(b) 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 and Millard -- 61,422 shares each; Mr. Crowe -- 61,422
shares;

47
<PAGE> 48

Mr. Gimbel -- 24,569 shares; Mr. Pierce -- 47,991 shares; Mr. Streeter -- 37,672
shares; Mr. Leech -- 27,845 shares; and all directors and officers as a
group -- 383,765 shares.

(c) Includes 43,000 shares of Common Stock owned by trusts of which Mr. Butters
is the co-trustee and 40,000 shares beneficially owned by Mr. Butters' wife.

(d) Includes 23,982 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 11,991 shares owned by his wife through her interest in the limited
partnership.

(e) Includes 15,210 shares of Common Stock owned by trusts of which Mr. Gimbel
is the co-trustee.

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of (i) 15,000,000 shares of
Common Stock, par value $.01 per share, and (ii) 2,000,000 shares of Preferred
Stock, with no par value ("Preferred Stock"). As of June 30, 1997, there were
6,765,893 shares of Common Stock outstanding and 1,010,312 shares of Common
Stock reserved for issuance pursuant to the Director Plan, the Employee Plan and
the Director Policy. There are no shares of Preferred Stock issued or
outstanding. The holders of shares of Common Stock will not be liable to further
calls or assessments by the Company. The description below is a summary of and
is qualified in its entirety by the provisions of the Company's Certificate of
Incorporation as currently in effect.

Subject to the rights of the holders of any outstanding shares of Preferred
Stock and those rights provided by law, (i) dividends may be declared and paid
or set apart for payment upon the Common Stock out of any assets or funds of the
Company legally available for the payment of dividends and may be payable in
cash, stock or otherwise, (ii) the holders of 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 the Company, the net assets of the Company will be
distributed pro rata to the holders of the Common Stock in accordance with their
respective rights and interests, to the exclusion of the holders of any
outstanding shares of Preferred Stock.

Holders of the 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 the Company. Holders of the 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. See "Price Range of Common Stock and
Dividend Policy."

The 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 the Company'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, subject to certain
exceptions, 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. The Company's Certificate of Incorporation provides that the
Company's directors are not personally liable to the Company or its stockholders
for monetary damages for breach of their fiduciary duty to the full extent
permitted by Delaware law.

As a Delaware corporation, the Company is subject to Section 203 of the
Delaware General Corporation Law ("Section 203"). 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

48
<PAGE> 49

stockholder or approved the business combination; (ii) upon consummation of the
transaction that resulted in the stockholder's becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
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 approved or not opposed by a
majority of the directors who (a) were directors prior to any person's becoming
an interested stockholder during the previous three years or (b) were
recommended for election or elected to succeed such directors by a majority of
such directors. The Company has approved the acquisition by Lehman Brothers
Holdings Inc. of the shares of Common Stock owned by it and Lehman is therefore
not subject to the restrictions under Section 203.

The Registrar and Transfer Agent for the Common Stock is American Stock
Transfer and Trust Company, New York, New York.

49
<PAGE> 50

UNDERWRITING

Under the terms and subject to the conditions contained in the Underwriting
Agreement, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, the Underwriters named below,
for whom Lehman Brothers Inc., Jefferies & Company, Inc. and The Robinson-
Humphrey Company, Inc. are acting as representatives (the "Representatives"),
have severally agreed to purchase from the Company, and the Company has agreed
to sell to each Underwriter, the aggregate number of shares of Common Stock set
forth opposite the name of such Underwriter below:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Lehman Brothers Inc. ....................................... 333,334
Jefferies & Company, Inc. .................................. 333,333
The Robinson-Humphrey Company, Inc. ........................ 333,333
---------
Total............................................. 1,000,000
=========
</TABLE>

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page hereof, and to certain dealers at
such initial public offering price less a selling concession not in excess of
$1.10 per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share to certain other Underwriters or to
certain other brokers or dealers. After the initial offering to the public, the
offering price and other selling terms may be changed by the Representatives.

The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions, including the condition that no stop order
suspending the effectiveness of the Registration Statement is in effect and no
proceedings for such purpose are pending or threatened by the Commission and
that there has been no material adverse change or any development involving a
prospective material adverse change in the condition of the Company from that
set forth in the Registration Statement otherwise than as set forth or
contemplated in this Prospectus, and that certain certificates, opinions and
letters have been received from the Company and its counsel. The Underwriters
are obligated to take and pay for all of the above shares of Common Stock if any
such shares are taken.

The Company and the Underwriters have agreed in the Underwriting Agreement
to indemnify each other against certain liabilities under the Securities Act.

The Company has granted to the Underwriters an option to purchase up to an
additional 125,000 shares of Common Stock, exercisable solely to cover
over-allotments, at the initial public offering price, less the underwriting
discounts and commissions shown on the cover page of this Prospectus. Such
option may be exercised at any time until 30 days after the date of the
Underwriting Agreement. To the extent that the option is exercised, each
Underwriter will be committed to purchase a number of the additional shares of
Common Stock proportionate to each Underwriter's initial commitment as indicated
in the preceding table.

The Representatives of the Underwriters have informed the Company that the
Underwriters do not intend to confirm sales to accounts over which they exercise
discretionary authority.

The Company and Lehman Brothers Holdings Inc. have agreed that they will
not, without the prior written consent of Lehman Brothers Inc., in the case of
the Company, and the Representatives, in the case of Lehman Brothers Holdings
Inc., during the 180 days following the date of this Prospectus, offer for sale,
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into, or exchangeable for, shares of Common Stock, or, as to the
Company, sell or grant options, rights or warrants with respect to any shares of
Common Stock, other than pursuant to existing benefit plans of the Company or
its subsidiaries. The directors of the Company have agreed they will not without
the prior written consent of Lehman Brothers Inc., during the 120 days following
the date of this Prospectus, offer for sale, sell or otherwise dispose of any
shares of Common Stock or any securities convertible into, or exchangeable for,
shares of Common Stock.

Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase shares of Common Stock. As

50
<PAGE> 51

an exception to these rules, the Representatives are permitted to engage in
certain transactions that stabilize the price of the Common Stock. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock. In addition, in connection with
the Offering, certain Underwriters (and selling group members) may engage in
passive market making transactions in the Common Stock on the Nasdaq National
Market in accordance with Rule 103 of Regulation M.

In addition, if the Representatives over-allot (i.e., if they sell more
shares of Common Stock than are set forth on the cover page of this Prospectus),
and thereby create a short position in the Common Stock in connection with the
Offering, the Representatives may reduce that short position by purchasing
Common Stock in the open market. The Representatives also may elect to reduce
any short position by exercising all or part of the over-allotment option
described herein.

The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the Offering.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

At June 30, 1997, Lehman Brothers Holdings Inc., an affiliate of Lehman
Brothers Inc., in the aggregate owned 2,030,226 shares of Common Stock
(approximately 30.0% of the outstanding Common Stock). As a result of such
ownership of Common Stock, the National Association of Securities Dealers, Inc.
("NASD") may view the Offering as a participation by Lehman Brothers Inc. in the
distribution in a public offering of securities issued by a company with which
Lehman Brothers Inc. has a conflict of interest. As a result, the Offering is
being made pursuant to the provisions of Rule 2720 of the NASD's Conduct Rules.
Such provisions require, among other things, that the initial public offering
price be no higher than that recommended by a "qualified independent
underwriter," who must participate in the preparation of the registration
statement and the prospectus and who must exercise the usual standards of "due
diligence" with respect thereto. Jefferies & Company, Inc. is acting as a
qualified independent underwriter in the Offering, and the initial public
offering price of the shares will not be higher than the price recommended by
Jefferies & Company, Inc.

In connection with the Contribution, Distribution and Merger, Jefferies &
Company, Inc. was engaged as financial advisor to the Predecessor and rendered
an opinion as to the fairness, from a financial point of view, of the
consideration to be received by the holders of the Predecessor's common stock in
connection with the Distribution and the Merger. Jefferies & Company, Inc.
received from the Predecessor a fee of $150,000 for its opinion, an amount which
the Company believes was reasonable and customary in transactions of that
nature.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon by Griggs & Harrison, P.C., Houston, Texas. Certain legal matters in
connection with the Offering will be passed upon for the Underwriters by Baker &
Botts, L.L.P., Houston, Texas.

51
<PAGE> 52

EXPERTS

The Company'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 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.

52
<PAGE> 53

GLOSSARY OF SELECTED INDUSTRY TERMS

AHTS. See Anchor Handling, Towing and Supply Vessels.

Anchor Handling, Towing and Supply Vessels. These vessels are typically
150' to 275' in length and are used to set anchors for drilling 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.

Bareboat Charter. A charter contract whereby the vessel is chartered
without crew, stores or maintenance support, "the bare hull," for a fixed time
period. The contract results in the charterer being treated as the "disponent
owner" for the full duration of the charter.

Below Deck Capacity. The capacity of the tanks located below the deck of a
vessel which are used to carry various liquid and powdered products utilized in
production and drilling activities such as gas oil, potable water, drilling muds
and powdered cement.

BHP. See Brake Horsepower.

Brake Horsepower. The horsepower made available by an engine for driving
machinery other than itself. It is the highest continuous horsepower output an
engine develops.

Charter. A maritime contract for the hire of a vessel.

Classification Society. A member of the IACS (International Association of
Classification Societies) generally accepted for providing classification
services on behalf of governments. The societies are generally recognized as
establishing that ships classified are built and maintained within certain
established standards. The company has ships built under ABS (American Bureau of
Shipping), DNV (Det Norske Veritas) and LR (Lloyds Register of Shipping)
classification.

Construction Support Vessels. These vessels can be used in an actual
construction effort, such as pipe laying barges, or 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.

Crew. See Crewboats.

Crewboats. Crewboats transport personnel and cargo to and from production
platforms and rigs. Older crewboats, built in the early 1980s, are typically
100' to 120' in length and are generally designed for speed to transport
personnel. Newer crewboat designs are generally larger, 130' to 165' in length,
and have greater cargo carrying capacities. They are used primarily to transport
cargo on a time sensitive basis.

Day Rate. Total charter revenues divided by number of days worked.

Drydocking. The process whereby a vessel is removed from the water to
accomplish repairs and complete classification inspection requirements. With the
exception of crewboats and vessels more than 20 years of age that are generally
drydocked more frequently, drydocks are required twice during a five-year
classification cycle. The time period of a drydocking differs based on the type
and age of vessel and the extent of survey and repairs needed.

Deadweight Tons. A measurement of the carrying capacity of a vessel,
calculated as the difference between the amount of water displaced by the
unloaded vessel and that displaced by the fully loaded vessel.

DWT. See Deadweight Tons.

Dynamic Positioning. An enhanced vessel maneuvering and control system that
will hold a vessel on station despite sea and weather conditions.

Floating Production, Storage and Offloading Vessels. Vessels (typically
converted crude oil tankers) configured and equipped to permit hydrocarbon
production to be processed, stored and offloaded, usually to ocean going tankers
for export but in some instances to local structures. These vessels are most
often used in

A-1
<PAGE> 54

areas where no pipelines or other infrastructure exists such as deep water
regions and offshore lesser-developed countries.

FPSO. See Floating Production, Storage and Offloading Vessels.

Full Production Horizon Contract. See Life of Field Contracts.

Large Platform Supply Vessels. These PSVs are well suited for large areas
with a concentration of offshore production platforms because of their large,
clear after deck and below deck capacities.

Life of Field Contract. A charter, the term of which is tied to a
production facility's lifespan.

Long-term Charter. A charter with an initial term exceeding six months.

LgPSVs. See Large Platform Supply Vessels.

Moon Pool. A structural modification in the hull of a vessel which provides
an opening allowing direct access to the sea. Moon pools are typically used to
launch and deploy ROVs or divers, or otherwise to allow entry and exit from the
water with some protection from wave action.

Oil Spill Response Vessels. Oil spill response vessels are specially
equipped to respond to oil spill emergencies.

On Deck Capacity. The amount of deck area on to which cargo can be loaded
on a vessel. The on deck capacity of a vessel is restricted by the weight and
dimensions of the total amount of cargo carried.

Petrobras. The Brazilian national oil company.

Platform Supply Vessels. These vessels are used to serve drilling and
production facilities and support offshore construction and maintenance work.
They are utilized for their cargo handling capabilities, particularly their
large capacity and versatility.

PSVs. See Platform Supply Vessels.

Rates Per Day. See Day Rate.

Remotely Operated Vehicle. An unmanned submersible craft which is used for
underwater construction, inspection and searches. It is controlled from the
launching vessel by umbilical controls and is "flown" through the water by a
trained technician who utilizes thrusters and cameras.

ROV. See Remotely Operated Vehicle.

Short-term Charter. A charter with an the initial term of six months or
less.

Specialty Vessels. These vessels generally have special features to meet
the requirements of specific jobs. The special features include large deck
spaces, high electrical generating capacities, slow controlled speed and varied
propulsion thruster configurations, extra berthing facilities and long range
capabilities. These vessels are primarily used for support of FPSOs, diving
operations, ROVs, survey operations and seismic data gathering, as well as well
stimulation oil recovery and oil pollution control.

SpV. See Specialty Vessels.

Stby. See Standby Rescue Vessels.

Standby Rescue Vessels. These vessels perform safety patrol functions for
an area and are equipped for all manned locations in the UK sector of the North
Sea. They typically remain on station to provide a safety backup to offshore
rigs and production facilities and carry special equipment to rescue personnel,
are equipped to provide first aid and shelter and, in some cases, also function
as supply vessels.

Time Charter. The hire of a fully operational ship for a specified period
of time; the shipowner provides the ship with crew, stores and provisions, ready
in all aspects to load cargo and proceed on a voyage.

Utility Vessels. These vessels are typically 90' to 150' in length and are
used to provide limited crew transportation, some transportation of oilfield
support equipment and, in some locations, standby functions.

A-2
<PAGE> 55

Utilization. Total days for which charter hire is earned divided by
calendar days in the period, adjusted for part-year availability caused by
vessel additions or dispositions.

UT 705. A supply vessel design developed by the Norwegian design and
construction firm Ulstein and first constructed in 1974. The vessel was first
designed to haul pipe in support of offshore pipeline construction. Post-1990
versions of this vessel have been enhanced to emphasize improved cargo handling
systems and sophisticated positioning capabilities, both of which provide for
high productivity and versatility in supply roles.

UT 755. A supply vessel design developed by the Norwegian design and
construction firm Ulstein. The vessel has a high cargo-to-size ratio, computer
controlled pumping and delivery systems, flexibility to add additional
accommodation or specialty equipment, circular product tanks for ease of
cleaning, large product capacities and improved maneuvering capability to
maximize effective working periods alongside installations.

A-3
<PAGE> 56

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
GulfMark Offshore, Inc. and Subsidiaries
Report of Independent Public Accountants.................. F-2
Consolidated Balance Sheets as of June 30, 1997
(Unaudited), December 31, 1996 and
1995................................................... F-3
Consolidated Statements of Income for the six months ended
June 30, 1997 (Unaudited) and 1996 (Unaudited) and for
the years ended December 31, 1996, 1995 and 1994....... F-4
Consolidated Statements of Stockholders' Equity for the
six months ended June 30, 1997 (Unaudited) and for the
years ended December 31, 1996, 1995 and 1994........... F-5
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 (Unaudited) and 1996 (Unaudited)
and for the years ended December 31, 1996, 1995 and
1994................................................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>

F-1
<PAGE> 57

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To GulfMark Offshore, Inc.:

We have audited the accompanying consolidated balance sheets of GulfMark
Offshore, Inc., a Delaware corporation (successor to GulfMark International,
Inc., see Note 1 to the Consolidated Financial Statements) 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 GulfMark Offshore, Inc. 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.

ARTHUR ANDERSEN LLP

Houston, Texas
May 30, 1997

F-2
<PAGE> 58

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------
1997 1996 1995
----------- -------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................ $ 5,931 $ 17,234 $ 5,136
Accounts receivable...................................... 12,784 8,939 5,026
Inventory, prepaids and other............................ 645 675 1,186
-------- -------- -------
Total current assets............................. 19,360 26,848 11,348
NET ASSETS OF DISCONTINUED OPERATIONS...................... -- 14,837 19,275
VESSELS AND EQUIPMENT, at cost, net of accumulated
depreciation of $21,440,000 (unaudited) in 1997,
$19,504,000 in 1996, and $14,722,000 in 1995............. 97,556 87,405 61,343
OTHER ASSETS............................................... 3,440 2,217 2,213
-------- -------- -------
$120,356 $131,307 $94,179
======== ======== =======

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term
debt.................................................. $ 14,012 $ 9,341 $ 3,976
Accounts payable......................................... 2,337 1,931 931
Other accrued liabilities................................ 3,028 1,628 957
-------- -------- -------
Total current liabilities........................ 19,377 12,900 5,864
-------- -------- -------
LONG-TERM DEBT............................................. 47,970 50,811 33,600
DEFERRED TAXES AND OTHER................................... 5,896 5,079 3,372
MINORITY INTEREST.......................................... 475 501 415
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 15,000,000 shares
authorized; 6,765,893 (unaudited), 6,679,904 and
6,672,704 shares issued and outstanding,
respectively.......................................... 68 67 67
Additional paid-in capital............................... 27,015 26,793 26,770
Retained earnings........................................ 20,790 36,676 28,237
Cumulative translation adjustment........................ (1,235) (1,520) (4,146)
-------- -------- -------
Total stockholders' equity....................... 46,638 62,016 50,928
-------- -------- -------
$120,356 $131,307 $94,179
======== ======== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE> 59

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ---------------------------
1997 1996 1996 1995 1994
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES......................................... $21,031 $14,493 $34,749 $27,233 $27,692
------- ------- ------- ------- -------
COST AND EXPENSES:
Direct operating expenses...................... 8,886 7,282 16,178 15,386 15,171
General and administrative expenses............ 2,670 2,106 4,523 3,483 3,643
Depreciation and amortization.................. 3,284 2,264 5,013 5,472 5,065
------- ------- ------- ------- -------
14,840 11,652 25,714 24,341 23,879
------- ------- ------- ------- -------
Operating Income............................... 6,191 2,841 9,035 2,892 3,813
OTHER INCOME (EXPENSE):
Interest expense............................... (2,616) (1,744) (3,936) (2,801) (2,408)
Interest income................................ 215 131 469 188 229
Minority interest.............................. 26 46 (86) 106 (124)
Gain on sale of vessel......................... -- -- -- -- 842
Other.......................................... 18 29 -- 74 112
------- ------- ------- ------- -------
(2,357) (1,538) (3,553) (2,433) (1,349)
------- ------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES.......................................... 3,834 1,303 5,482 459 2,464
INCOME TAX PROVISION............................. 1,120 371 1,839 91 981
------- ------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS................ 2,714 932 3,643 368 1,483
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net
of taxes....................................... (648) (129) 4,796 (2,270) 591
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS, net
of taxes....................................... (1,426) -- -- -- --
------- ------- ------- ------- -------
NET INCOME (LOSS)................................ $ 640 $ 803 $ 8,439 $(1,902) $ 2,074
======= ======= ======= ======= =======
EARNINGS (LOSS) PER SHARE:
Income from continuing operations.............. $ 0.40 $ 0.14 $ 0.55 $ 0.06 $ 0.22
Income (loss) from discontinued operations, net
of taxes.................................... (0.10) (0.02) 0.71 (0.35) 0.09
Loss on disposal of segment, net of taxes...... (0.21) -- -- -- --
------- ------- ------- ------- -------
Net Income (Loss).............................. $ 0.09 $ 0.12 $ 1.26 $ (0.29) $ 0.31
======= ======= ======= ======= =======
WEIGHTED AVERAGE SHARES
OUTSTANDING.................................... 6,807 6,672 6,676 6,644 6,640
======= ======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE> 60

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON
STOCK AT ADDITIONAL CUMULATIVE TOTAL
$.01 PAR PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
VALUE CAPITAL EARNINGS ADJUSTMENT EQUITY
-------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993.................. $ 66 $26,583 $28,065 $(4,326) $50,388
Net Income................................ -- -- 2,074 -- 2,074
Issuance of stock......................... -- 10 -- -- 10
Translation adjustment.................... -- -- -- 553 553
------- ------- ------- ------- -------
BALANCE, DECEMBER 31, 1994.................. 66 26,593 30,139 (3,773) 53,025
Net Loss.................................. -- -- (1,902) -- (1,902)
Issuance of stock......................... 1 177 -- -- 178
Translation adjustment.................... -- -- -- (373) (373)
------- ------- ------- ------- -------
BALANCE, DECEMBER 31, 1995.................. 67 26,770 28,237 (4,146) 50,928
Net Income................................ -- -- 8,439 -- 8,439
Issuance of stock......................... -- 23 -- -- 23
Translation adjustment.................... -- -- -- 2,626 2,626
------- ------- ------- ------- -------
BALANCE, DECEMBER 31, 1996.................. 67 26,793 36,676 (1,520) 62,016
Net Income (unaudited).................... -- -- 640 -- 640
Issuance of stock (unaudited)............. 1 222 -- -- 223
Disposition of discontinued operations
(unaudited) (Note 4)................... -- -- (16,526) 1,086 (15,440)
Translation adjustment (unaudited)........ -- -- -- (801) (801)
------- ------- ------- ------- -------
BALANCE, JUNE 30, 1997 (unaudited).......... $ 68 $27,015 $20,790 $(1,235) $46,638
======= ======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE> 61

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- -----------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................... $ 640 $ 803 $ 8,439 $ (1,902) $ 2,074
(Income) loss from discontinued operations, net... 648 129 (4,796) 2,270 (591)
Loss on disposal of discontinued operations,
net............................................. 1,426 -- -- -- --
-------- -------- -------- -------- -------
Income from continuing operations................. 2,714 932 3,643 368 1,483
Adjustments to reconcile income from continuing
operations to net cash provided by continuing
operations --
Depreciation and amortization................... 3,281 2,264 5,013 5,472 5,065
Deferred and other income tax provision......... 882 456 1,707 (18) 739
Minority interest............................... (26) (47) -- (106) 124
Gain on sale of assets.......................... -- -- -- -- (842)
Change in operating assets and liabilities --
Accounts receivable.......................... (2,665) (933) (3,445) 1,020 786
Inventory, prepaids and other................ 51 (749) 530 (85) (809)
Accounts payable............................. 446 (115) 1,003 42 (904)
Other accrued liabilities.................... 101 33 595 (779) 70
Other, net................................... 35 48 (507) 475 (264)
-------- -------- -------- -------- -------
Cash provided by continuing operations....... 4,819 1,889 8,539 6,389 5,448
Cash flows from discontinued operations...... (1,360) (797) 9,234 1,788 106
-------- -------- -------- -------- -------
Net cash provided by operating
activities............................... 3,459 1,092 17,773 8,177 5,554
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of vessels and equipment................ (15,422) (12,932) (23,263) (14,121) (687)
Expenditures for drydocking and main engine
overhaul........................................ (2,238) (997) (1,230) (1,141) (1,592)
Proceeds from sale of vessels and other
equipment....................................... -- -- -- 169 2,021
-------- -------- -------- -------- -------
Net cash used in investing activities...... (17,660) (13,929) (24,493) (15,093) (258)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt, net of financing costs........ 7,086 12,411 22,227 25,098 893
Repayments of debt................................ (3,966) (1,344) (4,356) (15,709) (8,873)
Proceeds from issuance of stock................... 223 -- 23 178 10
-------- -------- -------- -------- -------
Net cash provided by (used in) financing
activities............................... 3,343 11,067 17,894 9,567 (7,970)
Effect of exchange rate changes on cash........... (445) 26 924 (160) 124
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... (11,303) (1,744) 12,098 2,491 (2,550)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.... 17,234 5,136 5,136 2,645 5,195
-------- -------- -------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.......... $ 5,931 $ 3,392 $ 17,234 $ 5,136 $ 2,645
======== ======== ======== ======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid..................................... $ 2,463 $ 1,485 $ 3,613 $ 2,793 $ 2,075
======== ======== ======== ======== =======
Income taxes paid................................. $ 26 $ 53 $ 180 $ 167 $ 360
======== ======== ======== ======== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE> 62

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND AND ORGANIZATION:

On April 30, 1997, the stockholders of GulfMark International, Inc., (the
"Predecessor") approved a transaction (the "Contribution") to transfer the
assets, liabilities and operations of its offshore marine services business (the
"Marine Business") to GulfMark Offshore, Inc. ("GulfMark"), a new wholly owned
subsidiary of the Predecessor. Immediately after the transfer of the Marine
Business, the Predecessor completed a spin-off of GulfMark by distributing all
of the common stock of GulfMark to the Predecessor's stockholders (the
"Distribution"). Following the Distribution, on May 1, 1997, a subsidiary of
Energy Ventures, Inc. (now known as EVI, Inc. ("EVI")) was merged (the "Merger")
with and into the Predecessor, whose assets then consisted solely of the
Predecessor's remaining active business, the erosion control business ("Ercon"),
and the Predecessor's investment in approximately 2.2 million shares of EVI
common stock. The Predecessor survived the Merger as a subsidiary of EVI.

Although the separation of the Marine Business from the remainder of the
operations of the Predecessor was structured as a "spin-off" of GulfMark for
legal, tax and other reasons, GulfMark succeeded to certain important aspects of
the Predecessor's business, organization and affairs, namely: (i) the Marine
Business conducted by GulfMark, which consisted of over half of the assets,
revenues and operating income of the businesses, operations and companies
previously constituting the Predecessor; (ii) each member of the Board of
Directors of the Predecessor became a Director of GulfMark; (iii) GulfMark's
management is substantially the same as the management of the Predecessor; and
(iv) GulfMark retained as its headquarters the former headquarters of the
Predecessor. Consequently, the Consolidated Financial Statements present the net
assets, results of operations and cash flows of Ercon and the EVI investment as
discontinued operations. Reference is made to Note 4, "Discontinued Operations
and Disposition of Assets."

In connection with the Distribution, two shares of GulfMark common stock
($0.01 par value) were issued for each share of the Predecessor common stock
($1.00 par value). Also in connection with the Merger, the Predecessor
stockholders received shares of EVI common stock. The total value of the EVI
stock received by the Predecessor's stockholders was approximately $148 million
in the aggregate. Subsequent to the Distribution and Merger, the stockholders'
equity of GulfMark Offshore, Inc. relates solely to the shares of GulfMark
common stock issued in the Distribution and represents the historical retained
earnings of the Marine Business. Numbers of shares and per share information
have been adjusted to reflect the Distribution.

For purposes of these financial statements, "GulfMark" or the "Company"
refers to the Predecessor and its subsidiaries prior to the Contribution, the
Distribution and the Merger and to GulfMark Offshore, Inc. and its subsidiaries
subsequent to the Contribution, the Distribution and the Merger.

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 could differ from these estimates.

F-7
<PAGE> 63

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Statements 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, net of accumulated depreciation,
which 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 $0.18 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 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 the consolidated statements of 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 Statement of
Financial Accounting Standards ("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 the Company.

Other Assets

Other assets consist primarily of deferred drydocking costs and deferred
loan costs. Costs incurred in connection with drydocking are capitalized and
amortized over approximately a two to three year period, which approximates the
period between required drydockings. Deferred loan costs are amortized over the
expected term of the loan.

Earnings (Loss) Per Share

Earnings (Loss) per share is based on the weighted average number of shares
of Common Stock outstanding. Common stock equivalents have not been included in
the computation of earnings per share prior to January 1, 1997, since the effect
was not significant. For the six months ended June 30, 1997, common stock
equivalents represented 102,000 weighted average common shares (using the
treasury stock method), and have been included in the computation of earnings
per share. Fully diluted earnings per share is not presented as such amounts do
not materially differ from primary earnings per share.

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 "Earnings Per Share." SFAS No. 128 revises the methodology to be used in
computing earnings per share ("EPS") such that the computations required for
primary and fully diluted EPS are to be replaced with "basic" and "diluted" EPS.
Basic EPS is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the year. Diluted EPS is computed in
the same manner as fully diluted EPS, except that, among other changes, the
average share price for the period is used in all cases when applying the
treasury method to potentially dilutive outstanding options. The Company will
adopt SFAS

F-8
<PAGE> 64

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

No. 128 effective December 15, 1997, and will restate EPS for all periods
presented. Management does not believe the adoption of SFAS No. 128 will have a
material effect on the Company's computation or presentation of earnings per
share.

Revenue Recognition

Revenues from charters for offshore marine services are recognized as
earned based on contractual charter rates. Typically, charters are short term in
duration.

Income Taxes

The Company accounts for income taxes in accordance with 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. The Marine
Business has been included in consolidated federal income tax returns filed by
the Predecessor. 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 the
Marine Business had filed stand-alone income tax returns, except for the
utilization of net operating loss (NOL) carryforward benefits. These benefits
have been allocated by the Predecessor to the Marine Business based on the
Marine Business' pro rata share of the Predecessor's actual pre-tax financial
statement earnings for each year. Had this allocation not been made, the pro
forma income from continuing operations 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.

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) have been directly charged to
either continuing or discontinued operations based upon actual utilization or
have been allocated based upon proportional operating expenses, number of
employees, external revenues, average capital and/or average equity. The Company
charges for services at fully distributed cost. The Marine Business' 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 the Marine Business comprised
approximately 90% of the total shared corporate services allocated by the
Predecessor.

Although management considers the above allocation methods to be
reasonable, due to the relationship between the Marine Business and the
Predecessor, 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 the Marine Business been a stand-alone entity. Had the Marine
Business 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

F-9
<PAGE> 65

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 that
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

As of June 30, 1997, the Company operates 30 offshore support vessels,
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 December 1994, 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, the Highland Piper, was delivered on March 15, 1996. The
second vessel, the Highland Drummer, was delivered on 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 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 shipyard to construct an
enhanced UT 755 design supply vessel at a price of approximately $18 million
denominated in Norwegian Kroner. The new vessel will be a modified version of
the Company's recently delivered Highland Piper and Highland Drummer. This
vessel, scheduled for delivery in the first quarter of 1998, will be available
to participate in the growing demand for deepwater remotely operated vehicle
("ROV") support, standard supply duties and specialized services in the North
Sea. The Company made an interim construction payment of $0.9 million in April
1997 and interim construction payments totaling $0.9 million for the year ended
December 31, 1996. The Company is required to make additional interim payments
totaling approximately $1.8 million in the remainder of 1997. Final payment is
due upon delivery of the vessel. The Company anticipates financing the cost of
the vessel through additional borrowings, the sale of additional shares of
common stock and existing funds. In March 1997, the Company entered into a
contract to hedge 92.8 million Norwegian Kroner (approximately $13.9 million) of
the commitment against unfavorable fluctuations in the Sterling to Kroner
exchange rates. Upon delivery, any gain or loss under the hedging contract (a
loss of approximately $1.6 million as of June 30, 1997) will be included in the
cost of the vessel, but will be offset by the corresponding change in the price
of the vessel due to the exchange rate fluctuation.

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 $7.0 million bank facility and a drawdown
available under existing facilities. The new facility requires 10 semiannual
payments beginning in 1997.

F-10
<PAGE> 66

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On December 21, 1995, the Company acquired the Highland Warrior, a
1981-built pipe carrier/PSV 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% owned company, SeaMark Ltd., has bareboat chartered
certain vessels from the 49% owner, a U.S. owner/operator, at a combined rate of
less than $2,000 per day.

4. DISCONTINUED OPERATIONS AND DISPOSITION OF ASSETS:

As discussed in Note 1, on May 1, 1997, GulfMark International, Inc.
completed a spin-off of the Marine Business by distributing all of the common
stock of its wholly owned subsidiary, GulfMark Offshore, Inc. to its
Shareholders. Immediately following the Distribution, GulfMark International,
Inc., whose remaining assets, consisted solely of Ercon and an investment of
approximately 2.2 million shares of EVI common stock (the "Merged Assets"),
merged with a subsidiary of EVI. Accordingly, for all periods presented in the
accompanying financial statements, the financial position, results of operations
and cash flows of the Merged Assets are reflected as discontinued operations.
Summarized financial information of the discontinued operations is presented in
the following tables:

NET ASSETS OF DISCONTINUED OPERATIONS:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1996 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Current Assets.............................................. $ 1,494 $ 1,362
Investment in EVI........................................... 37,061 26,291
Other Non-Current Assets.................................... 682 348
-------- -------
Total Assets................................................ 39,237 28,001
Current Liabilities......................................... (1,754) (1,790)
Deferred Taxes & Other Non-Current Liabilities.............. (22,646) (6,936)
-------- -------
Net Assets.................................................. $ 14,837 $19,275
======== =======
</TABLE>

INCOME (LOSS) FROM DISCONTINUED OPERATIONS:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- --------------------------
1997 1996 1996 1995 1994
------- ------- ------- ------- ------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................................ $1,066 $1,646 $ 6,994 $ 8,844 $6,756
Direct operating expenses............... 811 1,078 3,922 5,963 4,350
Selling, general and administrative
expenses.............................. 932 763 2,068 2,323 1,994
------ ------ ------- ------- ------
Operating income (loss)................. (677) (195) 1,004 558 412
Equity in earnings of EVI............... -- -- -- 761 1,012
Gain on sale of 300,000 EVI shares...... -- -- 6,264 -- --
Income tax (expense) benefit............ 29 66 (2,472) (3,589) (127)
Extraordinary loss attributable to EVI
(net of tax).......................... -- -- -- -- (706)
------ ------ ------- ------- ------
Income (loss) from discontinued
operations, net of taxes.............. $ (648) $ (129) $ 4,796 $(2,270) $ 591
====== ====== ======= ======= ======
</TABLE>

F-11
<PAGE> 67

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In addition to the loss from discontinued operations, the Company's
operating results for the six months ended June 30, 1997 include a charge of
$1.4 million, net of tax, for expenses incurred in connection with the Merger.
Certain liabilities associated with the Merged Assets of approximately $0.6
million were retained by the Company.

5. 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 each of 1994, 1995 and 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% 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% and 9.0%, respectively.

6. 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>

F-12
<PAGE> 68

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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
-------
Total............................................ $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.

7. 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........................................................ 58
Thereafter.................................................. --
----
Total............................................. $834
====
</TABLE>

The Company, along with a major railroad, was named in a lawsuit in which
the plaintiffs are claiming damages resulting from flooding and erosion
allegedly caused by the railroad and/or the Company. During the third quarter of
1996, the Company was discharged from all claims by the plaintiffs in exchange
for consideration which was immaterial to the financial statements of the
Company.

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.

In connection with the transactions described in Note 1, the Company has
agreed to indemnify EVI and certain of their affiliates against liabilities for
claims and litigation relating to periods prior to May 1, 1997. The Company has
established accruals which it believes to be adequate to cover such claims, and
believes that claims, if any, will not have a material adverse effect on the
consolidated financial position and results of operations of the Company.

F-13
<PAGE> 69

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. STOCKHOLDERS' EQUITY:

Stock Options and Stock Option Plans

As part of the Contribution and Distribution, the Company assumed the
obligations of the Predecessor under its various Stock Option Plans.
Additionally, as discussed in Note 1, in conjunction with the Distribution, two
shares of GulfMark Offshore, Inc.'s Common Stock were issued for each share of
the Predecessor's common stock. Accordingly, the total number of shares under
option agreements has been modified and all references to shares in these
financial statements have been adjusted. Furthermore, in connection with these
transactions, optionees were entitled to an adjustment in the number of shares
under their agreements in order to preserve the intrinsic value of the options
prior to these transactions. After the adjustment, the ratio of the exercise to
fair market value of the shares and the total intrinsic value was the same as
before these transactions. Accordingly, no compensation expense was recognized.

Under the terms of the Company's Amended and Restated 1993 Non-Employee
Director Stock Option Plan (the "Director Plan"), options to purchase 10,000
shares of Common Stock were granted to each of the Company's five non-employee
directors in 1993 and 1996. Additionally, options to purchase 10,000 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 Director Plan is fixed
at the market price at the date of grant. In May 1996, the number of shares
reserved for issuance under this Plan was increased from 100,000 to 400,000. The
options are for a term of ten years.

Under the terms of the Company's 1987 Employee Stock Option Plan (the
"Employee Plan"), options may be granted to employees to purchase Common Stock
at specified prices. The Employee 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, 262,666 shares were reserved for granting of options under
the Employee Plan.

<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------ ------------------
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...................... 140,000 $ 6.50 169,934 $6.40 173,334 $6.34
Granted..................... 84,000 $13.94 -- $ -- -- $ --
Exercised................... (6,800) $ 3.34 (29,934) $5.94 (3,400) $3.25
------- ------- -------
Outstanding at end of
year...................... 217,200 $ 9.48 140,000 $6.50 169,934 $6.40
======= ======= =======
Weighted average fair value
of options granted during
the year.................. $ 3.06 N/A N/A

Exercisable as of December 31, 1996.................................. 140,000
Shares available for future grants as of December 31, 1996........... 562,666
</TABLE>

F-14
<PAGE> 70

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about stock options outstanding
at December 31, 1996:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING EXERCISE PRICE
- ------------------------ ----------- --------------
<S> <C> <C> <C>
$3.25 to $5.25................................................... 35,800 $ 4.13
$7.38 to $8.88................................................... 97,400 $ 7.59
$13.19 to $19.50................................................. 84,000 $13.94
---------
217,200 $ 9.48
=========
</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 No. 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 No. 25. The Company has elected to follow APB No. 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 No. 25,
because the exercise price of the Company's employee stock options equaled 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>
Income from continuing operations........................... $3,643,000 $3,554,000
Net income.................................................. $8,439,000 $8,350,000
Earnings per share from continuing operations............... $ 0.55 $ 0.53
Earnings per share.......................................... $ 1.26 $ 1.25
</TABLE>

F-15
<PAGE> 71

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Preferred Stock

The Company is authorized by its Certificate of Incorporation to issue up
to 2,000,000 shares of no par value preferred stock. No shares have been issued.

9. INCOME TAXES:

Income from continuing operations 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 GulfMark Offshore, Inc.'s tax provisions attributable to
income from continuing operations are as follows (in thousands):

<TABLE>
<CAPTION>
1996 1995 1994
--------------------------- -------------------------- --------------------------
DEFERRED DEFERRED DEFERRED
AND AND AND
CURRENT OTHER TOTAL CURRENT OTHER TOTAL CURRENT 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-16
<PAGE> 72

GULFMARK OFFSHORE, INC. 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, GulfMark Offshore, Inc. had the following
carryforward losses and credits for income tax purposes that are, subject to
certain limitations, available 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>

10. OPERATING SEGMENT INFORMATION:

Business Segments

The operations of GulfMark Offshore, Inc. are contained in a single
business segment -- offshore marine services. The business operated 30 offshore
support vessels as of June 30, 1997, 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-17
<PAGE> 73

GULFMARK OFFSHORE, INC. 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>
EUROPE
UNITED (PRIMARILY BRAZIL
STATES U.K.) FAR EAST AND OTHER TOTAL
------- ---------- -------- --------- --------
(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, GulfMark Offshore,
Inc. 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-18
<PAGE> 74

================================================================================

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES IN ANY STATE
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
STATE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.

---------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Prospectus Summary.................... 4
Recent Developments................... 13
Risk Factors.......................... 14
The Company........................... 18
Use of Proceeds....................... 18
Price Range of Common Stock and
Dividend Policy..................... 19
Capitalization........................ 20
Selected Consolidated Financial
Data................................ 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Business.............................. 31
Management............................ 42
Principal Stockholders and Stock
Ownership of Directors and
Officers............................ 47
Description of Capital Stock.......... 48
Underwriting.......................... 50
Legal Matters......................... 51
Experts............................... 52
Glossary.............................. A-1
Index to Financial Statements......... F-1
</TABLE>

1,000,000 SHARES

[GULFMARK LOGO]

GULFMARK OFFSHORE, INC.

COMMON STOCK
---------------------------

PROSPECTUS
August 14, 1997

---------------------------
LEHMAN BROTHERS

JEFFERIES & COMPANY, INC.

THE ROBINSON-HUMPHREY COMPANY, INC.

================================================================================